The Twenty Minute VCZachary Bookman: Why Valuations and Fundraising are BS | E1235
CHAPTERS
- 0:00 – 3:20
Enterprise SaaS has a long “wilderness period” (and OpenGov lived it)
Zac explains why starting and scaling an enterprise SaaS company often takes far longer than founders expect, using OpenGov’s early years as the example. He describes the confusion of initial traction that didn’t translate into a scalable business model.
- •Many enterprise startups “bobble along” for years before things click
- •Early OpenGov sold small $5K–$10K deals that looked like traction but weren’t scalable
- •Breaking into large organizations requires alignment across many stakeholders
- •Enterprise execution is people-heavy and therefore expensive
- •It took ~5 years before the model started truly working
- 3:20 – 5:14
Pricing, sales cost reality, and why big companies charge big prices
The conversation shifts to enterprise pricing strategy and the minimum viable deal size needed to support an expensive enterprise sales motion. Zac shares Marc Andreessen’s guidance that pricing largely determines the size of company you can build.
- •Enterprise salespeople and long cycles demand higher ASPs to justify CAC
- •Deal size expectations have shifted upward; $100K deals can be considered too small
- •Andreessen: “You want a big company? Charge high prices.”
- •There may be ‘no upper limit’ to software pricing when value is clear
- •Examples of massive pricing in enterprise software (e.g., Tanium, Palantir story)
- 5:14 – 6:47
Selling to government: slow cycles, contrarian market, and the retention advantage
Harry challenges the government market as ‘unsexy’ with painful sales cycles, and Zac agrees—then explains the hidden upside. Gov customers can be extraordinarily sticky, making the business attractive when executed well.
- •Govtech is contrarian; many investors dismiss it outright
- •If you make government customers successful, they can “partner with you for life”
- •High gross retention is the core game in enterprise SaaS
- •OpenGov’s steadier growth looked worse in ZIRP, but proved durable later
- •Mission-driven positioning helped endure skepticism
- 6:47 – 7:30
Gross vs. net retention—and why gross retention is the foundation
Zac defines gross retention and net retention and explains why gross retention is the non-negotiable health metric for enterprise SaaS. He highlights how govtech can reach near-annuity retention levels.
- •Gross retention: dollars retained excluding expansion
- •Net retention: includes upsell and cross-sell expansion
- •Many SaaS businesses with 70–80% gross retention are structurally weak
- •Govtech can achieve 97–99% gross retention in some cases
- •High gross retention can compensate for lower headline growth rates
- 7:30 – 10:59
Durability of growth vs. venture’s need for $10B outcomes
Zac contrasts durable vertical SaaS compounding with venture’s power-law incentives and fund-size constraints. He uses Tyler Technologies as a model of long-term durability and explains why ‘great’ outcomes may still not matter to a mega-fund.
- •PE often likes govtech for sustainable, durable growth
- •Many venture-backed companies stall after $50–$200M revenue
- •Tyler Technologies as an under-the-radar compounding success story
- •Venture incentives skew toward only the top fraction of breakout outcomes
- •A multi-billion exit can be life-changing for founders yet immaterial for large funds
- 10:59 – 15:33
Founder–VC conflict: expectations, attention, and brand dynamics
Zac discusses how founders misread investor incentives and why attention from top firms is uneven by design. He also explains why big-name brands can genuinely help—but bootstrapping can be the cleanest path when possible.
- •VCs are rationally focused on winners; founder experience can feel ‘unloved’
- •Best investor behavior is transparency about incentives and time constraints
- •Brand-name investors can boost recruiting, press, and early customer trust
- •Bootstrapping reduces conflicts and preserves ownership (when feasible)
- •Anecdotes about investor styles and the reality behind prestige
- 15:33 – 17:08
Fundraising near-death in 2019: overspending, one term sheet, and ‘cut more, grow faster’
Zac recounts a tough fundraising period: 30 no’s, one onerous term sheet, and high burn. He shares the operational reset that followed—cutting costs and focusing execution—leading to improved growth and economics.
- •2019 fundraising: 30 rejections and a single difficult term sheet
- •Overspending and overcapitalization nearly cost him the company
- •Term sheet example: $210M pre with weak economics and high burn
- •Operational lesson: ‘spend less, grow faster’ can be real
- •Tightening execution before COVID improved performance
- 17:08 – 23:58
What founders miss about M&A: buying product discovery as innovation
Zac challenges the idea that acquisitions signal a lack of ideas. In vertical markets, he argues M&A can be an innovation shortcut by acquiring years of product discovery and domain expertise.
