Zachary Bookman: Why Valuations and Fundraising are BS | E1235

Zachary (Zac) Bookman 0:00 I'm an LP in legit funds. Where's the money? Where's the money? How many years has to go by? People think these companies take like five, seven, nine, 10 years. Not true. They take like 15 to 20. That means your venture fund takes 15 to 20 years to distribute the money. Your business runs on a power law. Your business is about finding the next Coinbase. OpenGov's been quite successful, but it doesn't move the needle. It's a couple of billion dollar type exit. That's not what you're in the game for.

Harry Stebbings 0:29 Ready to go? Zach, dude, I am so excited for this. Listen, when we first had our call, it's quite rare to have the rapport that we did straight off. So first, thank you so much for joining me today, man.

Zachary (Zac) Bookman 0:52 I'm really happy to be here. Thanks for having me, Harry.

Harry Stebbings 0:55 Listen, not at all. But I wanna dive right in and I wanna start at kind

Harry Stebbings 0:59 of the company creation point. You said before when it comes to starting a company that it takes too long. I wanna start with, what did you mean by it takes too long in that respect?

Zachary (Zac) Bookman 1:11 There's like a wilderness period and the- some companies come out of the gate and these entrepreneurs they, they, they get the, the, the kudos rightfully if they just shoot off, and there's a lot of companies that just bobble along in the wilderness. We were one of them. As I look back on our first few years, I don't know what we were doing. It was a learning period. W- it was confusing because we were s- we actually came out of the gates selling about a year in, but we were selling $5,000 software, $10,000 software, transparency, reporting. It was kind of a political sale. Governments would buy it to show off the data in their 30, 40-year-old ERP green screen systems and I got tricked into thinking it was 1999, you're gonna sell it for a loss and make it up on volume. And I realized at year end, "Oh my god, we, we've got to broaden the suite. We've gotta get average selling prices higher." And it wasn't really until probably five years into the company that things started working. So when you're selling enterprise software, you're basically breaking into organizations. Organizations are filled with people and people disagree with each other, and when you're building a business, alignment is the most important thing you can get for execution. And when you're looking at a customer, how do you get them aligned on buying your product? Well, you have salespeople, you have marketing, you might have customer success or professional services. You're breaking down the walls, you're trying to create alignment, and that's expensive. People are super expensive, especially, you know, good-looking salespeople wearing sport jackets and wearing Breitling watches and what have you. These are expensive and you're not gonna make up the cost of sales and marketing by selling 10K software unless you're like a Dropbox where you can, you know, or some product-led growth phenomenon, and there are a few of those, and I think we all wish we'd had a company like that. If you can do that, more power to you. But even when they get to a certain size, they start trying to break down the enterprise, and that means you've gotta have an enterprise motion, which means salespeople, which means expensive, which means sale cycles, and the ASPs have to go up.

Harry Stebbings 3:20 How much do you have to get per customer to really justify that spend, to have the full sale cycle, the outbound motion? Is it 50K? Is it a 100K?

Zachary (Zac) Bookman 3:31 Uh, 10 years ago, 25, 50, 75. Uh, it used to be like, "All right, get to a 100K." Now I think kind of big league enterprise salespeople think a 100K deals is like Tic Tacs and we need to be targeting seven-figure deals. Marc Andreessen said to me, "You want a big company? Charge high prices. You want a medium-sized company? Charge medium prices. You want a small company? Charge small prices." And there's a lot to that. He actually said, "There is no upper limit on the price of software." Like, there is no upper limit. It's just the quantity of software and the pain that you're discovering and the value you're creating. And so it's an interesting business from that perspective.

Harry Stebbings 4:13 Do you agree with him then, always raise prices?

Zachary (Zac) Bookman 4:16 If you can, yeah. I look at like Tanium. Uh, I remember when they were like in their major growth curve, they were charging massive prices, you know, 5, 10, $20 million prices. Look at Palantir, for instance. I remember Michael Ovitz talking about the first deal they did with JPMorgan. They went into the room, supposedly, I, I wasn't there, and, uh, they discovered a huge amount of pain on a big kind of mortgage program that they were working on and combating fraud, and they said, "We think we can save you $100 million." Or maybe, actually, maybe it was like a billion dollars. And JP Morgan was like, "We want it." And they were like, "Great, we'll take 10% of what we can save you." And JP Morgan was like, "No, no, no, we'll pay you a few million bucks for the software." And they were like, "No." And they got to a stalemate and they walked out of the room and they didn't answer the calls for like six months, and then JP Morgan was like, "Fine, fine, fine." And apparently it was like a $100 million deal.

Harry Stebbings 5:10 Fuck. Okay, that's pretty good.

Zachary (Zac) Bookman 5:11 It might be a poncrophil, but I don't think so given the-

Harry Stebbings 5:14 Listen, I love a good story. Ne- never let facts ruin a good story. Um,

Harry Stebbings 5:19 can I ask you, y- you also have like the dockiest market. No offense. Like yeah, we, we said that we'd be totally honest, but you sell to governments, like this is where investors run the fuck away. Your sales cycles must have been horrible. Am I right?

Zachary (Zac) Bookman 5:33 Yes, basically. But look, I've been laughed at since we started the company in 2012. And when we were raising money, the number of times people said basically, "You, you are more artful, but you know, government? No thanks. I came to Silicon Valley to get away for, from government," or, "Good luck with that," or, "It's all waste, fraud, and abuse. No thanks." That was a little contrarian on our part. We're very, very mission-driven. Our mission is to power a more effective and accountable government. We're probably naive and a little, little thick in the head as you would say. Um, but...The customers will partner with you for life if you make them happy and that's called stickiness. And the whole game in enterprise SaaS is high gross retention, let's just be clear. The whole game is high gross retention. You look at a lot of companies, if they're in their, you know, 70s, 80s, good luck. I don't want that business. I'll take ours in the, in the mid to high 90s. And, uh, so there are a lot of attractive things actually about this little corner of the world. You know, we were growing steady while everyone was in ZIRP, you know, absolutely smashing it with 70, 80, 100% growth rates, and now those same companies are growing 10, 15, 20% and we're growing faster than them. And I'm kind of like, hey, just little, little, little engine that could.

Harry Stebbings 6:47 For- for those that don't know, what is gross retention and how does that compare to net retention?

Zachary (Zac) Bookman 6:51 So it's a, it's- if you have a dollar, uh, uh, uh, uh, a customer is paying you a dollar for the software, or a cohort of customers, a year later how much are they paying you? That's gross retention, um, of the same amount of software. And net retention is overall, uh, i- increase in dollars, uh, including from upsells and cross-sells. And a lot of companies think 80, 85, 90 is good, and there's companies in gov tech with 97, 98, 99% gross retention. So it's almost an annuity if you can really get screwed in and do it right. But yeah, we won't have the growth rates at, you know, 50, 70, 90%.

Harry Stebbings 7:30 Does that matter? Like when you think about compounding over a 10, 12 year period, does that matter? And I guess the honest question that I'm actually really going at, it's like, truth be told, Zach, venture today with the fund sizes we have, we need $10 billion companies.

Zachary (Zac) Bookman 7:45 Yeah. Look, I have two, there's two areas to take this conversation and I love it. One is durability of growth. The reason I think Cox was so interested in us and a lot of other kind of private equity firms are, are drooling over this gov tech space, is the sustainability and durability of the growth. A lot of venture back companies, they get to 50, 70, 100 million, maybe 200 and they kind of crap out.

Harry Stebbings 8:12 Yeah.

Zachary (Zac) Bookman 8:12 And you see them orphaned as public companies, uh, uh, uh, you know, in the post-IPO land and they're growing at 15% or they're literally bobbling along, not growing 'cause they're selling new business to make up for the, the churn.

Zachary (Zac) Bookman 8:27 You see a company like Tyler Technologies, which you probably haven't heard of and most of your listeners probably have never heard of, it's, uh, it's the vertical incumbent if you will, in, in, in gov tech. They do about two billion a year in revenue for state and local government software, and they trade at $25 billion on the S&P 500 on the New York Stock Exchange. It's been a Wall Street darling. Supposedly it's the tenth best performing stock of the last, like, 20 years. Um, and few people have heard of it, and they print cash, and it's an extremely well managed and impressive, uh, company. We compete against them. And that's an example of what can happen with growth durability. And, you know, if you're growing at 25, 24, 23 and you're decreasing at that kind of rate versus you're growing at 50, 60, 70 but then one year, oops, we're growing at 15 and the next year we're growing at eight and then we're not growing. And so that's one area to explore and your mouth is open and you're like, "Wait, I wanna know more about that company," uh, you can go look it up. The other is the dynamics in your business, Harry, which are totally different than the dynamics in my business. And I'm not here to convince you to invest in OpenGov, I'm not really. I think some of these verticalized markets are winner, winner take all. I do think there's a lot of room to build big vertical software companies, but not many great companies in single verticals. Your business is so different from my business, and it's something I feel pretty strongly about 'cause a lot of entrepreneurs and founders wanna just love their venture investors and, "Let's be friends and let's go to dinner and you're gonna be my mentor," and all this, and there's definitely room for that, but we are conflicted severely. Your business runs on a power law. Your business is about finding the next Coinbase or the next Uber, maybe the next Pinterest. The reality is, OpenGov's been quite successful, but it doesn't move the needle. You- it's a couple billion dollar type exit, that's not what you're in the game for. And it's really hard for an entrepreneur to understand that when you're starting out from zero, you're worth nothing, you're living on ramen, there's no- nothing in your bank account and you're like, "Gosh, if I could get to 100 million in revenue or 200 million in revenue, if I could get a multi-billion dollar exit or even a billion dollar exit or even a $500 million exit," that's powerful for the entrepreneur. It might be powerful for the company, even the industry it's in, it doesn't do much for 20VC. It doesn't do much for Andreessen Horowitz. And that's a really tough pill to swallow, and so you are incentivized to not care about me.

