Dan Siroker: Second-Time Founders Are More Investable & Why Not To Hire People Out of College |E1153

1. 0:00 – 0:47

   Intro

   1. DSDan Siroker0:00

      (instrumental music plays) I very much believe you should either be in fundraising mode or not. Always saying the highest price is almost certainly gonna be a mistake. When an investor asks, "How much are you raising?" more often than not, they're actually asking, "How much do you think you're worth? Let's start the negotiation on valuation right now." Because 20% is what they want. If you say, you know, "We're worth... Uh, yeah, we're raising $10 million," they just take $10 million divide it by 0.2, and then that's what they think that you think your valuation is.

   2. HSHarry Stebbings0:22

      Ready to go? (instrumental music plays) Dan, I am so excited for this. We've gone back and forth on Twitter. I've obviously been a huge admirer of yours from afar for a long time. So, thank you so much for joining me.

   3. DSDan Siroker0:43

      Thank you. The feeling is mutual. I've been a bit of... a big admirer of the show and glad to be

2. 0:47 – 1:35

   Background

   1. DSDan Siroker0:47

      on it.

   2. HSHarry Stebbings0:48

      Now, I think great entrepreneurs are shaped by their early years. And so, I'd just love to go back. When you think about how your parents or how your teachers would have described the 10-year-old Dan, what do you think they would have said?

   3. DSDan Siroker1:00

      They would have been very, um, astute to notice that I was very into computers. So from a very early age, uh, we always had a computer around. And I owe my mom's boss, she was working as a secretary at Stanford, and her boss was Professor Hector Garcia Molina. And he had this amazing generosity where every time he would buy himself a new computer for home, he'd always have my mom buy the same one for herself. And then me of- me and my twin brother actually got to play with it a lot. So, uh, we'd always have the latest and greatest thing at home because of his generosity. And that, I think, propelled me to what I'm doing today, because I'm into computers, which is, uh, something I've been doing ever since I was 10 and even maybe

3. 1:35 – 6:45

   Yeses & Nos as Turning Points

   1. DSDan Siroker1:35

      younger.

   2. HSHarry Stebbings1:35

      I love that. What a great guy. What an awesome influence. Uh, along the way, we have many great yeses and many hard nos in life. And I find that they shape us, the highs and the lows. When you think about a great yes that you think really shaped you, and also a really shit no, what comes to mind for each, before we dive in?

   3. DSDan Siroker1:57

      Yes, uh, was about eight years ago when my now wife said yes (laughs) to getting married. Any other yes I've gotten from venture capitalists or employees or kind of pales in comparison to that big yes, so I can't really, um, compare. And then nos, there's one cl- there's one pattern of nos I've gotten that now my team knows is the, the most motivating no I get, which is the version of a no that starts with, "No, that's not possible." And I'm a big believer in technology's ability to do things that were thought of as impossible before. Um, and so I think since probably very young, 'cause I know this has been going on now for at least a decade, I'm very motivated when somebody has a cynical or pessimistic view on what technology can do. And there's nothing more motivating to me than hearing that and then trying to prove them wrong by showing them, by building the demo, by building the product, uh, by building the feature to prove that that is something that techno- technology can do. And in some ways, every version of every startup I've ever done is some, there's some seed of that idea that's said, "No, that that's not possible," that motivated me to persevere.

   4. HSHarry Stebbings2:55

      Do you agree with Marc Andreessen's statement that there's no such thing as a bad idea, only a bad time?

   5. DSDan Siroker3:00

      I think that's m- largely true. And I find the, when, when I heard that, I think what I think about is, you know, I've had lots of pivots in my startups. Everything I pivoted away from almost always could have worked. You know, it's not so much that it's, like, unequivocal, at least in my mind. Maybe this is my delusional, optimistic founder mind. I never s- thought to myself, "Oh my gosh, this would never work." It was always a version of, um, if you draw the analogy, like climbing a mountain, if you're starting a startup at the base of the mountain, and as you climb the mountain, you see other paths to the top that seem a little bit easier and a little bit better, and you've learned a lot along the trip. You're like, "Oh, I'll just, I'll go down a little bit to go back up that path." It's not to say your current path, you couldn't get to the top of the mountain. You know, eventually you'll get there, it's just gonna be much harder. So in that sense, I think it also goes to this idea that, you know, ideas are cheap, it's all about execution. So I, I do think almost any idea can work with enough perseverance. Rarely, very rarely is it just fundamentally broken as an idea. So that's, I guess, yeah, in some ways, I definitely agree.

   6. HSHarry Stebbings3:54

      I told you beforehand, we kind of just go off on tangents, but I am fascinated. You know, we had Daniel Dynes, the founder of UiPath, on the show. It was 10 years to 500K in ARR for him. Uh, w- you know, not exactly hypergrowth scaling. You've scaled now and you've pivoted many times, as you mentioned. If I'm a founder coming to you asking your advice down on, "Do I pivot or do I stick?" what's the advice that you most often give founders, knowing what you do?

   7. DSDan Siroker4:20

      The best advice I give is advice I've gotten. So there's two, two things I've heard on this topic. One was, uh, an early investor in Optimizing, and actually a coworker of mine back at Google, Elad Gil, who's now a very successful investor himself, um, I, I once sought his advice on this exact question, and he told me pretty bluntly, he said, "Things that work tend to work really fast." You know, it was kind of this anti-pattern. Most people would say, "Well, you gotta stick it out and be perseverant and, you know, keep, you know, banging your head against an idea, and you have to keep executing it." But if you don't even see glimmers of hope, it doesn't have to completely be working. You, you know, you have to see some version of a glimmer of hope in the thing that you're doing. Even some of the stories, like Airbnb, that people just thought of as this, like, it's took for years and years and perseverance, there were glimmers of hope very, very early on that the idea was really powerful. That was very, uh, eye-opening to me. And you, you can kind of say, okay, yeah, if we've been at it for, you know, six months and you don't see a lot of the glimmers of hope, then maybe it's time to pivot. The other one was recently I saw Dalton Caldwell was asked this question, the YC group partner, and, uh, he said, "A good pivot feels like coming home." And that is something I've definitely resonated with. Every time I've, you know, pivoted or changed an idea or adjusted kind of what our focus is, i- in ma- many ways similar to my mountain climbing analogy, it, it feels like you're on a better path. It feels like you're closer to your core, closer to the problem, you know, closer to being able to, you know, solve it. And you were kind of on the periphery, and now you're in the core. So that would be my two thoughts of advice. You know, things that work tend to work really fast, and if you're gonna pivot, it should feel like you're coming home.

   8. HSHarry Stebbings5:46

      I can tell you're not a venture investor, Dan, because you should never give attribution for other people's wisdom when you can take it as your own (laughs) .

   9. DSDan Siroker5:53

      (laughs)

   10. HSHarry Stebbings5:54

       I, I, I agree. I, I always actually ask the one question, which is, are there more experiments that you're excited to run? And if so, what are they? And if not, then it's probably time to pivot. Like, when you've run out of experiments-... probably time to change. Do you see what I mean?

   11. DSDan Siroker6:10

       Yeah, I think that's totally true. I, and I, I see experiments as kind of, um, there's kind of a, you know, Pareto optimal or 80/20. Like, you've got all your most juicy, exciting hypotheses. And, you know, if those aren't working, you can always come up with new things to try. But it's almost always gonna be, like, if the, if the last five things haven't worked, like, is that new sixth thing gonna be the, the key to success? Sometimes. But almost always if, you know, you're, you're, you're naturally gonna try the things you're most optimistic and bullish about. Um, so but at some point, it's not so much that you don't have the experiments, it's that you're starting to ask yourself, "Is this even worth trying?" Like, am I even ... You know, I, is there any remote chance that what I'm gonna try next is even gonna make

4. 6:45 – 14:53

   First-Time Founders vs. Serial Entrepreneurs

   1. DSDan Siroker6:45

      a difference?

   2. HSHarry Stebbings6:45

      When I speak to you now, like, the thing that's just really striking to me, Dan, is just, like, the experience of starting companies, going through the hard yards, and finding product-market fit, not finding it, the pivots. Which is why I love to back serial entrepreneurs, and I struggle to back first-time founders, 'cause there's just so much mistakes and shit that you don't know that causes costly time. Do you agree with me in the value of serial entrepreneurship? Or do you actually say, "Ah, it's kind of overrated, and every time's different?"

