#50, Jerry Neumann and Elizabeth Zalman, Authors of Founder Vs. Investor — Learn to love fundrais...

Welcome to From Startup to Grownup, the podcast.

My name is Alisa Cohn.

I'm an executive coach, an angel investor, and the author of From Startup to Grownup. Each week I talk to founders, creators, advisors, investors, and builders of all kinds about their insights and experiences in going from startup to grownup. Today we have something really special, an in real life conversation with two amazing people. Liz Zelman is an infrastructure and information security expert. She's also a two-time founder CEO of venture-backed companies with two strong exits. Liz has raised more than $100 million in venture capital from the most renowned investors in the world, and she's a frequent speaker and guest at industry events and tech podcasts like this one. Jerry Newman has been an investor and early-stage advisor to groundbreaking technology companies for more than 25 years. He's been called one of New York's 50 most important VCs by Business Insider. Jerry also teaches innovation and entrepreneurship at Columbia University. Together they are the co-authors of a brand new book called Founder Versus Investor. And we got into all of this in this spicy conversation. We talked about the blog post that was a genesis of the book, Jerry's essay called Your board of directors is probably gonna fire you. We riffed on that and why it was true. We talked a ton about the fundraising process, how Liz learned to love it, and how you can do it better. We also talked about board dynamics, not just how founders can manage their boards, but also how to handle boards that have, let's say, interesting dynamics on them, why that is, and what to do about it. We talked about the grind of growing as a founder and how exhausting it can be and what Liz has found helpful as antidotes. And I invited Jerry to unpack some of the most common VC speak. You'll hear what he has to say about that. This is such a fun and interesting conversation and a rare peek into the real-world thinking of founders and investors. So please enjoy this fantastic conversation with Liz Zelman and Jerry Newman.

Okay. Jerry and Liz, welcome to the show. I'm so excited to have both of you here today.

Thank you. Glad to be here.

I'm thrilled that we're here in person in the podcast studio here in New York City. And we are recording right before your book launch officially goes out, Founder vs. Investor, the much anticipated book from this period. And I'm so excited to sort of hear the— Your subtitle here is The Honest Truth About Venture Capital from Startup to IPO. And I think we have a lot of discussion from both of your points of view, both of your sides of the table. I'm going to dive right in. Jerry, I'm going to start with you. "Your board of directors is probably going to fire you." Please explain.

This was the blog post that inspired the book 2 years ago. Somebody I know, one of the founders I had invested in, was fired by her board of directors. The company was much further along. I don't think I can say who it is. I was frustrated. I thought the founder had been doing a very good job. I was frustrated that the board didn't see that and they were going to bring in somebody who was, in the end, just going to be a mercenary, right? Because you can never find somebody to replace the founder who has that kind of energy and belief in the product. So I actually took an old email that I had sent to founders when they brought on outside investors besides me onto the board and repurposed it into this blog post. I think it was pretty even-handed. I mean, the point of the blog post was your board of directors is probably going to fire you, and that's just the fact. More than half of founders get fired by the board of directors. I was trying to tell founders how to manage their board to minimize their chances of being fired. It struck a nerve. So it hit the top of Hacker News. Had so many people coming to read the post at the same time, it crashed my web server, which I don't usually get that kind of traffic.— that concentrated—

You got stuffed up with your web server.

I still should have had redundancy in the web server and you know it.

Exactly. Who knew? And it was interesting to me because most of the people who read and comment on my blog posts are venture capitalists. And in this case, it was all founders. So, you know, Liz called me afterwards and said, "Hey, I read your post. Why don't more people write this sort of thing?" And I said, "Because there's no real upside to me for writing it. It was something I wrote out of frustration and the hope that people would read it and listen to the advice. But it seems to have pissed off my fellow venture capitalists, which it wasn't intended to do. And I don't know why they would be. I mean, I don't think there's anything in there that most of them would disagree with really.

Well, so tell us more about the reaction from your fellow venture capitalists. Like what were the private emails and calls you got about it?

People told me that they didn't want founders to think about venture capitalists that way. So it sounded sound to me more like a marketing problem than a real problem. I mean, it is true that founders get fired and often they deserve to be fired. But often it's really just the founders have managed the relationship badly and it comes back to bite them. I think Liz said to me or she said in the book at one point, "Well, maybe if the founder gets fired, the venture capitalist should also be fired from the board at least." And it's a good point, right? That's a good way to think about it.

Yeah, absolutely. I was just going to ask Liz, Liz, were you surprised that you're probably going to get fired by your board of directors, like by the article and the title? I think the provocative on purpose title, but also by the sentiment. Was it surprising to you that VCs feel this way?

It was a little surprising to me, although since then, as Jerry and I have sent the book around, I think the reception has been the same. Founders are super into the book and venture capitalists are a little bit more hesitant to embrace it. When I read the article, I was like, holy moly, somebody has actually gone out on a limb who does this for their day job and said the thing that nobody will say. And that's why I picked up the phone. I was like, Gerry, this is amazing.

Yeah. Well, what struck you the most? The thing that nobody will say. What struck you the most about that?

It was that somebody who was a venture capitalist, because while you may be a pre-seed and seed investor, you are still a venture capitalist. Went out there and said, "This thing happens and it happens for a reason. And sometimes it happens for a good reason, but sometimes it happens for absolutely no reason at all. And that's not fair. And companies are what suffers." And it was simply somebody in the space whose reputation could be at risk, with all due respect, as a result of it saying, "Here's the truth. Here's the narrative that folks are not saying out loud. And I'm going to say it out loud because in this moment I feel strongly about that." Yeah.

Yeah, I think actually when I read your book, that's kind of what I was struck by, the things that nobody says out loud, right? This sort of inside voice. I'd love to unpack that a little bit more. I actually want to talk about fundraising first because Liz, you fucking love fundraising.

I fucking love fundraising.

You fucking love it. She loves it. Tell us about that. Inspire us. Because by the way, some real talk is that like, "Oh, founders don't like fundraising." But again, you aren't always allowed to admit, "Actually, I kind of love fundraising." So I appreciate you sharing that.

Tell us about it. I didn't at the beginning because anytime you're not good at something— Jerry, what, my first round I failed at and then the second one took like 9 months to do, right? At my very first company.

I remember that, yeah.

You do? We talk about it in the book.

I remember talking you through it. Yeah.

I was like, "Why won't they give me money?" But since then I've figured out it's essentially a sale. I am selling a vision to somebody who has capital and I want their money. And so the question is, what are the things that I need to say in a particular order in order to get them to agree to give me that money? And it's just like a software sale, right? If you break it down, it's I need to make a connection, and then I need to get the person on the phone. And the goal of the first phone call is not to get to the close, it's not to get to the term sheet, it's to get to a second call. And if you think about it as a chain of events, it's actually quite fun. You know more about your topic of conversation than the person on the other side of the table. You know that their job is to deploy capital for a living, and so they're in the job of risk mitigation. And so that's a really easy game for you to play and game out. You, you can understand every every objection that they're going to ask you, you can figure out what you need to say in order to extract the response that you want. And I think that founders also forget that they have the ability to apply pressure to VCs to create the sense of FOMO. Oftentimes the founder feels like the VC is going to walk away, but what if the VC felt like the founder was going to walk away? And so over time, I've learned to flip that dynamic and it becomes a game then. How quickly can I get this done? How much more value can I add to that term sheet? Sheet, which might make people roll their eyes. How much more quickly can I close the round? So on and so forth.

Yeah, I love that. I think it's so important to also flip the script as in like, oh, investors or entrepreneurs think they have no power, but actually they do have some power.

So much power.

Liz, can you just walk us through, just very briefly, maybe steps, the steps to use for fundraising? For founders listening, what is your recipe or your advice? Then also, where do people usually get tripped up? Come with key advice.

