Akshay Kothari: How Notion Has More Money Than Ever & Why Startup Fundraising is Broken | E1203

1. 0:00 – 0:47

   Intro

   1. NANarrator0:00

      (instrumental music plays) Akshay, I am so excited for this, dude. We did this four years ago in COVID (laughs) uh, when no one was getting out, and now you're in London, man. This is so special. Thank you for being here.

   2. AKAkshay Kothari0:45

      Thank you for hosting, and so

2. 0:47 – 4:34

   Adapting to Multiple Roles & Learning Fast

   1. AKAkshay Kothari0:47

      good to see you in person.

   2. HSHarry Stebbings0:47

      Yeah.

   3. AKAkshay Kothari0:47

      Yeah.

   4. HSHarry Stebbings0:48

      I spoke to Ivan before the show. I spoke to many people before the show. Basically, just talked the shit out of you.

   5. AKAkshay Kothari0:53

      (sniffs)

   6. HSHarry Stebbings0:53

      Uh, and what I heard was actually that you have had so many different hats across the Notion journey, from CMO to CFO to Head of Inside Sales, CHRO, Head of IR, CPO. I mean, Christ, I hope you're accumulating different salaries for this. How did you learn new disciplines so quickly on the job?

   7. AKAkshay Kothari1:13

      Uh, I didn't really think of my job as those titles. Like, I think I, I, I... My job was COO, uh, and, and in many ways, I... My, my primary job was to, like, help scale the business and the company and let my co-founders, Ivan and Simon, stay focused on the product. And, and so that meant whatever the company needed, I would jump in and try to figure it out. Um, how did I do it? This is actually kinda interesting. So, so my background is product, right? And, and, and, and Ivan told me to join and take care of everything except product. And so I was... I s- essentially put myself on all these new functions and, um, and, and just tried to learn on the job. So one thing I realized was even though I had never really done any of these things before, actually, like first principles thinking and, like systems design that you learn in product development actually, like applies a lot to these functions, too.

   8. HSHarry Stebbings2:10

      Can we take one, apply systems design in a way that you did, just so we can understand that in a more contextual manner?

   9. AKAkshay Kothari2:16

      Yeah, so let's... The first job I had at Notion was actually, like there were three people who reported to me were support, customer support, right? Now, typically, as the number of tickets or as the number of requests go up, um, the first thing that people typically do is they just add more people. They sort of like divide the tickets by productivity, and then they come up with some number of people. Uh, the product, um, manager in me was like, "Well, we could build a better system, so we could build better tools so that each support person can do more every day." But also, you know, once you have enough of these, uh, customer tickets, then the next role you want to hire would be something called a product ops, right? Product ops would take all this feedback and synthesize it and pro- pr- and share it with the engineers. So one thing Ivan and I did in the (laughs) in the early years was, um, we created this like canonical database of about 200 types of requests that would come, which would map to, like features, right? And we trained our support team to tag every request that come in with one of those 200 tags. You have to do that, right? That was part of the job. And every morning at 6:00 AM, (smacks lips) we wrote a script which would take all these tags from Intercom and write it against these database tags in Notion. And so essentially, what every engineer at Notion had was a real-time view of what people were talking about last, yesterday or the last week or the last month. And so if you could see like, "Oh, wow, people are talking about the Android app over the last month, and it's really gone up," they can go in and start solving that problem. And, and we use this tag across the tools we had, right? So for example, if, if you're working on Android, you could essentially put that tag in Intercom, and you can lis- basically see all the customer support tickets that have come. So you could essentially... In many ways, you don't even have to hire a researcher, 'cause now... So now, if you put all these things together, we, we, we didn't have to hire as many support people. We did not have to hire a product ops person, and we also did not have research early days. In fact, all of these were given to the engineer directly to be able to tap into that feedback and actually

3. 4:34 – 6:00

   Founder Mode & the Transformation of Traditional Org Structures

   1. AKAkshay Kothari4:34

      solve that problem.

   2. HSHarry Stebbings4:35

      This is a strange question, but you know, everyone is going mad over founder mode and the difference between manager mode and founder mode. When you listen to the way that you're talking, it, it really is quite a change from traditional org structures and org designs, and it's really driven by a very product-driven founder mindset. Do you think in the future and with founder mode, we will see completely redesigned orgs and the traditional functions be very changed?

   3. AKAkshay Kothari5:02

      I do think, uh, everybody is starting to question this like things that we've been taught about this- specific org structure, and, you know, the fact that, you know, Jensen has like 40 direct reports and doesn't do one-on-one. So I think it's, it's actually kinda good that we're reopening, like what does, what does this lead to? And I think every leader has to sort of question what is sort of the best way to run their company.

   4. HSHarry Stebbings5:30

      What things do you think we should question that we aren't questioning today?

   5. AKAkshay Kothari5:35

      Well, so I think if you go back to Notion and sort of why we did some of these things, I think a lot of it came from Ivan, um, really sort of prioritizing keeping a very small team. And, and, and that part was not done just because we thought we would be profitable because of that. But I think we did it because it really meant that we could move a lot more nimble. We can stay a lot more nimble by, by

4. 6:00 – 7:16

   Managing Growth Without Losing Focus Amid Increased Funding

   1. AKAkshay Kothari6:00

      doing that, right?

   2. HSHarry Stebbings6:01

      How did you prevent the creep?... like everyone, there's, there's quite a few people that start very nimble and they're really aligned to how you built the company. And then with a $100 million round or with that big mass, "Ah, you know what? We can hire that extra. We can hire that... We can start that new division. We can go into enterprise early. We can do X." How did you prevent the creep with the increased brand and cash?

