Lenny's Podcast

M&A, competition, pricing, and investing | Julia Schottenstein (dbt Labs)

Julia Schottenstein is a product lead at dbt Labs, a data transformation company, and an active angel investor in data and infrastructure startups. She first got excited about dbt in 2019 when she was a VC at NEA and decided to make the leap from investor to operator by joining dbt Labs. She also co-hosts the dbt Labs Analytics Engineering Podcast, a show about data trends that impact analytics engineers’ work. In today’s episode, we discuss: • Advice for founders hoping to improve their M&A outcome • How to strategically think about competition • How to determine your paid features and have willingness-to-pay conversations • Why Julia lives by “worse is better” and “tech debt is a champagne problem” • Lessons from dbt Labs • What PMs can learn from investors — Brought to you by Vanta—Automate compliance. Simplify security | Superhuman—The fastest email experience ever made | AssemblyAI—Production-ready AI models to transcribe and understand speech Find the full transcript at: https://www.lennysnewsletter.com/p/m-and-a-competition-pricing-and-investing Where to find Julia Schottenstein: • Twitter: https://twitter.com/j_schottenstein • LinkedIn: https://www.linkedin.com/in/julia-schottenstein-25424318/ • Podcast: https://open.spotify.com/show/4BKMMeVXk4jJnAQSqGSJvE Where to find Lenny: • Newsletter: https://www.lennysnewsletter.com • Twitter: https://twitter.com/lennysan • LinkedIn: https://www.linkedin.com/in/lennyrachitsky/ In this episode, we cover: (00:00) Julia’s background (04:15) How Julia went from VC to working in product at dbt Labs (08:24) Four things Julia uses to evaluate a company’s potential (11:10) How to identify whether or not you have product-market fit (12:05) Distribution strategies (13:11) M&A strategies (15:54) Lessons from the Transform acquisition (18:01) Competitive values at dbt (20:25) Keys to dbt’s success (26:35) An offsite exercise Julia used to help her team internalize upcoming changes (29:32) Determining what features are included in open source (31:56) Pricing and willingness to pay (33:34) Lessons from dbt Labs’s first pricing change (36:33) Whether or not to be public about selling your startup (40:08) How to utilize connections during acquisitions (44:57) How to communicate selling your company (46:33) M&A market forecast (47:28) Values at dbt Labs (50:14) Lessons from working with strongly opinionated users (52:02) The importance of shipping, learning, and iterating (54:08) How VC skills translate into product (57:03) Lightning round Referenced: • dbt Labs: https://www.getdbt.com/ • Tristan Handy on LinkedIn: https://www.linkedin.com/in/tristanhandy/ • dbt Labs acquires Transform to enhance Semantic Layer tool: https://www.techtarget.com/searchbusinessanalytics/news/365530993/DBT-Labs-acquires-Transform-to-enhance-Semantic-Layer-tool • Snowflake: https://www.snowflake.com/en/ • Gödel, Escher, Bach: An Eternal Golden Braid: https://www.amazon.com/G%C3%B6del-Escher-Bach-Eternal-Golden/dp/0465026567 • Red strings training clip from Ted Lasso: https://www.youtube.com/watch?v=aVe3Iwy10MA • Monetizing Innovation: https://www.amazon.com/Monetizing-Innovation-Companies-Design-Product/dp/1119240867 • Madhavan Ramanujam on Lenny’s Podcast: https://www.lennysnewsletter.com/p/the-art-and-science-of-pricing-madhavan#details • Pricing survey: https://www.qualtrics.com/marketplace/vanwesterndorp-pricing-sensitivity-study/ • Hunter Walk’s blog post about publicly selling your startup: https://hunterwalk.com/2023/05/13/the-acquihire-market-for-early-stage-startups-is-ice-cold-one-better-strategy-announce-youre-for-sale/ • Range: Why Generalists Triumph in a Specialized World: https://www.amazon.com/Range-Generalists-Triumph-Specialized-World/dp/0735214506/ • The Snowball: Warren Buffett and the Business of Life: https://www.amazon.com/Snowball-Warren-Buffett-Business-Life/dp/0553384619/r • Sam Walton: Made in America: https://www.amazon.com/Sam-Walton-Made-America/dp/0553562835 • Succession on HBO: https://www.hbo.com/succession • In Depth podcast: https://review.firstround.com/podcast • dbt community Slack: https://www.getdbt.com/community/join-the-community/ Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email podcast@lennyrachitsky.com. Lenny may be an investor in the companies discussed.

Julia SchottensteinguestLenny Rachitskyhost

Jul 12, 20231h 0mWatch on YouTube ↗

WHAT IT’S REALLY ABOUT

Julia Schottenstein on M&A, competition, pricing, and product bets

Julia Schottenstein, product leader at dbt Labs and former VC, shares how her investing background shapes her approach to product, company selection, and strategic decisions like M&A and pricing.
She explains why effective M&A starts years before a sale, how to ‘inflict pain’ on potential acquirers while staying friendly, and why founders should be transparent when running a sale process.
Julia breaks down what made dbt a default standard in the modern data stack: simplicity, timing, open source, ecosystem-led distribution, and deep immersion in customer problems via consulting.
She also covers dbt’s philosophy on competition, open source vs. proprietary features, pricing and willingness to pay, and how PMs can make higher-upside bets by thinking more like investors.

IDEAS WORTH REMEMBERING

5 ideas

Treat joining a startup like making an investment: assess people, market, product, and distribution.

Julia evaluates companies the same way as when she was a VC—looking for a rare founder, a growing market with room for a new entrant, clear user love for the product, and a realistic distribution advantage.

Start your M&A strategy long before you need it by building real optionality.

The strongest negotiating position is having a credible independent path; relationships with potential acquirers and partners should be built early, before any explicit sale discussions.

‘Inflict pain’ on likely acquirers, but stay friendly and collaborative.

There are usually only two to three buyers for whom you’re highly strategic; win users in the area where you have an edge so they can’t ignore you, while maintaining positive, open lines of communication for future deals.

Use corp dev and your investors as leverage when selling, and be transparent if you’re in a Hail Mary situation.

Corp dev teams exist to find companies like yours; when time is short, it’s better to plainly say you’re running a process and use your investors’ networks than to try to hide your situation.

dbt’s success came from simplicity, timing, and an open ecosystem flywheel.

A simple, SQL-based model at the right moment in the cloud data warehouse boom, combined with open source adoption, community-driven evangelism, and partner integrations, created powerful network effects and default status.

WORDS WORTH SAVING

5 quotes

M&A is always about creating plan Bs.

— Julia Schottenstein

I would inflict pain on that potential buyer. Make it impossible for them to not notice you.

— Julia Schottenstein

You don’t get to decide if you’re going to have a pricing conversation. You only get to decide when.

— Julia Schottenstein, paraphrasing Madhavan Ramanujam

We are more concerned with value creation than value capture.

— Julia Schottenstein

‘Worse is better,’ and tech debt is a champagne problem.

— Julia Schottenstein

How to evaluate and join early-stage startups (people, market, product, distribution)M&A strategy: creating ‘plan B’s’, inflicting pain, and running a sale processdbt Labs’ growth, open source strategy, and competitive philosophyPricing, willingness to pay, and designing value capture vs. value creationWorking with strong user communities and open ecosystemsProduct development philosophy: shipping fast, tech debt, and zero-to-one betsTranslating venture investing skills into effective product leadership

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