Scaling Businesses | LinkSquares Chief Legal Officer Tim Parilla (Podcast 247)

Growth is really difficult at that pace. I think for me, having the experience that I did at DraftKings and seeing that growth from 20 to about 2500, I think when, when I left post transaction was something that helped me to, to build a roadmap. There are certain people who are really good at the 0 to 50 million revenue range and then that's a very different company than 50 million to 100 million. I know there are plenty of people that are great startup people that are not great big company people that are great big company people that are not startup people. At 21 or 22, I probably would have said don't go to law school.

You're going to love this episode. Tim Perello, the chief legal officer for Link Squares. This guy is more biz than most business people that I've ever interviewed. Massively refreshing that he's a lawyer, but he's not really a lawyer guy at all. Pretty cool. As the chief legal officer and the second command for link squares, he oversees operations people IT and legal helped take one company public draftkings at a $1.6 billion valuation just before this. Loves how controversy builds teams and he's going to talk about that. He's also going to talk about how Link Squares has actually raised $140 million in the last 18 months. $40 million just as he was coming on as chief legal officer, and then $100 million just 12 months later. He's also going to share thoughts on how companies should be giving out titles and compensation directly. Super intriguing, great episode. You're going to love this one. Hey Tim, welcome to the second Command podcast.

Hey Cameron, thanks for having me.

Yeah, I appreciate it. Looking forward to, to learning about your, your career and kind of what got you into this role. And, and sometimes I don't even go into the whole like what is the company, but I think it makes sense to start there for you to tell us a little bit of what Link Squares is. And then I'm going to kind of backtrack into how you got into the role that you're in because you're in a really unique role as well.

Yeah, absolutely. So Link Squares is a contract management software company. So we develop software for in house legal teams that helps to streamline the contracting process, at the same time provide quantitative data around the work that the legal team is performing. We really try to focus on easy to use software that is custom tailored for the in house legal team. So a lot of competitors, a lot of different folks in the legal tech space are targeting sort of products that are maybe not built as uniquely with the in house team in mind. So it's a great company. Really enjoying the growth that we've seen. You know, I joined in March of 2021. In that time we've increased our staff from about 70 to almost 400 today. And you know, our revenue has more than tripled in that time frame as well, which has just been absolutely incredible growth. We're seeing massive market share gains on our side as well. It's been really, really neat to see the organization grow and it's provided me an opportunity to be more than just a lawyer, which is really something that I've always wanted for my career. Prior to joining here, I was the general counsel at DraftKings and started at DraftKings. There were about 20 people working there. And I left about a year after the SPAC transaction that took the company public. Oversaw the legal, the growth of the legal team and the government affairs function as well.

That's really rapid growth to go from 70 to 400 in 18 months. Why do you think that happened and can you tell us a little bit about maybe some of the stumbling blocks along that 18 months? Because people will think that growth is easy, but growth is really difficult when it's that fast.

