S1E162 - Building a Unicorn with Manny Medina of Outreach.io

Greetings, everyone. Thank you for joining us. Very super exciting, fun edition of the Surf n Sails podcast. Bonfire edition.

Scott and I have been talking about.

How do we keep giving back to the community? And we were thinking that let's do some live shows. Let's get questions from the audience and have some amazing guests. So can't be more thrilled than to have Manny. I'm not even. You know, it's Manny Medina, but Manny from Outreach on here. And we're going to go deep on funding, fundraising, and a whole host of other topics. Leadership and growing. So, Manny, thanks for joining us, man, and making the time. We know you're busy, so we appreciate it.

Thank you for having me. Even Lars is here. You guys are a big deal.

See, Scott, I told you we're a big deal.

We're a big deal. I hear the Ron Burgundy voice right now.

I have a big deal, so I need to get that out for my wife to hear.

But anyway, before we jump into everything, we want to make sure we shout out to find them. Certainly Outreach for sponsoring Lead four one one.

Who'S our fourth. Oh, Perception, which is an amazing. They're all really cool techs and gong, as always. Right. But let's dive in. So, Manny, I want to go straight to early stage startup.

Right.

And I don't know if you went through this. Did you go through the friends and family stage to get started? And I know this is. You may have started before you pivoted to what Outreach started to be, but where did you get the first piece of capital?

Well, unfortunately, I don't have a lot of friends and family with money, so I had to make friends that have money to invest in outreach.

The first few bucks came out of a guy called Bruce Jaffe, who he's actually the first $10,000 into our cap table first. And what you will see is that. Is that our first almost a million dollars came in in sets of, you know, 1020s and 30s. And that's because the concept of sales engagement was not. Was not baked, was not something that people just gravitated towards. And when we came to market, there was another technology called Relate IQ that was sort of doing something kind of similar. They were trying to attack more CRM than we were, just trying to be sort of like an engagement layer. But, you know, I had to answer a lot of questions of, like, you know, how are you different? They're capitalized or worth quite a bit of money. You're worth nothing. How are you going to win? And then the fortunate thing happens, like, Every, everybody has to get lucky at some point. And our getting lucky was that relate IQ gets bought by Salesforce for I think like over $400 million. And relatedQ had a very large list of angels. And as a cold caller, that was my list. So I called for, you know, work. I work. I started with the Ace, worked my way through the Z's and I raised 200 $250,000 out of people who invested in Relate IQ and then another 200, $250,000 from their friends. So that was my friends and family round in which I sort of talked to everybody. And look, the important thing is that I am not sort of like a Silicon Valley entrepreneur sort of format, right? Like, you look at me and you, you don't think that, you know, I'm not, I'm not a, you know, Stanford computer science grad with a, you know, out of YC et cetera. So I don't look the part. I didn't, I didn't, I didn't fit the profile. So when you are like me and you know, I'm an immigrant, I'm Hispanic, there's also all these things going against me. You can't like go the regular route. You have to sort of like hack the system and you hack the system by playing to your strengths and I play to my strengths by you know, getting tens and twenties out of many, many people and have them make int the customers and VCs, etc.

So how does that. It's. The reason I'm asking is there's a. What's the pressure like between your friends and family, whatever those friends mean, that you feel and responsible for the finance. Not that you don't, you know, look, not that you, you don't feel responsible when a VC gives you money, but it's personal, right? Like this is really personal.

I would say so. Depends on the procurement. To me, it's always personal. So it never stopped being personal. And look, I live in Seattle. Seattle is a tiny town. And we pivoted the company when we started here in Seattle. And when people pivot, there's two ways to go about it. You can close the other company.

Everybody sort of lose their money and you start again and it's normally okay, right? Like everybody knows the risk, et cetera. We didn't. And we didn't because I, you know, you can't, you know, part of my French, you can't, you can't shit where you eat. You know, I mean like I live here, so. And the people who invested in me are people who I'm gonna run into in the streets. So I can't let him down. So I brought them all along into the new and into the new company, sort of recap the company so that the founders had some, some, some upside. But I brought everybody along and, and I think that sort of plays out. You know, at the end of the day, you have to live with yourself and living with myself being, you know, being honest and getting everyone a good outcome.

Yeah.

So what I jump into the next question. I'd love everybody to just go chime in on the chat real quick because we'd love to have it engaging. Tell us where you're dialing in from because it's kind of cool to see. Also, please put your questions in there if you've got questions for Manny, because we want to make sure we get to them. So let's talk, you know, from that stage to, I don't know, we can talk about series A, but really that growth from A to B, like what is the VC looking for besides product market fit, you know, a certain level of ARR. What are they looking for as they look at the executive team and then what are the places you sort of had to learn? Okay, I'm going to B series now.

I gotta up my game.

So when you are early stage. So my own experience, and I don't know how investors do it, but my own experience is that when you are sort of like C and A.

Your investors are looking at, do you have a, do you, do you have a really large market to go after and do you have a cohesive team? Like the team doesn't need to be particularly senior or seasoned, but they need to be able to work together well and have some kind of superpower. Our superpower was the fact that there was four co founders and it was literally like everything, every position was covered so that we had a back end developer, a front end developer, a designer and myself was selling and doing everything else. So that team took us from A to B. Sorry, from C to A. When we got the A from Mayfield, what Mayfield was sort of looking for was not only, you know, is a team cohesive, it's a market big. But do you have customers who are not only like rage, you know, raving about your product, but are in it to help you develop it. And we had two really early customers around the series, like right around the series A. One was Appdynamics who bought in really early. And the second one was Cloudera where I met with Lars. And in Cloudera, it was an interesting situation because they were on yesware and they were migrating to outreach. And when that migration, sort of like Lars became a big proponent of account based self development and that whole sort of like train of thought took off and along with it, you know, outreach and the tools that allow them to do that. So you need sort of like testimonials from investors, from customers who are, you know, kind of heavyweight and they're, and they're sort of like.