Yep. There's a section of the book called Liz's Absolutes of Fundraising that I call Liz AF. So there are like 12 rules of fundraising, but the number one thing that I think is important is to create a narrative that strikes fear into the heart of the venture capitalist. It's a very short deck. It's maybe 6 slides. It's pictures, no words, because you want people to be listening to you and not reading the stuff on the slide. And so that narrative is something like, The world is ending. I mean, like, it's totally on fire. You don't even know how bad it is. We are your savior, right? Here's the thing that we do. Here's how much money we're going to make as a result. Here's what we're raising and what we're going to do with the funds. And then here's the team slide. Everybody's faces have to be in a bubble. It's the only way to deploy faces.

Bubbles, not squares.

Bubbles, not squares. And then a thank you slide. And it's painting a picture that creates emotion, that creates an emotional attachment for the investor, is the number one thing that I think gets a fundraise done and is something that founders don't understand that they need to do.

Yeah, painting that picture. But then how do you even go back— going back to getting people on the phone, and then I'm going to ask you, Jerry, about how you like to be approached as an investor. But how do you get the right person on the phone? And you also say, "Don't speak to an associate. How dare you?" Right? Tell us about that.

So, over time, me and actually one of my co-founders of my last company developed a pretty solid process. It's actually based on a traditional enterprise SaaS SDR outreach process. So, you get a list of every single firm that could possibly write you a check out of Crunchbase, best money I've ever spent, shameless plug for a Crunchbase subscription, and you output a list of those funds and you make sure they're writing checks, so more than 3 a year. Is my rule. And then you make sure they're writing the checks that are your stage. And then you go and you find the exact right partner who's maybe backed people in adjacent spaces to write to. And then you do highly tailored outreach that says exactly why you want to talk to Jerry Newman at NewVC because he did X, Y, or Z, or he wrote this article that really resonated with you, or whatever quote-unquote bullshit you want to put in that email, but to get their attention. And then ideally, You've sold into portfolio companies of theirs. And so you say, "Hey, go call company X because they use us and they're going to give you an inside track." And that's it. And you send those out. I had an SDR do it for every single round that we did, and the response rate is outrageous.

That's amazing. I love the way you structured it as a sale, and I love the way you sort of think about the tailored due diligence for sure. So, Jerry, agree, disagree?

I agree with a lot of it. I would place the emphasis differently. So, a founder can't walk up to me and scare me about something I'm going— about what's going to happen, right? I mean, I get scared about not even about losing my money, but about a founder not being able to deliver on what they promise. But I do look for companies that are going to be the beneficiaries of a changing world. So, you know, if a founder tells me the world is changing, these companies that are doing things the old way are just going to have to go away and new companies are going to have to step into their place, And we're going to be one of those companies. It's going to be huge. And if you don't invest, you're going to miss this entire wave of change. That to me is very compelling. And I guess it's a little scary to think, you know, like right now, if you're not investing in AI, you might be scared that you're going to be completely irrelevant 5 years from now.

Right.

Right. So, so that does work. Some of the other stuff, I think— what was the other thing you said?

The The SDR process?

Well, I agree with the SDR process, although I think the thing that most founders get wrong is they just send out emails to everybody.

Oh, okay.

Right? I mean, I get cold emails all the time and I can tell they're cold emails and I can tell that they're not targeted. Right? So there'll be— I got one today. Somebody was pitching me on a Series A round. They'd already raised 2 rounds. They're raising their Series A. They're raising $20 million. This isn't what I do. Why am I getting this email? And I think because for a lot of them, it's easier just to take the list and send it to everybody and see what happens.

Okay. So you felt like not tailored. So maybe what Liz was saying was that it's tailored and you agree with that.

I wish founders would do that work.

Yeah. Okay. By the way, $20 million Series A, time has changed.

Well, you know, I didn't even get to that part of my thought process. I was just like, you know. They'll talk about traction. The companies look attractive. They're well-written emails. I just know it's not for me. And the last thing I want to do is be competing with 300 other VCs to put in the best term sheet because that's a loser's game.

Right. For sure. For sure.

If I'm the winner, then I'm clearly the loser. So if you can make me feel special, and I know that sounds awful, right? Like, why should— what's so special about you?

I think that's the bullshit that Liz was referring to.

But you know what? I want to feel like I was the first person they emailed because then it's exciting to me. Like, oh, all right, maybe I could make a difference to this company. Maybe this company would make a difference to me. Maybe I could be more involved than just writing a check.

Yeah. And that's kind of why you're in it, to be involved, not just to write a check.

I want to do the job. I want to earn my money.

Right. That's really great. When I just mentioned that about bullshit, you kind of said, oh, not really.

Yeah, that was the wrong word. It's a sentence or two of something highly tailored that they did.

Okay.

It should be enough to get them to pay attention so that Jerry feels special, even if it's not so relevant to what you're doing. I think it's window dressing. Okay.

Got it.

You don't want to hurt anyone's feelings. It is often bullshit.

It's also often transparent. People do that sometimes and they'll send me an email like, "Oh, I saw you invested in this company and we're very similar." I'll be like, "Oh, that company was an awful investment. Why are you bringing that up?" Or, "Love your green shirt." Yeah, right.

That kind of thing. So, then let's start with the fundraising process. So, the truth is that VCs do this all the time. Investors do this all the time. Founders do this once or twice or 3 times, not very often. So, Liz, starting with you, what is some advice you have when you get to the terms, the different rounds that entrepreneurs have to be aware of and must protect themselves from, for and from?

For terms? Yeah. Yeah. When you get a term sheet is to just pause. There is absolutely no rush to sign that document. You are in control, provided you're having a thoughtful conversation about the terms. That little date that's at the bottom that says it expires, that date's just going to keep getting pushed back because once you have something on paper issued, the VC wants to get your signature, and you quite frankly want to sign that because that's the future of your business. Um, so I would say slow down, and be thoughtful about that. And then the second thing that I would say is a moment, probably in the fundraising process actually, is go and start diligencing the investor. Go call any founder who's taken money from them, past or present, and say, "What don't I know?" Mm-hmm.

Yeah.

Because you need to understand who you're going into business with. It is a decades-long marriage and there is no divorce clause. Right.

That's for sure. Jerry, what would you add or how would you How do you think about that from your point of view?

Well, first I want to agree with the vetting the investor.

Yeah.

Anybody I invest in can call any of my founders and get to hear about me, right? And I think, why wouldn't you do that? It's crazy not to. And not because every founder loves me. There are founders who definitely don't. And they'll tell you the bad news. But I think generally I will get better reviews than other VCs. And I think every VC should believe that. I mean, it should be part of what they do with themselves is make sure their founders are happy. I don't think— you know, one of the things I recommend in the book is not to give a term sheet until you actually have an agreement. So to go and talk about price and talk about terms and then put it on paper. Because there's really no worse feeling than giving somebody a term sheet and having them come back and say, "Oh, I got a better term sheet," and realizing they took your term sheet and found somebody who would do better. Because if you're any good as a VC, some other VC will say like, "Oh, if they're investing," I want to invest.

Totally.

And I can give a slightly better term sheet.

But to me, I guess I would say, I think that's kind of normal. The idea of getting a term sheet in hand and maybe— is the difference between a promise of a term sheet and the discussion already happening as compared to an actual term sheet? I mean, is that so different? In my experience is that people do go around and try to get their best offer based on an offer on the table.

Oh, absolutely. I don't mind them going around and trying to get the best offer. I just don't want them to take my piece of paper to prove it.

Okay.

Because then I just feel used.

I see.

You know, so I'll say to a founder, "I love your company. I would love to invest. Here's what I'm thinking." Uh-huh. And they either say, "That sounds good," in which case term sheet comes, you know, that day.

Yeah.

Or they'll say, you know, "I think we're worth more than that," et cetera.

Okay. Got it. So you really want it to be a discussion before you put something on paper.

Yes.

Yeah. That's good. Yeah. Were you going to say something?