Yeah, growth is really difficult at that pace. I think for me, having the experience that I did at DraftKings and seeing that growth from 20 to about 2,500, I think when I left post transaction was something that helped me to build a roadmap. And so when I joined, we were in the process of raising the series, the series B financing which we closed in June of 2021. We raised 40 million and then we were really at an inflection point though we saw the velocity of our product adoption really starting to increase. We said let's, let's invest strategically into, into building and scaling the business. If we can increase the timeline on our product development and we can increase the horsepower behind our go to market motion, then we can capture more market share faster and really try to try to put the company on a trajectory for very high rapid growth while also maintaining the various efficiency metrics that we use to judge the quality of our business. Right. It's not just ARR at all costs. We're also looking at making sure our retention numbers are where they need to be. We make sure that we're doing the right things in terms of customer satisfaction. Even like CAC payback periods. There are a handful of different and gross margins are outstanding. Right. A lot of people, you can buy a lot of ARR. But if your other metrics aren't where they need to be, then it's just kind of phantom. But we've been able to maintain those metrics and ultimately we raised 100 million in our Series C in March of 2022. Wow, great. So just seeing, seeing massive, massive growth. Our go to market motion works. People want our product, which is great. A big part of that though going from 7 to 400 really is understanding how to structure team and understanding how to turn your idea and your product right. You got series A is really just proving your idea like a proof concept. Series B is making sure there's a product market fit. Series C is turning that into a business. D and beyond is scale. When you think about how you turn this product, this good idea with a good market into a business, it's when you start to think about like what's the less sexy stuff? Like how are we making sure that we are scaling our IT team appropriately to make sure that everybody has Internet, who's in the office, make sure that everybody who's remote has the tools that they need to do the job. And you think about the people function, right? With that level of rapid growth, you got to make sure that number one, we're hiring the right quality of people. Number two, we're retaining the people that we have. Right. I mean over the last 18 months our company has grown buybacks. We're at a point where a lot of people who have been hired are passing their one year mark. And so that's usually when you start to see attrition. So the focus now is on employee retention as well. And how are you building a good program to retain your key employees and motivate your key employees. How are you doing things like career pathing for people. Right. Things that you that are, that are really product and industry agnostic in a lot of ways that a lot of folks don't want to focus on. That's really what, you know, what I brought to the table is these are, these are critical components of really enabling your stars of the show, which I view as marketing, product and sales. Those are really your stars. You need people in the background really driving a lot of that Structured growth is something that I've been passionate about and really wanted an opportunity to be accountable for. And Vishal, our CEO gave me that opportunity here. So it's been, it's been really incredible. Also thinking about how are you being, how are you using data not only in making your product decisions and adjusting your go to Market motion, evaluating customer success and things like that. But how are you using data to help other parts of your organization to grow and scale? So I set up a data analytics team and there, there are different metrics. Like our people team uses a lot of different metrics as far as this is how we need to grow. This is, you know, an efficient way for people to manage in this type of an industry. How many people is too many people? How many layers of management or too many layers of management, given our size and really seeing as we go through building and structuring the organization, how, you know, we can track the performance of our, of our team versus the performance of the financial performance of our company and correlations. Very cool. It's fun.

You're touching on the answers to the questions I haven't asked yet, which is intriguing because you kind of started off really understanding like the value of the client and the CAC and the return off that and how. And. But then you quickly switched into the measuring of everything around the people side of things and the labor efficiencies and not getting too wasteful. And that was what I was going to ask was how does a company that's raising effectively $140 million in a year, which massively changes the culture of the company and gives you the ability to go out And I used to, you know, there used to be something 20 years ago called predatory pricing. Now I think it's predatory hiring, where companies that can raise money, literally, right, you can go out and just buy up the talent, which is a huge strategic advantage versus the average company that wants to compete for the tal. They can't. How do you prevent waste or be careful that you're not wasting money, like throwing money out the window and then going, oh shit, we overspent on, you know, 12 people or we hired too many where we could have. How do you measure that? How do you think about that?

We're, as an executive team, we're really deliberate about how we hire. It's not like, oh, I need 10 developers. It's, well, why do you need 10? Where'd you come up with 10? What are the metrics that you're using to actually back into that? I think about, you know, for example, our operations team, like our contract operations team. There's a certain number of customers that those people can onboard in any given time period. If we're looking at adding more cost, it's just a mathematical formula and we review it over time, right? It's not like, oh, in the next year, I know, we're going to have X number of customers. So let's hire this many people right now. Let's go, let's, let's hire. See if it starts to shake right, or it really starts to bend. Not quite break, but get really close to breaking. And then let's add one more unit and that'll be the way that we test the metrics we're using to drive our headcount decisions. And so we, we're really doing that over the entire organization. Obviously, if you look at the revenue team, it's a little bit different. They're not using the number of customers they're using. What must your per rep productivity look like? If we're expecting to be at a certain level and we're anticipating the per rep productivity to be at a certain level, it's just a, it's a mathematical equation. So with every hire we've sort of done that, but we also take time to say like, all right, let's sort of step, function up and grow into it. Step, function up and grow into it. So that's, that's the way that we've done it. And you know, I don't, I don't want to, I don't want to act like everything has been perfect and we've nailed that. Exactly. But the point is that we've been deliberate about what we're doing and then we take the time to say, was that actually done correctly and appropriately or were we looking at the right metric even?

How do you manage the employee net promoter score? Like your employee happiness versus the need to grow and optimize and be efficient in terms of the revenue per employee margin, per employee, your labor ratios, how do you keep them happy but also keep them busy?

