11 CEOs give thanks to their investors - Episode #76

Hello everyone and happy almost Thanksgiving. We're doing something a little different. For our Thanksgiving week episode. We decided to compile clips from a number of our CEO interviews where they give thanks to their investors. Let's be honest, the relationship between a CEO and their investor is an interesting1. Many CEOs feel like their investors are their boss. They don't think their investors really understand what it takes to run a company. They feel like board meetings are a choreography. They don't really add value. And in tough times, those relationships can get contentious with people pointing fingers at each other and they can even ruin a company. But when a CEO finds the right investor, when an investor finds the right CEO, when they're vibing, that relationship can be a real catalyst for growth. One honest conversation and piece of advice at a crucible moment for a company could be really the inflection point for that business. That one relationship could be the difference between life and death for the company. Especially if you're in a cash crunch and you need a bridge to the next milestone. So today we've put together a compilation of clips from 11 interviews we've done over the last, let's say, year and a half. And these are clips of CEOs talking about how their investors pushed them to swing for the fences. Investors who were former operators and were able to bring that to the boardroom. Strategic investors that helped companies get access to distribution, VCs that supported companies through pivots and much, much more. And I really do hope that you enjoy this episode and also just more broadly, if you have a couple minutes this week, I would say reach out to someone who has supported you along your journey and say thank you. So with that, enjoy the episode and Happy Thanksgiving.

Welcome to Not Another CEO podc. I'm your host, David Politis. Every week we talk to inspiring leaders and get the true stories, the ups and downs, the lessons learned, and come away with actionable advice for our own journeys.

I do feel that we've been really fortunate in the investors that we've brought in. I think they have all been incredibly value additive and important to say not destructive because I've heard tons of horror stories and seen a lot of stuff secondhand that would, you know, curl your toes about.

The behavior sometimes of investors and boards with regards to the companies that they invest in. And I just feel really fortunate that we've had supportive, smart, helpful, partnership oriented investors from the very beginning until until now. With tbg, you had a lot of pretty amazing investors over the course of the company kind of journey.

When you think about the investors, who had the biggest impact, who. Who were those investors?

Yeah. Yeah. I think this is one that people.

Can make a mistake on pretty easily, you know, so going back to that idea, what I said, I was committed to learning faster than the rate of my own experience. I knew we had to do that in order to achieve our mission. So I looked at investors as. I'm recruiting the best option I know of for us to get better, and I'm out recruiting investors. And, you know, Series A, I had competing term sheets, and I had a term sheet for common stock at a higher valuation than the preferred stock at a lower valuation deal that we chose. And it was all because of who was behind it at this point. It was Jason Green of Emergence Capital. But, you know, I tracked down David Cummings in the early days, who's kind of the prince of Atlanta sass. I tracked down Tom Noonan, who's, you know, legendary in Atlanta for his tech operations and investments. You know, after Series A, with Emergence, we went to Insight Partners and had Jeff Horing, the founder of the company, on our board. I was obsessed with getting the best, who would make us better, and I wasn't. And I was willing to sacrifice valuation and. And dilution in order to get that. But I'll tell you the. You know, we. I used to tell people, I'm like, dude, I have the greatest board. They'd ask me like, what's it like with these guys? And I'd always say, and you might even ask me this question, too. You might be the one who said this. You're like, well, you know, what's it like working with these guys? And I'm like, dude, they're amazing. They never tell me what to do. You know, they're always supportive. And then the question comes back, well, did you ever miss the number? And I'm like, no. Okay, So I don't have that experience with my board, you know, so I can't. Can't speak to that. But I will say that when times were the toughest, in those board meetings, they were the most supportive. And then when times were the best, they were the most challenging.

Do you think that they. I mean, those are firms that are literally some of the best venture firms in the world. Did they add the same value? You know what I'm saying? Like, did those firms their. Their scale, their teams? Like, did they add the same value or was there nuance to kind of the different firms and the value.

Every one of them offered different value, except one value that they all provided And I'm not sure they even really knew they were doing this. Every board meeting, I would leave the board meeting believing this company can be bigger and better than I thought going in. And that was the biggest thing that they gave me. I mean, so super intangible, right? But then, yeah, like, Jason Green was incredible at screening executives for us and really finding out the areas for improvement of those executives, which, by the way, you know, kind of back to hiring executives, I, I wouldn't hire an executive unless we had mutually agreed upon their opportunities for improvement. Does that make sense?

Yeah.