Harry Stebbings 10:59 Did you see that in your interactions with investors?

Zachary (Zac) Bookman 11:02 Yes, of course I saw it and these are people I love. And, uh, as soon as I got to understanding their business and where they're coming from, it all made a lot more sense and it got a little bit easier. Mark and, you know, Ben are- they- you know, Andreessen Horowitz is managing many billions of dollars, Lonsdale's managing many billions of dollars. It's just they're in a different game and it's about the very, very top 1% of 1% companies. It's probably, like, less than that. And I'm, you know, I'm, I'm an investor as well and I understand this. It's like I can't literally spend time on all these investments. It doesn't make sense. It's a really a bad use of time.

Harry Stebbings 11:41 Should we be different? Like, you as a founder advising me, your friend is an investor, should, should we do anything differently or that is just the rational product of the mechanism that we operate in?

Zachary (Zac) Bookman 11:52 Look, there's a class of investors who almost against- m- maybe they wanna- I was, I was gonna say against their interest wanna, you know, love on and coach and mentor all their founders and take them to dinner and get them together and all this stuff, and there's another class of investors who are like, "I don't have the time of day. Like, I wrote you a check but I barely remember your name." I think the best thing to do is probably just be open, honest and authentic about it.Um, if you're trying to build a brand as founder-friendly, you know, then sure, loving on everyone, maybe that's in your

Zachary (Zac) Bookman 12:27 financial interest. I have this... I, I didn't raise from, you know, Sequoia, uh, but I have kind of a... like a respect in the sense that I don't... Look, if you're crushing it, they're gonna spend a lot of time on you, and if you're not crushing it, wouldn't surprise me if they don't remember your name. I don't know, that's not a personal commentary, it's just a sense. I did get a, um (laughs) , an anecdote from a friend who was... he had term sheets from Sequoia and Benchmark, and he was talking to somebody about which one to take. It was kind of like, "Do you prefer to be front stabbed or back stabbed?" (laughs) And he's like, "Oh, I'd, I'd rather be stabbed in the front." And he's like, "Okay, go with Sequoia."

Harry Stebbings 13:02 I think there's actually a joy in being unloved, which is... I think a lot of investors bluntly take your time. You go for dinner, you don't always wanna go for dinner, you don't always wanna chat as much as they do. You get great (laughs) freedom from being the unloved one that can shine in the darkness, so to speak. Do the best founders need help?

Zachary (Zac) Bookman 13:22 I'm not sure I'd categorize myself in that rank, but from my perspective, the moral support was what mattered a lot. I don't need to go to your house and spend all Sunday afternoon doing strategy sessions on the business, which mostly consists of reminding you what products we have. Um, when I'd get a note from, like, Josh Kushner just saying, "We're honored to be in business with you," it's like, I just walk off and I'm like, "Gosh, I love that guy. Thank you, Josh." And when I got a... you know, a book at Christmas with a handwritten note from Joe saying, you know, "I admire what you're doing, Zach," it's like, "Ugh, that means a lot." And yes, I'd have lots of strategy sessions with Joe, who's a co-founder and chairman, but it's that moral support that just means a ton versus the group that's like, "Hey, we'd like to come to your office next Tuesday and spend 90 minutes reviewing X, Y, and Z," and I'm like, I can tell no and, like, damage the relationship, or I can suck it up and waste a bunch of my time on it. It, it just starts to be a bad, you know, kind of trade.

Harry Stebbings 14:22 It's not... Something that's challenging for me... Uh, by the way, Josh, I think, is just one of the greatest humans out there, there's so much love there.

Zachary (Zac) Bookman 14:27 He's kind of a burden. (laughs)

Harry Stebbings 14:28 Um, one thing that's challenging for me is so many young founders are so magnetized to the big brands and really just see stars and kind of Hollywood, so to speak. What would you say to them, knowing all that you do?

Zachary (Zac) Bookman 14:41 I don't think it's irrational. Uh, the, the brand, i- i- it's one of the re-... I, I... Look, are the Sequoia guys, like, amazing investors? They probably are, but it's probably also an incredible flywheel or network effect where, if they invest in your company, it simply helps you recruit better talent and better executives, and maybe it helps you a little bit get some more press. And if you're selling into, you know, commercial or enterprise, maybe it's a stamp of, uh, approval for early adopters. But I actually think it's just helpful. So, I do think brand name matters. However, for those who can, like, bootstrap, that's the ultimate. That's the ultimate, in my opinion, to avoid all of the conflicts that come from raising venture capital and to own much more of the company yourself. That, that's when I'm, like, tip of the cap and, like, very jealous. I don't know if you follow the Founder Collective guys at all, but, uh, they-

Harry Stebbings 15:30 Dude, David Bankel is, like, one of my biggest buddies, like-

Zachary (Zac) Bookman 15:33 They're, they're, they're first class and they, they were in OpenGov early. I got into a bunch of trouble in 2019. So I, I, I'd overspent the whole way, and I'd raised too much money, and I almost lost the company a few times. I'm happy to cry on your shoulder about it. And it was '19, I couldn't raise... I was... you know, I had got one term sheet after 30 nos and it was onerous, pound of flesh. I went through the deal and I said, "I'm not gonna raise any more money. I'm gonna get religion, I'm gonna change everything." And I started reading all their blogs, and they're very much on the raise less, own more of your own company, we want to be not conflicted as seed investors, so they wanna go in at the seed... And I just was like, "They get it. They get it, and they're right." And I know it's marketing for them, but they're actually just right. And very fortunately, before COVID hit or before people got with the program in '21, we started cutting, and it was... uh, you s- you saw the law at work. Cut more, grow faster. It was just, it was just

Zachary (Zac) Bookman 16:37 amazing.

Harry Stebbings 16:37 Dude, talk to me. One term sheet, 30 nos. Who was the term sheet from?

Zachary (Zac) Bookman 16:42 A group in Tampa, the We- Weatherford Capital. It was at 210 pre, Harry, just five years ago, and we just got marked, you know, in February at 1.8. So-

Harry Stebbings 16:53 What, what, what were you doing revenue-wise at 210?

Zachary (Zac) Bookman 16:56 I was probably in the 20s, if I remember correctly, and I was burning cash like a drunken sailor.

Harry Stebbings 17:01 Wow. Okay. First off, like, why were you burning cash like a drunken sailor, and what are some lessons from that?

Zachary (Zac) Bookman 17:08 Spend less, grow faster. It's a weird law. Um, it's probably my net out. We were single product essentially and in that August 2019 round, we bought a company in the permitting and licensing space, and we did probably $90 million of transactions in, like, 45 days, and that worked very well. And as we broadened our product suite, things started to work, the economics of the business started to work. Basically, you're paying all this money to market and sell. You're even paying a bunch of money to deploy. And if you have more product, more arrows in the quiver, you get higher ASPs for the same essentially cost. And everything started unfolding there. We ended up doing an acquisition, you know, one each year basically as we broadened our portfolio suite. And I learned this a little bit from John Chambers. Um, M&A can be innovation. It's not just buying for customers or revenue. We don't even do that. We buy for product quality and adjacency, and it jumpstarts the innovation.

Harry Stebbings 18:11 How is M&A for innovation? M&A is traditionally seen in the eyes of you basically run out of all fucking ideas, and that's why you're buying in companies and you're buying in growth.

Zachary (Zac) Bookman 18:20 I, I get it. It... Uh-It takes years to discover exactly what the product needs to do, particularly for highly verticalized, highly specialized use cases. So we sell software to departments of public works and building and planning and finance and budgeting and procurement. And if you're not asleep, Harry, wake up. I know you're a little bit asleep. These are very specialized, complex use cases with governmental accounting and, like, 12 bureaucratic processes that all have to be done and they're regulated in other

Zachary (Zac) Bookman 18:52 things. And if you just wanna sync up these use cases or just unleash AI and think you're gonna build the perfect product, you're wrong. You're gonna have to go through months, if not quarters or years, of interactive work with the customers. So getting the first million, two, three, four, five of revenue can take as long as going from five to 25. And if you can catch a company that's managed to get some semblance of product market fit with a beautiful kind of fully multi-tenant stack that has done the years of discovery about what the customer needs and what the product needs to have, you've saved years worth of work and you've captured tremendous subject matter expertise. And, and now you can pour engineering or R&D into the product, which is exactly what we've done. So we build organically, but also if we come across a company that we admire, we'll buy it and we'll, uh, double the investment in R&D on it.