   3. DSDan Siroker7:15

      Well, I, you know, I, I have these tweets that have, that have gone viral, where I, I compare. I say, "First-time founder X," you know, "Second-time founder Y." And it's usually some painfully true thing that I did when I was a first-time founder X and something that's sort of insightful to someone I've learned that's Y. A good example of one of 'em was, you know, first-time founders brag about how many employees they have. Second-time founders brag about how few employees they have. You know, it's sort of like this deep insight into, like, how to build a company. And I definitely think there's some truth to that. It's surprising to me how many, despite all of this great content out there, and Y Combinator and all this trying to help first-time founders, they all kind of make the same class of mistakes over and over again without really, you know, internalizing the, the, the learned wisdoms. So, another way to put it is, like, if I were to What, why, why is, why is that, Dan? Is that just human ego and humanity? (laughs) Is that just humanity of raising too much, hiring too much? I think the core of it is the kind of person that makes a successful founder is usually pretty non-conformist. It's very hard. A- either because the market has pushed them out from traditional jobs, and they just can't succeed in traditional jobs, so they start a company. Or that entrepreneurship has pulled them in to want to be deeply autonomous and have control over their own destiny. And so it's just very hard. I've actually really struggled with this. I was just talking to my old co-founder from Optimizely, getting his advice, 'cause he d- he's a YC group partner now at Pumwumen. I don't really know how to give advice to other founders and have it stick. You know, some of my best investors have Jedi mind-tricked me be- because they've sort of never directly said what they thought. They've sort of influenced me through im- you know, persuasion. And I think this is why a lot of first-time founders make mistakes and don't listen to common wisdom. They're just deeply wired to be non-conformists. And the idea of doing something the old traditional boring way is kind of maybe unexciting. So, and that, and there's naivete. So it's a combination of ego, arrogance, non-conformity, and probably naivete, um, all combined. You end up with a lot of founders who, they're not, they're not a, they're not, you know, gonna kill the company usually. But they, they waste a lot of time and energy on things that ultimately don't matter.

   4. HSHarry Stebbings9:06

      What do you think are other core examples of first-time versus serial entrepreneur, where it's just very striking the differences?

   5. DSDan Siroker9:14

      Focus. Focus. That's a huge one. You know, I, I did, I made up for lack of focus when I was a first-time founder by just sheer hours. You know, I just worked every waking hour. But now with the beautiful things, I have the benefit of hindsight. I have 10 years I put into my last company, and I can recognize that really only three or four things that we did made the difference in the success or failure of the company. At the time, I was doing thousands of things, and I thought all of them were important. But in the moment, you can't tell. You don't know what is the key things that help and are gonna meaningfully change the outcome, versus the things that are just, you know, work that feels like it's important. And that, that ability to focus, that ability to remember that the main thing is that the main thing should say the main thing, that's the thing I think a lot of first-time founders fail. Um, for me, I also had the constraint of having kids, which also forced me that the second time as a founder to really focus on the things that matter, 'cause I don't have nearly as much time as I once did as a first-time founder. So, that's a skill I think a lot of first-time founders can really improve.

   6. HSHarry Stebbings10:05

      Okay. The main thing being the main thing, and, you know, the importance of those two to three things. But Dan, I did my homework pre-this show. I spoke to so many of your teammates. And they said one of the things that makes you so special is your ability to get very in the weeds, to really be at ground level, and know exactly what is going on in each part of the business. How do you think about the hire great people and let them do their work and know those two to three things that you should focus on, versus being everywhere for everyone?

   7. DSDan Siroker10:35

      I've really made a lot of mistakes in my past around hiring and abdicating responsibility to them. Um, and I think it was the Ramp, uh, founder recently on the show who also talked about this. So, you can't abdicate your responsibility to the people you hire. You have to be involved enough to really hold them accountable, to understand the details, to probe, to push. Um, and that's something I certainly failed at, in many cases, my first time around, where I hired people who were really great. I mean, that's partly why I hired them. They did 15 years of the job that I had hired them to do. And so, how could I, this like 20-something founder who's never been the head of go-to-market, uh, at a, you know, huge multi-billion dollar public company, give them advice or hold them accountable? And so that's something I really struggled with the first time. I just didn't even know that was my job. You know, I just sort of thought, "Get out of the way. Be a, you know, be the kind of founder that, you know, gives them ownership, autonomy." And what I really learned is that at the end of the day, um, you, you as the founder and CEO of the company, you hold the bag. Like, they're gonna be there ... There ... Many of the people, uh, who join your company, even if they're great executives, uh, they're just on for a little bit of the ride, you know. And I, I've had several times at Optimizely where, you know, they'll join, they have their, they make their decisions, and then they end up leaving. We either part ways amicably or not. And then I'm hel- left holding the bag. I'm like, "Boy, if I'm gonna be left holding the bag at the end of this, I better be bought in on the things we do." Uh, and some of the biggest mistakes we made are when I sort of abdicated my responsibility there. So, you know, today I try, uh, to, um, to really be involved where I feel like it has the biggest impact. I'm not all up in everyone's business. I'm up in the business that I think has the highest impact to the company. And that amount of accountability and focus I think helps set the example for everyone else, the other managers at our company, knowing that it's their job to, to be a- enough in the details that they can hold people accountable. But that, you know, it's, it's a balance. You, you, you never know. And I try to pick the things that I think are highest impact. But w- only, only with hindsight will you know for sure that those are the highest impact things.

   8. HSHarry Stebbings12:15

      Before we move on to kind of lessons from Optimizely, which you kind of touched on there, I do just have to ask. So if you were an investor today, would you have more of a leaning towards backing serial entrepreneurs over first-time founders as a preference?

   9. DSDan Siroker12:25

      Yes, I would. Yeah. Oh, absolutely. Yeah, yeah, yeah. Because the other part about the nice thing about second-time founders is, by the time they decide to be a second-time founder, like, you kind of have already de-risked one of the main things, which is perseverance. Like, you know, I would much rather- rather h- you know, invest in somebody who's, like, 100% gonna stick with it and try to make it work and maybe 80% as smart than the other way around. Uh, because, you know, there's a, there's a lot of, you know, people who are smart but end up giving up because it gets hard. And it always gets hard. So when they're second-time founder, they're willing to sort of put themselves through that punishment again. That alone is kind of a strong signal to me. Um, and if you learned a lot, you know, I- personally, I've learned a lot. I'm much better because of the first company I had.

   10. HSHarry Stebbings13:02

       I also think clock speed is so important in going from zero to one. And as part of clock speed, that is assembling the best team to take you from zero to one. And as a serial entrepreneur, your network is so much better, more refined than a first-time founder who's hiring friends and kind of anyone who can join at that stage.

   11. DSDan Siroker13:18

       Absolutely, yeah. Yeah, the caliber of person that I can hire today is far, far better than the person I could have hired, you know, when I started Optimizely. So I do think that's a huge factor as well. You can hire much better if you... And c- certainly, if your first company did okay, did well, you sold it, that also, I think, helps a lot when, you know, an employee thinks, "Should I join this person? Well, they had a good, they had, you know, they'd done one good thing. Maybe I'll do another."

   12. HSHarry Stebbings13:35

       On the flip side though, just help me out on this. I never like it when a founder's like, "Aha, if- next company, I'll do this." I'm like, "No, no, no." Like, the great founders of our time have one company. It is their mission. Daniel Ek at Spotify, you name these great founders that we have, the Collisons at Stripe, this is the unwavering mission of their life. Is that wrong of me to expect it to be the founder's life mission?

   13. DSDan Siroker14:01

       I think when you're in the moment and you are the founder and you are the CEO of the company, that should be your mind- mindset. But, you know, you never know where the company goes. If the company doesn't make it or it doesn't become the next, you know... There's, like, ten companies that des- y- you described that are gonna be huge multi-billion dollar public companies the first time around. Bill Gates, Mark Zuckerberg, you know. So it's- it's li- more likely than not that the company that they've started will fail. And then the second most likely is it's gonna have a medium to okay outcome. And so that... And then if they decide after that, say, they want to start a new company, that's a huge pool of people who I think, you know, they shouldn't be knocked on for whatever reason if their company failed. You know, if it failed because of fraud or whatever, then you shouldn't invest in them. But more likely than not, it's some timing to market issues. Uh, you know, there's some factors that can explain the- the failure. And, um, and I wouldn't, I wouldn't, you know, not invest in them. There's just only... You know, yeah, if you could mar- invest in Mark Zuckerberg every time, you should do it. There's just only so many of those out there. And- and oftentimes, you might not even be able to get into that round

5. 14:53 – 16:36

   Biggest Mistakes in Leadership

   1. DSDan Siroker14:53

      (laughs) . So...