No. My experience has been that that doesn't happen. But in fact, what I was thinking about when you were just talking is how I used to give offer letters. It was you'd have a conversation beforehand, you'd agree on what the 1 or 2 offers were going to be, high equity, low cash, whatever it is, and then the person would say, "Yes, I will accept one of those offers," and then and only then do you issue paper. And yet most companies don't do that, quite frankly. I know a lot of former employees of mine who get offers and they're shocked at the number, and I say, "But didn't you have this conversation early on to see if they could pay you what you need?" And they're like, "Well, no, I didn't know that I could ask the question." And I have gotten— I actually can't think of a single term sheet I've gotten, Jerry, where I've just signed it because it was exactly what I wanted it to be.

Well, and I don't expect— I mean, typically when you talk about a term sheet with somebody, you don't talk about every term. You talk about price, you may talk about the board. That's probably it. How much money they're raising, maybe how big the option pool is. You know, the 5 or 3 or 4 or 5 biggest terms. Everything else is you just put in there and you hope the founder thinks it's normal and they'll just go over it.

It's true.

Well, most of this stuff really is kind of boilerplate. It's just standard. Doesn't mean it's not negotiable, but it's standard.

Right. So, actually, so Liz, I want to ask you, what has not been standard? What are some, you know, war stories or what you've seen that either you've made the mistake or other founders have made the mistake that other people should watch out for?

So there are a few big ones. Number one is an overly padded option pool. An option pool that's twice the size of what you need in order to get you to the next round, which makes sense. VCs want to— don't want to be diluted again and again and again. They want you to take on the dilution. Probably the second one is the intricacies of language surrounding the board of directors and the exact title of the exact seat, specifically as it relates, for example, to a founder who is also a CEO, and how— because that has implications later on for Founders ganging up on founders or investors getting control. Those are two big ones. And then there are things like thresholds for approvals. When do I need to get a check that I write approved by my board? So sometimes those thresholds are really low for an earlier—

Oh, I didn't know about that.

That's great. —earlier founders. So you look at it, you're like, "Oh, I actually can't sign a retained search firm to go and hire a CMO without calling my board and getting an approval." That's a little crazy to me. It actually impacts my ability to operate the business at the speed with which I need.

Yeah, I see. Those are really good. Those are good points. Also, I guess not to harp too much on this, but I guess I've experienced plenty of founders who, you know, they wake up one day and they just thought they had more control and they can get fired. Maybe they thought they weren't able to, weren't going to get fired. An experience where, you know, there's an acquisition price and as a coincidence, the acquisition price was exactly like at the threshold where the founders weren't going to make any money or like, you know, vesting suddenly didn't go well. I mean, what are some things that people really need to watch out for that I just will say, as you just said, investors will kind of just slide in if they can, if it's, you know, good for the investor. Are there other, you know, specific callouts that you'd like to make?

For me, the key thing, the number one thing is control. Yeah. Most people might say it's— actually, most early-stage founders, in my opinion, would say, "Oh, it's valuation." But actually, one investor said to me a long time ago, he goes, "If you get this right and you go all the way to IPO, then you bickering about half a point or a percent up or down as it relates to valuation, it's all a rounding error in the end." And he's a very rich man. And he's right. So for me, it's the big things, and control would probably be the primary one. Yeah. What do you think, Jerry?

I actually don't think that it's the right question to say which is the most important. Good. I think you should read the whole document. I think you should think about everything. Now, if you have a good lawyer, and we can argue about that, but if you have a good lawyer who knows what they're doing, they're going to say, well, sure, but this isn't negotiable. You're not going to negotiate preference away. Very few founders get to negotiate the preference out of the preferred stock. Yeah.

Could you define preference for people?

Preference means that the investors who own preferred stock have the option of either getting their money back or getting their percentage of the company or sometimes both. So until you sell the company for more than they put in, you don't get any money as a founder. They get the money first. And if you make— if you're going to make money, they'll also make money. If you're not— if they're not going to make money, you don't make any money. It's negotiable on sale, but that's the idea. And investors need this to protect their interests. Right.

But you were saying how the important thing is to have the right lawyer who can read every document and have the lawyers read every document so that they can really give you advice on what's normal and what's not normal.

Yeah. So they can say, "Here are the 5 things you can negotiate. You can negotiate the size of the option pool. Absolutely. You can negotiate how long your lockup is after you sell. You can negotiate a bunch of things, but you won't be able to negotiate preference away." Yeah. And it doesn't mean that it's impossible. Yeah. It's pretty unlikely. If somebody came to me and said, "I want you to have common stock, not preferred stock," I would probably walk away just generally because it's so unusual. So having a good lawyer and saying, "Here are the things you can negotiate," but you should read the document. And I think Liz says this in the book, actually, not me, that these documents are going to govern your life for the next 10 years. You should know what they say. Yes.

Liz, you do talk about that in the book. And also you talk about this great story about— well, first of all, it's about getting the right lawyer and making sure your lawyer works for you. And then you tell a story of a framed email in a partner's office. Can you share with us some background about that? Yes.

So we hired litigation, the corporate arm of a litigation firm at my last company to do our first few rounds instead of the standard lawyers. And we did it because we didn't have a lot of money and the head of the firm's son was best friends with one of my co-founders.

Helps to know somebody. Yes.

Essentially, they were very aggressive and they were willing to ask for a whole bunch of stuff that other folks wouldn't have. They were also highly protective of us. What happened when we were in the closing, essentially all the docs were going and being signed, is that somebody sent over a signature block that instead of signing their name to the fund, it said buy-in on behalf of various entities, which essentially means, I think, and Jerry, correct me if I'm wrong, you can transfer the stock. To others without approval.

Yeah, usually related entities. Related entities.

And so our lawyer was very protective and he was like, "Sorry, this doesn't work. Please send me over a superior signature block." And the guy on the other end of the phone was also a lawyer and he was like, this— and a very famous guy, famous firm. And he's like, "This signature block has been in hundreds of deals around the world and you have to blah, blah, blah, blah." And so my lawyer then writes back, Dear so-and-so, I'm glad to hear that your signature block is so well traveled. I still need a signature block this close to what I want. I was playing chess in Central Park at the time trying to take a break from the raise and I came back in. I freaked out and then I called the partner and I was like, "Your signature block is fine, don't you worry." But so as a thank you to the lawyer for after we closed the round as we give him a bottle of whiskey and then we framed that email because it was to a famous person, he hangs it up in his office.

Also, it shows him being a bulldog. He was such a bulldog.

He was protecting you.

That's exactly the kind of lawyer I need. That's what matters.

Exactly. So we've been talking about money and fundraising. Liz, what else do you want from your investors besides money, if anything?

Oh, let me answer a slightly different question. I think that most people are good at one thing and they're very good at one thing. And investors are good at some things, typically deploying capital. I think they can have a competency in something else, like being highly well-connected to a particular community that you might be able to sell into, or, you know, being a branding expert because they've run a company before, or any number of things like that. And so for me, as I'm thinking about the capital that I want to take in for my next round, the question is, what does my company need in order to get to the next level of growth, and is there anything that this person can do to that's above average to help me accelerate that. Good.

So you're really looking for that particular expertise, and that might, like, sort of be out there inside of the money that you're taking.

It might be, or it might not be. Most often it's, it's not. Um, they're, as Jerry will say, their investors are financiers. They're typically not operators, and those, in my opinion, who are operators have a bit of a half-life on what that operational shelf life is. And so I try to find somebody that I think is reasonable with whom I can work over a long period of time, right?

Huh. Jerry, what do you think about that?

I think I'm from New Jersey. I don't call them financiers. They're financiers.

Yeah, really? Is that how you pronounce it?

Well, I'm from Boston. Why so fancy?

Yeah, why so fancy? The French way of pronouncing it.

Jerry can't get over it.