   3. AKAkshay Kothari6:25

      The best power founder has is, like, the veto power. Uh, and, and Ivan used that a lot when I was in the early days. Like, you know, I remember, I don't know how many, uh, salespeople we'd interviewed, uh, for the first six months. And Ivan was like, "Well, this person's quite good, but not great. So let's keep looking." I think for up to about 500 people, we're about 700 people today, but up to 500 people, the last interview was always with Ivan or myself. So we, we met literally everyone, uh, before. And, uh, in many cases even, and because we did that, I think that it already sort of forced a certain rigor inside the company. But also in general, we were okay with enduring the pain. Like, we, we were okay, um... Like, a lot of times you feel like this person needed to be hired yesterday and, and we would be okay waiting a few weeks, a few months until we found the

5. 7:16 – 10:58

   The Importance of Speed

   1. AKAkshay Kothari7:16

      best person for that job.

   2. HSHarry Stebbings7:17

      Well, so I'm, I'm loving this and kind of continuing to write here notes. But, uh, y- you said there about kind of enduring the pain. That kind of goes in stark contrast to what we're told, which is the speed of execution is the most important thing in relatively early stage companies. The willingness to wait goes against that. How do you think about that and the importance of speed?

   3. AKAkshay Kothari7:38

      Well, I think, I don't know. I think we took a slightly different approach where we, we, we did try to, um, keep the team lean. Um, and we felt like it might feel like short term s- i- it's slowing us down, but in the long term keeping the team small allowed us to move a lot faster. I think even if I think about today, like, all of Notion, with all the different surfaces we have, we have under 20 product managers, and we have about 12 designers.

   4. HSHarry Stebbings8:05

      Mm-hmm.

   5. AKAkshay Kothari8:05

      12 designers sort of design the entire sort of har- surface of Notion, including Calendar. Um, and it really allows us to move faster. Like, it's not a committee of design or committee of product managers where someone's only responsible for a very small part of the problem. Because we have a, we are a lean team, uh, we can actually take a little bit longer because we're not trying to hire a lot more people. We're trying to hire maybe a couple people every year. And it also forces a certain prioritization that, that makes you a lot more effective, right? Uh, instead of just taking the fundraising money that you took and hiring a lot of people, saying yes to all the projects, I think that is, actually comes at a cost. The cost is that your bandwidth is now split among so many different projects. I think you may feel like you're going faster, uh, by hiring more people and saying yes to more projects. But in effect, it is actually going slower. So we've actually chosen the path where we're doing fewer things and doing them better.

   6. HSHarry Stebbings9:06

      I love the statement you said, which is the power of the veto. What did you and Ivan veto that with the benefit of hindsight maybe would have been better to do in the moment?

   7. AKAkshay Kothari9:17

      Initially, we, we, we didn't have our, uh, m- values codified, right? And so a lot of the initial final round interviews was a little bit around our intuition, where we felt like e- whether this person is gonna be actually a good fit for the company. Um, after about, I think when we were 50 people, we actually, like, did the exercise of codifying the values. And we have four values. We are owners of a mission, we are pacesetters, we are truth seekers, and we are kind and direct.

   8. HSHarry Stebbings9:46

      My team would be watching this going, "Whoa, there's a red rag." I think values are, are very, very challenged when you can't take the other side. So kind and direct, I want someone nasty and indirect. No one would ask for that. It, it, it's a d- like, it's... I, my question is, is it a good value because you could not take the alternative side? It's like table stakes. So like as an example, we look for obsessed people, not like passionate, like, that's, that's not... You need to be completely obsessed. Do you see what I mean? How do you think about that and what makes a really good value in that case?

   9. AKAkshay Kothari10:21

      Well, I think to us, like, values are the most important thing. So, so to answer your question, we wouldn't take someone who's nasty and direct. And I think-

   10. HSHarry Stebbings10:29

       And that's my point, like, no, but no one would.

   11. AKAkshay Kothari10:31

       No, but I think there's, there's a few nuances to this. I think, so one, for... S- one of the reasons, if you take that example of kind and direct, the "and" direct part is, is, uh, you know, has an extra signal there. It's not like be nice to each other or be kind to each other or be empathetic to each other. We want people to be direct, which means that we are inviting people to, to be able to debate internally.

6. 10:58 – 16:12

   Lessons on Hiring

   1. AKAkshay Kothari10:58

   2. HSHarry Stebbings10:58

      I spoke to Ivan again before, and he said, "Listen, he, he's basically hired every single leader at Notion at this point, Harry. Uh, so you have to ask him about that." And so when you think back over your lessons on hiring, what are your single biggest lessons on what it takes to really get the best people into Notion?

   3. AKAkshay Kothari11:15

      Initially, uh, you know, you, y- you sort of have to get a feel for the shape of what you're trying to do in this function. And I think... So in many cases, we didn't go to hiring the leader first. In a lot of these functions, maybe I started doing the job myself and sort of really, sort of shaping it to sort of what we wanted to do in Notion. Um, a lot of these functions, we also hired the ICs first. Uh, like individual contributors who can start to, like, do the work.

   4. HSHarry Stebbings11:42

      When you look back, what have been some of the biggest mistakes that you've made and wha- what are some big lessons from those?

   5. AKAkshay Kothari11:48

      People who do well at Notion are builders. And we sort of expect even the execs and leaders to be builders. And so, I think when we hired people who are VPs or CXOs at, you know, big tech firms, um, I think they have a machinery around how their work happens. And because Notion is so small and so...... lean. I think those people had a tough time, uh, at Notion because A, like, that machinery didn't exist. But also when we did have crisis or moment of, like, solution that needed to be found, I think they typically sort of went to needing another head count or, or, uh, or, or sort of blaming on the systems or so forth, right, which actually didn't work so well.

   6. HSHarry Stebbings12:39

      What was the hardest team to hire and the hardest function to build out?