   2. HSHarry Stebbings14:54

      We're gonna get onto rounds, 'cause I think we have some differences of opinion here, which I'm really looking forward to, to be fair. Uh, I do just have to ask, we mentioned kind of mistakes and lessons. When you th- I think, like, the best thing in podcasts, honestly, is when someone shares mistakes and attaches lessons to them. When you think about Optimizely, you scaled it to 120 million in ARR. I mean, fuck. What are the biggest fuck-ups (laughs) that you made in your leadership that you have not taken with you to Optimiz- uh, to Limitless?

   3. DSDan Siroker15:24

      The biggest pattern of failures fall into the camp of, "My gut says we should do A. Somebody else thinks we should do B. We end up doing B, and it turned out poorly." There's plenty of times where I said, "We should do A," and it turned out poorly. That wasn't anything I remember. The things that I really used to stay up at night and l- you know, I've been, I'm over it now, but, you know, it takes a long time to get over your company, um, are- are things where you're, in your, in your bones, in your gut, as a founder, you shou- you- you don't feel is the right move or the right focus or the right investment. Uh, but by smart people who you've hired, your board, you know, th- it's not because you're being bamboozled. It's people that you've decided that are gonna help influence the path. You go with their gut and, or you go with their decision, and it turns out poorly. Um, many, many examples of this, you know, from moving to the enterprise too quickly, to sort of not recognizing the core of what we had, to- to sort of abandoning the pr- the core problem of solving churn. Like, there's all of these things that, like, I- I time and time again felt in my bones we should do something, and I didn't have even the words or even the argument sort of... And I, you know, I like to think I'm deeply analytical and data-driven, but oftentimes it's just my intuition. And I coul- because I couldn't verbalize my intuition, um, I couldn't even feel like I should defend the path we should be on. Just, I didn't do the job of the CEO to d- be decisive. And- and, um, I think those were the biggest lessons I learned. And the biggest mistakes I made were not

6. 16:36 – 19:25

   Navigating Enterprise: Advice for Founders

   1. DSDan Siroker16:36

      following my gut.

   2. HSHarry Stebbings16:37

      A very academic way of taking notes here (laughs) . Uh, my question to you there is, so many founders make the mistake of moving to enterprise too quickly, thinking that it's the Holy Grail. Having had that experience, what are your biggest piece of advice to founders on when to move into enterprise and when to stay at the core?

   3. DSDan Siroker16:53

      I think the most important thing is to understand what's working about your business and what's not. I think we had a core magical thing working at Optimizely from the almost beginning, which was this product-led growth motion, which- which, by the way, didn't exi- that term was in many ways... Actually, the person who coined that term used Optimizely as an example of a product-led growth before the term existed. And, you know, a good example is, you know, we had on our website, when you go to optimizely.com back in 2013, you could put in the website, uh, the URL for any website. Doesn't have to be your own. You could put it into our- our homepage. You don't have to sign up. And you could instantly start making changes to the website and seeing what our visual editor looks like. Obviously, those changes don't go live until you put the JavaScript snippet on your page. But that alone, that was such a magical part of our product that led to not just small businesses, but Starbucks. You know, starbucks.com, a guy there who's in charge of optimization and conversion for starbucks.com had that experience, and he sought forgiveness, not permission, to put, you know, he, to- to run our product for $79 a month. He put our A-B testing product on his homepage. And so Starbucks, that's an enterprise company, but we missed... You know, we had sort of this confusion around there's the, there's the, you know, SMBs and- and the way you go at them is product-led growth or, you know, at the time it was sort of self-service. And then there's enterprise and the way you go at them is with human beings who, like, fly up to Seattle and meet with the, you know, headquarters. And we had this magical thing of getting large enterprises to adopt our product without a human being in the loop. And I think we too quickly ran away from that. So- so it's recognizing that was a core thing working well. And then we looked at the numbers and said, "Oh, okay, like, of all our businesses, the ones that are retained the best are enterprises, so let's go after the enterprises, so let's go hire a big enterprise sales team." Like, that- then that last leap was, like, too...... um, too naïve. We should have thought more about what would be the best way to get the Fortune 100 companies using our product, and I think we could've done that by being true to our core and going after this much larger market.

   4. HSHarry Stebbings18:38

      So if I'm a founder asking you advice as a portfolio founder of yours in your angel portfolio, and I say, "How do I know when's the right time?" What advice do you give me?

   5. DSDan Siroker18:47

      I'd say when you feel market pull, when you feel the market, like I gave the example of Starbucks, you know, they're going past all of the processes, they're going past all, like, they're seeking forgiveness, not permission to use your product, um, you're seeing signals that there's more than just a logo. There's a person at that company who feels the pain so viscerally that they've either heard about what your product does or they've tried it yours- themselves, and, um, and now, what a salesperson can do is augment and sort of maximize the potential of that relationship. They're not just, you know, cold-calling into the Fortune 100 trying to get somebody to pay attention to your rinky-dinky startup that, you know, more likely not... even if they got a meeting, they're gonna dismiss 'cause they have no intrinsic interest in what you do.

7. 19:25 – 24:20

   Title Inflation: A Common Founder Mistake

   1. DSDan Siroker19:25

   2. HSHarry Stebbings19:25

      I find one thing that, uh, early founders often make mistakes on is they give titles out too easily. "Oh, you're a CPO, a head of sales, a duh," and actually, titles are quite expensive in my experience. Do you agree with me on the challenge of giving away titles too easily? What have been some lessons for you there? And I got a shitload of hate, by the way, this weekend, 'cause they said, "Can we abolish, like, founding engineer?" You're either a founder or you're an engineer.

   3. DSDan Siroker19:50

      Uh, yeah, I mean, I do think titles, um, they're in- in- they're a bit weird because they're both kind of free to give in one sense, that it doesn't cost you more money, but they're expensive in that it creates this sort of, like, mutually assured destruction (laughs) . You know, as soon as you give out that first VP title, then everyone wants to be a VP and, uh, you know, that's why I think companies actually go in these waves where early stage, everyone's a head of, you know, you're a head of marketing, head of engineering, um, you don't have distinction between VP, SVP and, um, I think that's actually the sweet spot. You kinda wanna be in a place where it's clear who is ultimately accountable for a particular function. You don't want just everyone to be an IC. So that's why I kinda like this, uh, you know, head of, because it makes it clear, but it also doesn't box you out from one day, you know, hiring an executive from the outside and bringing them in and making them, you know, something that maybe they're more accustomed to. And then the one thing on titles that I do think is important to recognize, that at least in some circles, in particular the Bay Area, anything with the word "found" in it, "founding," "founder," "co-founder" has a certain weight that is hard to ignore. Like you- you- you're kind of... So th- I don't think you should be dismissive of that concept, I mean, to be a founding engineer is so much more meaningful to somebody both in terms of their... Both in terms of their... You know, if- if- if- for example, if 80% of your friends are- are founders of companies and you are just a software engineer but you started, you're a first employee, like, that just psychologically, I think, makes it harder. You're- you constantly have this pull, "Should I just go sh-" and then many of your found friends, by the way, who are co-founders are like, "These people are- oh, these people are founders? Like, I could do this." And so you, I think-

   4. HSHarry Stebbings21:17

      (coughs) .

   5. DSDan Siroker21:17

      ... mitigate the risk that somebody's gonna go off and try to start their own company and call them that.

   6. HSHarry Stebbings21:20

      That's why you have an employee number one, employee number two, and- and people take real pride in the fact that they're employee number four at Ramp or at Great Company. You don't have to be a found- you know, I see, like, "founding marketer." They were employee number 26.

   7. DSDan Siroker21:36

      Yeah, yeah.

   8. HSHarry Stebbings21:36

      Right?

   9. DSDan Siroker21:37

      Well, what do you see as the downside, though? What's the downside of calling them a founding marketer? It creates confusion?

   10. HSHarry Stebbings21:41

       I think it's-

   11. DSDan Siroker21:41

       Or are you...

   12. HSHarry Stebbings21:42

       I- I just think it's, like, it loses the meaning that is quite rightly deserved to founders, to the founding team. It kind of cheapens it, and then I think it makes it more difficult to layer. If you have a, uh, a, bluntly, a very junior marketer being a founding marketer, and then we wanna bring in a killer, uh, head of SMB, it's just gonna be really difficult. They're gonna be like, "Wait, so I'm kind of under the founding marketer, who is clearly not at the same level as me? Um, I, no, I don't wanna do that."