I, you know, gee, um, I, I think investors are good at a lot of things, and, and I'm very pro-investor. I, I think investors are very good at investing. They're good at giving strategic advice. Strategic advice. They're good at helping hire C-level executives. They're good at the things they've done a lot.

Liz is shaking her head. I know she is. Okay. Liz. I know.

We'll get back to that. We can get back to that.

Yeah. And they're very good at helping you raise future financing, and they're very good at exiting. Mm-hmm. Right? See, these are the things they do over and over. I think the problem you have is founders come in and they think that the investor is going to help them manage their company. Mm-hmm. On a more granular level, though, I've had founders come in and say, "Hey, before you invest, I want to know how can you help me? Can you introduce me to customers? Can you introduce me to suppliers? Can you introduce me to partners?" And I say, "Yeah, I could probably introduce you to one or two. But if you have a good salesperson, they could introduce you to one or two every hour. Why are you relying on your investors to do the things that you need to do in your business?" You need to build those skills inside your business. You need to be able to hire employees. You need to be able to get customers. You need to be able to build your product. Those things you should be the expert at, not your VCs, no matter how good your VCs are at that. Yeah.

I would just say there are some pretty famous firms who call themselves, you know, they have these services that they market to help founders, to help startups. And certainly recruiting or talent, and they have talent partners, certainly networks of like a bunch of information and networks of other people. They really market that. They do. As a real, like, reason that you should take their money is kind of a tier 1, let's say, I don't know, concierge service. But you would say, come on.

I can see how that's appealing to founders. Okay. But I think that founders should focus on building that internally. Yeah. And it's nice to have the stopgap, somebody to help you recruit your first 10, 20 engineers. But after that, you need somebody to do it internally because it's part of your business.

Yeah. Yeah. Liz, what do you think?

I think that— About the—

Yeah, well, you were shaking your head.

I don't think investors are good at helping you hire C-level executives. That's what I was shaking my head at. I think that of all the executives I've hired, and it's, I don't know, 7, 8, 9, something like that, that not a single one, when I sent them to any of my board of directors, none of the members of the of the board outside of co-founders said, "No, this person is inappropriate." Not a single one. Yeah. And that afterwards came back to bite me because I think something like 50% of retained searches fail. Certainly 50% of mine did. And there was no onus of responsibility amongst my investors and me saying like, "Hey, what did we miss together collectively and how can we better vet for that in the future?" Yeah.

I think there are several parts of the hiring pipeline, right? There's getting the right candidates in the door to interview. To be interested in your startup that they've never heard about, then figuring out if they're the right person or not, and then convincing them that they want to join. Right? Why would anybody good join a startup? It's crazy. Right? So I think VCs are good at the first and the third, not really the second one. Is this the right person for this company? Because they're not the ones who are going to have to work with them every day.

Mm-hmm. And I agree with Jerry completely, but I think this is where the tension comes into focus, which is the second piece, which I do think is that investors will often say, I'm really good at all of this spectrum, but to Jerry's point, they're good at the first and third, and you expect them to be good at the second because they say they are.

Because they market themselves that way.

Because they market themselves, but they're not. Just like founders market themselves as the end-all be-all for whatever things, and we fall down all the time. It's marketing and branding to get somebody into saying yes to something.

Yeah. Okay. I think that's really helpful, and I think it's important. I mean, part of this book is to sort of bring together these points of view. So I wanted to bring up another thing that's been a It's a chronic pet peeve of mine, so I'm excited to talk about it here. I know. Especially an early, like first-time founder, like seed stage, like early stage, and they start fundraising. You know what happens? They start talking to the VCs, the investors, even the younger investors or the earlier stage investors. The investors will say, or even as they get to later rounds, and the investors will say, "Sounds good. Keep in touch. Let's talk again in 2 weeks," or, "I love what you're doing. Keep showing us progress," or whatever. And they never say no. In your book, you say, hang on, they'll say, "Stay in touch," or "Check in," or "I'm traveling for the next 2 weeks, but how about then?" Or they'll ghost. How should entrepreneurs interpret this? Can you once and for all explain VC speak?

Investors absolutely do that. I've been guilty of it myself. I try not to. I think a lot of A lot of venture capitalists have tried not to do that because it's a common— Trope. Yeah, it's a trope. I mean, it bothers people. But if you put yourself in my shoes, you don't want to say no immediately because you could be wrong. But you don't want to say yes immediately either because you could be wrong. So the more information you have, the better decision you can make. So there's absolutely an incentive to delay, delay, delay, delay. And you do that by saying, hey, I really want to keep hearing more. I think it would be better if people were more honest about it and say something like, "I'm not there yet. Let's wait another 3 months and see what happens." But that's essentially what they mean. Until they say yes, until they've wired the money, you do not have a deal.

That's what I tell my founders all the time. Wake me up when they've wired the money.

Wake me up when the money's in the bank account. But it's just a way of speaking. I don't think anybody should be fooled by it. I mean, I don't know why anybody takes that seriously. They're all fooled by it.

So that's the trouble.

Everybody is fooled by it. I mean, are you fooled by that kind of talk in the other parts of your life where people are like, "Oh yeah, sure, sure.

I'll get to that." I don't disagree. I'm thinking about dating and saying like, "Oh, would you like to get monogamous?" And somebody saying, "I'm not there yet." It's very clear that they're not there yet. But somehow when I talk to early-stage founders, they just don't— They're like, "Oh yeah, they want me to come back in 2 weeks." And I was like, "That's a no." Or, "That's a no. I'm not ready." Why are you still talking? "Well, because they said this, this, and that." It's like they have this false— they're not willing to question it for some reason. Yeah.

I fall for that from founders. Founders will come— There's an absolute parallel here where founders come in and say, "Look, we're going to sign our first big client. The contract's illegal." You know how many times I've heard the contract is illegal? What does that mean, the contract's illegal? That doesn't mean anything.

You're like, "You're a 15-person company.

There's no legal." It's in the big company's legal, which to me says that's not happening. Right. Right. But of course I'm going to say, "Oh, great. Well, what do I say? Maybe I'll wait until it's out of legal." But founders do this all the time as well. I just don't fall for it. So I don't know. I think it's a little common sense.

I think there's an optimism. It's actually like a sales process, like you said before. Salespeople can often be overly optimistic, and I think founders, for better and for worse, for better and for worse, can be optimistic about what's going on. And I think can sometimes delude themselves when they really want something to happen.

So what I do with founders is I say, "Great, I'm gonna give you a decision by this date. And if I don't have enough information, I'll say no." Yeah. And I think that's fair. The date is often a few weeks out. But that's, at least they know what they're—

Yeah, and I think also what you're saying is, you know, the expression, "I want to invest in lines, not dots." So you're looking for the dot, dot, dot to lead into a line before you're ready to make a decision.

That's what it sounds like. Absolutely. I'm also, to a large extent, trying to get to know the founder better over time. I know you can't get to know somebody in a meeting or two. The longer I know somebody, the more likely I am to invest, whether or not I've known them because they're pitching me a company or not. Yeah. And I think a lot of founders, and, you know, Liz has said this as well, that it's not worth the time getting to know them, just get the check.

Yeah.

And that doesn't work for me.

I see. Right. Yeah, I see. I mean, you are really interested in building that relationship and in knowing what's going on. Yeah.

I mean, because once I write the check, I no longer have any leverage except the contract. Right. So I need the relationship.

Right. Yeah. And you talk a lot in the book about the importance of the relationship. Can you talk a little bit more and say exactly why you think it's so important to have that relationship with founders?