And they have a following and they have, they have a thought leadership platform for you to sort of continue to draw investments. And even to this point, when I'm talking now to like, you know, investment banks, you know, we talked about what is the road to public. And they're still the same thing. It's still, you know, make sure that you have customers who are willing to come and speak to all of us about all the great things that you got going and all the things that you're about to go build. So this, this is one of the surprising things that never ends. Like your customers speak for you in every single round. And A and B is sort of like the difference between getting a run done and not getting a run done.

Manny, you just mentioned talking to investment banks, which, which makes me think a little bit about how little information there appears to be out there about the thought process and considerations prior to going public. Like when do I take the company public, under what terms and why and that kind of stuff. Why does that feel like a black box of secrets? Maybe I'm just, you know, not in the right, you know, circle or whatever, but I don't see much discussion about that. So can you talk a little bit about what those discussions are like and what the considerations are there? I think it would be, it would be helpful for me to learn about hopefully everybody else as well.

Yeah. So I don't, you know, I'm not public and I haven't gone through it, so I can't tell you much about what it's like, but I can tell you from looking from the other side.

Right.

Like, you know, how do we prepare?

That's what I mean. Sorry.

Yeah, as we think about it.

Yeah, as you think about it, as you're considering possibly doing that.

Yeah, yeah. So first of all is you need a, you need a. There is a sort of like a work back plan to be public ready. So this is, you know, forget about being public. There's a public ready sort of like a statement in which, by which you run operations. And this is all about, you know, managing the Beat and race. So you need to be able to call the number at the beginning of the quarter and beat that number at the end of the quarter and then do it again and do it again and do it again and do that for entire fiscal year and then operate in that rhythm for a handful of quarters before you do anything. And if you look at even what Snowflake did, Slootman came in.

Along with his CFO and they sort of like.

They sort of deploy that rhythm in that rigor before they even went public. And they already had a lot of growth, they really had a lot of momentum. It's about being rigorous about it. And then there is the other little stuff like the ability to have audited quarterly earnings and the ability to sort of like, you know, make sure that you manage a story. You know, one of the things that I learned from henry@zoominfo was that you cannot spend enough time making sure that everybody understands your story really well. And the story is pithy and the story is impactful and the story is something that people get behind. So if you were to break down, for instance, Snowflake stories. Snowflake stories is very straightforward, right? Is not only they're attacking a huge market, they got network effects from the fact that they have this. Not only the platform play, but they have the ability to connect to several customers and they have incredible growth. So really good execution. So boom, three points, easy to consume, everybody wants in.

And then the bankers help you manage sort of like that float, meaning the amount of shares that are released, the momentum that you build coming into the public markets. So you know, you want a pre sale, you want to sort of like get a bunch of people excited. You want to get a lot of funds with big names excited, right? So you want to figure out, it's kind of very much like fundraising, right? You want to, you know, figure out the tier A funds and then the tier B funds. And you want to get a few tier A funds really excited and pre bought into your ipo and then a few TRB funds excited, pre bought in the ipo. Then you go public and then you float very little. And that little. That floats spikes because everybody wants to get in. There's no flow for anybody. You got a 30x multiple. The end.

Yeah, it all sounds so simple when you phrase it like that.

Let's do this, that and the other.

Yeah, but that's, but that's what, but that's what to me hasn't been spelled out and articulated. And maybe, maybe I. Like I said maybe I Just haven't done enough research on it. But I appreciate you sharing that because it's something that I think many startup employees think about. In particular, probably employees at Outreach and companies like Snowflake, you know, maybe a year or so ago, as they were thinking through these kind of things. I want to change gears for a second and ask you a totally different kind of question if you're ready for it. Okay. I want to know. There's so many times where businesses and founders, you know, on. On their journey, get advice and counsel from people and end up making a totally different decision. So I want to know about some times or a time that you made a decision that everybody around you told you was wrong and that you shouldn't do it and this wasn't going to work. And then if you're comfortable sharing, like, what was the result? Did you end up being right? Did they end up being right? I'm curious about that kind of thing.

I'll tell you one that we're still. So there is. Every time we have a board meeting, there is this bone of contention that it's been three years and we still talk about it every meeting. So.

When we brought in. So Rajeev, who came from Mayfield, had invested in Marketo before, and the Marketo playbook sort of is one.

That suggests that you move on market quickly. And then you do that by not only deploying reps and motions in and having the product ready to go in enterprise, but also by continually creating a new floor for what's the minimum bite to get into the product. So.

We continue to have that conversation. I was like, how do we raise the floor and eventually get it out of the SMB space and out of the sort of like the micro account. So. And as we were going down the path, I started getting personal emails from people who were running very small companies, you know, with one or two or maybe salespeople or a rep that used to use outreach in a bigger company and move to a smaller company, and they wanted outreach again and we couldn't sell it to them. And I started getting all this, like, bad blood, you know, I mean, unnecessarily so of like, we not able to, you know, go below a particular price. And I went to the board and I were like, hey, team, we're building a category here. We cannot build a category if we don't bring everyone under the tent. And I know that, that they sort of like, you cannot operate two businesses, right? If you're building for enterprise, it's much different than building for SMB, right. The SMB construct has a lot of self help, a lot of self serve, a lot of content marketing, a lot of things that kind of like HubSpot, right, in which you start and then you don't need help and you sort of like build that your customer acquisition is really low, but you also have high churn. And then on the other hand you have enterprise in which you spend a lot of time in governance and security and, and policy and you invest in a professional services organization. So those are two different businesses. And normally companies bet one or the other. We decided to do both. And what that does is that creates sort of like literally like a two hump kind of like business.