   13. DSDan Siroker22:10

       Yeah, that's fair. One thing I'll say about titles that I unequivocally believe is that if this is, uh, something that a candidate brings up early or even during the interview process at all, it is a pretty red flag. It shows you kinda what their values are. The best people I've hired are people who've come in with really fancy titles, and the topic of titles didn't even come up. You know, they show up, they could've been, you know, CTO or principal or... and they show up, "Um, I'll be a software engineer," no, no big deal. That is such a positive sign when title is not something they're overly fixated on, and you know, it shows that they care about the problem, they care about the company, they know that if they do well, they'll grow within the company. So that is one thing I think is, you can, you can say almost unequivocally, like, if somebody coming in, and this is one of the things that they're sort of focused on, it- it tells you kind of what their values are and what their, you know, what- what's meaningful to them.

   14. HSHarry Stebbings22:50

       Any lessons on comp in the hiring process?

   15. DSDan Siroker22:53

       I generally feel like people should comp better than they think (laughs) , you know, I think especially startups where you have some semblance of funding. We've been lucky that we've gotten, you know, great funding from almost the beginning, so maybe I- I'm- I- I- I'm not one to speak for folks who haven't, but, you know, I don't think it's fair to say that you should punish people when it comes to cash comp, um, if they join a startup. You know, obviously they can't match what some of the highest comp- you know, OpenAI is paying millions of dollars, and Google and Microsoft, you know, you can't match that, but you can still pay, you know, 75th percentile in te- in terms of cash, and it shouldn't be a huge lifestyle change just because they're joining a startup. I think that's a... You know, 10 years ago, that was this idea that you're- you're exchanging, you know, risk for reward and you should, like, punish people when it comes to salary. I feel like if somebody who's great has a choice between working at two startups, and one startup gives them a lot of equity and little cash, and a lotta equity and a lotta cash, they're gonna take the latter. And you wanna hire great people, not hire people who are willing to accept, you know, the marginal efficient, uh, um, uh, salary that you can offer them, so that's my philosophy. I also, I also compensate pretty internally fairly, like, I operate on- I- uh, on the model if everyone knew what everyone else made, they're like, "Okay, that generally makes sense." So, um, you know, for example, you know, we hired somebody, a great software engineer, we thought, "Wow, actually the market is showing that this person should be 30K more than the other folks on the team," and so not only did we hire her at that price, but we also raised everyone else's salaries to match, because we didn't feel like it was appropriate to sort of punish somebody just because they came in earlier, even though somebody else later, the market showed should be ear- should

8. 24:20 – 30:46

   Lessons on Secondaries & Motivation

   1. DSDan Siroker24:20

      be paid higher.

   2. HSHarry Stebbings24:21

      Okay. It's really challenging in one pivotal moment, when secondaries become available now more so than ever, for early team members, and obviously it's important that people get the right to do it in a lot of cases. Any lessons on-... how to do that the right way, how to not lose motivation incentive when suddenly people have got five million dollars from their early stock.

   3. DSDan Siroker24:44

      I have a pretty nonconformist view on secondary, and I think this is gonna get me some trouble 'cause, uh, most of my investors feel the exact opposite, (laughs) which is, I think that you should let early employees who have vested their stock sell their stock at any point. You shouldn't feel like the vested stock is yours. If they've vested that stock, and if they're working at your company, that should be, uh, almost as close to compensation, you know, as, you know, psychologically as c- as cash is, if there is a willing buyer. Obviously, you, you know, you wanna make sure you don't cause a distraction and your employees are going out and trying to find buyers. But for us, for example, in our series A, we were way oversubscribed. We actually have... We, we raised our series A over a year ago, and we haven't even started spending it. So, we had far more investors who wanted to invest than we had, um, you know, capital to sell them, and so I gave our employees a chance to sell up to 25% of their vested stock. No judgment, no, you know... Like, it wasn't frowned upon. And in my theory, and we'll, we'll see if this proves out true or not, my theory is that is more retentive, not less retentive, to give people the opportunity to view their stock as more liquid. I think, you know, it's kind of most what most investors will tell you. Most investors say, you know, "Give them golden hank- handcuffs, force them to stick with you," but I think that, again, that's kind of an antiquated notion, assuming that there isn't market liquidity and then they can't go elsewhere. So, I'd rather be thought of as the startup that lets people sell their vested stock and give them more stock as they continue to do well than sort of treat stock as this sort of, like, you know, lockup that you can't, uh, that you can't sell.

   4. HSHarry Stebbings26:09

      So, I, I like that idea, but I was chatting to a founder friend of mine who was in this position. He was like, "The challenge is it creates a tale of two cities, which is the new employees who have unvested and the older who have vested." And suddenly, there's, like, the rich people in the team who've got, not rich, but you know, have sold and have more liquid cash, and those who are coming in with less liquid cash, and it kind of creates this old versus new vibe. Do you worry about that?

   5. DSDan Siroker26:36

      Uh, not as much. I mean, that is a possibility. We don't have that now. We also tend to hire more senior people. Like, we don't hire people straight out of college. We hire people with experience. So we're not hiring people who are super early in their sort of wealth accumulation. You know, not everyone has done well, but like... And, and so in general, I don't, I don't s- I don't feel that vibe. And by the way, we also... It's not just that, you know, company primaries. If there are secondary buyers, and there have been, who've come in between rounds, we also give the opportunity to employees to sell then. So, if you're able to, which is again maybe not always true, if you're able to offer liquidity and you have a willing buyer, doing that, you know, every six months or something I think is a healthy thing. It, or it relieves the pressure for some people, especially people living in the Bay Area. Now they can go buy that house, uh, put down a down payment, you know, do the things that otherwise would have been limiting them and holding them back. And there's something about that ability to provide that liquidity, you know, that makes... You know, if you're able to be the difference between them being able to buy a house or not, I think that engenders a certain amount of retentive power that is very hard, uh, to do any other way. So, I think it's worth it.

   6. HSHarry Stebbings27:35

      Why don't you hire people out of college?

   7. DSDan Siroker27:37

      You know, I, I used to do that. I do think for the most part today, the best team is a small team that is tightly aligned, highly, you know, focused, and typically, you know, if- if you think about a team as every person is an opportunity cost, and you've got N squared connections between people, if given a spot, you could hire somebody straight out of college for, you know, less money or somebody who is, you know, has five or 10 years of experience. I would rather spend more to hire the more experienced person and keep the team smaller than sort of bloat the team by just filling, uh, you know, butts in seats. With 20 people today, I feel like we're having a greater impact and can ship faster than we ever could with 120 people in software engineers at Optimizely. So, that's working, and I just don't wanna mess it up by hiring a bunch of junior people who kind of... You know, they, there's this old saying, "The, the best way to slow down a project is to add a person to it." Uh, so I don't wanna do that. I don't wanna hire a bunch of junior people and help, uh, train them and have that at the cost of our velocity, which right now is very high.

   8. HSHarry Stebbings28:34

      Listen, I, I, I totally agree, and I get you on the impact of small teams. It was actually Arthur at Mistral who said about how they have five, uh, 10 teams of five, and how they try and continuously keep incredible operational velocity in each pod. Um, and it was his lesson from Google that they didn't do that. (laughs) Um, but I, I totally agree and love you. In, in terms of like the, the funding that we mentioned there and being well oversubscribed, I think we're gonna have an interesting chat here, because we actually first, like, engaged on Twitter when I was like, "A, a funding round that's, uh, makes 10% available total bluntly will not result in great investors, because you can't get a great investor to be engaged for 7, 8%." And you disagreed with me on Tw- Twitter, um, very politely. Why did you disagree, and what experience led to that?

   9. DSDan Siroker29:25

      This is one of those classic things that investors tell the public and most founders don't know the counterexamples. Like, there's a bunch of things that are all in the founder or investor's interest, that are sort of in the lore of how to raise money and what's accepted, what's not. And there's... And, and rarely do people see the exceptions. Uh, and so this is one of those, where like, yeah, the best investors, Benchmark, Andreessen, they will invest less than their supposed minimums for the right company. And, you know, you don't... You can't call your shots if you're not doing well, but if you're doing well, you shouldn't assume that just because you've seen that somewhere for the average company, that those, you know, constraints should necessarily apply to you. And I think min- minimums is a perfect example of that. Even if you talk to LPs of great funds, and you know, they promise these LPs a certain set of, uh, investment theses and portfolios, but if you talk to the LPs and said, "Hey, LP in, in big successful venture fund, would you like that fund to either, yes, invest or no, invest, in some of the best companies, let's say the best likely company of the year?" And if they say, "Well, the only way to do that is for less than the target ownership percentage," every LP would say yes. I'd much rather get 1% of the next, you know, Google than 0% if that's the constraint. So, um, that's why I disagree, is 'cause I feel like a lot of founders, they, they just fall into the pattern of what they think is common wisdom, not knowing that there are many exceptions to all of these sort of standard, very much investor-favored

9. 30:46 – 35:06

   Negotiation Tactics

   1. DSDan Siroker30:46

      terms.

