Pixar’s Golden Age, Twitter through IPO, and Building YC’s Growth Fund | Ali Rowghani | Ep. 26

1. 0:00 – 0:53

   Intro

   1. ARAli Rowghani0:00

      We live in a world of hedging. We live in a world of thinking with bets, backup plans, you know, contingencies-

   2. JAJack Altman0:04

      Yeah.

   3. ARAli Rowghani0:04

      -et cetera. And in a sense, that's very rational, okay? Um, but what if you didn't live in that world? Like, what if you, like, positioned yourself against that? And what if, like, you tortured everything you worked on to try to be great-

   4. JAJack Altman0:17

      Yeah

   5. ARAli Rowghani0:17

      ... you know, within the context of a company?

   6. JAJack Altman0:18

      Yeah.

   7. ARAli Rowghani0:18

      And I think that is the core of a miracle factory.

   8. JAJack Altman0:21

      [music] All right. I'm super excited to be here with Ali Rowghani. He was the COO at Twitter in some of the most formative years. You had exec roles at Pixar, worked directly with Steve Jobs for many years. You started and ran the YC Growth Fund. You've been an angel investor in amazing current companies like Cursor, Decagon. You've got your own fund now. You've also been, like, an advisor to a bunch of people in our ecosystem, like me, over the years, and so many others. Um, and so you're just someone I've looked up to and wanting to talk to you on the show for a long time, so thank you for doing this.

   9. ARAli Rowghani0:51

      Oh, it's a pleasure. I'm psyched to be here.

2. 0:53 – 6:28

   Pixar’s miracle factory

   1. JAJack Altman0:53

      The thing I want to start with that is so interesting to me is the Pixar experience, and you were there for ten years, around 2000 to 2010, give or take, and what's shocking to me, above all, is it seems like year after year after year, they just released, like, bangers, and everyone was good. And most movie studios, I feel like some of the products are good, some are not. But, like, here we had, we had Monsters, Inc., Finding Nemo, The Incredibles, Cars, Ratatouille, WALL-E, Toy Story. Like, it's just-

   2. ARAli Rowghani1:25

      Up.

   3. JAJack Altman1:26

      Up. It's just crazy.

   4. ARAli Rowghani1:27

      Yeah.

   5. JAJack Altman1:28

      And so I guess my first question is... And I don't think I skipped, like, a bunch of misses or something. How did that happen? Like, how is the quality bar-- What, what went into making that happen time after time?

   6. ARAli Rowghani1:40

      You know, Pixar was a miracle factory. That's, that's how I thought of it. Um, you know, you start with a blank sheet of paper, and then four years later, you have Finding Nemo, and then, then you start with another blank sheet of paper, and four years later, you have The Incredibles, Ratatouille, Up, and so on. So, like, the interesting question is exactly what you asked: Like, how is that possible? And I think for me-- I've thought a lot about this question, and I think for me, it kind of boils down to really three big things. One of them is, we only made movies that the directors themselves felt really passionate about. It wasn't, uh, filmmaking by committee. It wasn't, like, some executives ordering up a movie or like, "Let's do a Madl- Mad Libs style with focus groups," or whatever else. None of that. It was like, what was the story that somebody who was really talented truly wanted to tell? And then we put all of our eggs in one basket. Like, there was no thinking in bets.

   7. JAJack Altman2:31

      Mm.

   8. ARAli Rowghani2:31

      There was no hedging.

   9. JAJack Altman2:32

      Stuff wasn't getting killed along the way.

   10. ARAli Rowghani2:34

       No, no. And it was once we were committed to a director and to an idea, it was like-

   11. JAJack Altman2:40

       Mm

   12. ARAli Rowghani2:40

       ... all in. And it was this focus, almost like it had to be great. The future of the studio depended on it, so it would be great.

   13. JAJack Altman2:49

       What percent of the studio would work on a given movie while it was being worked on?

   14. ARAli Rowghani2:52

       At the beginning, before we could have multiple films going at the same time, a hundred percent of the studio worked on one film. So I would say for the first three movies or so, a hundred percent of the studio worked on, on the film. And that started to change with Toy Story 2, which I think is kind of the seminal movie in Pixar history, because Toy Story 2, it was a new creative team, not the creative team that made the first couple of movies. A new creative team made that movie. And when the creative team, like, finished up on Bug's Life, which was the second movie, they turned their attention to Toy Story 2, which was supposed to come out just one year later. And they looked at it, and they were like, "This isn't good enough."

   15. JAJack Altman3:24

       Mm.

   16. ARAli Rowghani3:24

       And so they replaced the creative team. They took over the movie nine months before it was supposed to come out, and if you know anything about animated filmmaking, nine months before the movie comes out is, like, not when you start over. You know, these films take multiple years to make. And they rewrote and remade the movie from scratch, and it almost, like, killed the studio to do that.

   17. JAJack Altman3:40

       Wow!