Harry Stebbings 19:43 I, I just wanna go back to the investor base before we move on from that. We mentioned-

Zachary (Zac) Bookman 19:47 By the way, I think, I think the guys at Rippling are doing something slightly similar. They're, they're, they're gathering founders and they're, they're... Some of these have subject matter expertise, some don't. And it's a form... Th- they're acqui-hiring and we're doing product acquisitions.

Harry Stebbings 20:01 When did you and your investor base disagree most, Zach?

Zachary (Zac) Bookman 20:04 I've had a lot of disagreements. I'll tell you a few anecdotes. One, very early on, I had this boneheaded idea that we were gonna create a network of governments across the country and we'll have the largest repository of public performance and financial data, and all the governments will learn and share from each other and they'll benchmark and they'll cut, you know, uh, waste and improve efficiency. The problem was we didn't have any products, and you come for the tool and stay for the network. You don't come for the network, stay for the tool. And so I was putting our metrics up at our board meeting saying, "We're going to get all these logos. The logos will just magically produce value over time." And, and Marc Andreessen was like, "Do you wanna be a real company?" And I was like, "Yeah. Yeah, I do. I'm like a young entrepreneur." And he's like, "'Cause real companies measure revenue, not logos." And I was like, "Ah, got it." So I came back to the next board meeting and I'm like, "Here's our two key metrics, logos and revenue." Gave me the same speech. He's like, "Real companies measure revenue." And I'm like, "Ah." So that was a fairly... You know, it, it was coaching. Um, two was hard times in kind of '15 and '16. We were, we were overspending, growth was slowing, we were learning about our vertical. "We, we are not a horizontal SaaS company. We've gotta go deeper." And I could see I was kind of losing the faith of my board, if you will. As in, not the faith... They're like, "Fine. You know, you're working hard. This'll be like... This company has revenue, but this is not gonna be the next, uh, uh, Pinterest." And that was not a good feeling, and I don't know if I'd characterize that as a disagreement as much as I was like, "Holy cow, what a-"

Harry Stebbings 21:46 What, what stage of revenue were you at there and what was the indications that actually it wasn't gonna be a Pinterest?

Zachary (Zac) Bookman 21:53 Between like eight and 20 million. You know, growth rates... We, we went from like 200K in revenue to two million and it was like, "Okay, like, something's happening here." And I could go out and be like, "Oh, we 10X this year," or something. But then it went like two to four and a half, four and a half to eight and a half, eight and a half to like 14 and a half. And I was like, "Something this is not... I'm spending way too much money to add six million in ARR."

Harry Stebbings 22:16 How much were you spending to add six? Because I'm listening to this and that is not bad actually, Zach. Like, most SaaS companies that I've seen are not even doing that.

Zachary (Zac) Bookman 22:24 In the beginning, we had very high expectations, Harry. I was, I... You know, w- we'd managed to recruit, you know, star-studded board and we'd raised real money.

Harry Stebbings 22:32 Yeah, but Zach, I'm re- I'm really worried though because bluntly, you know, I had this argument today in, in the investment committee that I'm in. One millionaire or SaaS company raising 25 on a 100. Another raising at 17-

Zachary (Zac) Bookman 22:44 Assuming they have AI in their name.

Harry Stebbings 22:46 N- no. No.

Zachary (Zac) Bookman 22:47 (laughs)

Harry Stebbings 22:48 No, no. No, but that's what's ridiculous. Vertical SaaS companies. We do boring shit like OpenGov, no offense. Um, and, and I said to my team, "This is fucking... This is rich."

Zachary (Zac) Bookman 22:58 I-

Harry Stebbings 22:58 And they're like, "It's not. It's market."

Zachary (Zac) Bookman 23:01 Well, that doesn't mean it's not rich and I would tend to... Look, your, your business is very difficult too, Harry. Uh, it, it, it requires judgment and decisions. How are you gonna... I mean, how are you gonna get a 50X if you're raising it 100 million? You gotta have a big company. And by the way, most people don't understand. 100, 55 billion, not how it works. They're clearly gonna have to raise more money, which is massively dilutive. And by the way, it costs a lot of money to run these companies. It costs equity to run these companies. Public companies are diluting multiple percentage points a year. What do you think some of these startups are diluting? And so it's amazing how much it adds up. So I'm like you. On the other hand, you know, I don't know. I, I... Somebody offered me the chance to put some money in xAI and I'm like, "It's raising at 18 billion as a seed round? Well, now they're at 50." And it's like, this is a tough game. This is a tough game. Some of the hot companies deserve it, and their multiples aren't coming down.

Harry Stebbings 23:58 I wanna go back to that earlier stage. You said the 200 to two. There, we kind of get the feeling that we have product market fit. We've chatted before about it, 'cause there is like a lot of ambiguity around how people define product market fit. For you, what's your like, "Yes, this is product market fit"?

Zachary (Zac) Bookman 24:13 Product market fit is when you can make a customer successful, repeatably and profitably. There, a lot of people have different definitions. Mark's is great. That's when they call you.I, I think it was like a 2007 blog post. It's when your prospects call you. I love that, but we got deceived. We signed up our first 100 customers, these were the 5 or 10K deals, and the company was upside down, and I hadn't switched into a multi-product understanding, but suite, at least in our vertical, suite beat- beats best of breed. So it's a classic dialectic in enterprise software. If you wanna build a Zoom, you got a 10X better product if you have a big enough market, great. You can build an IPO scale company, but in a lot of these verticals, you've gotta get to like workday level product or, you know, rippling compound, multi-product company to get the ASPs working, uh, and that's actually how you increase your, your at least strategic or total addressable market. Um, I got totally deceived. Like, wow, something's happening here, I think this is gonna work, but very quickly I felt it in my body, this isn't working, (laughs) this doesn't make sense, like we're gonna be totally upside down. How do I t- reposition the company? And repositioning is just brutal.

Harry Stebbings 25:29 How do you think, or how do you respond, I say this a lot to fans, I go, "Listen, the, the 5 to 25 game, that, that doesn't work." And they go, "No, no, that's our entry point. That's just for the state of Florida. When we expand to the other 10, it's gonna be 50 or 100 or whatever it is." And I'm like, "Ugh." And then three years later, it's most often not.

Zachary (Zac) Bookman 25:47 Yeah.

Harry Stebbings 25:48 But how do you think about that, that challenge?

Zachary (Zac) Bookman 25:51 Occasionally it works. They have, you have to build product furiously, and I, in my opinion, getting to a suite or a suite of suites is the way to do it, at least in vertical software. And they have to be maniacally focused, and it, it requires the proverbial pat your head and rub your belly. Like literally you now have a customer base on this 10K, 20K, 30K product and you gotta keep selling it or you're not gonna raise your next round, you're not gonna have any momentum, the employees are gonna know something's wrong, and you have to do that while building a new product and a third product. That's, that's the entrepreneurial hack, that's the magic.

Harry Stebbings 26:26 Before we go to that multi-product element, which I really wanna discuss actually 'cause it's so important, but in terms of like finding that product market fit, what are your biggest pieces of advice to founders in terms of ways they can increase the chances of finding it?

Zachary (Zac) Bookman 26:40 Go crazy. So we're the type of company, I mean, I mean, sell like mad. Get in front of your customers and prospects. We sing and dance in the aisles of the vendor hall, most of our competition, they sit back in their chair and they're looking at their phone and watching the prospects walk by and just waiting for someone to come up to them, and we are like, we're like maniacal clowns like, "Come look at what we're doing." We're opened up, we're smiling, we're enthusiastic. So it sounds a little funny, it sounds a little hokey, but we bring the energy, we bring the passion, we engage with our prospects and customers like crazy. Number two is, is, uh, iterate, iterate, iterate, iterate with the customers. This is discovery, you can read about this in the books, uh, but it's just true, it takes time.

Harry Stebbings 27:27 For me it's like narrow your ICP. Most often people don't mean enough to enough people. And I'm like, hey, make it so tight for a small segment of customers, make it really resonate. You can always expand from there, but make it really fucking hit.

Zachary (Zac) Bookman 27:43 I agree. That's advice I tend to give around growth, believe it or not. So, uh, I, shrink, shrink your TAM. So guys like you, sorry, I'll pay it back to you since you, you know, think our industry is so boring. Guys like you want TAM, TAM, TAM. Like show me the l- a large market so I know you could be a big company. And entrepreneurs actually need to get crazy focused. I wasted, one of the many mistakes I made was, okay, we've got a little product market fit on transparency, let's go to the UK, let's go to Australia. And I got on planes, I wasted so much time, I went to dinners and I didn't understand my business. My business was state and local government in the United States, and I gotta shrink the TAM, and then even shrink it further. Get to budget sizes under this and over that, and every step we took to shrink the product market fit segmentation and to get more focused on the ICP, the ideal customer profile, our growth rate ticked up. And so we literally, we get an inbound, if you, if you gave me an inbound from the central office of the UK, we're not responding. We're not responding. Our sellers, they can't prospect outside the ICP segmentation, and so having real discipline and knowing the only thing you have is time. You have 40, 60, 80, 100 hours a week, that's it, so how much ROI can you deliver on every hour of your time? It goes up if you shrink the TAM and the, shrink the PMF segmentation.