There's no one answer to that. I mean, if you look at the sales function, which has really been a major strength of, of hours, obviously our product is far superior to anything else that's out there on the market and our marketing team is second to none. And that really helps at the top of funnel and customer satisfaction. But really having having a dedicated team of sales professionals has been outstanding. And then you look at that team and they're really very highly motivated people who want to work hard. They're super competitive. And you carry your quota or you, you get carried out the door on that team. There's a culture to that and that culture is definitely not for everybody. Similar to how a startup is not. Like we were talking just before this, like, yeah, like maybe there are certain people who are really good at the 0 to 50 million revenue range. And then that's a very different company than 50 million to 100 million. I know there are plenty of people that are great startup people that are not great big company people. They're great big company people that are not startup people. So it absolutely is. Is startup culture. You know, I think looking at the rest of the organization, I don't want to say that it's any different because I think everybody here is really competitive and really wants to work hard. There's a sense of satisfaction that people get. Like, let's not just come in 40 hours and get a paycheck. People are here because they want to be here. And you see it because we don't, we don't mandate return to office for most orgs. Right. We say, hey, we'd like it if you come in, but if you don't like, that's okay. Our office is full. We have three more floors that we're developing right now. People want to be here. People want the energy. They see it, they're excited. It's a lot of fun. And so that's a personality type that we actually try to bring into the organization. And as cheesy as it may sound, like we have one of our values being you're all in. Another one is team first. If you're not all in and if you're not team first, you're not here, you're sure not getting hired. As soon as we see people who are not like, we create a culture of accountability too, where it's like if you see someone who's not being team first or see someone who's not all. Not all in. Yeah. Have a conversation with them. Like, that's not like I've been in meetings where director level people have. Have looked across the table and they're like, that is the least team first thing that you could possibly set to.

A VP or just to someone above them even. Yeah, right. Were you kicked out of law school because you were too business guy? Like, you're, you're like the least legal. Legal guy I've ever spoken to. It's incredible. Just like you're giving me hope for lawyers again.

Thank you. I, I appreciate that. It's. I think it's a, it's a product of being fortunate enough. It never worked in a law firm.

Oh, nice.

And also never really reported to another attorney. Throughout my entire career. I. Right out of law school, I ended up falling into, through a stroke of luck and incredible generosity into a job at an organization that didn't have an in house attorney and the CFO who became the CEO really took me under his wing and helped me to understand the business, the business side of it. I went to law school and learned a lot from a legal perspective and I've worked with a ton of really outstanding lawyers out there. I've learned a lot from a lot of really, really great mentors, et cetera. But my career trajectory and growth as a professional has. The muscle that I've really tried to work on is that business side even coming out of DraftKings and coming to link squares. Like I didn't come to link squares to do the legal work. The legal work at DraftKings is about as exciting as it gets. Right. I mean, we changed the law In I think 19 different states. Now from a fantasy sports perspective, we change. We built regulatory framework around an industry. We were proven right in every single circumstance that our initial going in, you know, legal position was the right legal position. It's been affirmed by courts. Right. It's been affirmed by legislatures. There's nothing more exciting that's cool to see the Supreme Court overturn PASPA during that time and see states adopting sports betting. Really exciting legal work. Really, really fun. I didn't come here to review SAS contracts.

Right, Right. It's interesting because I think there's a really huge opportunity for more people in the legal profession to go into business. Just like so many from engineering have gone into business. Like we have, a lot of the engineering space have gone in, but I haven't seen as many from the legal side move into the C suite as real operational people. Like not, not chief legal counsels. I have a friend who's the chief legal counsel for Panda and I have a close friend who is our chief legal counsel. But there's something about the fact that, you know, you oversee legal, but you also oversee operations, it and the whole people side of the business, which is highly unusual.

That was one of the things that I, that I talked to Vishal about. I said my favorite times at DraftKings were really those early days when we were going from 20, 30, 40 people to 500 and working closely with the management team there. We built out a fraud control department. We built out a compliance team right from nothing, which was, which was great. And seeing like this is how the product team is scaling, this is how the analytics team is scaling. All of that, like very, very good. That, that was what got me out of bed on a day in, a day out basis and really got me excited at DraftKings during that time period. Is just like, this is so cool. Being able to go and do that again was something that Vishal and I talked about. He's like, you manage all of the gna side of the business, you know, with the exception of finance. You got a great cfo. Our CFO is awesome. And he's managing that really, really well. There's zero value that I'll add. You know, if. If I were controlling that function too. Let him deal with that. The rest of the business is, you know, is. Is really where my passion lies. Being able to grow and scale that and being able to, like I said, provide the tools to, you know, the marketing team, the product team and. And the. The sales and success team that they need to go and. And dominate the market.