   2. HSHarry Stebbings30:46

      I get you. I think the caveat is, it's you. And I mean that nicely and not blowing smoke up your ass, but you scaled a business to 120 million in ARR, and the first, you know, uh, zero to one for Limitless has been very successful and efficient. 99.9% of founders are not like you, and I- I almost worry that they will listen, go to raises with like, "Hey, we're doing 10% dilution," and it's like, yeah, Dan's a different story. Parker at Rippling is a different story.

   3. DSDan Siroker31:15

      Well, I appreciate that, but I also did this before I was me (laughs) . You know, my very first Series A, I got-

   4. HSHarry Stebbings31:20

      So-

   5. DSDan Siroker31:20

      ... you know, I got Benchmark to agree to, you know, I think it was maybe 8% or something, uh, you know-

   6. HSHarry Stebbings31:25

      Okay, talk- talk- talk- talk-

   7. DSDan Siroker31:26

      ... and I'm sure there were a lot more talented people listening.

   8. HSHarry Stebbings31:26

      ... to me about that. I- I'd love to hear about that. So you ... how did that round happen? You met Peter, or you met ... who did you meet, and how did it go?

   9. DSDan Siroker31:33

      Yeah, so this was 2013, um, and yeah, the P- uh, well Peter was the first person I had met. In fact, and it was a very memorable conversation. It was also very competitive, and that's why it led to this, I think, uh, the- them willing to sort of flex, and obviously, you know, they had certain constraints and I was able to meet them, and well, it was a negotiation, you know, that's the thing I should say is that, it is a negotiation of which every negotiation, everything is up for negotiation, and in exchange for less ownership percentage, they also got a lower valuation, um, and so I do think that is something to consider. Like you- you- that's mainly if I go- if I zoom out, and- and just generally around fundraising, I think some of the most common mistakes founders make is they're not empathizing with the investor. They don't understand the world from the investor's point of view. They'll take like a clip of me on your show and say, "Oh, Dan says get, you know, less than 10%," and they think that that- that their job is to get everything, everything, everything for them, when really, often the best negotiations are when the person on each side of the table is thinking about what motivates and drives the other person on the other table and other side, and if you find common ground, you're able to negotiate one thing that doesn't happen to matter too much to you, and matters a whole lot to them, that's a great way to trade something that you really want for something that they might really want.

   10. HSHarry Stebbings32:38

       What's your advice to founders on what they should give on versus what they should not give on when it comes to those negotiations?

   11. DSDan Siroker32:45

       I think it's fair to give on valuation. Uh, I think you- you have to recognize that the person who's investing, many times, and depending on where they are in their career, they're putting a lot of reputational bet on you, and so you need to give them the thing that they can tell other investors when they're at their fancy Utah ski conference, and they're like, "Oh my gosh, you invested in this company?" Like, "What? You did the public fundraise with- with Rewind then?" Like, you know, and you need to tell them, "No, actually, here's the thing that I got that is so valuable," and every other investor on their peer group says, "Oh, good for you. At- at- " you know, "Atta boy, atta girl." And so you're recognizing, even just thinking about what did it take for that person to be able to do that I think is important, 'cause that's how you get somebody to feel like ... you know, every negotiation, you're compromising, you want them at the end, you know, you gotta work with this person (laughs) . You know, you don't wanna extract every little ... you know, you don't wanna squeeze them dry so that like the day after the term s- sheet and the day after the doctor sign, there's a whole bunch of resentment (laughs) from day one. So, um, so I think that's important, is recognizing where somebody's coming from and how you can give them some wins. You know, I do think that that's different for each stage and every investor and that ... but it starts with empathy. You gotta understand where they're coming from.

   12. HSHarry Stebbings33:49

       How do you advise founders on when to be willing to have a board? Often VCs want a board seat.

   13. DSDan Siroker33:55

       I've been lucky not to have a board for- um, for Limitless. Um, I do think generally boards are helpful for first-time founders, and of course, the right board members can be helpful for any company. Uh, I think it was Vinod Khosla who said something like, "80% of venture capitalists add negative value to startups." I don't know if that's true, but he's met a lot more venture capitalists than I have, um, and I've certainly worked with a lot of really, really great venture capitalists. Often, the best advisors and the best venture capitalists I've had didn't need to be on the board to be helpful. You know, Elad Gil is a good example. I- I quoted him earlier. Like, that was a very pivotal conversation that was just somebody who happened to be a small investor in our company, who I called, that he answered, and we had a conversation. Those are the kinds of things that can be really meaningful. I do think boards, uh, as a company gets bigger and bigger and closer to going public are really important for governance and accountability, but when the company is so early on, it's very, very hard for a board member to get up to speed. You know, they're- they're showing up once a quarter, maybe once a month, and, you know, you have the context of the- being the founder, um, that, you know, ultimately the board may not have. So, I generally think, you- you know, if you're a first-time founder and you find somebody who has- who's aligned around the right values long-term, it's probably worth doing, but I don't ... again, it's one of those things you shouldn't assume that you have to do every time you raise money.

10. 35:06 – 41:46

    Steps for Structuring Pronoun Fundraisers

    1. DSDan Siroker35:06

    2. HSHarry Stebbings35:06

       I do just wanna ask, you know, you- you're a pro now on fundraisers. Um, when you think about running your process, how do you do it step by step? How do you think about structuring it? Can you just walk me through that?

    3. DSDan Siroker35:18

       Yeah, I- I- it's actually interesting. Like, each fundraise I've done, I think, you know, I've raised probably 280 million in my career over two companies, and every time I've done it, I've actually done it a little bit differently. Uh, it kinda goes to, uh, uh, you know, it's- it's also very much my process for honing my pitch, which is, you know, like a stand-up comedian goes to these rinky-dinky bars on a Wednesday afternoon or whatever to learn what works, and to stick with what works. And so for me, each time I've raised money, I've actually done it a little bit differently. A year ago, the most recent time, what I did very differently and worked really well, was I- I broke this sort of conventional wisdom that you should do a fundraise in private, and just, you know, go down and meet the five investors everyone says you should go talk to and hope they say yes. Instead, what I ... and- and so let me just draw an analogy why that's so ridiculous, how like 90%, 95% of companies raise money. When you add an investor to your company, especially if they're a board member, that's like getting married to them. It's actually harder because you can't really get divorced. It's getting married without the possibility of divorce, and if you wanna be at your company for five or 10 or 20 years, that's a really, really big decision. Now, imagine if your ja- if- if you wanted to marry somebody for love, and the only way you could find the person you wanted to marry was you had to drive down this one street in Menlo Park called Sand Hill Road, you had to go down five beautiful offices, and pick one of those five people. If that was the only method by which you had to decide who you'd marry, you would think that's ridiculous. And now, you have the possibility with social media to do the opposite, to do what Tinder or, you know, any so- any great dating app lets you do, which is cast a wide net and see who's a good fit for you.... and that's what we did with our last fundraise, which is, we cast a wide net. Um, it started off not really actually as a goal of fundraising, it was really try to build trust with customers around our business and sh- showing them we're a going concern. And the byproduct is, you know, we put our deck out, you can see it, it's about seven minutes, it kinda went viral. We had a couple million views and thousands of offers to invest. We ended up getting, um, you know, many offers at a huge distribution of, uh, of valuations, and we ended up with a partner who, yeah, we could have perhaps found down St. Hill Road. They were actually an office there-

    4. HSHarry Stebbings37:15

       (laughs)

    5. DSDan Siroker37:15

       ... but ultimately I felt like that was the best path, you know?

    6. HSHarry Stebbings37:19

       Wh- who did you choose?

    7. DSDan Siroker37:21

       We, we chose NEA, which has been a great partner. NEA has a l- very... and, and the thing I loved about NEA and still love is their v- very long-term orientation. They're often buyers at the IPO, they're not sellers. So that was the thing that drew me to them, and there's so many things in there, both acts and words that really reinforce this, especially as I talk to references and other founders that they took, took money from.

    8. HSHarry Stebbings37:38

       Should you always take the highest price, Dan?