Yeah. You know, it's interesting. Liz sent me a blog post last week. I think a founder had written about how— I'm not going to say who it is, but I suppose you could probably Google it— how they had gone public saying they hated VCs and then was very surprised that afterwards VCs didn't want to fund his next company. Shocking. And he's like, "Well, why can't it be like— I mean, I tell people I hate lawyers and yet lawyers still work for me." That's true. Or dentists. Right. I mean, I can say that I hate bankers and bankers will still give me a loan. I said, "Yeah, but do you tell people you're dating that you hate them and then hope that they still marry you?" I mean, it's different, right? If you're going to have a long-term relationship and when you bring on VC money, you're going to have a long-term relationship. You need to be able to get along because situations are going to come along years from now, maybe next year, 5 years from now, 8 years from now when you're exiting, that are going to be very stressful. And if you can't work them out at that time, then it's going to be a disaster. And you can't codify all of these in a contract because they're so varied. Yeah. So I think having a relationship where you can work together and solve problems is super important. And to have that kind of relationship, you have to be copacetic and you also have to be partnering with the kind of person who can work problems out.

Right. I can see that. It's interesting to me how in this discussion we're having, there's a lot of reference to dating and romance. And in my book, From Start-Up to Grown-Up, I have— when I talk about co-founders, I say when you have a co-founder, you have a marriage. It's a good marriage or a bad marriage, and then I have this tool tool, which is called the co-founder prenup, which is actually a tool that you can use to figure out, are we values aligned? How do we handle conflict together? How do we deal with difficult things? I now think we need to have a prenup for the VC and the founder before pre-term sheet is a prenup.

Isn't that a good product? That would be a good product. I mean, I guess the contract is supposed to be that. Right.

It's supposed to be that. Right. But then, as we say, it kind of gets all bummed up. Okay, Liz, I want to go back to you because you wrote this great part in the book. This is about closing the deal. Your investors want to announce and move on. They want to tweet. They want to post on LinkedIn. If it's a massive deal, they want to brag at their weekend VC 100-mile bike excursions. So true. Another stereotype that happens to be true. And your point of view is you got to hound them every day until the money's in the bank. Tell us more about that.

Have you heard of ride and tie?

Yeah, I did look that up. Explain what that is since you mentioned it.

Ride and tie is the other VC pastime that isn't biking up a hill. It's two men and a horse. One man or woman starts off running and the other person is on the horse and the horse goes ahead and then the person on the horse jumps off and then ties the horse to a tree and then starts running. Then the original runner catches up with the horse, gets on the horse, unties it, and then starts riding. And they go back and forth. Yeah.

It's called Ride and Tie. I can't just tell you how weird it sounds. Who does that, Liz?

How many people who live in Hillside own horses? A lot. Okay. Good to know.

Anyway, tell us more about their tweeting and their LinkedIn-ing as opposed to getting the money in the bank.

Well, I think that in that passage, the point is that VCs often want to jump the gun and they want to talk about the deal that they're doing, but the deal's not done until the money money's in the bank. And even then, the startups, especially early-stage startups, have very few opportunities in which they actually have a piece of press that people might read, right? We're not Datadog, we're not public, and, um, not yet. Not yet. And so the ability to tightly control the narrative and when that press gets out is something that's really important. And often VCs will not do that, not pay attention to your email that says Please do not do this until such and such a date.

I see. So your point is not so much, why don't you sit at your desk and figure out how to get the money into my account? That's not your point. Your point is stop pre-releasing the news.

Yes. Okay. Yes. Got it. Good to know. Yes. I want to control how that information gets out there.

Okay. Good to know. Yeah. Okay. So we have this process of fundraising. We have the term sheets. We have the terms. It's all happening. Now we have a company and now we have what goes along with a company, a board. So you both say, I think this is something you agree on, you both say board meetings suck, pretty much. Oh, wow. You guys are not even agreeing with me. Like, oh no, board meetings are pretty good.

Well, I don't think that they're necessarily good. I think they can be good. Okay.

But I'm sure they can. Listen, I'm the person who loves meetings. I'm the person who loves all meetings. What I really like is the potential for meetings because actually most meetings suck also. I'd love to know from your— maybe, Jerry, we'll start with you. Tell us about even just board— I want to say construction, but board dynamics and what a founder needs to get right about board dynamics.

I think a founder needs to take the board seriously as a management tool. The point of the board is to manage the company. The CEO works for the board. And I think a lot of founders think that the board works for them. Liz and I have had this argument. And, you know, it's— and in some sense, you know, the VCs promise they're going to help. So you have a board meeting. You're like, "Great. Here's your chance to help." I really think that you should think of the VCs' promise to help as being outside the board meeting. The board meeting is meant for you to tell the board as a founder how the company is doing, what problems you have, how you're solving them. And to convince them that you're doing a good job. It's— if you've ever worked for a big company, and I have, you know, at the end of every month I would have a meeting with my manager and tell him what I've been doing, what I plan to do, the problems I had, how I solved them, basically how great I was, right? Why would I go in there and be like, I have all these problems I can't solve, I don't know, what do you think? Right? Like, who would do that? It's crazy, right? You wouldn't do that. So I think going into the board and saying, we have all these problems we don't know how to solve, but you guys are really smart, why don't you solve them for me? They will help. They'll try to help, I think. But they'll also think that you can't solve problems and maybe you're not the person to run the company. So I think it's dangerous to do that.

Yeah. Back to your blog post about why you're probably going to get fired. Yeah. Liz, how about you? What are your thoughts on the way to— what the purpose of the board meeting is, or sorry, what the purpose of the board is and how to think about and construct the board?

I agree with Jerry on the purpose of the board, but I believe that when the rubber meets the road, that that's actually not what the board.

Did you say what the purpose of the board is? Actually, it'd be helpful to clarify exactly what do you think is the purpose of the board?

Theoretically, the purpose of the board is to govern. Govern. Yes. Governance. Yeah. Governance.

I mean, I would throw one thing in there from a VC's point of view. The other purpose for the VC is to understand what's happening and how their investment is doing.

Yeah. So just being notified.

Communication. Yeah. Okay. Good. So understanding how their investment is doing. But I also think we wear multiple hats, right? And so as a VC coming into a board meeting, they're like, oh, how is my money doing? Is the Is this company going to return the fund? From a founder perspective, founders also have a hat on which isn't governance, which can be, "I want my vision to come true," or, "I want to keep my job," or whatever else. And so both sides are actually serving multiple masters and not necessarily the company itself and only the company itself. And that's where I think board meetings break down and both sides are culpable.

Yeah, for sure. And I think, you know, in my experience, it's also just human dynamics. There's a sort of a sense of actually, Most people don't know how to have good meetings. So it starts that way. And then you have people who've got their own agendas and then they have their own personalities. And you talk about this in the book and I talk about it in my book as well. They're in their email in the meeting. They're a little aggressive in the meeting. Not even a little, they're aggressive in the meeting. Also, they're fighting. I have one type of board director who is the general fighting the last war, right? So his company, 2 weeks ago, this thing happened. And so now he's bringing it into this meeting to to tell you why you should do this thing because it's talking about his company from 2 weeks ago. So I'm just curious, Jerry, if you have good board meetings, please enlighten us. How do you have good board meetings and how do you handle these characters?

So I'm often the first investor in a company, so I'm often the only board member for some period of time until there's—

So peaceful, just you. Well, it is.

It is. Someone you love and trust. But I try I get the founder ready for real board meetings, right? For when there are other people on the board where there's more of a group dynamic. And the thing that I really want to impress on them is that this is their meeting. If things are going wrong in that meeting, it's their fault. And they can fix it. And I think they need to take ownership of that. So, yes, there's people— people are strange. People do strange things. Investors will absolutely sit on their phone, you know, or on their laptop and do other work while they're there. And often I've noticed it's because the founder is boring them with detail they don't need to know in the meeting. So I had one founder who insisted on having full-day meetings once a quarter. Wow. Which I don't have the attention span for a full-day meeting. I just, after, you know, 20 years of venture capital, you know, after a little alarm goes off in my head after an hour, I just He'd start getting into— he'd bring in the CFO and the CFO would start going through the accounts receivable line by line. OK, I don't need to do that. OK, so yeah, I'm looking at my email because I've got other work I need to do while he goes through the accounts receivable line by line. I looked through the binder they sent before the meeting. So I think you have to hold the board members to account and say, OK, we sent you information. I'm sure you've read it. Let's talk about the highlights. If you have questions, ask them. And just run it like that. I sometimes think that founder was trying to lull us to sleep so that he could then give the bad news without us noticing.