What was it like for you coming into the organization when there were already 70 people there? And how do you come in in a senior role over top of a bunch of new people who no longer get to report to the CEO? How did you make that move without upsetting the Apple cart?

It was actually really, really easy. I came in and really just sort of oversaw the legal function. HR functions that were being done were effectively being done by our director of accounting using gusto. All the onboarding paperwork, and you click through, you're, you know, put in your papers, and that's your HR team. There wasn't anything else there from an operations perspective. So I hired our VP of hr. I hired our senior director of it. A lot of these functions weren't in place when I joined. The people who were performing these functions in most cases were very happy to get rid of them.

They must have known that they wanted someone else to report into as well then.

Exactly. And so our CTO went from like, answering security questionnaires, issuing laptops to new employees, to now living in the future of focusing on new products and really on the R and D side of the houses that. I mean, it's a waste of his time to sit there and figure out how to manage help Desk tickets. This was a big part of our growth, particularly through 2021.

You mentioned something about you kind of like controversy as a. Maybe you don't go out and seek it, but you're okay with controversy in organizations because it builds teamwork or builds that they. Is that kind of how you said it?

Yeah, absolutely. I think most lawyers are. Are comfortable with controversy and conflict, and if they're not, they should be. It's what we do. I view conflict as just a way to get to a resolution that needs to happen. Typically, the stronger the controversy or the larger the controversy, the more effort it takes to get through it. That's when you really see, like, dependency on your team and who really is team first and who really is all in, who's committed. You look at the controversy that DraftKings went through and very happy to call, you know, Matt, Paul and Jason, the founders and as well as the rest of the executive team there who was with us during that time, close friends. We still, you know, we still are, are in touch today. And it was those times that really brought us all together because it's a job. But when you're operating at this level, it's not just a job job, right? Like, you do this because you care about it, not because you're punching and you. When you're doing something that you care about with people who are similarly minded in terms of goal, like the goal orientation and methods to get there, and you really work hard toward a successful outcome. It builds that camaraderie, right. And you're doing it as much for the person, for the person next to you as you are for, you know, good of the business. And so the controversy, though, really tests those relationships and it can deepen those relationships. Right. It's kind of like the old adage, right? Like you should never marry a person with whom you haven't had an argument. Right. The arguments bring you closer. They teach you a lot about the character of the people who are working beside you. And so, yeah, I, for one, welcome controversy, welcome challenges. And, you know, I mean, you look at, you look at where we are from, and a lot of companies in a lot of different industries are dealing with controversy right now as a result of the macroeconomic situation. The teams that are, that are going to come out on top when the macro situation starts to correct itself are going to be the people who really, who really dealt with that controversy as a team and as a unit. And, you know, put. Put the, the team first in the business first.

You're fortunate in that you've raised 140 million, you know, in just prior to really the markets going for the. What is your position related to the economy right now in terms of what are you telling the employees? How are you guiding the company through this? Are there any thoughts around that?

There are a couple of aspects. Like, obviously, having cash is great, having enough Runway that we feel comfortable. Obviously, no one has a crystal ball, but we've got enough Runway where we're comfortable that the macroeconomic situation will be at least on the upswing, if not turned around in a meaningful way by the time we need to, you know, go and raise money. And there's an aspect of step function and growth as well. Right now there's, you know, there's probably a pretty decent argument that given the size of our staff, maybe we're a little bit bigger than, than we should be. But I can, I can guarantee you that by the end of Q1, maybe even the middle of Q2, we're going to be on the other side of that curve. Right?

Yeah.