   7. AKAkshay Kothari12:43

      The one I would change a lot if I, if I could, or the one that I, I probably regret not doing the right way is probably sales. I, I was optimistic. I, I thought, like, you know, I, I think we could do sales a different way, uh, and I thought our salespeople could be more consultative. They don't have to worry about quota. They just have to, like, make sure the customer is being successful and the product will grow and expand. And what I learned the hard way is that A, like, I think we tried to reinvent the wheel on something that has been done in a specific way that does work really, really well that we shouldn't have. But B, like, I think the, the thing that I, I misunderstood was, actually some of the best salespeople, they join because there is a quota, because they can hit a number, because they can outperform that number. And so actually not having that and not having, you know, the, the attribution, uh, really hurt us, I think the first year or two. Uh-

   8. HSHarry Stebbings13:40

      How did you see it hurt you? Inability to hire people? The people did not having direction? What was it that was like, "Oh, this is hurting us"?

   9. AKAkshay Kothari13:48

      You know, the way we looked at it was just the percentage of business that is driven by sales or sales assisted wasn't growing as much as we would've hoped.

   10. HSHarry Stebbings13:56

       Mm-hmm.

   11. AKAkshay Kothari13:56

       Um, but, you know, there's a, there's a, actually an interesting piece here around sales at product-led growth companies, right, uh, which is that I think, you know, in many ways, product sells itself, uh, at these companies. And, and, and you think you can do sales a slightly different way because you have all these leads, right? And, and that actually is, is also a blessing and a curse. Yes, it's a blessing because you have all these leads, but it's also a curse because I think your broader team starts to depend on it. It's like, "Oh, the product is not really signing up the right lead. This is why I'm not able to close sales," right? Which if you didn't have the product, or if you, if you didn't have anybody signing up on your website, you'd still be doing, you know, going out and trying to find the lead, and so you'd be, you know, you'd be sort of, uh, complaining about that part a bit less.

   12. HSHarry Stebbings14:49

       And if you want to build enterprise, at some point you've got to build outbound.

   13. AKAkshay Kothari14:52

       Yeah. Yes.

   14. HSHarry Stebbings14:52

       And you've got to build an enterprise function, and you cannot continuously rely on product inbound.

   15. AKAkshay Kothari14:57

       Exactly.

   16. HSHarry Stebbings14:57

       As nice as that would be for anyone.

   17. AKAkshay Kothari14:59

       Exactly. And so-

   18. HSHarry Stebbings15:00

       When was that moment when you realized that?

   19. AKAkshay Kothari15:02

       Probably like three years in, so that, that was, that would've been like three years ago. Um, we've obviously now moved very much into, like, you know, we have an incredible new sales leader, Pravesh, who comes from, like, a, you know, an enterprise sales background. And I think he's brought certain amount of energy and DNA that, like, I didn't have, right?

   20. HSHarry Stebbings15:24

       (laughs)

   21. AKAkshay Kothari15:24

       Uh, that's a, that's the other, that's the other thing is, like, you need someone who can really rally the troops and operate in a slightly different way rather than, like, a systems builder (laughs) product thinker. Like, doesn't work. Like, you know, I, I can't stand on the stage of sales kickoff and, like, rally the troops as much as Pravesh can. And, and I think if you're, like, a sales account executive, you, you need, you want to see that. You want to see that. You want to see that you're crushing your quotas and you, you know, you're really, you're really building for that. And so, so if I had to do... I guess to back to your question, if I had to do it one function all over again, I would do sales. And what I, the way I would do it is to not try to, like, overthink it. Just do it the way it is run, like a proper sales machine. I think it would have saved three years, uh, in that journey. (laughs) So that part, that part is painful.

7. 16:12 – 19:37

   Unmade Decisions Weighing on Notion's Future

   1. AKAkshay Kothari16:12

   2. HSHarry Stebbings16:12

      Slightly weird one, and going off on a tangent, but I heard it before this and I was like, "That's, it's just a really thoughtful statement." And it was, "The hardest things in life are not iron or gold, but unmade decisions." What unmade decision does Notion have that is heavy?

   3. AKAkshay Kothari16:27

      I think one of the challenges for Notion has always been the, the fact that it's a horizontal product, right? And so I think the question people ask is like, "Oh, is it for consumers or is it for large enterprises?" And the answer's always been yes. I still very much believe in, in that sort of horizontalness and, but one of the things I'm starting to realize is, like, instead of defending the answer, or s- or trying to pick, uh, I think we're, we're much more forthright with our employees about the kind of company we are.

   4. HSHarry Stebbings17:01

      How so?

   5. AKAkshay Kothari17:02

      I think the best way I've seen more recently is, um, Parker at Rippling sort of calls it a compound company, which is that it is this, like, big mission that we're, we're building many different products and they all connect through the data, data layer. I think it's very much for us, like, I think in many ways Notion is a compound company as well, where the building blocks that we're building really do serve consumers all the way to large enterprises. We actually did this study recently and we found that, um, you know, something like 46% of our business in, uh, in, you know, it can be attributed back to someone using Notion in their personal life.

   6. HSHarry Stebbings17:43

      Mm-hmm.

   7. AKAkshay Kothari17:43

      And this actually, like, maps really well with sort of all the customers I've spoken to. Everybody I spoke to who's using it at a large company with, you know, wall-to-wall usage, they all started because their spouse is using it for their home project, or they're using it for, with their kids on something, or their niece told them about it. Or I saw my uncle, uh, having, uh, their portfolio on it and so on and so forth, right? So we know that this part is very important for us. Like, it's almost like a part of distribution that...... happens naturally because it's a consumer-y product, but it doesn't pay the bills. The bills are ... The, the business is growing on the B2B side.