Sort of framework in which one business looks like an SMB, the other one looks like a corporate. And above and every conversation that we had with the board, the board, you know, you know, we would be arguing this point of like, should we be one or the other? Should we be just enterprise or justice and be that being in both didn't make any sense. But to me it's a principle thing and that we can only build a category if we bring everybody along. You know, I've seen false starts from, you know, people who were in the space before me who, you know, they either pick one or the other and because of that they failed. And I think that we have to pick both. And you know, it's still, we still need to play this out like the game is not over yet. But I stuck my, I stuck to my sort of this principle thinking on that like it's okay to run to business as long as you're aware that you're doing it, you're optimizing for one, you're carrying the other. But it's the only way you're going to build that new category from scratch.

All right, I got a, we got a couple.

I've got someone who wants to ask you a question, Manny. So Alex Smith is joining us. So Alex, go for it and ask Manny your question. And it's a good one, by the way.

Hey, how's it going Manny? It's great to meet you, man.

I'm curious because I'm gonna, I'm in a mid market, I'm gonna be starting a mid market AE role, SaaS, AE role. And one of the things I'm doing is gonna be going over a lot of investor relations reports to kind of really look at, you know, kind of really dissect the prospects that I'm going after. And I'm just curious for you, being a CEO, what are the questions that you get asked by investors that are thoughtful? If you can think of like the most thoughtful question that you get asked that really gets meaningful information from you that I should be looking out for from other CEOs when, when those type of questions get asked. So if you could think of one thoughtful question that you typically asked, get asked, and maybe the reverse. What are the biggest BS questions or questions that really just don't really, really get investors? Meaningful information that you get tend to get asked if you're willing to offer up something.

Let me, let me start by answering the question you didn't ask, which is, you know, how do you, how do you take a 10k and sort of get good information out of it? So you open up the file, the 10K and search for management, discussion and analysis. It's usually section seven.

And if you want to not read anything, go to the bullet point list, read that. That is in fact the board conversation. And what's top of mind for any CEO of a public company if you want to get richer? Read the entire section and stop right there and sort of write down what you learn and use that in your communication.

So what's the worst question? What's the bullshit question you get, Manny, that people want to hear that fun stuff?

Yeah, the bullshit questions are things like your margins are too high, your margins are too low. You know, stuff that, you know, okay, you know, what do I do with it?

And then what really grinds me and you know, I'm gonna just be vulnerable and open and honest. Here we are. Is when somebody comes with a point of view like your margins are too high and then tells me that 5 or your margins are too low. And they tell me the five companies that are doing better than me. But, you know, you know, one more click on that research, you can find the other 20 companies doing really well that had, you know, lower margins. Like, you know, Twilio and Snowflake have lower margins than I do, and they're killing it, you see? I mean, so the real question that they should be asking is like, what is the margins gross profile that you want to optimize at? You know, I mean, and if you're growing 100% and you have 65% gross margin, that's a fantastic profile. Now if you're growing 40%, you have 65 gross margin, that's an awful profile. But if, but if you have, if you're like, like zoom and you have 40% year over year growth, but you have 30% EBITDA margins you are a unique company, you see, I mean, so like you need to figure out who are you, like in what range are you going to operate based on your market, Right. If there's a lot of growth in your market, you may want to sacrifice points of margin for points of growth. And that's the sort of like those are the thoughtful conversations that good boards have of like, you know, they will ask you like, tell me your story, like, tell me what is your long term growth strategy? And the long term growth strategy could be, you know, I'm going to sell data warehouses that are more efficient, that are lower cost and that eventually they have this network effect because people can connect them in the back end and pay less to move data around. And then I will have an ecosystem of people moving the data around. And that's my growth strategy. That's a growth strategy, you see. I mean, as opposed to you growing too fast or growing too low. And what is your margin?

Where did you go to learn this?

Or did you just learn it by, you know, trial and error again, beaten up. What's that?

By getting beaten up and answering this question wrong three times and then, and then reading somebody else's once and be like, oh, I fucked that one up, I should have read that one. And then getting smarter over time. Cool.

I'm gonna let Lars come on.

So Lars, come on, I know you got a good question in there too and hopefully it's not too scary for many Lars.

Thanks Richard. Good to see you Manny. Looking forward to later this week. So I think I know the answer to the question, but how many founders did you start with and how many of those founders are in seat today? And tell us a little bit about what you think about multi founder startups. And the question comes from my work as an advisor within True Ventures and other venture capital firms and you know, the kiss of death being the three founder or the four founder because a lot of VCs and investors shy away from multi founder startups. Can you tell us a little bit about that?

Yeah, no, I got that a lot when I had. So I have four founders, so it's myself and three others and I got that question a lot of, you know, how is it going to work with four founders? And we divided the company equally the very beginning and that was a principal thing for all of us because refacto, when you start, when you fund the company, you don't know how things are going to turn out.

And it turns out that, I don't know, I feel that. So I'll Give you the other side of the argument, which is by having four co founders who are fully vested, just as capable and there for each other, I think we were able to grow faster than our entire competitors. As you know, Lars, when we came into the market, our market was busy. It was incredibly competitive with companies that had 10 times more funding than we did. And out of all those companies, all of them are gone or rebranded. And I attribute 100% of that success to my co founders. So I wouldn't be here without them. Now, to answer your question, my co founders are no longer here and they departed at around $75 million in AR is when they sort of started peeling off. And there were suits or like critical events that made him pursue their own journey. One of them was my two co founders, Gordon and Wes. They really wanted to get back to like coding. They the whole, you know, managing increasingly large teams was not their thing. And they had a bone to pick with building a collaboration tool, a collaboration platform. That had always been their dream. You know, they started going down the path. Outreach was a great startup for them and we were lucky that we were able to cash them out a little bit for them to go and do their thing. And they really wanted to go do that. And if that's their passion, that's a dream. I thought that they would go ahead and do that.

Andrew peeled off.