   18. ARAli Rowghani3:40

       But, you know, Ed Catmull talks about that was the, the moment in Pixar history, because faced with a choice of, like, "Do we release something we're not proud of, or do we kill ourselves to release something we're really proud of?" The studio made the choice to r- to, like, stop everything and focus on, like, making it great. And that established a culture, like, a set of norms, and this notion of, like, we don't think in bets. Like, we're all in. No hedging. Like, and, and I think that really means something.

   19. JAJack Altman4:07

       Mm.

   20. ARAli Rowghani4:08

       So that's the foundation of it. Um, and then there are two other things in terms of the process that I think are super important. One is, like, the, the Pixar films were made and remade and made and remade, like, a dozen times before the audience ever saw them, and not many people know that. Uh, but what we would do is we'd have this process called story reels, and we would expect the directors to write essentially a moving comic strip version of their movie, a temporary version of the movie, produce that three to four times a year, and then the... And that was-- a- and it was shown in pub- in public within the studio. And, you know, we'd get the brain trust of the studio, creative brain trust, together, and they'd give a bunch of notes o- on this thing. So there was a rapid prototyping process, and the thing that was important was not how bad the movies were when they started, but that they were showing, like, improvement from screening to screening to screening. And so this, like, making and remaking, making and remaking process, um, was really important. So that's two. The last thing is, there was an incredible sort of, like, open feedback on the films, um, meaning, like, you were expected, as a director, to hear the feedback of other filmmakers on your movie. You, you, you had the... You know, the decisions were yours in terms of what to do, but, um, but you had to hear it, you know? And so we built this, uh, sort of culture of it being safe and okay to show work that wasn't finished, to show imperfect work, and that just meant that the work, in-process work always got better, as opposed to someone working for two years and finally showing you something, and you saying, like, "Okay, that's crap." You know, if it's that kind of a, kind of a culture, then the feedback is, is shattering, and it's not sought. But if it's feedback where it's, like, okay to, like, show incomplete work, and the leaders of the studio, when they're making films, are showing their work when they know it's not very good-

   21. JAJack Altman5:44

       Mm-hmm

   22. ARAli Rowghani5:44

       ... then it, I think, breeds this culture of, like, always getting better. Yeah.

   23. JAJack Altman5:48

       That decade, like, the 2000s-... I guess Apple was and is also very much like that. Like, you know, you back, you go back and you think about going all in on the iPod and then the iPhone. Like, that was also, I guess, it couldn't have been a thinking in bets culture there either, right?

   24. ARAli Rowghani6:03

       Certainly in terms of the quality bar, that everything they release to the public has to be great, and that you take the time to make sure it's great. I think in that sense, um, probably. I don't know if A- Apple had-- I think from just hearing from the outside, there were lots of things they were working on that they killed-

   25. JAJack Altman6:16

       Yeah

   26. ARAli Rowghani6:16

       ... you know, along the way, that they just didn't think was good enough. Or-

   27. JAJack Altman6:19

       Yeah

   28. ARAli Rowghani6:19

       ... I mean, there was rumors about a television set-

   29. JAJack Altman6:20

       Right

   30. ARAli Rowghani6:21

       ... and all this other stuff that-
3. 6:28 – 13:23

   Working with Steve Jobs

   1. JAJack Altman6:28

      I think I didn't fully realize this until we were chatting before, but Steve Jobs was CEO of both, right? Like, he was running Apple through this, I guess, turnaround-

   2. ARAli Rowghani6:37

      Yeah

   3. JAJack Altman6:37

      ... and getting, you know, the sort of iPod and iPhone and everything else in those years. But he was CEO of Pixar during that same time.

   4. ARAli Rowghani6:44

      Yep.

   5. JAJack Altman6:45

      And for at least some number of those years, you worked directly with him. So I guess I don't know other people who have worked directly with Steve, so I kinda wanna ask a few questions about that.

   6. ARAli Rowghani6:54

      Mm-hmm.

   7. JAJack Altman6:54

      Um, what was, I guess, just to start, like, what was he like? Like, what was working with him, like, in a sort of regular cadence business? What was that like?

   8. ARAli Rowghani7:02

      You know, he was the most, um, impressive, like, business creature, um, I've ever been around in a room. And, and it wasn't because he was famous or it was like, "Oh, there's Steve," or anything like that. Um, and in the end of the day, for me, it boiled down to a set of basic skills that he had. You know, his ability to break down a problem in real time, his ability to communicate really clearly, his ability to inject urgency-

   9. JAJack Altman7:28

      Mm

   10. ARAli Rowghani7:29

       ... and kind of like cadence and urgency and importance to everything that we did. Um, all of this stuff kind of was in service of like, um-- all of his basic skills were in service of, like, trying to create, as fast as possible, a map of the world, a map of reality in every discussion, that would help, like, guide the discussion and help us get to the truth.

   11. JAJack Altman7:50

       Mm.