   8. HSHarry Stebbings18:21

      Which person do you think has had the most profound impact, maybe on you and your leadership, maybe on Notion as a company, when I ask?

   9. AKAkshay Kothari18:28

      I would say in many ways, like, Notion's kind of unique in that, um, because the company became cashflow positive pretty early on, uh, you know, we did not have to spend a lot of money or l- spend a lot of time on, um, sort of fundraising or, or, um ... So there was very little external pressure on Notion.

   10. HSHarry Stebbings18:52

       What does being cashflow positive mean you have done that you wouldn't have done if you weren't cashflow positive? Like, what has it enabled you?

   11. AKAkshay Kothari19:00

       It's a huge ... Like, once you get there, it's actually a, a huge time save. So I think ... I'll just talk a little bit about Notion, it's very nuanced, but we got there pretty early. I think we got there, like, five years ago. What it did was it meant that suddenly you feel in control of your destiny. You don't have to think about ... You, you don't, you don't have an end date, right? You, you don't feel like you're going to run out of money in X months or X years, Y years away. And what that means is you can choose to raise money if you have a good need for it, but you don't have to. Uh, so all the time spent there could be spent back into building a better product and, and

8. 19:37 – 22:26

   Are We Building Companies the Wrong Way Today?

   1. AKAkshay Kothari19:37

      selling to customers.

   2. HSHarry Stebbings19:38

      Do you think the way that companies are built today is wrong? Idea, raise five million on 25 after leaving Stripe, hire people, get to a million an error. You're, you're an angel investor too. Get to a million an error, have Excel index, never on 5 over here, you get to 10 million an error. Do you think we are building companies wrong?

   3. AKAkshay Kothari19:59

      I don't know. On one side, I feel like, isn't it a gift that so many exciting projects are being funded? But I would say, let's see, like, I, I, I do think, like, people should have a deep understanding for what long-term valuation metrics look like, right? And, and I think if you look at the-

   4. HSHarry Stebbings20:18

      What do you mean by that?

   5. AKAkshay Kothari20:19

      I mean, you just look at historically what is the revenue multiple or PE multiple of SaaS companies. So, like, you can raise on hope today, but in the very long run, unless you're trying to just, like, get acquired, you will be valued at a multiple of your revenue or a multiple of your cashflows that you're generating. And they tend to be an average of, like, you know, what, five to 10X in, on the revenue multiple side.

   6. HSHarry Stebbings20:46

      Mm-hmm.

   7. AKAkshay Kothari20:46

      And the way that you can increase your multiple is by three things, right? I think, in my view. One is you can increase it by having a faster growth rate. Uh, you can increase it by, uh, having a better cashflow margin.

   8. HSHarry Stebbings21:00

      Mm-hmm.

   9. AKAkshay Kothari21:00

      And you can increase it by having a, uh, being ... Operating in a, in an industry or in a space where there's ... The, the terminal growth rate can still be pretty high. Uh-

   10. HSHarry Stebbings21:11

       Totally.

   11. AKAkshay Kothari21:12

       So, so I think as long as you have a deep understanding of those, those things, as long as you have a good understanding of what you're, what you're going to use the money for, you can build towards that, great. I think if you're, uh, hoping that we're going to be back to 100 times revenue or 100 times ARR valuation, I think, I think that's a bit challenging.

   12. HSHarry Stebbings21:30

       It's funny, I had the founders of UiPath, Klaviyo, uh, ServiceTitan, and none of them could raise, and it meant that they all were forced to stay very close to customers for the first few years, and they didn't hire customer service teams, they didn't even hire product people because they had to do it all themselves. And all three said the company would not be the success it is if they'd raised the money.

   13. AKAkshay Kothari21:52

       I also have to credit Ivan here, because in the early days, I think, you know ... You know this. A lot of investors did knock on our doors, uh-

   14. HSHarry Stebbings21:58

       A lot.

   15. AKAkshay Kothari21:59

       ... a lot.

   16. HSHarry Stebbings21:59

       A lot.

   17. AKAkshay Kothari22:00

       And I think one-

   18. HSHarry Stebbings22:01

       Did some crazy things to get attention from you guys.

   19. AKAkshay Kothari22:03

       Correct, correct. And, and so literally every quarter, Ivan and I would discuss. It was like, "Should we do it?"

   20. HSHarry Stebbings22:09

       Why were you not? Just out of interest, what was that internal discussion? I'm fascinated.

   21. AKAkshay Kothari22:14

       I think primarily Ivan was very focused on, uh, do we have, uh ... Is, is money the constraining factor right now?It's like, if we had more money in the bank, would we, would we spend it on

9. 22:26 – 27:25

   Raising $50M at $2BN Valuation

   1. AKAkshay Kothari22:26

      hiring faster? Um-

   2. HSHarry Stebbings22:27

      Take me to the time where money was a really constraining factor and you decided to raise it.

   3. AKAkshay Kothari22:31

      So we raised, uh, we raised, uh, 50 million at two billion at the start of COVID. Um, like, pretty much, like, a couple weeks into COVID in 2020, early 2020.

   4. HSHarry Stebbings22:40

      50 million at two billion. I mean, that's a weird raise in the way ... I mean, it's a brilliant raise, but in the raise that it's minimal dilution actually.

   5. AKAkshay Kothari22:47

      Mm-hmm.

   6. HSHarry Stebbings22:48

      But a lot of money. 50 million buys a lot (laughs) a lot. And so the traditional notion is, well, VCs wouldn't like that because they can't get the ownership that they need. How do you think about that raise, the structure of it? I'm just fascinated.

   7. AKAkshay Kothari23:01

      Well, it actually came about really fast, um, uh ... And it actually goes back to being cashflow positive and not needing it. I think you sort of are able to do-

   8. HSHarry Stebbings23:11

      You're allowed to break the rules.