Harry Stebbings 29:11 One way to increase, not the TAM but the spend in TAM, is what you said, which is expand product line. The challenge is knowing when the right time is. What's your biggest lessons on when's the right time to add secondary, third, fourth, fifth products?

Zachary (Zac) Bookman 29:26 I think is, is the earlier the better. You've gotta manage to keep the, the, the, the cart on the tracks, and that's, that requires management and it requires leadership. Creating new products is part of the magic and pulling the trigger on bold bets, whether that's, uh, a, a new direct- a new product direction for the company, and sometimes people are crying in the streets like, "No, I thought we were a budgeting company." Well, we still are a budgeting company but we're becoming a permitting company as well. It's amazing the internal resistance you'll get, uh, but you've gotta bake it into the DNA and the culture of the company, and that, again, that's just like leadership and execution, and some people get left behind, and it's all for service of the company and the customers and the mission.

Harry Stebbings 30:08 How do you think about maintaining that morale internally when things do feel a little bit flatter? You, you mentioned kind of feeling a little bit flattered there in the growth from like does 200 to two, but then you said kind of growing 80% a year or 60% a year. How do you maintain morale when people feel it's flatter? Was there ever a time when it felt really fucking flat?

Zachary (Zac) Bookman 30:28 Yeah. Yeah, there's been many, and the CEO...... has to give the energy, and it's one of the hardest parts of the job. It's literally how much do you have to give? And you drag yourself out of bed and how do you give to your employees, your teammates, your customers, and just give your energy. There have been times where like, I ne- you know, my mother died, uh, eight years ago w- in the middle of very hard times at the company. And it was absolutely brutal and I'm having to come to work every day and kinda grieve, while also telling people at the company, "It's gonna be okay." And it's that, it's that juggle that... And people, people have hard things going on in their lives all the time. And so, I don't know, that's, that's the... Ben Wolowitz talks about this in The Hard Thing About Hard Things. I remember, like, cradling that book and reading it like it was a bible.

Harry Stebbings 31:15 Did you ever doubt whether it would work?

Zachary (Zac) Bookman 31:18 The short answer is yes, basically all the time. I don't know how I kept going because I felt for years like I'd destroyed my career, I'd made the worst set of decisions. I came back from Afghanistan, uh, in the summer of 2012 and I was like, "Wow, I used to be somebody." You know, I was, I was a lawyer and I was in foreign policy and I was doing things. And now I'm, like, in this, like, dank three-bedroom apartment-style office, like, you know, hiring and firing and making, like, a total mess out of everything. And I was like, "What have I done?" But I was like, "I've already..." You know, it's a burn-the-boats kinda thing. I've already made the mess so why don't we fi- (laughs) why don't we keep going?

Harry Stebbings 31:58 What was the easiest round to raise for you, Zach? When were you like, "I feel this is, uh, uh, super easy round to raise"?

Zachary (Zac) Bookman 32:05 Honestly, it got harder each... It got harder all along the way. The easiest rounds were early. You know, Joe had come out of Palantir and, uh, tremendous network and credibility. So I'd say the first, the first few rounds kind of came easy, and that was a blessing and a curse. It was a curse because we overspent. Like, one of the many mistakes I made was to overspend on sales and marketing before we had the product. And you'll probably, you probably see this in some of your companies, it's, uh, it's very dangerous. If we didn't have some of these unfair advantages, we would've been dead pretty early, like in 2014 or '15. Laurene Jobs came, uh, to the rescue and, uh, Glen Capital and some other great firms in kind of, like, bleak years. It ended up working out great for them, but as I look back I'm like, "Wow, they made some bold, they made some bold bets on us at, like, kinda tough times." And they knew. They knew they were tough, you know, tough times. As we got further along, I think we got more attractive in terms of raising money, but I also got way less interested in raising money. Like, I wanted to literally stop raising money for the past five years.

Harry Stebbings 33:09 Wow. But just 'cause you hated it so much for the rejection state? Like, why?

Zachary (Zac) Bookman 33:13 Well, yeah, it's a huge time suck. It's definitely not, it's not f- fun to get said no to, but that's fine. I s- I'm, you know, I sell every day and th- that's no big deal. It's just, it doesn't actually create that much value. And a lot of people talk, "Oh, I raised this much, hundreds of millions," or, "These valuations." It's literally irrelevant. You will be, you will be judged and weighed by your exit and by the liquidity that you can provide to people. And so there's these tremendous roller coasters that go on between the time you take the money in and the time you gotta give it back, and I think a lot of people lose sight of that. And you over capitalize the company, I mean, it's just more you gotta... That's a higher pref stack and it's more dangerous for the common stock, which is, m- you know, m- management and employees. So I just found it was kind of, like, not a great deal in many respects, and the tighter we got, the better we did. So we started to get to cashflow positive and EBITDA positive and it was like, "Great, like, let's keep this going." I don't, I don't, I don't wanna return to those days.

Harry Stebbings 34:12 What did you not do in the journey that you wish you had done?

Zachary (Zac) Bookman 34:15 I would move faster. I'd be more decisive. If I knew now what I, you know, didn't know then, I'd, I'd, yeah, I'd probably have saved three years and gray hair and, you know, injured shoulders and knees. I would move at a tempo that was, that is a different tempo than I was moving for the first five years. It's, it's removing people that aren't working, it's product decisions, it's, uh, the, the wh- the sales machine, the enablement machine, the hiring machine. Enterprise software rewards intensity and focus, you know, the, the Amp It Up article from Slootman in his book, it just feels spot on. It's not, it's not, it's not one philosophy. It feels like it's kind of, like, the way these companies are supposed to

Zachary (Zac) Bookman 35:00 work.

Harry Stebbings 35:00 You mentioned the gray hair there. That's kinda what a board's for, in many respects, and what they often proclaim to be. What's your biggest lessons and advice on how to manage boards effectively?

Zachary (Zac) Bookman 35:10 I think a lot of experienced CEOs really understand this, and a lot of founders and, and, and folks that are new to it w- which is where I was for many years. I didn't understand the board is for governance. The board is for governance. They're to make sure that there's no fraud and, like, it's a real company. And primarily, to hire and fire the CEO. They represent the stockholders. And in the, in the, in the sales process that is fundraising, which goes both ways, a hot company, you know, is being sold too by investors, it's easy to get confused and think, "Oh, these are my, just my mentors and coaches and friends," and like, "We're in this together and we're partners." One thing I learned from, you know, from Mark and even, even Joe in the later years is like, oh wow, we have natural conflicts. My job is to grow the share price and I need to, like, A, deliver on the mission and win for our employees and customers, but I need to win for our stockholders. And, like, that's my principal job. And so, when you go into the board meeting, like, you, you're the chairperson. Whether you're the chairper- whether you think that or you have that actual title, the CEO needs to run that meeting, the CEO needs to explain the direction. Sure, gather input, but boy, there are times, Harry, where Mark would be like, "I've seen this ten times, you gotta go right." And Lonsdale or somebody else be, "Nope, I've seen it ten times, you gotta go left." And I'd walk out and I'd be like, "What do I do? These are both, like, people I look up to."And it was through this process I said, "Duh, form your own opinion, become a real leader and a CEO, use your independent judgment, you've got more facts than they do, make the call."

Harry Stebbings 36:51 Unfair question. You have another company and you can only have one investor. Which investor do you have?

Zachary (Zac) Bookman 36:57 Me.

Harry Stebbings 36:59 No.

Zachary (Zac) Bookman 36:59 (laughs) I- I- I'm serious. I- I- if I was gonna do something again, I- I'm enamored by the bootstrap idea. You just, uh, you reduce a lot of conflicts, you own way more of it.

Harry Stebbings 37:12 Couldn't OpenGov have been bootstrapped?

Zachary (Zac) Bookman 37:15 There are... No. No, no, no. Because you- the- even the MNA, the reason I executed the transaction we did earlier this year was, I looked out and said, "Okay, we could get ready for an IPO in a couple years, maybe less, and then what happens? We, we could raise a bunch of money, but to truly live the destiny of this company, we're gonna need to, we're gonna wanna buy other companies." So you could do secondary offerings, and it just starts to... But then you're like, you're on the quarterly game, and I'm like a long-term owner with very deep pockets that's super mission aligned. This is how we're gonna build the biggest company that's gonna live its mission. So no, probably not, is the short answer. So if I had to pick one investor, I- I probably would go, I mean, it'd definitely be partner-specific, and I would, I would go for kind of name brand, you know, as, as good an investor as I could get, based on the returns of that investor. But I'd have a very serious chat and say, "Hey, I'm running the company, are you comfortable with that?"