Mutually agree that these are your areas for development. And then they had to give me the thumbs up that they would let me challenge coach them and push them to get better in those areas and hold them accountable. So Jason was awesome at that. You know, David's like the everything guy. Like, he, he just, he has a way of having a short, concise, to the point answer for like so many of the different challenges you have. So I call him like, he's like the ultimate tool belt, you know, of every challenge and problem, you know, and then, and then Jason, Jeff Horing of Insight was really good at raising capital. Strategic decisions. Yeah. So they all added tons of value, but they also were really just good.

All the way around.

How did you choose those investors? Like what, what was your priority when.

You were looking for them? Well, I'd say in the, in the. What I was looking for changed kind of like as the company matured too.

First of all, fundraising is the hardest thing of any. You know, that's job number one of an entrepreneur. Right? Your, your money is your oxygen. There's no guarantee there'll ever be another dollar coming in the door. Do it, do it really wisely and be very, very blessed to be able to do it successfully. All that being said, though, we were fortunate that we had had two exits.

Previously in the prior three years, one to Yahoo, one to Google. So you kind of had a lot of credibility when you're talking to investors and you had a lot of investors who are willing to meet with you and showed interest.

The reason we chose Google Ventures was it was a brand new venture fund. I knew the guys who had started it, you know, Rich Miner, Wesley Chan, Bill Maris, David Crane. I liked them all and I was their eir. So it was just kind of understood that they would be the investor for the Series A. But the other thing on top of that though, they had a really great process of helping you work through your ideas. Like they had designers and UX folks and people who would prototype things for you before you even had that capability on your own team, which I thought was just genius. When we did our Series B and kind of like had built our first product, which was Uber conference, and when TechCrunch disrupt with that product, you know, there was a lot of interest. And then we were going, okay, well, let's go talk to like, the real, the real real of the Silicon Valley and all the, all the Tier one names you could imagine. And I walked into the meeting at Andreessen Horwitz, you know, and you're meeting with. Meeting with Mark Andreessen, who at the time was on the board of Skype, if I recall, or had just left the board of Skype. So he understood the space. And you're like, okay, this guy's brilliant. Like, I'm not meeting with the underlings. I'm meeting with the guy whose name's on the door. Oh, and by the way, who invented the browser that made the Internet work or useful? And then so. But we were talking to some other Tier one folks who are obviously similarly very impressive. I get a call from like, within. The next day, I got a call from our. Our kind of liaison at Andreessen Horowitz was this guy, Blake Krikorian. He was founder of Slinger, and he was kind of like a special limited partner there. And he worked with other funds too. And he had been in the meeting at a 16Z and he's like, hey, it's Thursday night, They'd love to meet with you. And I was at some telecom conference down in pebble beach, and I'm like, look, I just got down to fricking Pebble Beach. Like, we're teeing off at 10 in the morning.

We have a dinner tonight until 10 at night. He's like, the partners will meet you at 7am in the office at Menlo park tomorrow. You're out at 8, you can make your 10 o' clock tee time. Can you be there tomorrow morning? I'm like, yeah, I can totally do it. So I wake up at 4:30, get on the road by 5, get to Menlo park by 7, pull in, the parking lot's full of. I walk into the partner meeting at Anderson Horowitz, it's like 16 partners at the table. Everyone you've heard of. You do your pitch, have your conversation, do the thing. I leave at 8, and then we get a term sheet. I think the next day or that night or something.

I'm just like, wow, that's impressive. These guys are all radically Successful people and still they're working really hard to make this new startup. They're in this venture fund radically differentiated and show how much interior and like they're super into it. And when I saw that, I'm like, okay, these are the guys I want to work with. So they, they really impressed me and Mark really impressed me and has been on our board for a long time and then as we got more and more mature it was like Iconic Capital has been like our big investor lately. And then omers, which is a pension fund out of Toronto. The reasons that I loved about them is they just take a long term view of investing and we had term sheets from others and other late stage investors and I won't name them, but one of them specifically said, look, we're a late stage investor and it's a well known fund, it's like our goal is to hold it for no more than five years and to at least triple our outcome. And that's kind of like success. That's what we're looking for. I'm like, wow, that's affirmatively the opposite of what I'm looking for. Like, I'm like, this is a, is a $100 billion TAM. This isn't like an overnight, we're going to triple it thing. This is like let's put in the foundation to build a company that could literally be massive for a long time and be disruptive in this massive market for a long time. Not like let's financially engineer, like do some short term things to make a quick exit. So Iconic Will Griffith from Iconics on our board, he's awesome. They're in every great B2B SaaS company basically and they take a very long term view of investing and so that's been fantastic. And then the omers, which is the pension fund.