   9. AKAkshay Kothari23:12

      You're able to break the rules because there's more demand than, than, than, uh, than supply. Um, but, uh, but, but ... But, you know, the reason we raised that round was also ... I think was an interesting one where we didn't have a need for $50 million, but we raised it because we saw that the, the talent was, was flocking to safety, where all the people we wanted to hire needed some signal to say like, "Oh, this company is stable and I ... And, and I'm willing to work there." Uh, and so in March or April 2020, again, we didn't have the cash needs, but we needed an Index and Co2 stamp that, "Hey, I'm putting $50 million in this company that is growing and, and that actually really helped us recruit and, like, break that."

   10. HSHarry Stebbings24:02

       How do you not let that alter your mindset towards focus? You've got 50 million now, actually. You can, you can build that new team. You can build that new product. You can do that at LAC or higher.How do you retain that discipline when 50 million drops?

   11. AKAkshay Kothari24:17

       Frankly, I don't know. I, I, I think this might sound weird, but I think we're just, like, not wired that way.

   12. HSHarry Stebbings24:21

       (laughs)

   13. AKAkshay Kothari24:21

       Like, in, in some ways, like the-

   14. HSHarry Stebbings24:23

       Which makes you very rare. (laughs)

   15. AKAkshay Kothari24:25

       Yeah. In some ways, like there's, there's more cash in Notion's bank today than the history of its raise, right? So it's like in, in some ways, like, we've produced cash. We, we haven't spent any of it. And some people might look at it and be like, "Hey, you're not really utilizing the cash that is in hand. You know, you should..." But I think, you know, one of the things that, um-

   16. HSHarry Stebbings24:43

       Are you being aggressive enough?

   17. AKAkshay Kothari24:45

       Yeah, so that, that's a question people ask. One of the things, uh, I learned, this was actually one of my favorite tours of duty inside Notion, was when I was, uh, running finance for a year. First of all, I thought finance, like, at least before I actually worked on it directly, I thought, "This is just, like, bookkeeping. Stay out of trouble. Like, stay compliant." But only after... As I worked for a year and I, I sort of got introduced to the whole world of, uh, FP&A and BizOps, and I was like, "Wow, this is so strategic." And once you get to a certain scale, so Notion got to about 100 million in ARR, um, couple of years ago, and you realize like, oh, there's all these interesting comps you can look at, public comps that you can measure your performance against as well, right? If you think about your job as like, well, there's all these different projects you need to fund and you need to resource allocate. Finance becomes such a strategic partner in that. I remember talking to... As part of, like, me going to hire, uh, uh, our CFO, I talked to a lot of, uh, CFOs in the Valley as a way to learn. And one of the... I remember one of the conversations was actually quite interesting where I asked, like, "What's the ideal, like, rule of 40?" Like, you know, should it be this? Should it be that? Like, you know. And this person said, like, you know, "Basically, you should have test budgets for everything you want to try out." You should just look at each part of your business through that unit economic lens, right? So if you want to do performance marketing, give people $50,000, $100,000, doesn't matter. Tell them to test whatever they want to test, and if they can prove the unit economics for that channel, and the, the, the channel's working, then you should load up the truck. You shouldn't worry about rule of 40 at that m- period of m- that quarter or that month, 'cause you, you've seen an opportunity that pays you back. You can do the same with sales. One of the years we did actually spend a lot of money on billboards, right? And, and it was like a, a way for us to learn that, okay, well, this does improve your brand awareness but doesn't actually do a lot to signups or, you know, d- deal closing sort of completion rates, right? Uh, and so, so that's the, that's the theory we have right now with, with sort of being aggressive versus being too defensive, is that this test-

   18. HSHarry Stebbings26:51

       What percent of budget should be allocated to tests across those different disciplines? Is it like 10% or is it like 50%?

   19. AKAkshay Kothari26:57

       Well, the budget could be pretty small. It, you just need enough of a budget to be able to get signals back that, that, that, that, that channel is working. Uh, and, and in many cases, you don't need it to be very large, right? Uh, I think maybe, like sales is might, might, might have a longer period before you sort of see what the paybacks are. But I think anything you're doing with, um, performance marketing or some partnership deals or other things, like, I think those things, you know, you can, you can

10. 27:25 – 32:12

    Raising $270M at $10BN Valuation

    1. AKAkshay Kothari27:25

       do it.

    2. HSHarry Stebbings27:25

       So we do the 50 at two billion, and then, uh, how much did we raise at 10 billion?

    3. AKAkshay Kothari27:31

       We raised around 270 million at 10 billion.

    4. HSHarry Stebbings27:34

       Around 270 million to not be precise.

    5. AKAkshay Kothari27:36

       (laughs) .

    6. HSHarry Stebbings27:36

       Talk to me about the thinking there. What were we unlocking with that fundraise?

    7. AKAkshay Kothari27:40

       So this was, um, second half of 2021. Pretty crazy time. Um, and the reason we did this raise was because, um, our peers, our competitors were getting very aggressive in, in going to market, both from the marketing lens as well as from the sales lens. And we saw an opportunity not only to raise us money but also to sort of play the game on the field. Uh, and, and so, so we did this in October 2021, and, um, and I think the plan was to sort of, you know, go more aggressive on go-to-market.

    8. HSHarry Stebbings28:20

       Did you decide to play the game on the field and go aggressive?

    9. AKAkshay Kothari28:24

       Yes, we did. For about a year or so, uh, before the markets turned, we-

    10. HSHarry Stebbings28:29

        Was it the right decision?

    11. AKAkshay Kothari28:30

        You have to. I mean, there is no other choice, right? I think at the end of the day, um, you do have to play the game that is being played on the field.