Harry Stebbings 38:20 Wow. So you'd choose like a Sequoia over a ABC?

Zachary (Zac) Bookman 38:25 Oh, I don't know. Uh, I've had a, you know, longstanding relationship with, with ABC and honestly, we wouldn't be here without them. Uh, they, they rode, they rode through thick and thin. So no, that'd be an easy one, uh, to choose. Thrive as well. You know, been in it for the, for the long haul. I mean, they were in like January, February of 2013.

Harry Stebbings 38:45 So take me to that deal itself. Like, this is when suddenly OpenGov got sexy as well. Like, you know, it only took like 12 years but suddenly OpenGov-

Zachary (Zac) Bookman 38:52 (laughs) This has turned into a- it's a 12-year overnight success.

Harry Stebbings 38:55 Yeah, bro, dude, I- I- I'm, everyone's like with me as I was like podcasting in a dark room for 10 years. You know? (laughs) Um, so like-

Zachary (Zac) Bookman 39:02 (laughs)

Harry Stebbings 39:02 ... I'm shit old now. Uh, but like tell me about the-

Zachary (Zac) Bookman 39:05 You had but like, "I'm, hey, I'm this 19-year-old kid. Like, look at me." But you're rapidly just becoming like a guy.

Harry Stebbings 39:12 I know, amazing.

Zachary (Zac) Bookman 39:13 (laughs)

Harry Stebbings 39:13 I was called a former, I was called a former teenager the other day in an article. I was like-

Zachary (Zac) Bookman 39:17 (laughs)

Harry Stebbings 39:17 ... "Well, me and Warren Buffett should get back together." Uh, so

Harry Stebbings 39:21 thank you. Uh, so tell me about the, the deal itself. Like, how much was it for and how did it come about?

Zachary (Zac) Bookman 39:26 So we sold the company in February for 1.8 billion to Cox Enterprises. This is a large family business in Georgia. They own the largest private cable company in the United States, they own the largest automotive company outside of the car manufacturers, and they're diversifying their 125-year-old family business. They understand growth, their ability, they understand customer acquisition costs, they understand regulated businesses, they understand services. So, uh, I called them kind of last August, I guess it's almost a year and a quarter ago now, and I said, "Hey, you've been rubbing my thigh and whispering in my neck. You know, if you'd like to put a term sheet down for two billion, I think this board would take it seriously." And they produced a term sheet for 1.5. I rode my bike home that night and I got really nervous, and I said, "I might have made a big mistake here. I don't wanna sell the company for 1.5. And yet, I think this board is probably tired, they've been in for a long time and they might want this." I called a board meeting and, the next day, and they said, "What do you wanna do, Zach?" I said, "I'm a no." And they were like, "Whoa, really?" And I said, "Yeah, shall we end the meeting?" And then they were, were like, "Uh, uh, you know, this is pretty serious valuation and a lot of deals aren't getting done right now, and this is a good IRR." And, you know, da-da-da-da-da-da. And I said, "Look, we've talked about going to become a multi-multi-billion dollar company for a long time. Like, you and I seem conflicted. You've also incentivized me with a performance plan in '21 to pursue a, you know, four billion dollar type valuations." So I agreed to study the issue and we set up a whole... We hired Rocktel, we set up a whole process. We spent like five months working on the deal, and we got the board aligned, uh, and we did price negotiation. We did a management incentive plan, and we put together what I think at the time was the third or fourth-largest private software transaction of the last few years.

Harry Stebbings 41:37 What revenues was the company at, at that stage?

Zachary (Zac) Bookman 41:40 I mean, when we did the price negotiation, we were probably 110, 115, something like that. Very quickly we surpassed 150, um, and, you know, the company's cranking. So we're like burning down. It was, it was a, you know, near 15X at the time, and we're burning it down. Now, it's an interesting deal in that I left a majority of my stake in the company. So, uh, I'll tell you about this. It- it's a supposedly common-ish structure in kind of telecom and media, and I think it's a little innovative in, in your classic kind of software or tech, uh, ecosystem. So I basically went, we as management went into business with the Cox organization, with a new investor. So all the existing investors were swept out and cashed out at the 1.8 valuation. Board was shrunk from eight to four. You know, it's me plus the, the Cox team. And employees' vested equity was cashed out, so it was essentially a large secondary for employees. But all equity plans remain in place. We got, uh, a large RSU pool to continue to attract great talent and compensate people, and we have defined liquidity at years three, four, and five. So essentially it's a put-right.You can sell a third at year three, two-thirds at year four and three-thirds at year five. And Cox has a call right in the out years, uh, so that if they want, they could, uh, eventually obtain 100% ownership of the company. Uh, so I'm, I'm in very deep, um, very long and bullish on the company and it's been borderline a breakout year for us this year. And my fortunes and ours rise and fall with the company so we're very aligned, if you will, with our new owners.

Harry Stebbings 43:25 I got to ask, dude, do you not just want the, like, cash? (laughs)

Zachary (Zac) Bookman 43:29 (laughs)

Harry Stebbings 43:29 And I mean this in the nicest way, but, like, you know, I interviewed Ryan from Qualtrics and he's like, "Yup, I remember when the cash just went thud."

Zachary (Zac) Bookman 43:37 Well-

Harry Stebbings 43:38 I'm like-

Zachary (Zac) Bookman 43:38 ... I, I did take out, uh, you know, I, I did participate in the secondary so I took out, uh, uh, 49% of my vested equity, um, so-

Harry Stebbings 43:49 How much was that million?

Zachary (Zac) Bookman 43:50 ... my family's safe. Look, these companies, the investors at growth stage kind of maturity end up owning like 80% of the company, 75 to 85% of the company, and management and employees and, and founders own, you know, the remainder. Um, so my family's safe, I'm in good position. I can tell you it has changed my anxiety levels. Those who knew me, I would come in some days and I'm like, you know, tweaking and, like, grouchy and, like, very fearful because 98% of my net worth is locked up in the company. The last 5 or 10% of that anxiety is, is go- like I can sleep most nights. I don't wake up at 4:00 AM with like a pit in my stomach and, like, you know, like, "Aah, I'm dead. Like, we're dead. Aah." That mostly has, has gone away but I'm still kind of obsessed. Um, and look, part of this was that was the deal. Like Cox doesn't wanna buy a company and not be in bed with the founder and know that we're going for the long term and we share the vision and, and I wasn't tired. I mean, I, I am tired of course, you know, I get tired, but I try to recuperate, you know, when I need to. Um, so that's kind of... You know what I mean? This, this was not just a sell it to Oracle, cash out and buzz off after 12 months. This was a different type of deal. This was going into business with a new owner.

Harry Stebbings 45:09 Do richer founders make better founders?

Zachary (Zac) Bookman 45:12 I don't know. There, there's an old school Silicon Valley mentality on like, you know, keep the founder poor, don't give them secondary. I had a board member who said, uh, "I, I wanted to sell I think like 400 grand to like..." I mean, I was in my like mid-30s, I'm trying to like paint my house and like get something set up and I got the, "If you're selling, I'm selling." And I'm like, "That's pretty harsh. Like, that's pretty harsh. Like, I, I don't have much and you do and that's a weird speech you just gave me." For me, with, you know, entrepreneurs I'm friends with or advise or work with-

Harry Stebbings 45:51 What, what did you, what did you say to him?

Zachary (Zac) Bookman 45:53 I mean, I did not say, "F you." But that's definitely a little bit how I felt. Um-

Harry Stebbings 46:00 Would you say F you now?

Zachary (Zac) Bookman 46:01 No. No, look, people are entitled to their views and that is like a common view and I, I get the view. I just think I disagree at this point. I'm not less committed now. I'm honestly able to drop back and scan the field and throw passes in a way that I wasn't before. Y- y- it's actually a decent way to encourage the entrepreneur to play small ball. For somebody who grew up without a lot, you know, mowing lawns, to go be able to make like X millions or tens of millions, it's like as soon as you get to a certain stage, there's a natural tendency potentially, you're like encouraging the person to grip tight when actually what the VC wants more than anybody is for the person to go long and go really, really big.

Harry Stebbings 46:44 What is that number? I was w- I was talking with my mother the other day about this and I was like, "Yeah, yeah, like five to feel, like, sa- like safe. Uh, five pounds, so like $8." Like, it, that's... And then like 20 to be like, "Okay, I can really go long."

Zachary (Zac) Bookman 46:58 Yeah.

Harry Stebbings 46:58 Those are my-

Zachary (Zac) Bookman 46:59 Sure, that sounds right. I think it depends on what kind of crowd you run with and what you care about and your values and other things. I mean, if you, you know, if you want like a two bedroom in the suburbs, you know, fine. If you want the flat in Mayfair overlooking the park, (laughs) you know, and you get caught up in it, there's, there's always more. There's always something better or a different crowd.

Harry Stebbings 47:21 Do you fall victim to that, Zach?