   12. ARAli Rowghani7:50

       And so he was so good at, like, you know, developing this, generating a map of the world. And even if it, he was wrong about c- certain things, like, you fed him new data, and he would, like, recalculate it. And it was, it-- you always had the feeling being around him that, like, wow, like, this, you know, I thought this game we were playing was, like, level one to three, but then you saw somebody that was, like, at level twenty-

   13. JAJack Altman8:13

       Uh-huh

   14. ARAli Rowghani8:13

       ... and it was, like, incredibly inspiring, just the way he did the basic stuff.

   15. JAJack Altman8:17

       So, like, what are some of those, like, those basics, like communication-

   16. ARAli Rowghani8:20

       Yeah

   17. JAJack Altman8:21

       ... and, like, understanding and pulling things out of people? What, what specific sort of things stuck out to you there? Like, can you share more of those, like, basics done really well? 'Cause I feel like I can't remember where I saw this recently, but someone was talking about, like, if you don't know what, like, your equivalent of practicing scales is, you, like, you need to figure that out.

   18. ARAli Rowghani8:39

       Mm-hmm.

   19. JAJack Altman8:39

       And I feel like when you're talking about basics, like, that's something that doesn't get discussed enough in, like, business.

   20. ARAli Rowghani8:44

       Yeah.

   21. JAJack Altman8:44

       'Cause especially as a CEO or an executive or an investor, you kind of don't even know what your basics are a lot of times. Like, what, what were those?

   22. ARAli Rowghani8:51

       Yeah, so I mean, it was really some of the things th-

   23. JAJack Altman8:53

       Yeah

   24. ARAli Rowghani8:53

       ... I mentioned.

   25. JAJack Altman8:54

       Yeah.

   26. ARAli Rowghani8:54

       And I think what happens with most of us, you know, I, I'm-- certainly with me, is like, you get pretty good at communicating. You get pretty good at, like, exchanging ideas-

   27. JAJack Altman9:02

       Yeah

   28. ARAli Rowghani9:02

       ... or, like, trying to decipher something or developing your own mental map of the universe or-

   29. JAJack Altman9:05

       Yeah

   30. ARAli Rowghani9:05

       ... a mental map of a particular problem, particular discussion.
4. 13:23 – 16:28

   Ed Catmull and John Lasseter

   1. JAJack Altman13:23

      What, what did you learn that you can share about Ed Catmull or John Lasseter, who are the other leaders?

   2. ARAli Rowghani13:29

      I think Ed Catmull was the architect of the miracle factory, in my view, and, um, he, um... You know, like, this idea that, like, we have to make everything great, um, uh, which, by the way, like, if you think about it, you know, again, applying it to like... I mean, what, what greater aspiration would anyone trying to start anything have than to try to build a miracle factory of their own, you know? And so, like, you know, I think really for Ed, it started with, like, having an extremely high bar-

   3. JAJack Altman13:59

      Mm

   4. ARAli Rowghani13:59

      ... for what was great, you know, and always trying to... You know, you perform to your own expectations, or you perform down to your own expectations. And like, he helped, he and John both, um, who was the ch- chief creative officer at Pixar, held the studio to an incredibly high bar about what was good, and they were willing to pay the costs of, you know, whatever cost was necessary to maintain that bar, so-

   5. JAJack Altman14:17

      I think that's the key. It's easy to say, but there's costs associated-

   6. ARAli Rowghani14:20

      Exactly

   7. JAJack Altman14:20

      ... and they're personal and emotional-

   8. ARAli Rowghani14:22

      Yep

   9. JAJack Altman14:22

      ... financial.

   10. ARAli Rowghani14:23

       Yeah.

   11. JAJack Altman14:23

       There's a lot of costs-

   12. ARAli Rowghani14:23

       Yep

   13. JAJack Altman14:23

       ... associated with maintaining a high standard.

   14. ARAli Rowghani14:25

       That's right. So I, you know, I mentioned the Toy Story 2 story. The other, the other story at, at, at Pixar was Ratatouille, where, you know, the film wasn't coming together and the director of the film was replaced. Another director was put on the film-

   15. JAJack Altman14:36

       Mm

   16. ARAli Rowghani14:36

       ... and then the film was essentially... And then they delayed the release of the film by, I think, six or nine months or maybe a year, I don't know, uh, some period of time, which in animation time is a big deal, and it makes the movie a lot more expensive.

   17. JAJack Altman14:46

       Yeah.

   18. ARAli Rowghani14:46

       Um, but then Ratatouille becomes, like, one of these incredible-

   19. JAJack Altman14:49

       Yeah

   20. ARAli Rowghani14:49

       ... you know, it, members of the sort of like canon of Pixar.

   21. JAJack Altman14:52

       There was this great, uh, tweet from John Collison, and it ended with basically, like, the world's a museum of passion projects-

   22. ARAli Rowghani14:59

       Yeah

   23. JAJack Altman14:59

       ... or something like that. Basically, just that, like, every good thing you see in the world, like, somebody had to sacrifice a lot-

   24. ARAli Rowghani15:05

       Yeah

   25. JAJack Altman15:05

       ... to produce anything at a high standard.

   26. ARAli Rowghani15:07

       Yeah.