At 4 o'clock in the afternoon.

Exactly, right? It's, you know, bring in other people. It was really— nothing we could do could change his mind about how to run these meetings. So what's your specific—

because I want to also say that actually first-time founders haven't ever run a board meeting before.

Well, absolutely.

And I don't think they get advice from their their board directors. In fact, when I do 360 feedback for my founders, I will talk to board members and they'll say, "Well, I wish that he'd be more like this or more like that." And I'll say, "Did you mention that to him or her?" And they're like, "Oh, no." And I don't know why. I literally don't know why. It's not a conflict.

It's not confrontational. No, totally. And I think this is something where venture investors can help if asked. So I had one venture investor, a Series A investor, say, "You know, I really like joining boards that you have been on previously because the meetings go so well." I was like, "Yeah." I think that's because I've really impressed on the founder like how to run a meeting or how I think a meeting should be run at least. And I think it does go better. And yeah, I agree. I think sometimes the founder gets thrown in with 4 VCs into a board meeting. They've never had a real board meeting and the VCs ask for all sorts of crazy things. Like one says, "I want to go through this." The other is like, "I really want to go through the product in detail." The other one says— So you have these 4 different things The team spends a week putting a board deck together and then has the board meeting, which goes badly, and none of that's productive. Right? Right. So I think you need to go and find one person, one board member, and say, how should this go? I mean, it doesn't have to be one, but— Yeah. You know, what is— show me a board deck with all the confidential information scrubbed of a board that you think is run really well. Yeah. Right? Ask to learn. Yeah. Because it is something that VCs do over and over and over.

Yeah. That all said, and I really agree with you, and also I just think like planning is very hopeful too. And sort of thinking, begin with the end in mind. But two things I just want to say. One is, actually, you do have somebody who's like, "Let's do a deep dive on the product," and someone else who's like, "Let's look at the finances," and the other person's on the email. I mean, you sometimes have strong personalities. And I think that a new founder in particular, a newer entrepreneur, is going to have trouble managing that. And the second thing I would say is actually people do not read the material before the meeting.

You might. But whose problem is that? That's their problem. Right? It should be their problem. You should make it their problem. And I think if you do have several VCs and 3 of them have read the material and one hasn't, now— That's peer pressure. There's peer pressure. It's clearly more complicated than that. You know, Liz will tell you there's often one board member who's much more important in the industry than the others, and the others will kowtow to them. Right. So I'm not saying it's easy. Right. But I am saying it's the founder's responsibility, and I've had founders Josh Reich from BankSimple had never run a company before. He ran perfect board meetings. Right? And he had— there was Josh Kopman was on that board. I mean, somebody really a big name in the industry. And then there are people like me on the board. Right?

Also a big deal.

Oh, yeah. But he really knew how to run the meetings. Right? He would come in and be like, "Here's the problem. Here are the 3 solutions we thought about. Here's the one we've chosen. Here's why." Yeah. And then we discuss.

So you felt it was sort of structured. Yeah. Liz, what are your thoughts about— what advice do you have for how to run a good board meeting and how to deal with the dynamics that you just talked about, which is there's an important person on the board or there's a loud person on the board or there's someone disengaged?

What are your thoughts? I don't know that I've ever run a good board meeting. I'm going to just call it right now.

Maybe you should talk to Jerry because he runs really good board meetings.

I wrote a book, Liz.

I'll pick that right up. Thanks. What I do think is what we're sort of describing as it relates to, let's say, 3 of the 4 people not reading materials or in the inverse case, this founder going off for a day and just droning on and on about details is I do think it behooves both sides to sort of have a conversation. Actually, one of the people, one of the board members of my first company was Ian Sigelow of Greycroft. And he would leave his phone in his bag for every board meeting. We ended up getting Aqua hired, so he lost money on that deal, but he was present for the 1.5 or 2 hours that we were there, whether or not we were going to make him money. And I always respected that he made that deliberate decision to be present in the meeting. And he still does it today. I walk into Greycroft and I see him walk into meetings and he's just sitting there at the table with his hands in his lap. Mm-hmm. But I do think it's on the founder, if an investor hasn't read the material, to actually pause and say, "Hey," maybe not in the meeting the first time, maybe outside of the meeting, and say, "Hey, it was frustrating to me that you hadn't done this," and maybe even be sort of like, play them a little, "What could I have done better to ensure that you could have read the material in time?" Like, take on the responsibility there. So, I think those techniques have proven somewhat helpful to me in the past.

Yeah, that's really good. And do you feel like, you know, now, you know, sort of if you move on and start another company or whatever it is you do, Do you feel like you've learned enough to maybe correct your mistakes on your own board meetings?

Oh, Jerry's laughing.

Yeah.

So every time I fundraise, I think I know everything there is to know about fundraise. And then the next fundraise happens and I learn something new. And so I think the same thing happens. Even if I could run a perfect board meeting at my next company, something's going to get fucked up and I'm going to fall down again and have to learn a new lesson. So the answer I think is no. I think I've learned some stuff. I think I've got way more to learn. Yeah, got it.

Now what I tell—

I was just going to say, I think in the end, like there's, you know, it's hard to say you have to do it this way, right? Because there's always some weird thing happening that puts whatever you think is the right way of doing it just completely askew, right? There's no recipe. But if you understand what the person you're presenting to wants from the meeting, meaning, then you can tailor the meaning to what they want. Yeah. Or what they need. Yeah.

Let's say that. Right. For sure. And I also think in order to do that now, having had a wide array of investors on my boards, that it also requires a bit of emotional distance from the founder. They need to— I would think I would need to extract myself and say, how do I manage this particular person or that particular personality in order to have at least a neutral board meeting?

—For you personally, in that instance. —For me personally, yeah.

To zoom out and say, "How do I manage this thing just like I'm managing my management team?" Right. Right.

For sure. Which is another— I think that is also the point about the notion of do you work for them or do they work for you? When you think of them as a management team that you are managing, then you're thinking of them as they work for you and you're trying to deal with them in the way that they can be dealt with. That's what I think about it. Great. That all said, something else you talked about closer to the end of the book about growing and your psychological— you were just sort of talking about this now, your distancing. Talk more about when you reach product-market fit and now you're building a company, how you, the founder, have to change, like your inner transformation to be the person who can now build a company.

I'll speak for myself, less so founders generally. I think I, as a founder, in order to scale, if I've hit product-market fit and now I'm pushing the button, I've got my dozen AEs working for me, then I need to shift from being a founder, somebody who wants to get their hands dirty all the time and do all the things, into a manager to abstract out and to actually manage the business strategically. And that's where I, like many founders, fall down. And it becomes really hard because I want to do all the things., and I don't want to manage. I started the company because I like doing the things that I was doing then, not necessarily to become the CEO of a public company. And it actually requires me holding up a mirror and saying, "What do I want from this?" And it's okay for me if the answer is, "I want a different role," or, "You know what? There are different types of CEOs. There's the visionary CEO, there's the product CEO, there's the sales CEO. I want to be the visionary CEO and I want I want to keep that title, and so I'm going to surround myself with other folks who can handle the things that not only am I not good at, but I don't want to become good at. Those are the types of things that I thought about as I was scaling in my last company.

Yeah. I mean, I think that that's so important, the idea that you— I think founders, especially founder CEOs, so often think they've got to stay as CEO. I think what you're saying is it's more important to look in the mirror and have self-knowledge about where are you capable and where's your kind of highest and best use and where is it like just not your thing, like you're not into it.