Ontario Municipal Employee Retirement System is same thing, you know, and, and it's a long term. They're looking for quality investments. These are pension dollars of, you know, nurses and doctors and school teachers and firemen and stuff like that. It's like, it's like great like this. These aren't, you know, telecom or communications is so big. This isn't a race to the next turtle. This is literally like let's go disrupt this, let's go change, challenge these large legacy folks who have all these legacy mindset but they do have a ton of market share to go after and it's not an overnight thing. So I really was interested in our later investors having that long term view.

So you've been through a Number of businesses. And with Odeco, you've, you, you're not. The business today is not the business that you set out to build originally. Can you maybe talk a little bit about that journey and what did you set out to build and how. Where are you today?

Yeah, and this is one of my favorite refrains, so if you've heard before, I apologize. But I think founders so often, I think we talked about this, David. I think founders so often get stuck on the idea that I have to have the perfect idea. It's gotta be every detail. The Excel spreadsheet's gotta be perfect. Something has to be perfect. And that's an incredibly hard criteria to get to without data coming back. Odeco started with a mission that we felt we could make small businesses better. We could average out the difference between a chain and an independent. And we picked coffee as our community to really embrace. At first that helped because as you said, we started off as a predictive AI five years ago, before it was super cool and it would allow coffee shops to understand everything that happened in the days ahead and no one gave a shit.

It was stupidly powerful. We took, we bought back our old company's tech stack. It could literally tell you the croissant sales within a 90% range five days ahead, every 15 minutes of the day. It was perfect. But when we went into the businesses, they liked it and they would save some money, but they couldn't get the croissants on the shelf in the first place. I was like, yeah, it's great, you predicted it. But they never showed up, so who the hell knows what would have happened? And so we changed hugely. What we did, we went from being an entirely software driven stack, almost invisible to the customer. They'd give us the data feeds and they would just place the orders in the background and give you data and results, to basically being a distributor leveraging that same set of tech and building driver tech and warehouse tech and the port portal for customers use and moving it very far away. But it was a hugely different model.

Which was interesting because our board was particularly smart and they were clear to say I was an idiot, like this was a stupid thing to do. This would tank our valuation. They were smart enough to say, if you were following intuition for your customers, go for it. And it did both things. They're totally right. We wiped out our valuation for a period because we got a truck and that scared a lot of people. But we found out what the customer really wanted and the customers, and in New York, our hometown, like there's 1900 coffee shops that are on Odeco that every night get their load in from our inventory and.

It works better for them than if it was just some sort of tech in the cloud.

But very, very surprising challenge curve to go from one to the other. And again, I think this comes back to the thing we talked about before. So often founders feel like they've committed to a business model to their investors. I was just share this with investors. Like the more you can as an investor and a board release that tension, the better your team will be because they'll be like, oh, I, I pitched first round on, you know, spacewalking. It turns out that we are an.

Ocean company but they're afraid to say that change.

They just drive harder and harder and harder. The more you understand that they're betting on you figuring this all out and you can take those pivots, the better it's going to be because we 100% change from our original business plan, model, pitch deck and everything else. Same customer, but to a very different way of delivering value.

I may be wrong, but I feel like you were able to do that. I'm sure it was not easy and we've talked about some of the challenges that you've had, but because you have so much success and track record and pattern recognition where kind of to your point, a first time founder.

Probably just runs their head against the wall until they run out of money in that situation because.

You, you do feel like you're working for the investors. I, I, I, I, I can speak from my own experience, you know, like you do at some level you say, oh, I just took tens of millions, hundreds of millions of dollars. Like I, I'm doing to your point, what I told them I was going to go do. And if it's not working, I got to find a way to make that business work versus I can take it this other direction. Like do you agree with, do you think it's because of that or do you think you would have done this earlier in your career as well?

No, it's 100% because.

Well.

I've gone to a point where people think my gray hair means I'm smart and I've lost a ton of money and made a ton of money so I get more rope and that is unfair. I'm, I'm trying to share this in part because I wish I heard this when I was a younger founder because there are certainly companies I wish your podcast was there that I was bleeding my head against the wall trying to do skunk works to the thing I thought would work, I could then pivot the narrative to skunk works. And it took a long while to realize that in the boardroom, when you sit around, I'm the biggest shareholder working for myself. These are people who joined in the mission. We're all facing this thing together. If our baby doesn't go to college or graduate, we're screwed, right? So one parent hiding the fact that our kids doing drugs at night isn't going to work. And I think that the positioning of, like, boards is just horrible because you end up having this. I made a deck. Oh, here, High Lord. I will send you the deck six days before our meeting, and I'll have everything you want, and then I'll sit and answer your questions. It's totally positionally, even just socially, like, I am in service of you when it functionally actually isn't from a structure standpoint. So, like, when I advise folks, I tried to help them rebalance that board to have them do work products so that you always come to the meeting. They've done research. You've had research, have a way of collaborating on universal dashboards. You're not making presentations.