   27. JAJack Altman15:07

       That sticks with me.

   28. ARAli Rowghani15:08

       That's right.

   29. JAJack Altman15:08

       And it hurts.

   30. ARAli Rowghani15:09

       And, and... Yeah, yeah. And, you know, and we live in this world where, you know, particularly investors, and look, investing isn't like Pixar, but it in a lot of ways, but, like, you know, we live in a world of hedging. We live in a world of thinking with bets, backup plans, you know, contingencies-
5. 16:28 – 18:30

   Crazy years at Twitter

   1. ARAli Rowghani16:28

      that much harder.

   2. JAJack Altman16:28

      Okay, I wanna move over to Twitter-

   3. ARAli Rowghani16:31

      Yeah

   4. JAJack Altman16:31

      ... now X. Um, you were COO there-

   5. ARAli Rowghani16:33

      Yeah

   6. JAJack Altman16:33

      ... from 2010 to '14, and obviously, those were, like, crazy years. I guess on some level, it seems like for the company, all the years are crazy years, but there was a lot going on then. Can you just, like, tell me about what was happening at a leadership, founder level? Like, what were the, what were the big chess pieces moving around at that time?

   7. ARAli Rowghani16:52

      Yeah. So when I joined Twitter, we had, um, less than 100 employees. We had no revenue. We didn't have a business model. We weren't sure we were gonna make our money with ads or some other charge memberships. Like, there were all sorts of issues-

   8. JAJack Altman17:01

      The site was going down all the time?

   9. ARAli Rowghani17:02

      The site was going down all the time.

   10. JAJack Altman17:04

       The fail whale.

   11. ARAli Rowghani17:04

       The fail whale, yeah. There was a logo, for those who don't remember. The company built its own logo for the site crashing and the site going down, which was the fail whale.

   12. JAJack Altman17:11

       That's funny.

   13. ARAli Rowghani17:11

       Um, it was kind of a bit of a laughingstock company, and it clearly touched a certain cultural zeitgeist. You know, it had about 15 million users. We just ran twitter.com. We didn't have any mobile apps. We didn't have any mobile engineers at the company. And, you know, about eight months or so after I joined, um, the founder... You know, there'd been s- a lot of founder turmoil between Jack and Ev, and J- Ev was the CEO when I joined, and he was out. Um, and Biz kind of walked out with him, and so we were sort of founderless, um, about eight months into the, into the tenure. And it was both a-

   14. JAJack Altman17:39

       Wow

   15. ARAli Rowghani17:39

       ... sort of like hyper-scaling challenge, um, because the opportunity was so large, and effectively a turnaround-

   16. JAJack Altman17:45

       Mm-hmm

   17. ARAli Rowghani17:45

       ... because, you know, all the leadership was pushed out. There were a lot of wrong people in the wrong pos- uh, in the, in various positions.

   18. JAJack Altman17:51

       It's a very interesting case study, 'cause it seems like it had unstoppable product market fit-

   19. ARAli Rowghani17:55

       Yeah

   20. JAJack Altman17:55

       ... and then was just not run well.

   21. ARAli Rowghani17:57

       ... That's largely right.

   22. JAJack Altman17:58

       It's better than the inverse, I guess.

   23. ARAli Rowghani18:00

       Yes. Yes.

   24. JAJack Altman18:00

       Yeah.

   25. ARAli Rowghani18:01

       Yeah, sometimes product-market fit is so powerful that it allows you to make a lot of mistakes at the top.

   26. JAJack Altman18:05

       Reddit had this for a long time.

   27. ARAli Rowghani18:06

       Yep. Yeah, that's right.

   28. JAJack Altman18:07

       Yeah.

   29. ARAli Rowghani18:08

       Yeah And so, um, yeah, so I joined it when it was in that state. I left about four or five years later, and we'd gone from no revenue to $2 billion in revenue. We'd gone from 50 million users to 300 million users. We'd gone from just one office in San Francisco to 23 offices in 14 countries. And when I look back, I think there are a couple of things we did great and a couple things I wish I could have over again.

   30. JAJack Altman18:26

       Mm-hmm.
6. 18:30 – 19:56

   Getting monetization right

   1. ARAli Rowghani18:30

      I think we got monetization right. And the core of it was, I think we figured out before any social platform, that if you can make the ad unit and the content unit the same, in our case, tweets-

   2. JAJack Altman18:41

      Yeah

   3. ARAli Rowghani18:41

      ... then, um, you have the ability to make ads feel more like content.

   4. JAJack Altman18:45

      Yeah.

   5. ARAli Rowghani18:45

      And you have- you can judge them based on relevance, and you give advertisers the ability to participate in a conversation. And, like, my favorite example of this, you may remember, um, the year we're in the Super Bowl, like, when the lights went out at the Super Bowl, um, Oreo, which was Oreo cookies, which was a advertiser on Twitter, right at that time, when, like, the lights are out, it sends out this adverti- this tweet-

   6. JAJack Altman19:04

      Yeah

   7. ARAli Rowghani19:04

      ... promoted tweet, that ta- that talks about, like, dunk after dark.