    12. HSHarry Stebbings28:38

        Do you, or can you just watch others burn money in go-go times and stay disciplined?

    13. AKAkshay Kothari28:44

        Probably nuanced. I think you don't want to, like, burn your company down, but I think you, you do want to, like, compete and see if you can capture more of the customers that you're, you and your competitors are both trying to get.

    14. HSHarry Stebbings28:56

        And so we go aggressive for this year, and then harder times come and we pull back?

    15. AKAkshay Kothari29:01

        That's what happened-

    16. HSHarry Stebbings29:02

        Yeah.

    17. AKAkshay Kothari29:02

        ... um, in 2022. In fact, the harder times came much faster than, uh, most had imagined. And so in, in many ways, the pullback happened quite, quite a bit q- quite a f- quite a bit early in our journey.

    18. HSHarry Stebbings29:14

        Just thought, thought exercise here. Is that not when you get more aggressive, your competitors, who we won't name 'cause, you know, I don't want to upset anyone, but, uh, they don't have actually the cash supplies that you do in a lot of respects. You could have gone aggressive then when they pulled back. Did you think about that?

    19. AKAkshay Kothari29:31

        We did do some of that, and I think the reason we were able to do some of that was because we were already cash flow positive. So we saw all the companies around us all trying to get fit, all trying to get back to cash flow positive, and we, we were like, "We're already there, so what do we do?" Through all of these things, one thing I realized it's act- actually, there's, there's like 99 ways you can burn money. There's only one good way (laughs) to, like, effectively, like, make money, right? There's just, like, so many bad ideas out there. You can, like, throw money on the billboards, you can throw money on YouTube, you can... But I think it's like, it's actually very few ideas that actually can, like, continue to scale well. And even when it starts to do well, like, you put more money in, and it starts to be a bad channel, right? So, so it's actually kind of an interesting, um, exercise of like, you know, if, if something works for X, like, how do you get to 10X and still have the same unit economics? It's pretty hard.

    20. HSHarry Stebbings30:22

        I have a question for you, uh-On the 10 billion, it's a big, big valuation. How did you think about that and how do you think about the growing into that over time?

    21. AKAkshay Kothari30:32

        Well, I think the, I think going back to what we discussed, right, I think the, in the very long term, it will, uh, be a function of, uh, the company's sort of multiple, it'll be a function of, you know, multiple of revenue, and the premium we'll get is based on us being able to grow fast or continue to grow fast, uh, and do it at, uh, uh, in an efficient way. The, the great thing about Notion is that we just operate in a very large market. Like, I think the, the different categories that we play in has, like, I think we've barely scratched the surface on it. And so there's, you know, we're pretty excited to sort of like keep building towards that vision.

    22. HSHarry Stebbings31:08

        Does the valuation even matter if you're cash flow positive? (laughs) If you're being blunt. Valuation matters a lot if you're not cash flow positive, because there's crunch time in 18 months when you're going back to the VC and your judgment day comes on your valuation. If you don't, if you don't need to go back to the VC, I don't see a problem.

    23. AKAkshay Kothari31:28

        Well, valuation matters internally, I think, to employees.

    24. HSHarry Stebbings31:31

        Mm-hmm.

    25. AKAkshay Kothari31:31

        I think they, it matters that, like, you know, the, the stock that they did get, uh, is able to be valued that much and continue to grow in value over the years.

    26. HSHarry Stebbings31:42

        Is that a challenge with leaders today? You bring them in at a 10 billion price. It's, it's high. Like, seeing like, you know, 10As on that is, (laughs) is hard.

    27. AKAkshay Kothari31:51

        I think it is a challenge for a lot of companies-

    28. HSHarry Stebbings31:53

        Yeah.

    29. AKAkshay Kothari31:53

        ... when you can show them a path. Uh, and I think it was a, a bigger challenge in 2022. Uh, I think some companies have been able to sort of like show a path or, or have gotten there. Uh, but I think they're probably more rare than, than, than the number of unicorns that were sort of made during that time.

11. 32:12 – 36:15

    What Would You Change About Fundraising? How Did Sequoia Join?

    1. AKAkshay Kothari32:12

    2. HSHarry Stebbings32:12

       When you look back at your fundraising, what would you have done differently?

    3. AKAkshay Kothari32:16

       Oh, I wouldn't do anything different. I think we raised both of these two rounds with-

    4. HSHarry Stebbings32:20

       How did Sequoia come together?

    5. AKAkshay Kothari32:22

       So, interestingly, um, you know, when we did the, um, COVID round in 2020, we really, really wanted Sequoia, uh, 'cause when, again, like, if you think about the, the goal for that round was to get a stamp of approval so that r- we could, we could recruit, uh, and people feel like this is a safe company. And there isn't a better stamp than Sequoia's, uh, right, uh, and so, so we pitched them and actually, we, we, we, we got a no that, that time, uh, in March 2020.

    6. HSHarry Stebbings32:52

       Was this from Pat Grady?

    7. AKAkshay Kothari32:53

       I think it was from the partnership. I think the person we had talked to there, um, was, um, Mike Vernal then, who was a early personal investor and, um, and I think they actually wrote a very thoughtful note, uh, for, for why. In many ways, like, it worked out, uh, in, in terms of us, like, getting, getting to know even, you know, each other even more over the next 18 months.

    8. HSHarry Stebbings33:17

       And then with the next one, you came back and said, "Hey, we still want you"?

    9. AKAkshay Kothari33:19

       Next one we came back and, uh, and, and we, we asked them first and... Them and Coatue, 'cause I think Coatue had put a smaller check in the $50 million round.

    10. HSHarry Stebbings33:30

        Uh-huh.

    11. AKAkshay Kothari33:30

        And so, so they came back and did a larger one, and Sequoia was the coinvestor in that.