    9. DSDan Siroker37:40

       No, absolutely not. In fact, d- always taking the highest price is almost certainly gonna be a mistake. Uh, I know now because I have real data on this. So I actually have a distribution of the valuations we got from the last series A. Uh, we had offers, actually, uh, 22 offers at a billion dollars. Uh, we turned them down and took 350. So we chose, we actually have this dis... I can share the deck if you want, or the graph if you want. But the, you know, the most common was 200. We had several folks between 300 and 400, and we had a handful of outliers at a billion. We not only chose 350, but we also invited everyone who offered more than 350, if it made sense, we invited them to be part of an RUV, a roll-up vehicle, to participate even a little bit in the round. So we got kinda this benefit of great lead investor and this wide net of hundreds of smaller investors who then are sort of evangelists and supporters, and, you know, they'll help retweet things when (laughs) when we post launches. Um, so we had kinda the best of both worlds.

    10. HSHarry Stebbings38:31

        I agree, and I think the biggest challenge is people struggling to scale into enormous, enormous valuations. So, I totally agree with you there. You mentioned NEA and their kind of, uh, continuous financing pathway that they can do. Often founders are told, "Ah, signaling's really dangerous with these large firms, 'cause if they don't do the next round and they can..." As a serial founder, are you like, "For fuck's sake, the signaling argument's not true"? Are you like, "Mm, it's worth thinking about"? How do you, how do you think about that?

    11. DSDan Siroker38:57

        Yeah, I mean, I do think it, i- it is, it is a factor, for sure. And you have to... again, goes to empathizing with your investors. You have to think through the world from their point of view. And especially somebody who's val- you know, if, if somebody says, "I wanna invest in Limitless," and they're saying to their partners, "Look, and I think we should invest at this incredibly high valuation relative to revenue," you know, th- you need to understand that they need to be armed with the right evidence, motivation, desires to do that. And if one of the, you know, headwinds is, "Oh, by the way, hold on, looks like Andreessen Horowitz, they invested, they, they did the seed round. Like, why isn't Andreessen leading this round?" Like, you need to have a good answer to that question, and that's something that I do think most founders don't recognize. It comes back to empathy. You have to understand, for this person, it's likely, almost certainly, you'll get one person at a firm. You know, if, if you got a good company, you're r- doing something well, it's almost impossible not to get at least one person at a venture firm to love what you do. Your job often is to get that person armed with the data, information, and support to convince their partners that it's investment worth making.

    12. HSHarry Stebbings39:49

        Yeah, I totally agree. I think, you know, one thing that people forget is the craft of salesmanship or sales int- inside a partnership, and you have to get other people along with you in a lot of cases. So I totally agree there. How do you advise founders on how much they raise and how they say the price? Like, should they shoot for a smaller amount, let people go over it? There's a kind of cat and mouse game here. How do you advise them?

    13. DSDan Siroker40:12

        Well, first thing I'll advise you is I wanna just demystify. When an, uh... I wanna share some code that you may not know. When an investor asks, "How much are you raising?" what they're trying to do often, they may actually wanna know the, literally the amount. More often than not, they're actually asking, "How much..."

    14. HSHarry Stebbings40:27

        I do this.

    15. DSDan Siroker40:27

        How... They're actually asking, "How much do you think you're worth?" And let me he- he... Let's start the negotiation on valuation right now. Because, like you said earlier, often, you know, 10% or 20%, let's say 20% is what they want. If you say, you know, "We're worth... Oh, yeah, we're raising 10 million," they just take 10 million divided by 0.2, and then that's what they think that your valuation, that you think your valuation is. So instead of answering the question how much you're raising, the best answer is, "You know, we don't need to raise, so we don't have a budget we're driving. We wanna sell no more than this percentage of the company, and we're letting the market decide the valuation." That's how I frame it. It kind of pisses off investors 'cause it doesn't play into their game of... You know, when they sp- again, it goes back to when they write up their memo for their partners and say, "Okay, what, what valuation should we go in?" You know, it doesn't give them what they need, so they get a little frustrated. But I usually say, uh... And the other thing, by the way, that I think I frustrate so many investors, I've been doing this for 10 years, I, and I probably need a better answer. But oftentimes people ask me a very simple question: "Are you raising money?" And my answer almost n- always is, is never yes or no. They want just a yes or no. Usually it's some version of, "Well, no, but if over the next week we get a term sheet we can't say no to, we're probably gonna take it." Um, so that's something, you know, you also gotta recognize that, "Are you raising money?" "Yes," causes them to then have this perceived clock that, "Okay, if they haven't raised money in three months or six months, then what do the other investors know that I don't know?" So, you know, these are small little traps that you can fall into. But at the end of the day, I don't think it really matters that much. These are all sort of marginal benefits you get from sort of understanding where the investor's

11. 41:46 – 58:07

    Engaging with Associates & Practicing the Pitch

    1. DSDan Siroker41:46

       coming from.

    2. HSHarry Stebbings41:46

       And one of the worst things that I've heard from like, you know, investors and team members is like, "Oh, the ra- they're, they're not raising right now." I'm like, "There's always a fucking round in place." If you wanna make it happen, like, you can always make a round happen if you want to. How do you think about actually a really challenging thing when you've got one term sheet, and then you're kind of waiting for others, but they're pressuring you to get an answer, but you do wanna wait and see what the others say? How do you manage this timing process on term sheets?

    3. DSDan Siroker42:16

       So this is actually something you can think about and be proactive about upfront. So I'll give you an example. Last year, when we did this fundraise, I, um, uh, we did this kind of in public. We put the deck out, and then for any of the people we felt were good finalists, we gave them a Calendly link for the first meetings. And those meetings were all one week, so no more than one week. And that's another benefit of doing this in public, is you can do it all in parallel. If you're just taking investor meetings willy-nilly as they come, you get into the exact problem you're describing, which is you might get a term sheet from one investor, but you haven't even started the meetings with another that you actually wanna work with.... so I do think, thinking about how we structure and sort of calendar out the raise ahead of time, for me, it was all first meetings are one week and then everyone asks, "Oh, how is the round going to help?" This, and I just tell them, like, "This week, from this day to this is first meetings. I'm having f- you know, final partnerships meetings, I have three final partnerships meetings next Monday, and then two more the following Monday." And then they have transparency, they, the thing is, they also don't want to miss out, so it's actually a mutual benefit. They, the investors who haven't given you a term sheet yet, they want to make sure they're not too late to the game, and then you just set expectations with everyone that, like, that's your calendar and, and I'm gonna make a decision by X date, then they work backwards from that. So I think if you don't set those constraints, you end up in exactly this- the situation you want, which is, by the way, what investor... The investor who's giving you that term sheet wants to preempt it. They want to get in early, they want to get a better price, and so they know that if they do it before you're getting information from everyone else, that's gonna help them. So you should just work backwards and try to avoid it.

    4. HSHarry Stebbings43:34

       Do you not feel that with the transactionalization of the process, you lose the ability to get data on what they're like as a true partner? Do you see what I mean? Like, if you're just running as a-

    5. DSDan Siroker43:44

       Oh, yeah, I definitely-

    6. HSHarry Stebbings43:44

       ... route?

    7. DSDan Siroker43:44

       ... see what you mean. I, and I, I think there's definitely some truth to that, but I also think when investor and usually it's an associate reaches out and says, "Hey, we really love your business. We'd love to catch up." That's them kind of being transactional too. That's their fulltime job to get meetings booked for their senior partner, and when you meet with that partner, it's not really building a relationship, it's them evaluating you to be decided should we preempt their next round? So not to say that you should treat their lack of relationship building and transactional nature with your own, but you can very quickly get up to speed with a lead investor like I did with NEA by doing a ton of references. You know, as soon as it's clear that you're gonna potentially, you know, get married and take a term sheet, in that moment, you can ask them, let, let, "Give me the contact info of every founder you've fo- funded in the last five years." And, you know, even Peter Fenton did that. You know, Peter Fenton, when I asked for references on him, at the time he was this, you know, amazing luminary, I asked him for references, he gave me 12 founders and CEOs, their phone number, their email, he didn't even introduce me, just, just reach out. And then I got this great conversation to talk to 12 amazing people. I talked to every single one of his references, and that's how you can really get to know somebody, you know, the, the sell part when they meet you during the fundraise, you get a really unique narrow view of them, you really get to understand a person when you do the references on them afterwards.

    8. HSHarry Stebbings44:51

       Should founders always be raising? Mark Suster says about lines not dots in building that relationship over time, but then it does take time away from running the cool business. Lines not dots or...