So in other words, instead of us.

Facing each other, we're both facing together at our child and being like, hey, David, something's really wrong. We thought this was going to work, but what's. Let's talk about it versus hey, David, something's wrong, right? Like, you just have to get into the mindset that you're together on this. You're parenting this thing collaboratively. It's not your responsibility for its success. Your responsibility is to create the environment for it. Right.

Sounds awesome.

Bloody hard to do, especially with crappy VCs who just want to show off their ego and get bigger and bigger and bigger in the meeting. And, like, you know, it's.

It's.

I go know everything. And I just met with one of my companies. We had a board member who was on Facebook's board, and all he would be is like, oh, when I was hanging with Zuck last week, he said, blue is the right color. And then the entire company for, like, six months want to be going blue. Like, oh, my God, blue is it. You can only see blue. Everything's gonna be blue. Like, no, he was just trying to look cool. He was just trying to show off how great his network is and how smart he is. Smart guy and nice guy. But I don't even think he meant to do that to us. It was just there's so much authority given by that movement. Of capital and that experience that very hard for a team and even the teams underneath it to not get swayed by the smallest thing. Rob Hayes, one of our investor, he was on the board of Uber and Square First Investors and all these great companies. Amazing guy. And he would often hold, you could see him literally hold it. He like he had the answer, but he would tell me things like, hey Dane, I've just seen this pattern. May not be for you at all, but I've seen this pattern that when companies do stupid things, bad happens. It would be a relative thing, but somehow just that small phrasing, I was like, oh, it's not me. It's a pattern. You're right, I'm totally wrong. So these people have been around the block a lot. They get a way of delivering that without adding that ego dose in that makes it really hard to interpret. But as a founder, it's also something you got to manage.

You've got to find where you want to get to and take the pain of not necessarily delivering what you think are the promise of everybody and working with everybody around you to get to that outcome. Bloody hard to do. An imposter syndrome is no joke.

You raised money from a number of investors.

As you think about that, was there.

Something that like where was the value that the, that your investors brought, if any to, to the business?

Yeah, so I think different, different stages, you know. So we raised you know, a, you know, kind of traditional path of did a pre seed seed series A, series B and then we got acquired right before our series C and we're like halfway. We were like out raising our series C. I think investors, there was plenty, you know, there was insanely good investors. People like our, our, you know, like our, our seed investor, which is Madrona Tim Porter, I can call him out directly. Like was like with us the entire time and always trying to be, you know, I always say like his best quality is he knows what he knows and he knows what he doesn't know and he kind of stays out of what he doesn't know and just tries to be helpful in that case and like was just completely supportive throughout the entire, you know, history of the, of, of, of the company.

In other cases, you know, we had investors that came in and gave us like great leads. Right. And because they had like, you know, a CIO summit and like they were really well connected and you know, if you, you have to learn what the quality of each investor is and what they bring to the table and in some cases you just have to understand that all an investor does is bring cash and cash is green and they're irrelevant and it's okay. Right. Just don't, you know, again, that goes back to like, you know, the, like the social contract of like expectation management. Like if I bring in this investor and I think they're going to bring all this value and they don't, our social contract has been broken.

Right.

But if I think all you're doing is bringing cash to the table, which is fine, I need cash.

Right, right.

And that's all I expect then, you know, no, no, no harm, no foul. And so I just really think it's just like, you know, I, I think it's really important, very, very important to pick your board members well and I think your board members, a good board member. There's essentially three categories of board members of mining. There's the great, which increase the value of the company, really coach the CEO and really help out. And sadly I think that's 1% of board members maybe a little bit more and they're insanely rare. You know, I, I hope that one day I can become that board member. I'm in a bunch of boards. I hope one day I can become that board member. Like, I really do. I think like the biggest category is the like, hey, they're like sort of helpful but kind of like, you know, like no harm, you know, no harm is done. Like, you know, help you think through things, help you do that. And like they're, you know, and they're there. And then there's like a category of board members which are actively detrimental to your company.

And probably every CEO who's been around long enough has had at least the bottom two categories. The like no op and the, you know, and the, and the bad. The great is a lot, you know, they, they're, they're, they're a lot less, you know, common. You just got to avoid that bottom, you know, from that bottom because they can be so disruptive to the company, they can be so problematic, they can be so dysfunctional to, to a board. And it really matters to cross references and be like, understand what you're getting into. Right. Because it's the one position you can't really remove or it's very, very difficult to remove.