Because if I'm sitting on the board as a founder and I just have my governance hat on and I'm not thinking about keeping my job, then the question distills down to what is the best decision for the company at this moment in time? For sure. Yeah. And it might be for me to stay on as CEO but have everything else abstracted to a COO or a CFO or whatever it is to be surrounded by help. But I think it You have to ask the question.

Yeah. Yeah, for sure. Randy Komisar, the legendary investor from Kleiner Perkins who wrote the foreword for my book, From Startup to Grownup, the argument I would have with him is he would sort of say it is a waste of founder talent to have them be CEO. They should not be CEO after a certain point. What they should be doing is doing their founder magic because anyone can be a CEO, but only the founder can be the founder. I'm curious, Jerry, what have you seen in your portfolio companies, in your experiences about founders who can and are interested in becoming that CEO, and maybe founders who are not?

Yeah, so there's both kinds. I actually don't know if many of my founders thought that far ahead when they started the company to being a public company CEO. Right. I think the ones who have become Public company CEOs are a little surprised. But the ones who have, have really grown into it. And it is a difficult transition because what you're doing as a founder is very different than what you're doing as the manager of a large company. It doesn't have to be, right? You look at the founders of Google and they've pretty much stayed founders the whole time, even though it's one of the largest companies in the world. And they've done it by hiring professional managers to manage the operations where they're still the idea people and the to be sometimes the public face, but perhaps the visionaries and the motivators for the company. Yeah. And I think that's what they want. So, you know, Sergey Brin will step in and out of the CEO role depending on what's happening at the company when he's excited to do it. So I think that's great. There is a time though when you're not quite that big where you can't just hire operational people and be the figurehead. You can if you want to be chairman of the board or something. But if you want to maintain real power, you can't do that. Yeah. You can't be two heads of the company. Company. So, the dilemma for founders is, do I want to give up the power to have somebody else run the company? And what does that mean for me? Yeah.

I think that's a very important point. And Liz, I wanted to ask you about that because it's also giving up the power, but it's also, you know, at a certain stage, you're in the in-between stage where you can't actually so easily hire an excellent operational leader, and yet the company needs needs excellent operational skills. So, I guess, what do you think about that? And then how did you learn the skills of management that you have enacted? Oh. Still learning. Still learning.

Still learning, of course. So, I do think there is a point as companies are scaling where outstanding operational help can be helpful. So, in my past, we had one or two investors who had been operators of large public companies frequently, and so I would call them frequently for help. So it's a question of creating a network of people in the absence of being able to hire an executive in order to be able to call for help. Lots of financial help, lots of operational help. I do think though that if you are a good founder and you're good at sales, that you can land some pretty good people if you just try and you hustle a little bit. I remember we landed a CMO actually who used to be at PagerDuty. The way that we did it is everybody in the management team, she actually signed her contract right before New Year's Eve hit or New Year's Day, and we all sent her cute videos of us with children or dogs licking our faces or something in this huge charm attempt to get her to come on board. It worked. She'd been talking to 4 or 5 other companies and nobody was willing to make themselves ridiculous in order to get her to say yes. I really do think startups have more power than they think from a charisma perspective in recruiting top talent.

Yeah, that's really well said. Jerry, you have a similar story with one of your companies. I can't remember. It was a new bank. Is it?

Was it a new bank? Probably Bank Sample. Oh, it was Bank Sample, yeah.

Maybe where somebody called up the founder and said— they didn't hire this person. This person called up and said, "I want to join you." Yes.

Can you tell that story? I think having— Yeah. So it was the third co-founder. So there were two founders. They started the bank. They were moving along trying to build a product. They got some very early press, which they weren't looking for, but it was right after the banking crisis. So the newspapers were interested in other things happening, other ways of banking. They got a call from one of the first engineers at Twitter who was a legendary software engineer and said, "Hey, I'm really intrigued." Sorry. No, actually, sorry. This is what happened. I'm forgetting the story. He signed up as an early customer. Oh, customer. Yeah, as a customer. So the founder, Josh, was calling people who signed up as early customers to ask them why they signed up. So he would pick out of every 100, he'd pick one.

Great founder. Go Josh.

I love that. I love that. So he emailed him and said, "Hey, I would love to talk to you about," you know, what you're thinking. And so they started talking and Alex, the engineer, said, you know, I was at Twitter. I really liked it early on. I felt like, you know, the mission wasn't quite there later on, but I really am looking for something in my, you know, to start a company or to do something that has meaning. And they talked a bit more and Josh convinced him that changing the banking system had a lot of meaning to a lot of people. So Alex was like, you know, I'd love to, I would love to come help you build this. Yeah, I love that.

I love how you said they didn't hire him. He joined them. Them.

And it's completely true. It's so beautiful. Yeah.

That's the ideal. And I think when you're a founder on a mission, that's a good day when you can make that leap and make that connection.

Liz, what you write in the book is—

let me end on a note about fatigue. Founders get tired. Scaling is exhausting, made more so, made much more so, because it takes even more energy than everything up until this point. Going from zero to one is exciting. I found nothing like it. Then you have to figure out how to hand it to a bunch of other people to scale it. That requires emotional growth, which may be even harder than the scaling itself. Can you talk about that? Because that's another thing nobody talks about. Nobody talks about founder exhaustion, even founder depression, when, like you say, it's a 10-year journey. You can say that in year 1 and year 2, but year 7, it's like, "Oh my gosh, I can't believe it's a 10-year journey." Founders just don't realize it's a 10-year journey ever.

And even 4 or 5 years in, you're building product, you're hustling, you're working yourself to death. You're working 12, 14, 16 hours a day, 7 days a week. Your personal life is suffering. Your kids don't see you. If you have kids. If you have kids. Because maybe you put that off. One of my co-founders got married during our last company and I remember remarking to him, I said, "I have no idea how you got her to fall in love with you during this time." Because he was so busy all the time. And so it's exhausting and we don't talk about it. I know I would talk about it with all 3 of my co-founders and say like, "I'm tired," and admit it because that was a safe space and we were all different levels of tired at different moments in time. But I could never, ever say that to my investor because then they think I'm checked out. And so the only way to deal with that was talking to a therapist or really trying to take space. It's hard. And I've certainly, yeah, I've probably been more depressed in my life being a founder than when I'm not. Yeah, yeah, it's really challenging.

So what advice What advice do you have for founders?

Oh, well, I can tell you what worked for me. I would take walks 4 times a day and they were calendared in my calendar so nobody could disturb me during Liz time, 8, 12, 4, and 8. I shut down for dinner for 2 hours. I would work after dinner, but I shut down then. I worked out 3 times a week at 7 o'clock in the morning, so there's no excuse not to work out. I would see a therapist weekly. I think that's it. It's like the major checkboxes. Yeah.

I noticed how you mentioned therapist. I'm not going to talk about the slam on executive coaching you mentioned in the book. Slight slam. Well, well, well. It was a little bit of a slam, people.

Let's assume that I like executive coaches for a moment. Certainly now, right this moment. Of course, in this moment. Alisa Cohn. Executive coaches are different than therapists. Yes. Yes. And so I need somebody that I can really Why am I feeling this way? Totally. And I do think executive coaching has a ton of value. I have yet to personally work with one that I thought wasn't anodyne, but that's of course because I haven't worked with you.

Obviously, you have that in store for you. That great treat in store for you. Yes. And I do— I also want to make the point that of course therapy and coaching are very different. Of course they are. And I think it's really powerful how open you are about your emotional and mental health, which is different. Definitely an unsung thing we don't talk about with founders. Were you going to add something, Jerry?

I was just going to suck up and say that I've actually recommended executive coaching to a lot of my founders. Okay, good.

Good for you for sucking up. Have you mentioned Alisa Cohn? I will do. Author of the book From Start-Up to Grown-Up and the podcast of the same name.