Zachary (Zac) Bookman 47:23 Yeah, of course. You know, I'm starting a family and there's all these different levels so keeping grounded... It's one of the reasons I love our company, you- that, you know, you find the end market boring as hell, we find it fascinating, we're proud of what we do and, yeah, literally at some point we're like-

Harry Stebbings 47:39 How did it feel when, how did it feel when you signed? Everyone dreams of this for years and years and years. How does it actually feel?

Zachary (Zac) Bookman 47:46 Yeah, so the deal was, it was really wild. Uh, I spent probably the better part of six months on this. It was exhausting and nerve-wracking. In December of last year I started breaking down. I was like breaking. I got sick three times in December. I got hand, foot and mouth disease. I didn't even have a child. I got some Victorian era virus. I'm like breaking out in things and this is the middle of the price negotiation. I remember Chambers saying, "Zach, sometimes you gotta play hurt." And I'm like propped up, you know, talking about big numbers while I have 103 fever. So that went on. We're supposed to close in January and I'd, I'd had like a, a baby moon or a pre-moon, uh, booked in Hawaii and I went on the trip, the deal got pushed by a month, and this is at a point where it's pushing and you're wondering if it's actually gonna happen. These things do break. And I'm in Hawaii, I'm on the phone like two-thirds of the time, the rest of the time I'm literally, like, in the gym, like, trying to manage my adrenaline. The deal ended up happening in February and Alex Taylor, the chairman, CEO of Cox-... came out and we announced it to the employees. I was so amped up and so exhausted at the same time. Uh, very excited, felt like I was making a good decision. But, like, I wasn't present, if you will. Do you know what I mean? Like, I wasn't, like, living the moments. So, in terms of the signing, it was, is literally just execution. The, the number of deliverables and the number of variables, and even at the end, the amount of people that have to be aligned, and the squirrelly things that happen, it just became, like, tunnel vision execution mode. And so, I spent a fair amount of the year literally processing and digesting and trying to reset because, you know what I mean? Like, we're amped up for the next chapter, but, like, we gotta turn the page.

Harry Stebbings 49:43 But it does return money to investors and it gives some a pretty great return and a great multiple. I'm pretty worried for venture as an asset class. I think '21 will be some pretty bad numbers and a really shitty vintage. And I think people are artificially keeping numbers high, and I don't think LPs have quite the understanding of how bad it is. When you analyze the venture asset class today from your perspective, what summary do you come to?

Zachary (Zac) Bookman 50:07 I think I'm probably aligned with you. I think overall the venture asset cl- and I don't have all the numbers, you m- you might, but I think the venture, uh, asset class is not particularly impressive. Uh, I think privates as a whole are probably not particularly impressive. I know there's a lot of people who are, disagree with me, are gonna tell me I don't have the stats, "You're totally wrong. I'm an LP in legit funds." Where's the money? Where's the money? Like, how many years has to go by? These thin- people think these companies take, like, five, seven, nine, 10 years. Not true. Just not true. They take, like, 15 to 20. And what does that mean? That means your venture fund takes 15 to 20 years to distribute the money typically, unless you're selling kind of secondary stuff, in which case you're probably taking a discount. So, I think the asset class, y- you have a very, very tough job. It's hard to be a first-class, uh, uh, you know, venture investor in terms of returns. I think the last few years have probably been pretty bad. Uh, I know, I know, you know, the, the post-Zerp kinda stuff. And there were a lot of people that were like, "I'm the best investor in the world," and yours truly made lots of stupid investments. Like, really stupid investments.

Harry Stebbings 51:19 What was your most stupid investment?

Zachary (Zac) Bookman 51:21 Oh, man. (laughs) I- I mean, I, I started writing bigger checks thinking, "Of course I'm a genius," that the checks I wrote in '13, '15, '17, you know, fantastic companies w- you know, uh, Flock Safety and Adipar and, uh, uh, Qualia and Flexport and other things. And it's like, "Oh, look, I'm good." And then I, like, write bigger checks into earlier stage companies and they go absolutely nowhere. And even some frauds, you know, just straight-up frauds where it's like, "Wait, you said the numbers were this." They weren't that. Like, "You just lied about it."

Harry Stebbings 51:57 I think there are many more frauds than we think.

Zachary (Zac) Bookman 52:00 Oh, I think there's loads of these. And, uh, a lot of entrepreneurs lose... Th- they either didn't have the kind of morals and the anchor weights or they, like, lose it in the, you know, intense, uh, pursuit of success. So, look, I think it's a really hard business and I'm an LP in some of these funds and I'm waiting for distributions and, you know, I- I- I don't know. I- it, to me, multiple invested capital and distributions on paid in seem like a lot more important than "IRR" based on other funds marking things up to impress their LPs. And I can tell you post-transaction, I'm getting hit up to invest in lots of companies or, or funds and it's like, "Maybe I shouldn't be so overweighted on privates."

Harry Stebbings 52:42 Okay. You shouldn't be so overweighted on privates. How do you think about publics now? 'Cause when you look at the opportunities in publics, they're there.

Zachary (Zac) Bookman 52:50 I wish, I obviously wish I'd taken, you know, any liquidity I had and dumped it into the S&P 500 early this year. Uh, I didn't. Um...

Harry Stebbings 53:00 What did you do with the money?

Zachary (Zac) Bookman 53:02 I put it in some money markets and tried to catch my breath mostly, paid down my mortgage and got back to work. Just stick it in the indexes and go do something else. Extremely hard to beat the market over a very long term.

Harry Stebbings 53:15 Best advice to me came from Founders Fund who once told me, like, "If you wanna be in the next Anduril or you wanna be in the next OpenAI, invest in Anduril or OpenAI." And it's like, and it's like, do you know what? Don't try and be too smart. Which fund are you not in that you'd like to be in?

Zachary (Zac) Bookman 53:30 That's probably, that- that would be one. I- I have tremendous respect for Brian and Trey and what they've built.

Harry Stebbings 53:36 Whi- which, which fund are you in that you wish you weren't in?

Zachary (Zac) Bookman 53:39 I- I put, you know, small checks into a few just to kind of support, uh, friends or investors in OpenGov. And I don't know how they'll do, but I- that to me was overweighting on privates and just unnecessary. So, making less investments is probably a good New Year's

Zachary (Zac) Bookman 53:58 resolution.

Harry Stebbings 53:59 Okay. So, this is a fun round, okay? You see these cards? (laughs)

Zachary (Zac) Bookman 54:03 They look stylish.

Harry Stebbings 54:05 These cards... Yeah, thank you very much. These cards are each worth $1,000 donation. Okay?

Zachary (Zac) Bookman 54:09 Wow.

Harry Stebbings 54:10 Yeah, yeah.

Zachary (Zac) Bookman 54:11 Okay.

Harry Stebbings 54:11 This is big money. And so you can either answer the question... And I don't know these questions. Okay? So, these were submitted by friends of yours and mine.

Zachary (Zac) Bookman 54:20 Wow. Cool.

Harry Stebbings 54:21 Uh, but $1,000 donation or you answer it. Okay?

Zachary (Zac) Bookman 54:27 (laughs) Okay.

Harry Stebbings 54:28 And there's no, and there's no skirting out of it. Okay? So, question number one. What was the worst investor meeting you've ever had?

Zachary (Zac) Bookman 54:38 So, there are two to come to mind. Um, one, I pitched Peter Thiel and I was so green and I'd just gotten back from Afghanistan, and I literally would go to work in slacks and leather shoes like a business lawyer looking type person. And the Founders Fund guys, at least in those days, did not respect people who wore button-down shirts. And I got looked at like, literally I got laughed at.Um, that hurt. Number two, I had a few meetings with Mike Moritz, and I was very excited. I think they would've been great investors. And I was on maybe the, uh, third or fourth meeting, went to kind of partner level meeting. And I thought this was gonna be the one, and I walked in, I could just see something on his face. And, and I go through my spiel, but I'm like, "Something's not right." And I just knew, like he had... You know, he had just decided against it, and he was like, "What have I done scheduling this meeting?" And he walked me out and shook my hand without looking me in the eyes, and, and then just literally turned and walked off. And, and that brought out, like very, very bad feelings in me, like, you know, high school fisticuffs level feelings. Um, so those would be, those would be two.

Harry Stebbings 56:01 Woo. Uh, this is, this is a lot of fun. Uh, okay. Uh, oof, tough one. Uh. Hmm. How much in cash did you take out?

Zachary (Zac) Bookman 56:13 1000 dollar donation.

Harry Stebbings 56:14 (laughs) Boom. Uh, what is the worst thing about having Marc Andreessen on your board?

Zachary (Zac) Bookman 56:23 He's tough. He's out to ensure governance and investor interests, and I learned a lot from that. But it was not... I had a warm, loving relationship with John, with Katherine. With Marc is a lot of business, it's a lot of... I mean, we, we had fun, we had warmth, but like, he took his role seriously, so it was a, it was a, it was a... I wouldn't say it was transactional, but I'll give you an example. I scheduled a two-hour board meeting, and the board was opening up, lot of give and take, big discussion going on, some important issue. So I decide to let it run. And at, you know, maybe it was 10:00 AM to 12:00 PM. At 12:00 PM, Marc literally just pulls his chair out, gets up, grabs his briefcase, walks out, slams the door, leaves the building, and we see him drive off. And everyone is just like, "What just happened?" And I text him afterward, and he was like, "You told me the board meeting ended at noon." And it was like a pretty stark message of like, manage the board meeting. Stay on time, run it tight, like be in control. And so these were the type of... I, I wouldn't call them avuncular lessons, but like, you know what I mean? Like... So it was, it was, it was tough.