    9. DSDan Siroker45:04

       I very much believe you should either be in fundraising mode or not. One, the one thing I actually really recommend, so before I did this public fundraise, the way (laughs) I actually practiced and actually got the story and the pitch right was any time prior to that some investor would reach out, I would actually send them a Calendly link for my investor week. It was, it was a week somewhere usually it was, like, once, I didn't think at the time, I was doing it maybe once a quarter, now I do it once every two quarters, where I just bu- I do back-to-back usually associate meetings where you hone the pitch over and over again, and I just, when they reach out, I say, "Hey, super interested, but right now I'm not fundraising. If you're interested, book a time." And so you build up sort of these bookings that then the week comes and then you're in investor mode, so you can get out of product mode or customer mode, you're not kind of distracted along the way, and you, you can really, really hone a pitch. When you have, like, 30 back-to-back associate investor meetings where you're practicing your pitch and tweaking the deck every single meeting, by the end of that, you have this really, really honed product like a stand-up comedian like I said earlier.

    10. HSHarry Stebbings45:58

        I totally agree with that in terms of the constant A/B testing and really measuring what works and what doesn't. Should... (laughs) This is a real grenade in the pen, uh, should founders engage with the associate level and how does that vary?

    11. DSDan Siroker46:13

        Yes. I mean, I'll say yes, but I'll say yes in a way that's probably reinforcing the part of the Twitter-verse that think associates don't MHI. You, I, I view them as practice. I view them as if I can get past a, and oftentimes when I did this, these are associates who didn't even Google me ahead of time, they show up 10 minutes late to a 30-minute meeting, but if by the end of that meeting where they care... they, they're just mailing it in, they show up, I use those 20 minutes I have with them to really nail it. I really practice my craft. In the same way that Chris Rock will go down to New Jersey, you know, the, the dive bar and nail, if you can nail your craft there with a 20-minute disengaged associate who doesn't really understand your business, you can really nail it with the people who understand your business. And I know others disagree, some people think, you know, I think Keith Robost said, like, you know, the, the questions you get from a truly great investor are different from the ones you get from an associate, and there's definitely-

    12. HSHarry Stebbings46:59

        Mm.

    13. DSDan Siroker46:59

        ... some truth to that, but I think that by nailing it there, at minimum, you know your deck is polished, you know you're answering all the right questions, uh, you've heard a lot of objections ahead of time. For me, my secret is, um... and I probably shouldn't give this away, but any time I get a question there, I almost always either change the deck or I'll add a slide to the appendix. So if I ever get that question again, it's very impressive to somebody, I think, when you say, uh, when they ask you, "Oh, well, what about Apple? How are you gonna compete with Apple?" And it's, "Oh, let me pull that up in the appendix," and I have, like, a beautiful, well-articulated, with transitions, slide in your appendix. If you can answer their question with a slide you've already prepared in your appendix, you at least show the investor that you're prepared, you're not just winging it, um, so that's another reason I, I meet with associates is to build up my appendix.

    14. HSHarry Stebbings47:36

        I, I, I so agree with you, and I think the FAQs is a brilliant way to show getting ahead of time on their concerns and actually arming them with the internal material to sell it to their partnership.

    15. DSDan Siroker47:47

        That's exactly right. That's exactly right. Oftentimes, especially I found this too, when you, you, you very quickly can tell if the person you're meeting with, they just, they have an inclination they want to invest almost from the beginning, and all of their questions you'll find out, actually, I think, are often the questions they think their partners or the senior partner at their firm will ask them. So they just want free, "Give me some ammo so that when my senior partner comes back to me and say, 'Wait, hold on, how is this differentiated in AI? And isn't this commoditized? And how are you gonna pick something in the app layer?' " You have all of the things ready to go, you're sort of like, you've done their jo- you've sort of done their homework for them, uh, and that's it, when you... and you're in a good mood. When you're in a investor meeting and you can kind of get this vibe that they're asking the questions not because of their interest, but because they're about to go sell their partners, uh, that's a good sign.

    16. HSHarry Stebbings48:26

        I'm not being a dick, but I guess I am being a dick, but I guess at this stage, you know, like, I don't really want to work with someone who's got to go up and sell it to someone else. Like, Fenton does not have-

    17. DSDan Siroker48:36

        (laughs)

    18. HSHarry Stebbings48:36

        ... to sell a deal re- I mean, like, he will present it in the way that Optimizely is, and people will see the brilliance, but he's not, like, selling in the way that we talk about there.

    19. DSDan Siroker48:47

        Yeah, my, my thinking on this has actually changed quite a bit. I think the best investor you can have for your company is somebody who's on the rising arc of their career. You want a Peter Fenton when he's 35, not 45. You want... Not, not, not to be ageist, but you want somebody before they've had their first IPO. And you want them to be the person who is going to have it. You're betting on them just as much as they're betting on you. Because what happens when somebody's had a lot of success, and no knock on the people... I got to work with amazing investors who had a ton of success, like Peter Fenton and Marc Andreessen. Like, they've had a lot of success. Like, for you to truly be the difference in their career or not is pretty unlikely. And so, you want somebody where they've just, in their bones and in their pocketbook, you are the difference between them reaching the pinnacle of their career. Um, and so that's... You know, the same way that you'd rather get, you know, an NBA player, you know, who's in their prime, not somebody who's on their way out of their career. And they're good- you know, they've done great things, but I think you, you get the best out of somebody when they are, when they're aligned around trying to build something with you, not because you're just a fancy logo on their, you know, many logos of public companies they've, they've taken.

    20. HSHarry Stebbings49:47

        How do investors differ pre-success on the arc versus post-success when they're legends?

    21. DSDan Siroker49:52

        The thing I noticed is... Well, there's some investors who just, out of competitiveness, I think more than anything, um, are gonna be helpful no matter what. They just can't not be helpful because they just feel like it's, uh, kind of in their DNA. It's that kind of their... But they're not doing it actually rationally. Like, if they were rational, they would probably spend more of their time on the other parts of their portfolio where they could have a bigger, you know, IRR impact to their fund. And so, there's a certain set of investors in that camp. There's others who, you know, I'll be honest, you know, at some point it was clear that Optimizely was gonna be okay. You know, we sold for, you know, a nice outcome, but it wasn't a multi-billion dollar public company. And I could tell some of the other investors were like, "Okay, I'll do the, you know, minimum necessary, I'll show up to the board meetings, I'll do the work I need to, but I'm not gonna bend over backwards to help recruit you the best head of engineering I can possibly find." So, that just happens. You, you have to know that too, is, uh, for a period of time, you'll be the darling. You'll always have a... If you raise money, for a period of time, even after you raise money, you'll have this darling effect. But then quickly, you, you know, is if they're being highly rational, economic, you know, investors, they're gonna allocate their time proportionately to where they can have the biggest impact. So, you know, the way I sort of... You know, it hurt a little bit in the moment when I sort of recognized that, but you also got to understand, like, it's a business. They're investors, that's rational. You're the founder, your job is to make the company successful. You can't outsource. Th- the one thing that really kills me is when I see a founder playing the victim here, and saying, "Well, and my investors didn't help me enough." Like, that's not their job. Their job is to give you money and hopefully do no harm (laughs) . Uh, if you got some help along the way, great. But, like, your job as a founder is to make it succeed. And so, playing the victim and assuming your investor is the reason you're gonna succeed or not, I think, is a, is y- you're lying to yourself and lying to your investors.

    22. HSHarry Stebbings51:27

        (laughs) I, I, I totally agree with you. Can I ask, you've had some of the best brands, Benchmark, your Andreessens of the world. To what extent does v- venture brand being behind you make a large difference to company trajectory, or not?

    23. DSDan Siroker51:41

        I think it helps. It doesn't, it's not the difference maker. I think it helps with recruiting. Um, I think that's probably the biggest benefit. You know, great, great talent can work anywhere, and if they had the choice between a company that's got, you know, great marquee investors who, you know, who've done their homework, that de-risks the founder to them, that de-risks the company. So, I think that's probably the most tangible benefit. Um, it maybe marginally helps with customers. I don't think so. Um, if you're B2B, maybe in the enterprise it might help. But for the most part, I think it, it helps build a movement, and sort of traction and momentum in the market. It probably scares off competitors (laughs) . Uh, I did notice this, that one of the bene- side, unintended bene- side benefits of, of the round we raised, uh, I do think kind of, uh, made everyone else's job, who's a founder trying to compete with us, much, much harder. Because first of all, we had hundreds of investors, and now that all those are conflicted out, and you get this sort of momentum. It's like, oh my gosh, how are you po- Like, all of the questions they're getting, their appendix, appendix like number one is, "How are you gonna compete with Limitless?" You know, "How are you gonna compete with, uh, uh, with us?" Uh, especially given, you know, all of the, the who's who's invested." So, um, that probably helps. Maybe I don't, I don't appreciate that quite as much. I haven't heard that, but I assume, uh, that's happening as well. So, that's one benefit.

    24. HSHarry Stebbings52:50

        Do you think there's any big misalignments between venture investors and founders that aren't called out enough?