Around 80 some ish and he really wanted to build something in hardware. So he went off to go research the hardware space because that was his calling, that was his passion. Now it helped the fact that all of them have kids around the same time. So they all became new dads and they were like, I got to take some time off and spend time with my child. Once you spend time with your child, your mind wanders and you question your life, et cetera. And they went off and do that. But what allowed us to do was to bring in because they sort of found their own replacements as they were leaving. They brought in people who were just as committed and just as good to be my son. Sort of like new set of co founders for the next leg of the journey, right, like the hundred to IPO journey. And I frankly, like, I appreciate that. Like I know that there are some other, you know, parting aways that haven't been as amicable as ours. But you know, our co founders are so tied to our, you know, our outcomes that they are. They had all the incentives to make sure that, you know, not only that we were well placed, but that we were, you know, but they brought in Somebody who brought, you know, continue with their ethos and continue to bring the company forward for a long term. I consider my co founders my kind of like my brothers. They're, they're 10 years younger than me and I made sure that I look out for them, you know, at all times, even when we were building the company as they exited. Because I want to make sure that they're happy, you know, I mean, like life is too short for them to not be happy what they were doing. So, you know, I always make sure that they are doing well. And you know, I think we.

We are each other's trust, you know, managers, I think it's called whatever, like, you know, they set up. I think Wes is on my daughter's trust and I am on his daughter's trust. Like we're all tied, you know, by blood at this point. You know, I mean like we administer our daughters, you know, money at this point. So like we are, we're beyond co founders. We're like, you know, family. And I feel like, you know, that story is what made us who we are. And I don't know how else I would have done it without it.

Many you talked about entering a crowded space and how a lot of the competitors are no longer there. What is the best and worst part of having such a high profile rivalry in your space? There's been multiple incendiary moments from one side towards the other, mild mudslinging. One might say. What's the best and worst part about having such strong, you know, link to competitor or competitors?

I think the best is that it raises the profile of the entire market. So we're all aware because everybody's sort of watching, you know, the activity creates noise. The noise is actually good for building the category.

Again. It wasn't up until 2015 or 16 that, you know, that sales engagement became a thing. Before there was just a bunch of point solutions and even the companies who were there did not have, I don't know what, I don't know if it was timing, it was the right people, etc. To sort of like bring this category forward, the current batch of competitors. Like now we're bringing the category forward to the point that even, you know, Microsoft and Salesforce have jumped into the category. So I think that to answer your question, the best is the fact that the noise have generated enough awareness of the category. The worst is that, is that it's, you know, we still need to go and finish the job right? Like we need to build this for the customer. We need, you know, our Success is the success of our customers and their outcomes, not sort of like, you know, the petty shit between.

Yeah, it can become a bit of a distraction.

It does to a point. And I feel like personally we have done a really good job staying above that kind of conversation, but it's annoying sometimes. And yeah, you try to sort of take the bigger approach of like, you know, competition is good. It will, it whips up sort of like, you know, energy around the category and it makes people sort of like excited about it.

Yeah, you mentioned sort of like, I'm going to put words in your mouth a little bit, but like you had a couple co founders at the beginning and then they moved on and you added a couple other co founders. It makes me think of like stage appropriate executive hiring. And that's Max and I and Richard had this conversation long time ago, maybe a year ago now. But we were talking about stage appropriate VP of sales, VP of marketing hires. And you know, so. And so is the 0 to 10 million, 0 to 20 million person. And so and so is the 20 to 100 and this person is the 100 to, you know, IPO kind of thing. Are you a proponent of the stage appropriate kind of executive hiring? You've had a couple heads of sales. Was that, you know, planned and stage appropriate or is that just kind of the way it unfolded? I'm curious what your thoughts are there.

That's a, that's a deeper, that's a really deep question. I don't have a perfect answer for you. I usually don't. So I don't plan for a stage appropriateness. If you would.

But it is tricky, right? Like, even a company that.

You know, I don't know. When do you stop being a startup? You see what I mean?

So like, I don't know either.

Even if you cross 100 million AR and you're like, you know, talking, you know, big game, IPO stuff, like it's still day one, you know, so you still have to, you still, you know, do I see stuff? You still have to hustle just, just like you did when, you know, we were four people.

So for me, as a, as a. Look, I'm a, I'm a, I'm not a serial anything. I barely consider myself an entrepreneur. So I don't, I don't know what I don't know. I only know my own journey. And in my own journey I think that you have to have this mindset of prepared to change for what's appropriate for the next stage. But if you don't, it's okay too, you know, I mean like if your thing is, you know, 0 to 50 or 20 to 100 or like, you know, 30 to 150, whatever your stage is or like the number of people, right? Like your team, you're really good in a team of 10 people. You know, the moment that your reports have the reports, that's when things break. I think having that sort of like self awareness is very healthy. And it's very healthy because you have to know what you like when you don't like, you know, I mean like if you like it all, then go for it, right? But if there is a sweet spot of operation that is really your, your shop, your thing, stick with it. There's, there's this stigma a little bit associated, like, oh, we scale out of some person's ability to grow. And I think that's wrong because people should be happy doing, you know, what they're good at. You know, like there's some people who are just not very good at the early stage. Like, I don't consider myself an early. I thought I was an awful early stage CEO. I was, I'm a much better later stage CEO.

Why is that?

Because.

I don't like, I'm not a great marketer, for instance, you know, and I feel like the, all the good early stage CEOs are kind of like Macs, you know, they're in for the hack, for the burst of growth, for, you know, for the, for the ability to do very little, you know, for the ability to make something with very little and sort of like continue to hack it.