Harry Stebbings 57:36 Dude, I wanna move into a quick fire. So I say a short statement, you give me your immediate thoughts. Does that sound okay?

Zachary (Zac) Bookman 57:41 Sounds great.

Harry Stebbings 57:42 So dude, what do you believe that most around you disbelieve?

Zachary (Zac) Bookman 57:45 Snap judgments are very valuable.

Harry Stebbings 57:48 Ooh.

Zachary (Zac) Bookman 57:48 A lot of people tell you, "You gotta be thoughtful, you gotta be balanced." And look, you do, especially when, as the organization gets larger. But you've gotta listen to your stomach and your gut. I often advise our execs or others when they've got a big decision, whether it's personnel or, or something else, go sit in the woods, go sit on the hill, look at the ocean and what is your body telling you? It usually is telling you an answer, and you gotta listen to it. And sometimes it's telling you that really fast, like when you meet somebody or when you walk out of a meeting, you know.

Harry Stebbings 58:22 What do you know now that you wish you'd known before you had your child?

Zachary (Zac) Bookman 58:27 Everyone tells you that it's a life-changer and, you know, you wanna pick the right partner and you gotta be in the right zone and all that. And it's washing over me, like I've changed my life materially. I've changed it materially. I wanted to go... I think I told you I wanted to go on that trip in November. Like, nope, not happening. We have a five-month-old baby and we're not dragging the baby around the globe. And so yeah, my life has changed dramatically. And like, I'm just coming to accept the new reality that I don't think I really understood. And a lot of learning is like that. It's gotta be experiential because... At least for me. You know, people just tell it to you, it doesn't, doesn't really sink in.

Harry Stebbings 59:11 The heaviest things in life are not iron or gold, but unmade decisions. What unmade decision rests on your mind most?

Zachary (Zac) Bookman 59:22 I don't lose a lot of sleep over it, but you know, if we hadn't sold the company, you know, what would life look and feel like if we were pursuing IPO? I still feel convicted, uh, that we made a great decision, and I'm very excited about the future and the vision and mission and the alignment and all of this. But that would be one. There's always the like, little kind of, if I hadn't made that hire or I made that other hire, but that's not really what you're asking. You're asking like, if I wish I'd run off and gotten married when I was 18 to the high school sweetheart. And-

Harry Stebbings 59:54 So like, you know, when I was 18, I had the chance to move to the Valley and, and do what I do in the Valley. And I didn't, I chose to be in London. What would my life have been like?

Zachary (Zac) Bookman 1:00:05 You would've had an incredibly successful podcast and a $400 million fresh fund, and you'd be crushing it. (laughs)

Harry Stebbings 1:00:16 Or not.

Zachary (Zac) Bookman 1:00:19 That's very I, I think you would. Um...

Harry Stebbings 1:00:23 You know, would I have been hanging out with Alex Wang at Scale, who's kind of similar age to me, and investing in him? And being around-

Zachary (Zac) Bookman 1:00:30 Or maybe doing your own company.

Harry Stebbings 1:00:33 Mm. Maybe. Do you know what I mean? So that, that is mine. Can I ask you... You mentioned that like, oh, go, go like not sell. Why the fuck does any Stripe, Databricks, Starlink, you name it, go public when there is so much money in privates?

Zachary (Zac) Bookman 1:00:51 Look, I think they have to. I, I, I don't... I'm a little surprised this has gone on the way it's gone on. Databricks supposedly raising the largest private round ever, I think. So I guess that's your, that's really the point you're making. But, you know, my read is, and what...What motivated me a little bit is, look, at some point, the mon- you've got to deliver the money back to investors. They're raising... Databricks is raising most of that to deliver secondary to employees, including to deal with some tax issues, and I know that's what Stripe did, and Josh, I think, is doing most of these. So, look, I think that can continue, but no, I don't see how these companies don't go public. I'm sorry, they've raised a ton of money. Uh, at some point people need liquidity and that's gonna come. So I, I, I don't know whether it's in '25, '26 or '27. If I'm guessing, it's probably '26, but I think thes- th- the market's opened up and all these companies end up going public.

Harry Stebbings 1:01:47 What have you changed your mind on in the last 12 months?

Zachary (Zac) Bookman 1:01:50 I've changed my mind on up-and-comers. I spent a lot of time hiring been there, done that, and I've grown a little tired of it, and I a- I see the value of promoting from within. I see the value of hiring people that are geniuses and wanna work, like, all the time and grow their careers and learn and have, kind of, the growth mindset versus the, "Hey, here's how I did it at my prior companies," and, "Hey, look, I'm an exec and I've got a playbook." So I... Yeah, I'm, um, I'm excited about growing, uh, and learning and promoting from within and, like, hiring, like, fresh, you know, talent that wants to get after it versus the been there, done that.

Harry Stebbings 1:02:37 If you could be CEO of any other company for a day, what company would you be CEO of?

Zachary (Zac) Bookman 1:02:43 I would understand a company like Workday.

Harry Stebbings 1:02:46 Workday?

Zachary (Zac) Bookman 1:02:47 Probably even-

Harry Stebbings 1:02:47 Workday? Th-

Zachary (Zac) Bookman 1:02:48 ... Apple. No, look, I'm in enterprise software. I, um, I sell ERP software. We're almost like a verticalized Workday. Where I'm going with this, Harry, is, like, to run, like, a Microsoft, like, I would... It would take me a lot of time to even understand their business. They have so many business lines and so many disparate sources of revenue th- I think what Satya's done there is, like, it's, it's kind of incredible, um, 'cause I don't have a clear understanding of that business and how it works and how I would... what growth levers I would pull and how to carry it on.

Harry Stebbings 1:03:18 OpenAI at 160, xAI at 50, which is what it's supposedly raising at now, or Anthropic at 40. Which one do you invest in, if you can only do one?

Zachary (Zac) Bookman 1:03:29 I think you'd tend to not invest against Elon, and if I sat down with him and talked with him and said, "Are you, like... Is this, uh, is this real and are you all in?" And he's, uh... I think he clearly is. Um, uh, I think that's probably a, a perfectly good investment. I think it's similar to the OpenAI investment in that, um, I talked to... I was at, uh, an event and Mary Meeker was there and I talked with her and I said, "Man, what a round that OpenAI..." I said, "Would you..." Uh, you know, uh, "Would you do it at 150?" And she said, "To be clear, I'm not... I, I'm, uh, not in the round, but yeah, I would do that. No question." I said, "Tell me about it," and she said, "Look," I don't remember ex- exactly, but she said, "60% chance that company crushes it and becomes, you know, a world-changing trillion-dollar company. 20% chance it goes sideways and the, you get the pref stack back or you get 80, you know, 70, 80 cents on the dollar. And then, yeah, 10, 20% chance it's a big goose egg." And she's like, "I... That's a nice bet."

Harry Stebbings 1:04:29 So I'm, I'm totally with her, except I don't actually think there's actually any chance that it's a goose egg. I mean, maybe it's like a 1% or a 2%. I think the chance that Microsoft actually take something with it and it, you get the pref stack back at least. By the way, people are like, "You've never seen a $50 billion acquisition." Yes, actually you will do when companies are worth three trillion. As a percent of market cap, it's absolutely aligned to what, you know, traditional acquisitions were. So, yeah, but I think that's like an 80% chance.

Zachary (Zac) Bookman 1:04:54 When you stroke the check or when you're writing your own money, it's different, you know? And you're like, "I'm writing a check with real money at $150 billion valuation," so...

Harry Stebbings 1:05:03 If you're writing a billion-dollar check like Josh, there's very few places where you can see a three to four to 5X on that big a check.

Zachary (Zac) Bookman 1:05:11 Yeah, fair. Fair. And he's going o- on that and Databricks and others and, yeah, I'm in, I'm in the fund and so it's just, well, it's exciting and nerve-wracking and I mostly just wanna watch and admire what they're doing.

Harry Stebbings 1:05:25 Final one before you, dude. What question have I not asked today that I should've asked?

Zachary (Zac) Bookman 1:05:30 I thought you were gonna ask more about the struggles, um, like the super pain. And we did touch on, on, uh, some of those, but I thought you were gonna get a little more personal with me about, you know, how I grew up or my mother or, you know, this kind of stuff, and I've listened to so many of your episodes and heard, uh, heard about some of your background. So I'm not begging you to do that, I'm just kind of being... I was a little pre- prepared to get, like, vulnerable and have a cry-out with you.

Harry Stebbings 1:05:59 Is there a tortured child within you, Zach?