   8. JAJack Altman19:08

      That's good.

   9. ARAli Rowghani19:08

      So, you know, dunk your Oreo cookie in milk. It's dark or whatever.

   10. JAJack Altman19:11

       Yeah.

   11. ARAli Rowghani19:11

       Right when the... So and it got a lot of attention and a lot of buzz, and it was just clever. It was content, or was it an ad? I don't know. It made people laugh, right?

   12. JAJack Altman19:18

       Yeah.

   13. ARAli Rowghani19:18

       So, um, I think we got that notion of the ad unit and the content unit being the same, right? And the nice thing was, it was graceful as, like, the platform shifted from desktop to mobile. Um, Facebook, at the time, you may remember, kind of stumbled because its ad units were built for the desktop, which is the majority, majority of users.

   14. JAJack Altman19:34

       Mm-hmm.

   15. ARAli Rowghani19:35

       That's how they interfaced with Facebook until that changed, and so they kind of had to figure out what their ad units would look like in a mobile world. I, I think Twitter kind of nailed that. Um, [clears throat] the second thing is, you know, we scaled the company globally really fast and generally pretty well. And as a result, our, um... You know, there was a big global audience, and we built a global business quickly.

   16. JAJack Altman19:54

       Mm-hmm.

   17. ARAli Rowghani19:54

       I think those were the things I think we got right.

7. 19:56 – 22:37

   Learnings in hindsight

   1. JAJack Altman19:56

      Yeah.

   2. ARAli Rowghani19:56

      I think the things that I regret or big learnings for me, um, were, um, probably the biggest one is w- the company never showed enough curiosity about its own users.

   3. JAJack Altman20:07

      Mm.

   4. ARAli Rowghani20:07

      And we had a mental model of who a Twitter user was that way lagged the reality of what Twitter users were, you know, across all these countries, across all these devices-

   5. JAJack Altman20:16

      Yeah

   6. ARAli Rowghani20:16

      ... you know, using it in v-

   7. JAJack Altman20:18

      Oh, yeah

   8. ARAli Rowghani20:18

      ... a myriad of ways.

   9. JAJack Altman20:18

      I can imagine that the early adopters and, like, the middle of the pack of the curve were completely different.

   10. ARAli Rowghani20:23

       Yeah. A- and this is an interesting thing for, like, any, any, in any business-

   11. JAJack Altman20:26

       Mm

   12. ARAli Rowghani20:27

       ... which is, um, your mental model, um, of your customer, ah, naturally lags. There's inertia in how that model, like, moves relative to, like, reality. And you have to, if you're gonna kind of keep up with, like, who your users actually are and what their needs are, you have to actually develop a ton of discipline and a ton of, like, rituals and processes to keep up.

   13. JAJack Altman20:49

       Yeah.

   14. ARAli Rowghani20:49

       I remember, um, uh, Patrick Colsen asked me years ago to attend one of their, um, all-hands, and this is all I talked about. All I talked about was, like, "Hey, your platform is starting to take off, and let's talk about the ways in which your views of your users are maybe outdated to what you... who your users actually are today and what they're doing."

   15. JAJack Altman21:06

       Yeah.

   16. ARAli Rowghani21:06

       Um, so that was a huge thing at, uh, at Twitter. Um, and, you know, unfortunately, you know, there were big product launches that we, that we had. One of them was, uh, the conversations feature. You remember the blue line?

   17. JAJack Altman21:16

       I do remember. That was so hard to use.

   18. ARAli Rowghani21:17

       Yeah, the co-

   19. JAJack Altman21:17

       Yeah.

   20. ARAli Rowghani21:18

       Yeah. Well, what happened was, um, there were- there... Probably, our most engaged users of Twitter were people who were using the platform to subtweet their friends, often with false identities, kids usually.

   21. JAJack Altman21:26

       Mm-hmm.

   22. ARAli Rowghani21:27

       And that feature broke Twitter for them. So our most eng- engaged users in the United States, like, we launched a feature that broke Twitter for them, and that was simply because we didn't really understand-

   23. JAJack Altman21:36

       Mm

   24. ARAli Rowghani21:36

       ... like, who they were. We were building for ourselves, that, that seemed nifty.

   25. JAJack Altman21:39

       Yeah.

   26. ARAli Rowghani21:39

       And so that's a really dangerous thing to do.

   27. JAJack Altman21:41

       Yeah.

   28. ARAli Rowghani21:41

       The other thing- the other learning for me was, um, we were too precious. I mean, we were too precious about 140 characters-

   29. JAJack Altman21:47

       Yeah

   30. ARAli Rowghani21:47

       ... we were too precious about, um, the reverse chronological, um, timeline. And I think one of the things I give Elon credit for is he, like, sacrificed-
8. 22:37 – 24:03

   Elon Musk observations

   1. JAJack Altman22:37

      It must be interesting for you to watch Elon do what he's been doing with it, which is so different from what you were doing. And I'm sure there must be a lot of things that he's doing that you think are really good. I'm sure there's some things where you're just like, "What are we doing?" I'm curious to hear your, like-

   2. ARAli Rowghani22:50

      Yeah

   3. JAJack Altman22:50

      ... you know, observations.

