Zachary Bookman: Why Valuations and Fundraising are BS | E1235

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.

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.

I'm really happy to be here. Thanks for having me, Harry.

Listen, not at all. But I wanna dive right in and I wanna start at kind 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?

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.