- •In vertical gov workflows, product discovery can take years
- •Early revenue (first $1–$5M) can take as long as scaling from $5M to $25M
- •Product acquisitions can ‘save years’ of iteration and embed SME knowledge
- •OpenGov buys for adjacency and product quality, then increases R&D investment
- •M&A as a deliberate strategy to broaden suite and raise ASP
- 23:58 – 27:27
Defining product-market fit in enterprise: repeatable, profitable customer success
Zac offers his definition of PMF and explains how early ‘traction’ can be misleading when unit economics don’t work. He argues many vertical SaaS businesses ultimately need a suite strategy to scale ASP and expand spend within the ICP.
- •PMF = making customers successful repeatably and profitably
- •Early logo growth with small contracts can deceive founders
- •In many verticals, ‘suite beats best-of-breed’ for scaling economics
- •Repositioning after realizing upside-down economics is brutal
- •To escape the $10K–$30K trap, build furiously while continuing to sell the base product
- 27:27 – 35:00
Shrinking TAM to grow faster: ICP discipline and focus as leverage
Zac reinforces that tight segmentation is often the fastest path to growth, even if it sounds counterintuitive to venture narratives. He shares mistakes expanding geographically and the discipline required to say ‘no’ to off-ICP demand.
- •Founders should ‘shrink the TAM’ to improve ROI on time and sales effort
- •Expanding too early (UK/Australia) wasted time and attention
- •Every step tighter on ICP segmentation increased growth rate
- •Operational rule: sellers cannot prospect outside ICP boundaries
- •Time is the scarcest resource; focus multiplies effectiveness
- 35:00 – 39:17
Boards are for governance, not therapy: running meetings and forming your own judgment
Zac explains what boards are actually for and how founders should manage them. He shares lessons from Andreessen and others about metrics discipline, meeting control, and handling conflicting board advice.
- •Board purpose: governance, oversight, and hiring/firing the CEO
- •Founders often confuse board members with mentors and friends
- •CEO must run the board meeting tightly and control agenda/time
- •Marc’s feedback: measure revenue, not logos; run meetings on schedule
- •When board members disagree, the CEO must synthesize and decide
- 39:17 – 43:25
The $1.8B Cox acquisition: process, negotiation, and an unusual founder-rollover structure
Zac details how the Cox deal formed, including an initial term sheet he rejected and the board alignment process that followed. He then describes the transaction structure, including cashing out existing investors and rolling much of management’s equity forward with defined liquidity windows.
- •Cox acquired OpenGov for $1.8B (after an initial $1.5B offer)
- •Board dynamics: balancing IRR desires vs. founder conviction and long-term vision
- •Revenue context: ~110–115 at negotiation, quickly surpassed 150
- •Structure: existing investors cashed out; board shrunk; employees got secondary
- •Founder/management rolled significant equity with staged liquidity and call/put rights
- 43:25 – 49:43
After the exit: founder psychology, secondary, safety, and staying ‘in the maelstrom’
They explore whether founders should take secondary, how money changes anxiety, and the pressure of being all-in for years. Zac describes the emotional and physical toll of the deal process and the shift in his mindset after partial liquidity.
- •Taking some secondary reduced anxiety and improved decision-making bandwidth
- •‘Keep founder poor’ mentality can backfire; security may enable bigger risk-taking
- •The signing process felt like tunnel-vision execution, not celebration
- •Money provides safety more than happiness—especially for those who grew up insecure
- •Zac stays mission-obsessed post-deal rather than ‘cash out and disappear’
- 49:43 – 53:59
Venture as a ‘tough asset class’: power laws, long timelines, fraud risk, and pref vs. reality
Zac and Harry discuss concerns about venture returns, long distribution timelines, and the gap between marked valuations and real liquidity. Zac emphasizes MOIC and DPI over IRR narratives and notes increased skepticism about being overweight in privates.
- •Venture outcomes take 15–20 years to fully distribute for many funds
- •Power-law economics mean most outcomes don’t ‘move the needle’
- •Marked-up valuations can mask weak liquidity and poor DPI
- •Fraud and misrepresentation are more common than many assume
- •Public index investing can be hard to beat over the long run
- 53:59 – 1:14:14
Spicy questions + quick-fire: worst meetings, Marc on the board, remote-work reversal, and personal drive
The final segment mixes candid audience-submitted questions with rapid-fire prompts and a personal turn. Zac shares painful investor-meeting anecdotes, lessons from Andreessen’s board style, his change of mind on remote work, and formative experiences that shaped his drive.
- •Worst investor meetings: early Founders Fund pitch; uncomfortable Moritz interaction
- •Marc’s board style: intense governance focus and strict time discipline
- •Quick-fire: value of snap judgments; promoting up-and-comers vs. ‘been-there’ execs
- •Remote work: Zac says he was wrong—office collaboration wins; painful return-to-office transition
- •Personal background and motivation: safety, worthiness, and the entrepreneurial ‘maelstrom’