I am much better now that I have teams and I can think longer term and I can sort of pause and think a bit more strategically. I can make. I'm great at the two year bet. I'm not so great at the two month bet. You know what I mean? I can bet on something that it's going to take a year and a half to pan out and just deliver it and ship it and make a big deal and sort of change the trajectory of the market. The little stuff, like it's grinding for me, like I'll fake it until I make it, but it was grinding, right? So when I started, you know, I was doing sales by myself, right? And the way I would do sales is that I would go and borrow leads from whoever, right? Like I would call friends who are in sales operations and now borrow leads, et cetera. And that was fun for a little bit, but I wasn't great at it, you know, I mean like somebody who would be great at. It would be somebody who, like, really learns, you know, SEO and really learns, like, you know, you know, how to sort of create a better funnel. Who stays up late at night and writes content that is pithy and attractive and that kind of stuff. I never got into that. So, like, I never consider myself a great CEO. I'll sell the shit out of anything and I'll build some products, and that's what I do.

I'm gonna not take people off me.

Just for the essence of time so we can get to more questions. But John Stern asked a really good question is, you know, when you're young.

And you're trying to grow the team.

How do you appropriately measure or rank the team to go, can this person get me to there?

Right.

Say that again.

Yeah. So when you. When you're growing from A to B or B to C, you do have to sort of step back and look at, okay, can this sales leader get me there? Can this marketing leader get me there? How do you determine if you've got the right team in place based on the stage you're at and where you're going?

The one metric that you track at all times is pipeline coverage.

The sooner you come up with a good rubric for your business on how much pipeline you need to generate to hit that number, the better off you're going to be. Your life is just going to get significantly easier. And of course, the larger the number, the better. Everybody needs more pipeline. That's not a secret. But you need to understand what is your sweet spot. Too much of it, you're wasting money. Too little, you're not going to make the number. And all you need is one quarter. And you will feel it. You will need one quarter in which you barely make the number that, you know, the last deal comes in at the last moment at 10pm and it was a stretch, and you have to give discounts and throw in some professional service and do some weird stuff to get that deal over the line. That's the moment you're sort of like, spidey sense needs to go up and be like, do I have the right people on the boat?

And that's when that should be a trigger for inspection. Because that means that you're not running the appropriate amount of pipeline to the number you need to hit. That's a sort of. That's the simplest way of thinking about the problem. And then you have to figure out where. How is, you know, depending on your business, how's your pipeline generated? It says, is it, you know, A mix of inbound and S bound, outbound. Is it SDR driven? Is it self generated? Like, you need to figure out, like, what is your shop type? But those are the two things that tell you whether you're. You've got a. You got a team that is humming or not.

How do you learn as you grow an organization, right?

Like, you know, and for some people.

I think it's easy. For me, it's not. Scott and I talk about this all the time. How do you learn to trust the team? Like, what does Manny say to Manny.

Of like, okay, even though I can.

See this accident that may happen, I'm.

Going to have to let go of.

The steering wheel and let that occur.

Although you're talking to the wrong guy, that should be your next entry.

Razor is still trying to figure out how to trust me.

I think it's every year is my number one area of development. It's my potential for growth, right?

What's been the biggest surprise as you've grown this, like, as you've gone from where you were as four people in.

The garage, for lack of a better.

Phrase, to now what was like, oh.

My God, Like, I had no idea.

This was going to be this way.

And I know that.

I'm sure there are many of them.

So.

I'll tell you my area struggle and I'll pick up from your last question is the whole, like, letting go, you know, because when you build everything from scratch, you tend to believe that you're, you know, sometimes you sort of think too highly of yourself and you think you can do everything, right? And you drive yourself to do inspection and do everything. And those inspections at the very beginning, they're kind of fun. And, you know, there goes Manny asking all his questions, whatever. But at some point it becomes distracting, especially when once you have, you know, themes of teams and you're international and, you know, now you're in the mode of hit, you know, beat and raise, etc.

The managing two people was. Has been my hardest and probably most rewarding experience in my. In the growth of outreach and in my own professional growth. And then the managing through questions, right? Like, I just finished reading Reed Hastings latest book on the no Rules Rules. I recommend everybody to stop right now and go read that book. And there's this.

Finish the podcast. Hold on.

Finish this, and then you can go read the book. Hold on.

All right, all right. Don't leave yet. But there is this area of, like, you either lead by telling people what to do or giving people the context. And it's so easy as a founder to just tell people what to do. And you have to, like, almost like, speak slower, you know, I mean, to like, make sure that you catch yourself not telling people what to do and giving people the context. So this is called, you know, general's intent. This is called many, many different ways. But you have to. I, or at least I, when I say you as me, I had to learn and relearn every day this art of giving people context and just giving people the broader question, not what I thought the answer was. So, for instance.

I used to say.

The moment that an account got an escalation, I immediately was like, do we have the right ae? Do we have the right csm? And the better answer is, is the team a good fit for where the account is at at the moment? Not just the A or the csm, it's the entire team, right? It's is a training consultant where they onboard it, right, where they upgrade it, you know, once they, you know, they pass a particular threshold, is a system ready for that account or did we do it wrong and we have to go and revisit that? You see what I mean? And those are materially different questions. With one, you're implying something. With the other one, you're actually letting people explain where you are in the system building and where you're going with the system building. And it's been incredibly hard for me to operate this way, but it's also being very rewarding because I can see my own thinking getting better and elevated by asking these different kinds of questions.

As you've gone through the various rounds.

Of funding, let's say you get several sheets, you get a couple of offer sheets on stuff, and you have to eventually turn one down.

Does that really burn the bridge that.

You could never go back to them? Is that how it works?

If they liked it once, they'll want to come back again.

This is many five steps to raising almost $300 million. You build a small cadre of investors that really understand your business, and you grow that cadre of investors by one or two at a time. And you bring everyone along through each round. Because even if they turn you down, they can invest in the next one, and they can invest in the next one, and they can invest in the next one. So these people will make your time to fundraise very, very short. My last two, my last three fundraises took each of them two weeks.