    12. HSHarry Stebbings33:34

        Do you find having Sequoia as an investor is a needle mover for a company?

    13. AKAkshay Kothari33:38

        I think it is probably the best brand. Uh, it, uh, it... Their, their record speaks for itself, I think.

    14. HSHarry Stebbings33:46

        What does it help most, talent, customer acquisition, pure brand and market and ego? What is the thing that it is the needle mover for?

    15. AKAkshay Kothari33:55

        I think the thing I would say about Sequoia, having gotten to work with them more in the last few years, is that, you know, similar to how we demand excellence from our fi- uh, from our employees, I think they demand excellence from their companies. If you like that pressure, if you like wanting to build a generational company, I think you get the best s- you know, set of questions from them. You get a lot of really sort of nuanced feedback and data points from them. Um, you know, right now we work with Pat Grady. I mean, Pat has seen literally every, like, generational SaaS company closely, like, really closely, right? Like, he could basically like... And everything is memory, so he can essentially tell you, "You are where, you know, ServiceNow was like 12 years and two quarters ago," right? And I think, uh, that's, so I think it's like he's seen the movie so many different times.

    16. HSHarry Stebbings34:53

        His mind is so structured. That's what I... For me with him, like, whatever problem you have, he'll break down it to, like, core component parts and then play it back in incredible clarity and structure.

    17. AKAkshay Kothari35:04

        And actually, one of the things that l- I've also realized is like, it's not just like business performance. One of the... I remember one quarter, um, where we missed our, uh, uh, this was maybe like a year and a half ago or something, where we missed a, a, a quarter, where we, we sort of like missed our number. I remember, you know, saying like, "Oh, you know, here are, like, seven things we're doing to, like, close the number gap." And I remember both Mike Vernal and Pat, uh, said, "I think you guys are thinking about this wrong. I think the question is not whether you can hit this quarter or not. The question is whether you can actually really scale this product to 100 million users and beyond, because that's th- that's the future we see with Notion." It was a good reminder where it's like, wow, like they s- they sort of believe in this long-term mission, uh, you know, and, and their, like, their sort of, the long-termism is, uh, is, is, is sort of like helped us recalibrate in terms of what we should do.

    18. HSHarry Stebbings36:05

        We mentioned Pat, we mentioned Index, you mentioned Coatue. When investors invest and lead and write big checks, they generally get board seats. (laughs)

12. 36:15 – 39:50

    What Was Unique About How Akshay Structured His Board

    1. HSHarry Stebbings36:15

       You did boards a little bit differently. How did you do a board differently, Akshay?

    2. AKAkshay Kothari36:20

       Well, I think, like, uh, you know, we talked about these rounds. These rounds were, uh, fairly low dilution. I think there's essentially 2 to 3% ownership, um, that we, that we, we gave out. Uh, and so...You know, we were able to essentially, um, not give out board seats. I don't think it came from like a place of arrogance, but I think it just, it- it- it just, like, we were able to do it in a way that, um, that- that- that sort of like felt like we could almost recruit a board in the future, which we wanted to do. Not just because someone is investing money, but someone who could be a long term sort of board- board member for us.

    3. HSHarry Stebbings36:59

       What do you want in the recruits that you have to your board?

    4. AKAkshay Kothari37:02

       So actually, like, this is something we've been thinking a lot about, and actually, it's actually not that different from thinking about recruiting an executive team. You know, I can just give you, like, maybe- maybe if- if there's like five seats, um, that we would want to fill. I think I would want one person to be like a CEO whisperer, almost like a CEO coach. Uh, ideally, like a former CEO who's done that job. Um, I think CFOs always would like a partner in, uh, having a- an amazing audit chair.

    5. HSHarry Stebbings37:33

       Mm-hmm.

    6. AKAkshay Kothari37:33

       Um, then there's probably a person who's in go-to-market. Uh, and this could be, like, either someone who's deep in sales or deep in marketing, and you can pick whichever one you need, like you're gonna need help with in the long run. Then there's the other r- uh, like the governance and, like, the compensation committee, is typically a person who you could match with your head of people. And what you could do, if you design it this way, you could also, let's say, you know, fifth one is an investor who actually gives you, like, a macro perspective or how things are going on.

    7. HSHarry Stebbings38:04

       Mm-hmm.

    8. AKAkshay Kothari38:05

       But if you design this well, you could almost have a, like a one on- one-to-one coach for your executive team to your board that you, that you sort of put together. Where- where they, as they're growing in their careers, and they're sort of like figuring out the next phase and the next phase after that, they have an incredible board member who's investing in them. I don't actually, uh, this is probably pretty rare. Like I don't know another company that has done that. But I think a lot of this sort of came from first principles, thinking, "What would we need?"

    9. HSHarry Stebbings38:33

       Do you think we build boards the wrong way? I lead your A, board seat. Someone else leads your B, board seat. Someone else leads your C, board seat.

    10. AKAkshay Kothari38:41

        People are rethinking what org structures should be, and like how many people should report to you. I think people should rethink what boards should be. There is an element of, um, if you had to like recreate what a board meant, I think just writing it down. But people don't get to do that, right? Because I think, uh, uh, I think we- we got lucky in that the ownership, uh, and some of the- the cash flow positive really helped, like, not dilute as much, and not need as much capital. I don't know. I also think, like, you know, some of the investors I know, someone I really respect is, uh, Jeff Weiner, who was my old boss at LinkedIn. Ivan and I actually tried very hard to get him to be a board member, at, uh, uh, you know, our first board member at Notion, and- and he said no. Because in, deep down, he wanted to be, you know, the CEO's coach, right? And he said, some of the board stuff around, you know, I think requires him to think about the company before he can think about the CEO.