   4. ARAli Rowghani22:51

      Look, I think he made a bunch of unforced errors. Like, I think the check marks thing, I think, was really poorly handled-

   5. JAJack Altman22:56

      You think?

   6. ARAli Rowghani22:56

      ... letting people buy the check marks, and then obviously-

   7. JAJack Altman22:58

      Shouldn't have done that.

   8. ARAli Rowghani22:59

      It shouldn't have been handled the way it was handled, where, like, the thing that verified your identity was suddenly for sale.

   9. JAJack Altman23:03

      Yeah.

   10. ARAli Rowghani23:04

       And of course, like, you know, somebody bought the drug maker's handle, the check mark-

   11. JAJack Altman23:08

       Yeah

   12. ARAli Rowghani23:08

       ... and then tweeted, and their stock dropped.

   13. JAJack Altman23:09

       I just feel like the blue checks thing was driving a lot of people... Like, it made this multi-class system-

   14. ARAli Rowghani23:13

       Yeah

   15. JAJack Altman23:13

       ... kind of thing that I think didn't feel good.

   16. ARAli Rowghani23:14

       Yeah, yeah.

   17. JAJack Altman23:15

       It's like I actually- I think what you're saying is, like, it wasn't necessarily it was a bad idea, it was just the way that it went down that was bad.

   18. ARAli Rowghani23:19

       Yes, the rollout was bad.

   19. JAJack Altman23:20

       Yeah.

   20. ARAli Rowghani23:20

       It wasn't as thoughtful.

   21. JAJack Altman23:21

       Yeah.

   22. ARAli Rowghani23:22

       You know, um, but look, I, I never expected him to change the name, you know?

   23. JAJack Altman23:26

       Yeah, that was, that was surprising.

   24. ARAli Rowghani23:27

       Yeah, yeah. I mean, I think it's, in a sense, indi- indicates that he has something bigger in mind, and maybe that's cool. Um, uh, you know, he took a lot of costs out of the business.

   25. JAJack Altman23:34

       I also wonder if it was just, like, a sign to say, like, nothing's sacred.

   26. ARAli Rowghani23:37

       Yeah.

   27. JAJack Altman23:37

       Like, even without a big plan, just like, "I'll change the name"-

   28. ARAli Rowghani23:40

       Yeah

   29. JAJack Altman23:40

       ... like, says something, I guess.

   30. ARAli Rowghani23:41

       Oh, yeah, for sure, for sure. Yeah.
9. 24:03 – 29:31

   Beginning of YC’s growth fund

   1. ARAli Rowghani24:03

      too.

   2. JAJack Altman24:03

      Yeah. Okay. So-... um, you had those experiences, and then you went into venture.

   3. ARAli Rowghani24:08

      Yeah.

   4. JAJack Altman24:08

      Right? So, um, talk about that, like-

   5. ARAli Rowghani24:11

      Well, I joined YC.

   6. JAJack Altman24:12

      You joined YC.

   7. ARAli Rowghani24:12

      Yeah, yeah. It's not venture. It's not now venture, but yes.

   8. JAJack Altman24:14

      You had a-

   9. ARAli Rowghani24:15

      Yes

   10. JAJack Altman24:15

       ... you had a large venture fund-

   11. ARAli Rowghani24:16

       Yes

   12. JAJack Altman24:16

       ... at YC, but really-

   13. ARAli Rowghani24:17

       Yes

   14. JAJack Altman24:17

       ... at YC.

   15. ARAli Rowghani24:18

       Yeah. Yeah.

   16. JAJack Altman24:18

       Yeah. Um, but, like, so that was, like, the beginning of the growth fund, right? Like, there wasn't one- like, that was right at the beginning of it.

   17. ARAli Rowghani24:23

       Yes.

   18. JAJack Altman24:23

       And, um, obviously, you invested in, like, a ton of great companies-

   19. ARAli Rowghani24:27

       Yes

   20. JAJack Altman24:27

       ... and you learned a lot from it. So I guess, can you share maybe like... I, I, I wanna spend more time talking about what you're doing now-

   21. ARAli Rowghani24:32

       Yeah

   22. JAJack Altman24:32

       ... but, like, can you share just, like, a little bit about that?

   23. ARAli Rowghani24:34

       Of course. Yeah. So, um, you know, I, I feel like everything kind of happened serendipitously. Like, you know, I joined Pixar because I was, like, in awe of how could anyone make Toy Story 2?

   24. JAJack Altman24:44

       Yeah.

   25. ARAli Rowghani24:44

       And, and they were a public company at the time, and it was kind of like this, like, y- as we said, miracle factory that attracted me, and I was there for a decade. And then I went and joined Twitter, and the... What I learned there was, like, an experience services, hyper-scaling thing-

   26. JAJack Altman24:56

       Yeah

   27. ARAli Rowghani24:56

       ... and taking something from zero revenue through, through IPO.