Why? Because each of these investors already knew us. They already seen our movie. They already believed in the market. They believed in the tam, they believed in our execution, and all they had to do is get the latest update and what's the price?

So they. You will never disappoint anybody. These are not. These are multi layer games. So the people who you, who you pass on a particular term sheet, they will be around for the next round. There's no shortage of money in this world.

Any mistakes you can share. When you're going from A to B or B to C. When you were pitching to your VCs, like, oh, you know, I shouldn't have said this, or I should have shared more of this, or, you know, again, there's no playbook that I know of that tells you really well how to do this.

There is the one thing that I see a lot of entrepreneurs make. The mistake is that when somebody asks to explain your tam, your total addressable market, they have, they come up with this really complicated equation. And if your TAM is not a number times another number.

Then you lost the vc.

So you need a headline number that talks about your addressable market in a way that is both believable and very, very simple. So, yeah, there's a story about me and Business Insider on how I raised serious. I think it was B with, like, with three slides, and one of them was literally the TAM. And the TAM said, there is six and a half million B, 2B sellers in the US and we sell for $100 a seat per month.

That's it. That's it.

Do the math. Do the math.

I'll, you know, I'll wait.

That's awesome.

That's.

That's easier than the math I'm working on with my son in distance learning. So.

I'm like going back to A squared, B squared, C squared. Shit. So I hope everybody wrote that one down.

Question, as you go from C to D or D to E, you know, do you go to D to E because you need the money or that it's so cheap to get the money? Or how do you know when to stop taking funding and go, all right, we don't need any more right now, or do you just take it because.

You can and then decide, okay, we're gonna go down this other path, right? We're either gonna sell out, we're either gonna let someone buy us, or we're gonna go ipo?

Yeah, that's a great question. And yeah, that's a great question.

Because we, you know, we would like to again, be public ready. We look at the quality of investors that we would get in each series, and will they Help us get to our ultimate destination. So for instance, on our last round we had Seance Capital and Salesforce Ventures and Salesforce has been a powerhouse in terms of public investment lately. You know, they were in Twilio, they were in Snowflake, they were just making some big bold moves and we thought that having them would be accretive to the mission and then having Sans Capital, which is also a public fund, will be, you know, would be a long term buyer. So you sort of started setting yourself up to become a public company that has very stable, again, very stable set of shareholders. So people who are there for the very, very long term and are just buy only, right, don't get those hedge funds who are long shorts because you know, you could be on the wrong side of the equation. You're screwed. You want to be in the, you want to be on the, you want to have on your cap table people who are very long term minded, who believe in your vision so that, you know, they take up the majority of your equity going forward.

Were you thinking that way right from the start, Manny? Like you, you had that kind of, kind of vision right in the beginning when there was you and three other people in a garage, so to speak. Or did that vision kind of crystallize and evolve for you?

That was so, that was never a vision, that was more of an execution thing of like, how do you go from. So, you know, Silicon Valley walks out the moment you go public and then what? Right, so. And I have a goal of being a, you know, I want to be a happy public CEO. Yeah. I mean, I don't want to have to manage, you know, all sorts of drama with like people coming in and out and like, you know, very militant investors, etc. So what after serious, after serious d. You know, we realized that the next round we're going to do is probably going to be either a Silicon Valley outfit or somebody who's not from Silicon Valley. It's just a big fund. And we're in a situation right now that every single public investor is making private investments too. Even countries are doing private investments. But there is so much money in the world and so much understanding of private companies that you can pretty much pick who are you going to partner with. So now you start talking about what is your long term prospects as you're. And thinking about the dynamic as your Silicon Valley investors win out. Who is going to be your next batch of friends who are going to be on your, on your, who you're going to be accountable to. I mean, you're picking your bosses, you know, for all intents and purposes, you want to make sure that you are. You are, you know, picking your boss, right? Because you're going to have to answer some tough questions for them in terms of, like, your investments, your bets, you know, if the business doesn't perform as well, et cetera. So you have to just pick, right?

I think that's something that everybody, regardless of their role and what stage they're at, should. Should remember about picking your bosses.

I think. I think things I'm going to walk out of this with today is, you know, one. We got to have a simple math equation, Scott, and then we got to find the right countries with the right surf breaks to invest in.

That's right. The Costa Rican government is ready, is ready to invest.

Manny, when did you. When did you realize that you hit on something here? You're building a new category? When did you have a moment where you're like, holy shit, this actually could be a unicorn. Do you ever just sit around and kick yourself and be like, how is this real? Is this really happening right now?

That's a great question. So, you know.

Is this real? Happened to us kind of early when.

We had a customer that we deployed, and at that point, we didn't have a lot of safeties in the application, and they did something that completely decimated their Salesforce instance, and we have to repopulate it. This is before you, Lars. So I didn't experiment with you. This is before I signed up, Lars.

And we were so bummed, we had to work all night. And they were mad, and, you know, we work all night. This customer's in New York. So, you know, we work through the night. We wake up and the stuff is not ready yet. And I get a call from the VP of Sales saying, I guess I'm sending my team to lunch early. It's like 10am you know, new York time. And, like, you know, we're sort of like, you know, we're like, oh, my God, we're gonna lose this customer. It's gonna be awful. And, like, we're not that big, right? And then we solve the problem, and then we stand back and we're like, guys, we're important. Like, if our reach is not up, people are not selling. Like, we don't need it.

That's a very big moment, right?

Like, there's product market fit, and there's your mission critical. And those are two different things, right? Product market fit could be a good vitamin. Mission critical is like, if, you know, if you're not up, we're not selling. And that's what really sort of that gave us not only like the hope and the crush, they gave us perspective, you know, because the road is going to be bumpy all the way through, you know, whatever the outcome is. And you know, whenever you find a tough spot, like you know, reminding yourself that you're here and you're needed, it's a very comforting thought, you know, so.