    25. DSDan Siroker52:55

        Well, for the most part, at every stage, up until the very end, they're pretty well aligned. Um, you know, you get into these situations and you're selling the company where maybe the motivations and incentives are slightly out of alignment. You know, like, it's, it's... I think a lot of founders actually have a very binary view on outcomes. They think either it's gonna go to zero or it's gonna be a multi-billion dollar public company. Or actually, I think more likely than not, they're discounting kind of the middle of the road outcome where maybe it's, you know, 2X what you've raised, you know, or 3X, or maybe it's, it's slightly more. And things like liquidation preference are really important. And, you know, so I think those are the kinds of things where you do need to model out and think through what are the different middle of the road outcomes and how you might be misaligned there, to make sure you're not, for example, raising too much money and then getting to an outcome where, you know, investors have a very, very different financial... You know, they're basically... Uh, for example, just to make it very plain, if you sell your company for as much as you raised or slightly more, the difference between as much and slightly more is incredibly meaningful to your employees, makes no difference to the investors. They basically get 1X back (laughs) . So, in those situations, you really gotta be thoughtful around how you, what you raise and also how you structure that. Never take more than 1X non-participating preferred liquidation preference. You know, those are the s- I mean, this is common wisdom, you can read a bunch of books on it. But, uh, that's when things get really out of alignment.

    26. HSHarry Stebbings54:11

        Do you think we're gonna enter a world of pain around, like, prefs? We've seen a lot of people raise a lot of money, and I think the investors will get their money back in a lot of cases. Not all. But everyone else will suffer in a lot of cases. Do you agree? And, and any advice?

    27. DSDan Siroker54:25

        I mean, I think it's, it's very possible, especially in a situation where during ZIRP a company raised at X valuation and they have too much pride and, um-... fear associated with that valuation, and they're afraid of taking a down round if they need more capital. And so, they trick employees by saying, "Hey, we raised an up round." But behind the scenes, what they really did was they added, like, a 2X liquidation preference, which almost always means no employee is ever gonna get any of their stock worth anything. So I do worry about that. But if you're a founder listening to this and you're contemplating an up round with a liquidation preference, more than one, or a down round, do, 100% of the time, do the down round. It is much better for you as a founder with common stock. It's much better for your employees. It will hurt in the moment when somebody says, "Oh my gosh. This company that I thought once was worth a lot of money durnzer is now worth less," but that's fine. They'll leave. You, uh, hire somebody else. Like, you'd much rather be in a company with less, uh, overhang on the valuation on the liquidation preference than one without.

    28. HSHarry Stebbings55:19

        Any big other mistakes that you see founders make in fundraising when you look at the founders around you?

    29. DSDan Siroker55:25

        I think they don't, uh, they don't recognize control as, as important thing to maintain. Um, and I think, you know, there's the Sam Altman camp, which is like, "You know, you gotta trust people at the, you know, small percent risk that you're gonna get screwed over." Uh, this was before he got screwed over (laughs) , so, uh, he had a very kind of, like, you know, "You do right for the world and it does right for you." And, uh, I wonder if, you know, I should ask him, uh (laughs) , what, what he thinks now. Uh, maybe somebody's asked him that in one of his, uh, interviews. But I do think, y- you know, it's when you think control and you think governance, you shouldn't view it as you're offending an investor. Like, if an investor was highly rational, they would also ask for and want as much control as possible if they were the founder. And many former founders who are now investors understand that. They wish they had more control. So, things like super voting stock, I think you should make sure to ask for. Multiple board seats, you should ask for. Not having board members, maybe having board observers instead of board members for certain investors. Um, you know, it's- it's, you know, and it- it's hard to ask 'cause it kind of can feel a little personal, I think, because like, "Well, you don't, you don't trust me," but at the end of the day, you're just being rational. You, as the founder of the company, uh, are actually, as a fiduciary, responsible to represent the interests of the common stock. And that's your employees, you know? And, and so if you wanna do best for your employees, you want to rationally control as much as you possibly can around the outcome of the company for them. So, advocate on their behalf, and likely your own because you're also likely a large common stock holder, and, uh, be- be willing to push for things like super voting and, and multiple board seats.

    30. HSHarry Stebbings56:48

        Can I sell you my product in venture and see if you like it? Okay.
12. 58:07 – 59:58

    The Best Venture Meeting

    1. HSHarry Stebbings58:07

       very funny. Um, so yes, good. What was the best venture meeting you've had? Like, when you look back and you're like, "Oh, that one was, like, my favorite ever," across both companies?

    2. DSDan Siroker58:16

       I would say it's, it was probably the first meeting I had with Peter Fenton in 2013. It was, it was not only the best because... I think it was mostly the most memorable. Um-

    3. HSHarry Stebbings58:24

       (laughs)

    4. DSDan Siroker58:24

       ... the first reason it was memorable is 'cause he came in with this entire contraption around his knee. He could barely walk, and the reason was he had just been helicopter skiing, and he, like, broke his knee or something, but he still showed up to the meeting. He then, by the way, he, I think, has a similar kind of, um, dynamic with me where he has to sort of prove to the world other things. Anyway, he ended up to learn how to fly a helicopter after that 'cause he wanted to conquer the thing that had (laughs) broken his knee. Anyway, the reason I remember it, 'cause the- the, I remember so vividly the very first question he asked me, which at the moment I had no idea why he's asking or why it matters. And now with hindsight, I totally get it. The very first question he asked me was, "Dan, what's gonna get you excited to be at this business in five years?" And this is 2013. In 2018, exactly five years later, it was exactly when I started to feel trapped, resentful, disengaged, you know, sort of, like, going through the motions. And he exactly s- astutely figured, a- asked and pointed out... And at the time, I probably gave him some answer that I felt was true, but if I had really listened to that question, I think I could have done a much better job of staying in love with the business 'cause I think what he'd found basically, and maybe this is just his track record or- or is, the- the companies he's taken public, they're all founders who have just been perseverant, who can keep it up, who- who- who stay in love with the business five, 10, 20, 30 years into it. And I think I- I mistook that question as, "Oh, that was an interesting question." Uh, you know, I thought it was maybe he was trying to flatter me. It's like, "Oh, he wants..." but it was really actually trying to understand what motivates me, what drives me. And that's something I've definitely learned with Limitless. You know, I will be at Limitless. This is my life's work. I'm gonna be doing this. Even if we failed, I'd be proud to have done the kind of problems we're trying to solve than, um, than not. So, that was probably the most

13. 59:58 – 1:07:42

    Navigating the AI Investment Landscape

    1. DSDan Siroker59:58

       memorable meeting.

    2. HSHarry Stebbings59:59

       I just have to ask you, as an investor state, it's a really freaking hard world to navigate, investing in a world of AI, of such transience of leadership. One week it's Mistral, the next week it's LLaMA, the next week it's OpenAI. How do you think (laughs) about where we are? How do you analyze the landscape today? I know it's broad and shit question, but just help me understand how you think about it and where we are.

    3. DSDan Siroker1:00:22

       I think the most important thing to do if you're an investor today is find founders who are obsessed with problems, not solutions. You know, th- today, many founders, especially ex-crypto founders, tend to think of AI as the solution to all the problems in the world, and they're, uh, they're actually technology in search of a problem. I learned this anti-pattern at Google, actually. I started my career there as an associate product manager, and Google's notorious for building products that are technology in search of problems. Google Wave, Google Buzz, Google Glass. Like, all of these products were basically some smart...... engineer or technologist starting the sentence with, "Wouldn't it be cool if..." dot, dot, dot. So, if the startup you're evaluating or the technology you're considering began with the origin of, "Wouldn't it be cool if..." dot, dot, dot, and the, the cool isn't problem, the cool is technology in search of a problem, then I think that's a very strong anti-pattern. I would focus on the- that's the only custom- companies I really invest in today, are companies that deeply care about the problem, and it just so happens that maybe AI or technology can solve it. It's not that they're sort of wed to this ideological idea. You know, for me, for example, we're building a hardware, we're building a wearable. If I can solve the same problems I wanna solve without them, go for it. I would be happy to do that. Hardware is hard, it's expensive, it's painful. I, I would happily give up hardware if I could solve the problems using entirely just software. So, I think that's the filter you should use. It shouldn't be, is it app layer or foundational layer? It shouldn't be first-time or second-time founder. It's, is this font- founder obsessed with a problem in the world? Is the problem real, are there other people who have that problem, and do I have confidence that this founder will persevere to try to solve that problem and maybe have some of the skills necessary to use technology to do that? Not, "Oh, cool, it's-"

Episode duration: 1:17:14