   28. JAJack Altman24:58

       Mm-hmm.

   29. ARAli Rowghani24:59

       And YC, which is another serendipitous thing, and I was approached by Sam, and he said, "Hey, would you join YC initially just as a visiting partner-

   30. JAJack Altman25:05

       Yeah
10. 29:31 – 33:23

    Between pre and post traction

    1. ARAli Rowghani29:31

       you know, to me, like, there's, like, pre-traction and post-traction.

    2. JAJack Altman29:34

       Mm-hmm.

    3. ARAli Rowghani29:34

       And so the question is, like, where's the line, right?

    4. JAJack Altman29:37

       Mm-hmm. Mm-hmm.

    5. ARAli Rowghani29:37

       And to me, it's, like, $5 or $10 million of revenue-

    6. JAJack Altman29:40

       Mm

    7. ARAli Rowghani29:40

       ... is the line. It's not a million.

    8. JAJack Altman29:41

       Yeah.

    9. ARAli Rowghani29:42

       You know, it's definitely not 500K.

    10. JAJack Altman29:43

        Why do you say it's not a million? 'Cause a lot of times people are like, "Oh, s- a million dollars, that's product market fit. That's the A."

    11. ARAli Rowghani29:47

        There's no repeatability at a million dollars.

    12. JAJack Altman29:49

        Yeah.

    13. ARAli Rowghani29:49

        You haven't proven repeatability, and, um, you've just proven that you can, you know, get someone to pay you-

    14. JAJack Altman29:54

        Yeah

    15. ARAli Rowghani29:54

        ... or you get five people to pay you or seven people, whatever it is, you know? Um, and to get to one, you have to prove repeatability, in my mind.

    16. JAJack Altman30:01

        Yeah.

    17. ARAli Rowghani30:01

        You know, which means that, like, you've found a problem that enough people have, and you've found a way to, like, be able to, like, convince people to, like, buy it.

    18. JAJack Altman30:09

        Yeah.

    19. ARAli Rowghani30:09

        Right? And the other thing, obviously, you have to prove in that phase is, like, not only do you convince them to buy it, but they use it-

    20. JAJack Altman30:15

        They like it, and they wanna buy more

    21. ARAli Rowghani30:15

        ... they like it, and they wanna buy it again-

    22. JAJack Altman30:17

        Yeah

    23. ARAli Rowghani30:17

        ... or renew or buy, buy more, or if you're in a consumer business, like, the cohort stick.

    24. JAJack Altman30:21

        Yeah.

    25. ARAli Rowghani30:21

        You know, or, you know, and, and similarly in a B2B business, like, the, the renewals and expansion are happening.

    26. JAJack Altman30:25

        Yes.

    27. ARAli Rowghani30:25

        And, and renewals and expansion are the probably the best, you know, metric for product market fit. Uh, it's a lagging metric-

    28. JAJack Altman30:30

        Right

    29. ARAli Rowghani30:30

        ... that's when you gotta-

    30. JAJack Altman30:31

        And you don't know right away.
11. 33:23 – 34:35

    The second job of a CEO

    1. JAJack Altman33:23

       Actually, can you talk about, for a second, um, I sh- have shared your blog post a ton of times-

    2. ARAli Rowghani33:27

       Mm

    3. JAJack Altman33:27

       ... about the, like, second stage of, uh, second phase is the-

    4. ARAli Rowghani33:30

       The second job of a CEO.

    5. JAJack Altman33:30

       I'll link it-

    6. ARAli Rowghani33:31

       Yeah [chuckles]

    7. JAJack Altman33:31

       ... 'cause I think it's an extremely good post.

    8. ARAli Rowghani33:32

       Yeah.

    9. JAJack Altman33:32

       But, like, can you talk about that transition for the CEO-

    10. ARAli Rowghani33:36

        Yeah

    11. JAJack Altman33:36

        ... and, like, what that post was about?

    12. ARAli Rowghani33:38

        Yeah, so the interesting thing is, like, I think that if you... But if you like this analogy of the three, three phases, you know, seed and sapling and tree-

    13. JAJack Altman33:44

        Mm-hmm

    14. ARAli Rowghani33:44

        ... the CEO, founder CEO's job changes a lot between sapling and tree. And because the job becomes... At the beginning, the job is just, like, about build a great product and find customers, and keep those customers happy, and get them to renew, et cetera. So it's about product and customer, product and customer, right?

    15. JAJack Altman33:59

        Yeah.