If you are needed for a, you know, 50, 100, 200 people company, you're gonna be needed for a 10,000 person company. And all the bumps and bruises that you're gonna, you know, run into all the way there, they're fine. Like they're not as meaningful if you were, you know, struggling to get up there.

I want to come back to the thing you talked about, the hedge fund, because I've been hearing about this for about 12 or 18 months and I'll assume you've been approached by some at some point.

Talk more about, for people who don't know, talk more about really why, when could you or should you take the hedge fund or why you stay away from it. I got this impression from you that you were like, these are like loan sharks. They're not Salesforce Ventures. They're looking at the number. They're not going to hear your rationale on product, market fit or any of that stuff. Talk more about that because I don't think people talk about it, but I know it's out there.

So.

My point of view on this is that I found the conversations with this public funds a lot more.

I found them a lot more meaningful and sort of nuance that the ones that I had with my average five years ago, Silicon Valley investor. Now everybody's getting smarter. So everybody's sort of on the same page now. But when we took the round from Lone Pine, which is an offshoot of Tiger.

It was beautiful in that they had a hypothesis in the market. They said.

There is room for an engagement platform that actually elevates the use of CRM. And we did the math, we talked to our customers, we did all this pre work upfront. And here is a term sheet for $100 million or $1.1 billion valuation. It was almost magical, the amount of preparation that they did. And I think that.

The world is getting very smart, like really, really smart. And because they're seeing, especially.

These investment funds are seeing scale ready private companies as the next frontier for them to understand because they thrive in this sort of like.

Information misalignment where they know more than the next guy. Hence, they can make a trade. So they understand the fact that if you pick a couple of private companies and spend a year doing research, you're all of a sudden ahead of everybody else. And if you. And you are now in a position to make outsized returns. So everybody's looking for an angle, and if that angle happens to meet your thesis, all of a sudden you have a really big check writer. You know what I mean? Like this fund.

So Lone pine is a $20 billion fund. Just think about that $20 billion fund. American Capital is a one trillion dollar fund. Wellington is a trillion dollar fund. The largest Silicon Valley outfit has 600 million to a couple billion, tops. These people are trading in the trillions. You see what I mean? So, like, it's a disproportionate amount of, like, capital to deploy that the people you're talking to, they're very long because they can't get out. You know, once they're in, they're in.

When you say that, you know, the world's getting smarter, right? Does that make it harder or easier on you?

I think it makes it easier for the winners. It makes it easier because your story now resonates. Your story has now a landing. A landing spot.

You know, before, you know, if I got too complicated with the. With the model and the sort of, like, you know, how we, you know, we. We internally at our. Which we think of flywheels, right? You know, by helping a customer drive an action that drives an outcome and completing that circle, our machine learns, right? So I tell that story, and, you know, at the very beginning, half the investors would be like, whatever. I don't understand. And now, you know, the people that I talk to from public funds are, you know, are very sharp, very attuned. They ask, you know, very insightful questions. So I find that it is. It will work out better for the true entrepreneur, for the people who know what they're doing.

Question. What's the most grateful mistake you've made in building this company?

The most. What mistake?

What mistake did you make that you're grateful happened? You're like, oh, you know what? I was wrong about that. And thank goodness I was wrong.

Oh, my God. I have a catalog of those.

I know it wasn't bringing Max in. So I know that.

You know, we made a lot of, you know, boneheaded decisions early on in terms of, like, product that we thought were gonna work, that we ended up shelving.

So, you know, we're about to release sentiment, but before we had this, we built this entire system in which you will, like, put the sentiment of an email in the product. And we thought that people were gonna love it and, like, people are gonna click and nobody click. Nobody cared. And I mean, that wasted like a full quarter of resources. And when you're small, that's a lot. So that was one mistake of product that we ended up building and nobody liked.

I don't know what other mistakes were we made. You know, there is a whole. Like, this will happen to a lot of entrepreneurs that, you know, your VCs will tell you to go and, you know, move to enterprise. Like, land the big customer, right? So you will hustle and, like, land somebody huge. And we did that early on with a really big telco. And it was so hard to deploy. Like, it was so hard to get people to adopt. Like, and there's a. I feel like there is a mindset almost that you sell into. So, like, the whole everybody has read Crossing the Chasm, right? Or heard about it at least, right? Not. Yeah, yeah, yeah, yeah. So, like, the whole Crossing the casino is real meaning there are some people who are the innovators who will adopt your product and, you know, you will slowly move to early adopters. Don't go and sell to the laggards. They're just not ready for you. I mean, they may buy you, but you're gonna spend all your waking hours trying to get them to do something, and it's just such a waste of time. You know what I mean? And like, of course, like, you know, when investors tell you, oh, you're too, you know, all your customers are all tech companies. Like, of course they are, because they're innovators. You know what I mean? They say we're not selling to each other. It's a real economy out there. So, like, it's nothing wrong with being tech heavy because those are, you know, you build a product on the back of them, they push your boundaries, they help you get better, and then once you have a scalable product, then you can go and sell to, you know, AT&T and Walmart, whatever that is. But don't, like, don't sell too early to those people who are in the wrong side of the adoption equation because it will be an enormous pain in the ass. You will waste all your cycles on that and you will do all natural things that you regret you did.

So what, we're going to flip this a little bit. What kind of questions do you still have? You got 43 people here who could answer a question for you. On anything about sales, engagement. What would you like to ask them? Or Scott and I.

So.

What'S different? So headline. What is different? Post Covid.

And then what? What is marketing like? Post Covid. Like it's not events anymore. Right. We used to have unleashed and that was big, et cetera. Like what? You know, what is a new. What is a new sort of like seminal event? How do you create a category? Post Covid.

Anybody want to jump in on that?

I don't want to hog the spotlight. There's got to be somebody here who's raising their hand. John Stern is raising his hand. I see John Stern raising his hand. Sam, Richard, can you get them?