Zachary (Zac) Bookman 1:06:01 Yeah, for sure. For sure. Um, I grew up... You know, I had a difficult home life. Um, my mother was a severe alcoholic and parents got divorced after, kind of, years of home war zone. I think... I think there's probably something like this in a lot of entrepreneurs. You would have more experience in it than me, talking to so many entrepreneurs as you do, but there's the, you know, wanting to prove that, you know, I'm good enough or I'm worthy that, kind of, is part of the drive in, in some of these companies. This is not just a mercenary activity. This is mission plus that personal, kind of, pursuit of...

Harry Stebbings 1:06:45 Did selling help you feel more worthy?

Zachary (Zac) Bookman 1:06:48 You know what's funny? Yes, on the one hand. And the other thing is... And, and you often ask guests, like, you know, "Does money make you happy?" It's helped a lot. And I don't mean that to sound trite and I don't... I hope this doesn't sound super pompous, um, but, like...I grew up, I never felt safe. I never felt safe. I didn't feel safe at home. I mowed lawns from the age of eight, and, like, I'd collect $20 bills and count them and go del- you know, literally deposit them and, like, been pinching pennies in one way or another for, like, most of my life. And so, there's a sense, uh, uh, of security that's come from, from some of this that, like, I often will walk around and just try to tell myself, like, "It's, you're okay. Like, it's safe." Like, (laughs) and, uh, yeah, I, I don't know. That's, that... I, I feel different than I did five or 10 years ago and it's a... No, it's not gonna produce happiness. It's... I still need to probably go to the Hoffman process and visit Esalen and do all the things that your other guests do. I, I, I need to get on some of those trains probably. I'm not there yet, but like, yeah, like, having a little, like, a touch of security and peace is, like, helpful.

Harry Stebbings 1:08:05 Why are you not there?

Zachary (Zac) Bookman 1:08:07 The maelstrom. Like, I'm still in the, like... Like, I'm living daily and hourly and, like, working, like, most of the weekends and nights and just, like, cranking to make this thing go to the next level. It's, it's... It sounds kinda sick but yeah, it's a total treadmill, and we're on it until we're not. And, and, like, I take my job super seriously and there's many hundreds of employees who are depending on me to do that as opposed to, like, buzz off and play golf in Ireland or something. And so, you know, while I'm here, I'm completely mission obsessed and I wanna deliver for our customers, employees and shareholders.

Harry Stebbings 1:08:43 Well, Zach, as a VC, I now have to fuck off to Ireland to go and play golf. Uh... (laughs)

Zachary (Zac) Bookman 1:08:48 Are you being serious or no?

Harry Stebbings 1:08:50 No, I'm totally messing with you, dude. I, I... Dude, uh, running media, running a media company, you have no time to do anything else. It is a knife fight.

Zachary (Zac) Bookman 1:08:59 You are... You have to be one of the hardest working guys in showbiz, okay? That is ve- abundantly clear. I, I-

Harry Stebbings 1:09:05 No, no. You know the-

Zachary (Zac) Bookman 1:09:06 I love your... I can't even keep up with your content. I mean, it's insane how much you put out.

Harry Stebbings 1:09:11 Dude. Dude.

Zachary (Zac) Bookman 1:09:11 And it's not just 'cause you cut it three ways from Sunday, it's 'cause you're literally... You are at it all the time. And you've been doing this, Harry, now what? Eight or 10 years?

Harry Stebbings 1:09:20 10. 10.

Zachary (Zac) Bookman 1:09:20 Yeah.

Harry Stebbings 1:09:20 But the cheat that no one tells you, dude, is, if you start so young that you've never experienced life.

Zachary (Zac) Bookman 1:09:25 (laughs)

Harry Stebbings 1:09:26 No, no. You really have to-

Zachary (Zac) Bookman 1:09:27 If you don't leave this dark room ever, you don't know what's on the outside.

Harry Stebbings 1:09:32 Yeah. No, I'm being serious. So, I never, ever travel. I've n-... I haven't been on holiday in 10 years outside of this country. In 10 years.

Zachary (Zac) Bookman 1:09:39 What are you gonna do? You gonna do this for another 30 years or are you gonna, like, step back? What are you gonna do?

Harry Stebbings 1:09:44 100%. I know. One of my, my dear friends, um, who runs Google Ventures, he's like, "The thing I love about you, Harry, is, like, you're the only person who thinks in, like, massive sun time horizons." Which is like-

Zachary (Zac) Bookman 1:09:56 (laughs)

Harry Stebbings 1:09:56 ... absolutely this is like a 40, 50 year game.

Zachary (Zac) Bookman 1:09:59 So, no... You're like... You're not going to the islands and you're not taking up golf and-

Harry Stebbings 1:10:04 No, 'cause I was talking to Mom about, like, you know, life the other day. And like, you know, I have more money than I used to and, you know, I'm very grateful for that. But then it's like, well, what's life?

Zachary (Zac) Bookman 1:10:14 Do guests ever ask you how much money you have?

Harry Stebbings 1:10:16 What?

Zachary (Zac) Bookman 1:10:17 Do your guests ever ask you how much money you have?

Harry Stebbings 1:10:20 Fuck off. That's personal. (laughs)

Zachary (Zac) Bookman 1:10:23 (laughs)

Harry Stebbings 1:10:24 So rude. Uh, no, but I wa- I was talking to her and I'm like, "Well, you know, if, if it's not about the money then, like happiness, what is it about?" And the summary that I came to was, it was about doing great work with people that I loved.

Zachary (Zac) Bookman 1:10:37 It's the craft. It's the-

Harry Stebbings 1:10:39 Yeah.

Zachary (Zac) Bookman 1:10:39 It's the, it's the, uh, fraternity or whatever you wanna call it. Yeah, I love that.

Harry Stebbings 1:10:44 Isn't it?

Zachary (Zac) Bookman 1:10:45 I love that.

Harry Stebbings 1:10:45 And is feel- feeling proud of the work that you do and the people that you do it with.

Zachary (Zac) Bookman 1:10:49 I was talking with my friend, David Peterson. I was in New York late last week and I caught up with David and, um... You know Ryan, I think, probably pretty well. David said that... H- his dad was a, uh, a, a computer scientist, a programmer, um, while we were growing up. We, we grew up together, went to elementary school together, me and Ryan. And, um, and his dad retired early and has been retired probably for like 20 years, and we were talking about people who don't, and don't stop. And he said, "You know what? I think some of these people who are cranking in their 80s actually have a higher quality of life." I said, "Tell me about that." He said like, "I went to, you know, on some trip with Nelson Peltz from Trian and, you know, this guy's, like, still with it and he's still cranking and, like, people wanna talk to him." He's like, "There's something about the, like, stimulation, the relevance, the, like, being in it." He's like, "It's, it's not just a need and it's not just vanity." He's like, "I think they might have a higher quality of life than if you just buzzed off and, like, toot around in a golf cart." And I thought that was interesting. I, I, I wanna look into it. (laughs)

Harry Stebbings 1:11:56 100%. I think your mentally, mental activity continues way stronger when you are continuously put through it.

Zachary (Zac) Bookman 1:12:03 I think there's a social element too.

Harry Stebbings 1:12:05 It's like stress

Narrator 1:12:05 Um-

Zachary (Zac) Bookman 1:12:05 It's, it's something... And it, we didn't talk about the work for work, work from work stuff, but I made a mistake on that. I went remote virtual and distributed in 2020. I'd been getting the crap beat out of me. Well, we were, we were at Redwood City and struggling to hire and struggling to compete and things started to break before COVID. And COVID hit, I go, you know, "Move home with your folks or go to the beach, keep your salary. We're remote virtual and distributed." And company fanned out. Catherine beat on me, by the way. She said, "Your, y-... The companies that get back to the office first are going to win. What are you doing?" And I was like, "Oh, come on, you..." (laughs) "There's been innovation in the world, you don't know what you're talking about." And the reality is, I was dead wrong. We're getting back into the office. The collaboration, the productivity, like, it's not even close. And it's very painful getting back into the office. And you know what is worse than that? It's not getting back in the office. It's the disaffection. It's the... Uh, I don't wanna be paternalistic but, my, my colleague, Tiago, who, uh, is our, our, um, one of our key leaders here, he said, "Look, people think they're happier sitting at home, and they're not." And they end up quitting, like, a week later. They say, "No, no, I love working from home." And then they go quit. Why? Because they're disconnected, they're not part of it, they're not with people. It's not natural just to sit in a room and, like, crank all day without collaborating and white boarding and talking. And so, I'm very excited about the track we're on and I've had to literally stand up in front of the company and say, "I was dead wrong. I'm sorry. I'm gonna own it. But this is where, this is the direction we're going." I wish remote virtual and distributed on all of my competitors.

Harry Stebbings 1:13:47 Dude, listen. I've loved having you on. I'm so grateful for like the new friendship. Like, this is w- one of the reasons why I love doing this show so much. But thank you.

Zachary (Zac) Bookman 1:13:55 I... The feeling is completely mutual. I'm a, a fan, uh, but honored to be a friend too and I'm really excited to be with you, Harry. And this is a lot of fun.