    16. ARAli Rowghani34:00

        Once you get to this place where like, "Oh, I'm now a tree, it, it's taken root. I have a business. It's repeatable. I know, like-

    17. JAJack Altman34:06

        Yeah

    18. ARAli Rowghani34:06

        ... you know, I have some foundation," at that point, then, the job of the CEO changes-

    19. JAJack Altman34:11

        Big time

    20. ARAli Rowghani34:11

        ... from building the product and selling the product to building the company. You become the, like, you need to build a machine that builds the machine. You become the PM of the company-

    21. JAJack Altman34:20

        Yeah

    22. ARAli Rowghani34:20

        ... not so much the PM of the product. And so that means you've gotta find people to do all the... You've gotta get yourself out of these vital things you were doing before, and that's super hard-

    23. JAJack Altman34:27

        Mm-hmm

    24. ARAli Rowghani34:27

        ... um, and so that you can focus on, you know, um, the second job, which is, like, company building.

    25. JAJack Altman34:33

        Yeah.

    26. ARAli Rowghani34:33

        Yeah, that's the basic point of the blog post.

    27. JAJack Altman34:34

        Yeah.

12. 34:35 – 35:31

    First Harmonic

    1. JAJack Altman34:35

       So when you thought about putting your firm together, you also were doing, like, a program.

    2. ARAli Rowghani34:39

       Yeah.

    3. JAJack Altman34:39

       Like, how did you... I guess just how did you decide what structure of firm and approach you wanted to do?

    4. ARAli Rowghani34:45

       Yeah, so what I'm interested in doing is I'm interested in working very intently, intensely with a very small group of these sapling kinds of companies, and really on either side of a Series A. I'm a little bit indifferent about that. But people who have launched their product, they've got some traction, they've got- they're committed to what they're doing.

    5. JAJack Altman35:02

       Mm-hmm.

    6. ARAli Rowghani35:02

       There's some beginnings of, you know, something. Like, I don't think I'm very good at the seed stage. Um, I did a lot of the growth stage, and I know that, know that pretty well. But the sapling stage is, I think, where founders need the most help. And in order to help them, you have to do it almost subscale.

    7. JAJack Altman35:16

       Mm-hmm.

    8. ARAli Rowghani35:16

       Like, you have to do it really, really intimately and closely.

    9. JAJack Altman35:19

       Yeah.

    10. ARAli Rowghani35:19

        And so I wanna work with a very small group of folks, um, and try to make a contribution there. And, um, and so yeah, so that's, that's basically my, my hope.

    11. JAJack Altman35:30

        That's

13. 35:31 – 41:10

    Beliefs in venture

    1. JAJack Altman35:31

       great.

    2. ARAli Rowghani35:31

       Yeah.

    3. JAJack Altman35:31

       One of the things that you've talked to me about before is that you think, um... I don't wanna put words in your mouth, but I think you said, like, the Series A is often, like, a bit of a rip-off, and that people take way more dilution than they need-

    4. ARAli Rowghani35:42

       Yeah

    5. JAJack Altman35:42

       ... that it's like the rounds are bigger than they have to be.

    6. ARAli Rowghani35:44

       Yeah.

    7. JAJack Altman35:44

       Is that still something that you feel, or have you, you know... Was- is that an accurate thing that you at least felt at one time?

    8. ARAli Rowghani35:50

       Yeah.

    9. JAJack Altman35:50

       Do you feel that way now?

    10. ARAli Rowghani35:50

        Well, I think that, um, what's happening, and I expect it to continue, is that the, um, traditional ownership that a traditional Series A investor would get in a Series A has degraded and will continue to degrade.

    11. JAJack Altman36:01

        Yeah, 'cause it used to be, like, 25%.

    12. ARAli Rowghani36:02

        Even more.

    13. JAJack Altman36:02

        30.

    14. ARAli Rowghani36:03

        But yes.

    15. JAJack Altman36:03

        Yeah.

    16. ARAli Rowghani36:04

        Yeah.

    17. JAJack Altman36:04

        Yeah.

    18. ARAli Rowghani36:04

        And so, um, and that's just driven by the supply and demand of capital and the, like, you know, like, very, uh, sort of burgeoning nature of the seed eco-

    19. JAJack Altman36:11

        Mm-hmm

    20. ARAli Rowghani36:12

        ... ecosystem.

    21. JAJack Altman36:12

        Mm-hmm.

    22. ARAli Rowghani36:12

        And I think that, um-

    23. JAJack Altman36:14

        I also think you have a dynamic where there's not just the availability of capital or the prices are low, but it's like the venture firms are winning, and they're pushing-... the founder take more money than the founder even thinks they need.

    24. ARAli Rowghani36:24

        Yes.

    25. JAJack Altman36:25

        And they're like, "Okay, but I wanna work with whoever."

    26. ARAli Rowghani36:26

        Yeah. Yeah, that's right.

    27. JAJack Altman36:27

        Yeah.

    28. ARAli Rowghani36:27

        Yeah. So I think that, like, the nature of, like, the Series A is changing, and I think the nature- and I think largely to the benefit of founders. Um, but the other thing that's kind of fascinating that's, that's happened, I think, over the last five, seven years especially, as more capital has flooded into the system, you know, deals are getting done in a blink of an eye.

    29. JAJack Altman36:42

        I know.

    30. ARAli Rowghani36:43

        And, and founders don't fundraise anymore. They just get preempted-

Episode duration: 41:10