It's true that the founders don't know what they're doing when they start and they have to learn. And sometimes it's hard to learn from the people who can fire you. Yes, yes. Right? You recommend bringing in somebody else to help them get past that.

Yeah, totally true. Yes. Now, Jerry, you write, "This book isn't new knowledge. No one who has been in the startup world for more than a few years will think, 'Gee golly, I didn't know that.' It's just knowledge that no one likes to say out loud." You two said it out loud. Do you think you'll ever eat lunch in this town again?

Only with each other. You know, in 19—

I guess it was 2000, before the bubble burst. A partner at one of the premier West Coast firms told me I would never work in California again after we had an argument. Mm.

He literally said that to you?

He literally said that to me. It was on a call with about 5 other people.

So dramatic.

And those 4, those 5 other people all bought me lunch in the following 2 weeks. Did they erupt in giggles? Yes. And then that firm actually invested in the next round of a company that I had seed funded. So like literally 6 months later. Yeah. No, I think— I actually don't think that anything I've said is untrue. I think if people read the book, they'll find that everything I say is pretty reasonable actually, if I say so myself.

I would say in terms of style, you have a more reasonable style. I think that Liz has a little more, let's say, provocative.

Are you saying that I'm never going to be able to raise a penny in this book?

No, I don't think that. Ultimately, just what Jerry said, they're going to say what they say, but 6 months later when you come and knock in, I mean, you're a proven founder now.

Jerry, will you write me a check again?

I don't know, Liz. I could use a couple of months after this book is out.

I was going to ask you that. What were your dynamics writing this book and what was the low of writing this book and what was the high of writing this book in terms of your dynamics with each other?

Oh boy. Really? Do we have to talk about this? I mean, I can think of a few. There was a time last summer where we were trying to integrate— because it's a back and forth. I don't know if anybody's read the book, they'll see that I'll write and then Liz will write. We're writing about the same things and we'll have conflicting opinions. And some of the early feedback we got was, "Well, who should we believe?" And the answer was, "Well, both of us. Even if we say opposite things, you should know that we both believe what we're saying and that's the point." But we did get in a few fights over some of the things. Actually, if you read the last chapter, chapter 7, we taped that. So we were like, "How do we do this?" Oh, I saw this.

Yeah. So we sat down. Isrin has a script.

Yes. Yeah. We sat down and we actually talked for a couple of hours and then we took out the parts that made sense. But there is a point where I think we both got quite frustrated with each other where Liz says to me, "Well, the board works for me." And I said, "If you take somebody's money, you work for them." Yeah, I think we almost came to blows.

Yeah, I think Jerry and I are both strong personalities with extremely strong beliefs and different experiences. But I think as Jerry says, I think you say it in the foreword, we have had some of the biggest arguments of our career writing this book, and yet the book has come out and it's a great product. And we're still friends and can have a lovely lunch together. And so I think the relationship has deepened. He might think otherwise. Jerry? I think so too.

No, and I think because we've had such a long relationship that we can fight and still get over it. Yeah. Past it, you know, the fact that she's wrong about something doesn't mean I—

I think that's a mark of a good relationship, that conflict makes you stronger and that— you know, one of my mandates for the world is that we have to be able to disagree with each other and then still appreciate each other and like each other. And it doesn't mean we're not friends. What, if anything, did you learn about each other or yourselves during this process?

Oh, you know, I've been a founder. I was a founder and I was fired by my board of directors.

That was probably gonna happen.

Well, it probably should have happened, actually, in retrospect. At the time, I didn't think so.— but I learned a lot from reading Liz's part of this book because a lot of it I do disagree with and a lot of it I think was maybe over the top even. But then I would talk to other friends of mine who are also founders and if they would read the same part and say, "You know what? I think she's right. I think she deserves to feel this way." So I learned a lot about that. And I think understand— this is because founders don't tell you that as an investor. They don't come to you and be like, "I'm super frustrated by how you're acting. Generally. Liz might. But generally they don't, right? Because why would they do that? So hearing that and understanding that that's happening and I'm not hearing it was really eye-opening for me.

That's really great. Good. Liz, how would you say, answer that question? What have you learned about yourself or about Jerry?

I would say two things. So I would say reading Jerry's side of the book, I have more empathy for the investor point of view and specifically because I think often founders Even if they're open-source companies, they forget that the moment that they take— they often forget that the moment they take a penny of venture capital, they are down a road. And that road is that you need to monetize and you need to create an outsized return because you're a bet for this investor. And so there's a lot of conflict that just comes from that. And so I have empathy for investors having to, quote unquote, deal with founders who don't quite understand it or take it to heart, certainly more so after the book. I also think I admire Jerry deeply for being willing to put his name on this book and to say unspoken things. Even if they are true, they are unpopular. I think he's been very daring in his career with respect to publishing, and this book is no exception to that.

That's beautiful.

Thank you. You're welcome. We had a conversation with a venture capitalist just last week who was unhappy with the book. What did he say? What did he say?

He disagreed with the premise and wished that— his argument was VCs are good people, mostly good people, and that he deals with more founder-to-founder strife than founder-to-VC strife. And he wished that he would be able to present that point of view to the media, but that would be unpopular because founders will never tattle on other founders. And if he as a VC describes the conflict he's having with founders, his deal flow is going to stop. So I appreciated that perspective even though it was very pro-PC.

Okay. So my last two questions for my podcast are always about personal growth. Liz, I'm going to start with you. What do you wish you had known earlier on your journey?

As a founder? Yes. I wish I had known, I wish I had believed more. That I was equal to investors, that my feelings matter just as much as theirs, that I don't need to be overwhelmed by their power. In fact, like, we, as a founder, I give them power by doing that. And I wish I could have found a way to, I think, engage, like you said earlier, in conflict that isn't necessarily like full of strife, that gets to better outcomes. Yes. So I actually wish maybe I had an executive coach 15 years ago to help me prepare for that when I was much, much younger.

Thank you for saying that. I'm not even going to say you're sucking up. I think I appreciate it.

No, I'm not. That's raw honesty.

It's beautiful. Jerry, what do you wish you had known earlier in your journey?

I think I wish I had understood that no matter how big or small the idea, it has about an equal chance of succeeding. So you might as well go for the big ideas. I think I early on backed some small ideas thinking, "Well, these are more likely to succeed." And then they didn't or did. And then I backed some big ideas thinking, "These will never work." And then they did or didn't. And why spend your life backing small things or as a founder doing small things when you could do big things?

Yeah, beautiful. That's great. I love that. And my last question, Jerry, I'll start with you. What advice do you have for founders as they embark on their journey to grow into leaders?

That's a tough one. I think you have to embrace being the manager, being the leader, and giving up on being the worker bae. You know, a lot of people become the leader because they were so good at doing the work, and then they have a hard time letting go of the work because the people they hire aren't as good as they were. But you have to, right? You can't be the— there's no— 10-person billion-dollar companies, at least not yet. I think if you don't give up the work to other people and become the manager, become the CEO, then you're the bottleneck. You're what's preventing the company from growing.

Beautifully said. That's so, so true. Liz, how about you? What advice do you have for other founders as they embark on their journey to grow into leaders?

I think they need to stare at themselves in the mirror and decide to embrace it. You either are or you are not, and you have to walk the walk even if you can't talk the talk yet. Maybe it's a little bit of imposter syndrome, but I think you need to explicitly opt into that or you're just going to be fighting it the whole way with everyone.

Yeah. Well said. Amazing. You two, this was such a great conversation. I really, really appreciate your joining me today. It was such a joy to spend the time with you. I want to tell everybody to go out and get this book, Founder vs. Investor: The Honest Truth About Venture Capital. From Startup to IPO. Thanks for joining me. Thanks, Elizabeth.

Good luck. Thanks for listening to From Startup to Grownup. If you like what you heard, give it a review on Apple Podcasts so other people can find it. And if you know of a founder or someone else who is meant to be on this podcast, drop me a line through my website, alisacohn.com.