    11. HSHarry Stebbings39:43

        Sure, you have a fiduciary duty to shareholders.

    12. AKAkshay Kothari39:45

        Correct.

    13. HSHarry Stebbings39:46

        Which can be in direct conflict with your CEO coaching.

    14. AKAkshay Kothari39:49

        Exactly.

13. 39:50 – 48:53

    Quick-Fire Round

    1. AKAkshay Kothari39:50

    2. HSHarry Stebbings39:50

       I want to do a quick fire round. So I say a short statement, you give me your immediate thoughts. Does that sound okay?

    3. AKAkshay Kothari39:55

       Let's do it.

    4. HSHarry Stebbings39:56

       Okay, so what do you believe that most around you disbelieve?

    5. AKAkshay Kothari39:59

       I think AI will create more jobs than it will kill.

    6. HSHarry Stebbings40:02

       I stalked your Twitter, so I know that you thought this was quite a good question. Uh, what's your favorite book written before 1956?

    7. AKAkshay Kothari40:10

       I've actually, uh, you know, with the kids, sort of reread, uh, some of the Indian epics. There's a part in Mahabharat called the Bhagavad Gita. And some of those principles in Bhagavad Gita are so timeless that I think are worth reading again.

    8. HSHarry Stebbings40:25

       Best board member that you would most like to have, if you were to choose one other than Jeff Weiner?

    9. AKAkshay Kothari40:31

       I personally would- I would've loved, um, Charlie Munger.

    10. HSHarry Stebbings40:35

        Yeah, that would be amazing.

    11. AKAkshay Kothari40:36

        That would be, like I guess talk about like long term thinking, long term business building. I think, um, sad that he passed away, but, you know, I think him and Warren are- are sort of like my- my heroes.

    12. HSHarry Stebbings40:50

        Did you ever go to the Berkshire Hathaway event?

    13. AKAkshay Kothari40:52

        Event? Many times.

    14. HSHarry Stebbings40:53

        Was it amazing?

    15. AKAkshay Kothari40:53

        It's amazing.

    16. HSHarry Stebbings40:55

        I've always wanted to go. Uh, most memorable first investor meeting?

    17. AKAkshay Kothari40:58

        So for me, I think, I graduated 2010, uh, and, um, I won't go into too much detail, but I- I built this like small little app in my class project at Stanford, uh, that became a company, uh, called Pulse. And I remember meeting, uh, an investor, um, Emily Melton.

    18. HSHarry Stebbings41:16

        DFJ.

    19. AKAkshay Kothari41:17

        I think, uh, was at Mayfield then, then she went to DFJ, and now she runs her own fund. And one of the things I realized as a student, uh, the superpower of meeting investors is that what I saw in Pulse was like just another RSS reader. And what she saw in Pulse was this next generation browser for the iPad. And- and it really sort of made my idea like 100x stronger, just like having that meeting, and having her talk about, like, someone seeing the vision even before you do it. Uh, I think that was incredible.

    20. HSHarry Stebbings41:50

        What's the most contrarian or unorthodox advice that you'd have for founders listening?

    21. AKAkshay Kothari41:55

        I think in general I would say, like, almost all advice is genius for a subset of people and completely rubbish for (laughs) the- the rest of them. I think you can take literally everything. Like, I mean, even founder mode. Founder mode is really good if you have a founder who's right a lot. If they're not, like, uh, you know, God bless that company. Uh, and so- so I think I- I just- I don't know. I think I've- I've moved away from giving advice to, um, to sort of like more share my experience with what happened at Notion or Pulse. Because I found that to be like, I think you, hopefully you can take the right learnings from them and apply it to what your situation is.... rather than a more generalized advice.

    22. HSHarry Stebbings42:38

        What have you changed your mind on in the last 12 months?

    23. AKAkshay Kothari42:40

        One of the things, uh, uh, I think my wife was right on this one, one of the things I used to do, about a year or two ago, (laughs) was try to, like, pack up every hour of my kids' weekend, uh, uh, with, like, activities, and I was like, "Oh, they can't be bored." Like, they, they've got to do this, they've got to do that. And then, you know, we just spent like a month in India this summer, and they had no programming, and they were just like sitting around with family, and in many cases my, my daughter complained she was bored. But I think, I don't know, they, I think, I, I, I think both of them grew so much with all these interactions and have realized that, you know, you don't n- I don't know, boredom is good. Like, I think it's okay for them to like just, you know, uh, not be like occupied every hour of the, of the day.

    24. HSHarry Stebbings43:29

        So, what concerns you most in the world today?

    25. AKAkshay Kothari43:31

        I think this like general TikTokification of every social app, uh, I'm really worried about that, 'cause I think every social app has become like one or two clicks away from infinite stream of viral videos, which I think is like just really sad.

    26. HSHarry Stebbings43:50

        Has it not helped Notion?

    27. AKAkshay Kothari43:51

        Has it helped or ...

    28. HSHarry Stebbings43:53

        Yeah, like, you have amazing community on TikTok and on a lot of short form platforms. Is, is, I, I agree with you, but has it not helped?

    29. AKAkshay Kothari44:01

        Similar to this podcast, I think there's definitely better content out there. I'm not saying necessarily like Notion content is better, but how many people have control over this information that they're sort of, you know, consuming? Uh, I guess maybe like they didn't have that even when they were watching TV or something. But I guess I worry on the... Uh, the thing that I worry about is like, is just the consumption to creation ratio has, has gone o- out of whack, right, a little bit. Like I think...

    30. HSHarry Stebbings44:33

        Do you think so? So, so you think there's now more consumption than ever, like the... Because there's also more creation. Everyone's a creator. You can't walk down the street in London without seeing everyone creating.

Episode duration: 48:53