As I, as I said before, like, you hire, see when it's going to break, hire a little more, see when it's going to break. And so that's, that's sort of the way that, that we're approaching it. But we're also very, very regularly being data driven and metrics driven with our, our revenue, we're looking at. All right, how are we tracking for year end? All right, great. Or are we meeting our goals? Yes or no? Okay. If we are, by how much and what does that do for, for Q1 and Q2 and Q3 and Q4 for 2023, does it make sense for us to invest a little bit more in certain parts of the business because we're ahead of goals or, you know, let's say we're missing the goals. All right, well, what are we going to do? Our Runway is something that we hide our, ourselves to. Right. And we'll modify our business to fit that Runway. It's a decision that we've made to try to combat this sort of macroeconomic turmoil that we're dealing with right now. Our employees are aware of, obviously of everybody's aware of what's going on in the, in the macro environment. And we have employees who, you know, who have expressed concern like, oh, how are we thinking about this? Is this going to impact us? You know, Wayfair and a bunch of others doing massive, massive Amazon, massive layoffs. Right. It's a natural question for people to ask. We haven't overhired, given our revenue. And so short of, you know, something extremely negative happening to our revenue, we feel very confident that the way that we've structured and are running our business is something that's going to provide job security for our employees and the opportunity to make more money and get a higher equity stake and really just continue to build the business and grow a good fundamental business.

There's been a lot of discussion recently, and we just had a group discussion with our COO alliance members the other day around compensation and where we are right now vis a vis inflation. And you know the needs of employees to keep up. What are your thoughts around that in terms of compensation? Are we having to raise employee comp. Should we be trying to teach employees to start living within their means and stop buying so many big screen TVs? Are we somewhere in the middle or what's, what's going on?

That's a great question. I think what we're seeing is that at least over the last year and a half it's very much been a, been a, been a candidates market. Start to question with these layoffs, whether it's still a candidate's market. But our perspective is pay employees fairly and they're going to work well for you and build into your hiring plans the aspect of retention and also planned attrition. Right. And what I mean by planned attrition is understanding that there's just going to be some frictional moves. People are going to say maybe the company is no longer a startup enough for me and I'm really the person from zero to a hundred people and I tried to make this work, I'm going to go elsewhere. Right. People who maybe come in and say, hey, I really like this idea of a startup, but working in it is very different. So you have this like percentage that you just kind of factor in and then you have the retention aspect and that all goes into your hiring plan as well. How many heads should we be hiring for? Well, there's backfills that we're going to need to deal with. So let's think about that. And there's the budgetary constraints, but there, there's also retention and raises for people who we really want to keep around and make sure are going to be in it for the long haul. You just got to plan it. From my perspective, I think that companies that are in a position where they're not giving raises and just telling people to sit and be happy with what you have, are going to find themselves in a situation where their staff will leave.

What about titles? It's something that is pretty unique in terms of when you're with a small or mid sized company, titles don't have as much structure as they do when the company is more established. So how do you decide what titles to give out and you know, what criteria to place around titles?

I look at titles and I try to align titles as much as possible with career pathing templates. You're looking at individual contributor, manager, senior manager, director, senior Director, vp, svpc. Like for example, within the legal function here I'm the chief legal officer, I don't like we don't have a general counsel title here. That's very specific on my part because I want everybody to recognize that Jonathan, our VP of legal, is a VP level contributor. You had some of these different roles and titles and people like, what level are you? Right. And when you start thinking about how are you evaluating someone's performance, like, I expect something different from a VP versus a director versus a manager.

Yeah, that's where I'm going with this. So how do, how do you place those titles? Is it based on roles and responsibilities? Is it, what's it based on?

I define the seat first. And here's where a lot of startups go wrong and eventually have to do something that is really uncomfortable, which is basically retitling people. Like, I get it, you used to be the chief marketing officer. But like you're really operating at like a director level.

Yeah. There were 14 of you back then.

Yeah, exactly. And like you and your college roommate decided you'd be the cmo. Right. Now you have a business on your hands, which is great. Awesome opportunity to learn. That's the joy of startups, the wonder of startups. Right. I go by defining the seat and what that really means. And so when you think about a level of expertise in your particular discipline, that's only a part of the puzzle. I think the leveling actually shows what strategically are you doing within the organization and what is the organization expecting from you At a strategic level, at an execution level, how are you working cross functionally? There are absolutely roles within an organization that shouldn't be C level roles. There just are. Right. It is what it is like. And I don't want to pull any one particular title out of it, but there are some roles that are just not C level roles. Yeah, right. Because. Because you're not, you're not contributing cross functionally. You're not driving strategy, you're not originating strategy that you have to drive across multiple functions. It's just not within your discipline to be a C level executive or a VP level or whatever it may be. And so if you really define like this is what it means to be a VP at this organization. Right. You're setting your strategy, you're working autonomously, you're executing on your own, you're holding others accountable, you have your sphere of influen across your peer group. Those types of things like that's in the. If you're not doing those things, then you're the wrong person in that seed.