I don't.

Yeah, hold on.

There it is.

John, you got unmute. There you go.

Perfect.

Thanks, Manny. Thanks for coming on. And I think post Covid we've seen it with the rise of these communities and selling in communities and more social, I guess is like the buzzword for it, but it's more personable. Like, I know I was doing it pre Covid but I consider myself a trendsetter. Like my little kids were in on all my meetings. Now everybody has their family at home and my personal life is much more on display in my business and it's much more.

Whole life enveloping instead of just work life and all of that. And we're either like, you know, living in our offices or working from home or whatever it might be. People are searching for these human connections. And I think, you know, Scott has his Patreon and Thursday night sales group and there's this rise of all these micro communities. And for me personally, I have a startup and I can get all these leads and meetings just from these communities instead of going through traditional old school sales processes and outreach and things like that. So I think post Covid people are really looking for that connection that they're lacking in the physical world, probably because they're not going out and seeing their friends. And there's a huge opportunity within like networks and, you know, one on one video applications and just getting to know people on a personal level more so than, you know, the traditional business sense of like doing a cold call and following up with an email sequence. No offense to outreach or anything, but I think people are really looking for a very personal connection. Post Covid.

That's great.

John. Go ahead, Manny. Yeah, follow up.

Yeah. So what are these communities and what apps are using for one on one video?

John. Hold on. John. Got muted again. So community. So obviously there's sales hacker community. Right. There's Revenue collective. There's Revgenius. Folks like Dave Gerhardt, Kevin Dorsey and myself have built communities on Patreon. Yeah, one could argue that Richard and I started community events, small scale micro community events with surf and sales. For example, Thursday night sales that Amy Volas and I have run now for 30 something weeks in a row. You know, weekly happy hour. There's probably 150 to 200 plus people every single Thursday night there asking questions like this, back and forth dialogues and like John was talking about. Deals are getting done. Right. Leads are happening real time, hiring is getting done in real time. Introductions are being made in real, in real time. Discussions about tech and the evolution of the field is happening in real time. So those are, those are a few of the places and communities that I'm thinking of. John, you want to add on to Manny?

Yeah, I mean you nailed a lot of the good ones. There's modern sales pros, there's a bunch of ones that have been known for a while. There's also like this app called Chalk. There's also Clubhouse that are like those audio, you know, communities. Kind of a bunch of people are on Discord. There's so many micro communities and then from the micro community, like Thursday night sales that Scott and Amy have, another micro community comes from that one. So people are really striving to kind of drill down like you connect on LinkedIn but then you go to another place to have that conversation or whatever or get to know people better. So I think that people are really, you know, the ones that I'm in are Thursday night sales, Scott's, Patreon and Revgenius, and then the ones that are on that Chalk app. But there's so many now and I think people are more accessible than ever before. Like you can get CEOs of companies through these communities or wherever they are and get their ear like you never could before.

This is how you get executives time. For example, many like if, if, if somebody here messages me and says, hey, can I get 30 minutes to pick your brain? The, the answer is no, right? But now with the rise of micro communities, the answer is yeah. Actually, you know what? I have this Serpent sales bonfire session with Manny and Richard. I have this Thursday night sales thing where every Thursday I'm available for two hours. I run these Tequila Tuesday events every Tuesday on my Patreon community. So it's an easy way to get access to people. And like John was talking about, you get their whole kind of family life a real clear picture of who they are, which helps you Potentially decide do I want to work with this person?

Right.

What are they really like? So I think these things are quite powerful. Somebody mentioned Bravado is another micro community around sales. I know there's marketing events like this as well. Gitano and Chris Walker run a sort of the marketing version of Thursday night Sales, which the name of the event eludes me. But yeah, that's how I would take that question. Richard, do you have anything you want to add?

I mean, I think it's, I will add all of that is correct. And it's, and it's super easy. Like every one of these people could have screenshotted all these names or taken a picture of the three pages of people. And then you go to LinkedIn and you connect with them. Not to pitch them, not to sell them. But wow, there's 50 people that I could connect with and start to share more knowledge with. And then over time, you know, our network is our net worth. As much as I hate shit like that. But that's what it is, right? Like that's really what happens. And I think that's what these micro communities have done. And they'd allow, you know, Manny, it allows you in a non outreach capacity or sales hacker capacity to talk to people you wouldn't necessarily talk to.

Right.

Like I, you know, your outreach people are people who are your customers or your prospects. Whereas this is just a freaking community and who knows where this could take you, right?

And then, and in lieu of that, you're giving so much back to the community. And I think these, that's what the communities are about is like where do we go to support each other, how do we figure this out? And I think it's forcing a lot of companies to understand the long tail and their brand.

You got to really sort of build it there. That was a long answer, I think, for your question.

No, no, but this is exactly what I was looking for. I have this fundamental belief that everything will be different, especially when it comes to B2B marketing, that it's going to look more like this, where it's going to be a lot more targeted, a lot more useful in the moment. You're gonna be influenced by other people who are not influencers, but are people that you respect because they're in the community and they have done something that you respect and they have your trust and the credibility. So this is super helpful actually.

Great.

I think it's been helpful for all of us. I think we're all thrilled and I hope this was different for you in terms of the kinds of questions we grilled you with.

Absolutely. It was awesome. It was fun.

And this is a good time. Cause my CFO is on vacation and my legal department can see.

I may.

Have said something that I must have not.

I'll be sure to send him the record. That snippet. That'll be the one snippet that I put on LinkedIn for him. Oh, my CFO. So, man, thank you so much. And again, thanks to Outreach and to Find them and to lead 411 and to perception, Predict, and all of our other sponsors and gong, of course. So, thank you so much. We really appreciate it.

Absolutely. Thank you, everybody.

And thank you, Manny.

Bye, everybody.