It's a shame that so many companies miss that But I guess that's just part of the natural evolution of a company growing as well, is they you make the mistakes and you learn or, or you listen to some of the experts. Because I had to help a company. I helped coach them from 40 people up to 700 and then we had to retitle them at 700 because they weren't listening at 40. And they had a whole bunch of people that were VPs, senior VPs. I'm like, they're not, they're not VPs. They're like, you don't pay a VP 120 grand. That's not a VP, it's a director, like. But whatever. They went through the pain. I want to talk about the fact that you took that one company public as well and via the spac. What was that like? Any lessons in doing that? Was there anything that you guys learned through the school of hard knocks or through some of your successes?

Obviously, I learned a ton through that process. Worked with really, really outstanding external advisors, both on the finance accounting side and on the. And on the legal side. Ton of work. At its most fundamental level. What I learned is that your chief executive and your true business leadership are really just the secret to it all. And maybe that's not the case in every company and maybe that's just a unique thing for DraftKings. But you know, between Jason, Matt and Paul, like the way that they drove the resolution was just incredible. Just absolutely incredible. Relentless. Seeing Jason's strategic vision throughout that because list, that was not a short process. You don't SPAC in like 60 days. We also, as a part of this acquired SB Tech, that combined company which, which had a thousand plus employees at the time. And then you have a gaming transaction. Like, it's a complex world that you had to navigate. And seeing Jason in particular, really being able to go through and understand everything from the legal implications to the finance side to the, quite frankly, the sales and marketing side to get investors ready for this combined company to be a successful public entity. That was huge. And so when I think about what those learnings really were, is that something that I think a lot of lawyers generally should understand is that you really are nothing more than an input at a fundamental level. You're an input. You're basically a subject of the business. You have to get comfortable. Like, there was no legal wagging the dog on, on the SPAC transaction. The transaction just took a particular form. It wasn't like lawyers being like, this is how it goes. It was all right. Jason recognizes this is the Lowest cost of capital. And this is the most efficient way for this company to go to the next level. And this is what business metrics are driving that decision. Lawyers get on board with it and figure out a way to get it done. It's not that cut and dry. Right. It's not like Jason was like, go screw. Like he's not that kind of person. Sure, but, but as a professional, as an executive, you need that kind of leadership and you need that laser focus and determination on why are you doing this and making sure that every decision you make leading up to that, whether that's an IPO or SPAC or whatever that exit may look like, you're doing it for the right reasons. You don't go public because you want liquidity. You do it because it's the cheapest cost of capital. It happens that you get some liquidity for your shareholders too. That's great, but that's not a reason to go public. Right? You go public because you're a fundamental business. You know that this is the cheapest cost of capital for you, not only right now, but on an ongoing basis.

That's interesting insights for sure. I want to go back to the 21 or 22 year old Tim. What advice would you give yourself back then that you know to be true today, but you wish you'd known when you were 21?

At 21 or 22, I probably would have said don't go to law school. No, I'm kidding. I've been enjoy, I've enjoyed that. I, I would say, I would say just be confident that you're going to be able to figure it out. You may not have all the answers right away and, and nothing is going to go according to plan, but be able to be, be adaptable and just have faith that like if you work hard and you maintain your integrity throughout, you know, throughout your development, particularly your, your profession, your early professional development years, you think about, about maintaining integrity, you think about a good, strong work ethic, you think about building relationships and the importance of relationships in, in your career, then anything that you're going to face, you're going to be able to come out at least on a, on a pretty good result, if not a great or excellent result.

Well, Tim Perillo, the chief legal officer for Link Squares, thanks very much for sharing with us on the Second Command podcast.

Cameron, thanks so much. Really appreciate the time and it was great, great, great chatting with you. This is actually truly life changing stuff. You're facing fears, you're overcoming challenges and that's what appealed to me. My life got changed when I went through this program. When you lift off the ground and you're sitting in that seat by yourself and you're flying over whatever you want to fly over, and seeing whatever you want to see, it just puts a new perspective on everything.