For me at early stage, it's much more important, much more important to have alignment on the Teslas and the people you're going to work with really, really closely rather like on, on the brand of the, of, of the vc. Like I think we have amazing brands but, but, but, but still like Someone can can say I don't know like maybe Sequoia could could have been better like brand wise. Just an example. So, so in in my opinion like the partner and like the match not.

Who did you end up working with?

Who did you by the way not only the Tesla of the of the VC but like specific the specific partner it could change but still like.

You want to start. So our, our Series A is a squarepeg for example they're the first seed into the first investor into Canva. Just an example. They have amazing companies in that are really ambitious. I love it like AI A doc like one of the leaders in healthcare. They have, for example Exotico and Tomorrow that are digging in the under the earth and satellites in the sky and doing different like so like really ambitious like VC and we're aiming for something really big. We didn't talk about Croto too but. But I can double click on that later. And then we have suse Ventures. They're for example one of the first chucks in Robinhood and then and some other like amazing companies and they're very, very very you know, visionary and founder first and also very well connected in in the Valley and I wanted that foot as well. They.

They'Re very like doing hard work to understanding the market and who you are and who the company is. And I felt that that's very important when you're talking about Series A and speed so that I really connected to how they think. So that these are the two, our two investors about about us a bit to explain why it was so important for me to find visionary investors. So so basically when you think about the future, if you're talking about AI that's going to write most of our code, you can, we can start to think all our code, most of our code doesn't matter. Like a lot of code is going to be written by AI. It means that it's also going to complete complete features end to end. It means that people are not necessarily going to review most of the lines that AI is going to write. Are you. Do you feel comfortable with that? Like it could do. It could do so many things. You know, it finished, the task is complete, the feature is running. Who says that underneath it's not sending data somewhere, you know, or doing different things. Coda what we're doing is we're talking about code integrity. We're talking about making sure that the code that is written by human developer or AI fits the company's best practice, compliance, values, functionality, etc. As a whole that's what we call it code integrity, not necessarily just quality. And we're thinking about the vision. You, you will have AI that are more focused on generating code faster and Kodo AI to focus on making sure that it doesn't harm, you know, society, humanity, the company's culture and et cetera. I'm talking about the end game because in the middle there's more concrete stuff like less bugs and issues, more high quality software. But as we go, and that's quite fascinating, at least for me in any vision and important task to give to the world. And we needed that VC sync with us. Think, think ahead.

Let's talk a little bit about the Salesforce acquisition because that was obviously a big deal for you and for the company and I think for Salesforce because this was a product that all their customers needed and wanted. And you know, so can you maybe talk about what that process was like?

Sure.

In terms of how did that even come about? They were an investor in Spiff. Um, was that how it came about? Was it, was it something else? You know, what was that process like?

Yeah, sure. And you know, and let me know if there's anything specific you want me to focus on. But so, so Spiff, you know, I think we made a couple of key decisions early on with the help of a, of Sean Jacobson at Norwest, one of our board members, where we, we had some decisions early on around hey, do we want to involve Salesforce or not? Because we, with, with the particular product that Spiff was building, which is a commission engine. It's as you mentioned, it's a solution for automating commissions, motivating sales reps and helping them to see their commissions in real time while they're building out an opportunity in a CRM or, or, or something like that. So we knew right up front, hey, we feel like this is a much bigger market. This is one of these deceptively large markets. The average company spends 10% of their entire revenue on commissions. People don't know that, but it's a very. Sales commissions are gigantic. Part of a typical company's budget. And so it, we felt like this was, had an IPO path. We, we really did. Like when we, and I don't think we would have raised money from Lightspeed and Norwest and very, very large funds if they didn't believe that we had an IPO path. So I, I think all of us around the table felt like there was a realistic IPO path here. But we also knew that however likely that was or wasn't probably an even substantially larger likelihood of an outcome for an exit for Spiff was to sell to someone like a CRM vendor. And when you start to look at the potential acquirers at scale for a commission software platform, I mean, Salesforce is at the top of that list in every possible way. There's probably a couple of others. There's, you know, there's a possibility that Microsoft could get in that, you know, could, could want to do it. There's a possibility that Oracle, Oracle already kind of has a solution. There's a possibility for, say, a work day or something like this. But like most CEOs, I had kind of mapped out our acquisition space and Salesforce was by far the best and most likely acquirer. So what when you have that, when you have an acquisition space that's heavily slanted in the direction of one player, you know, some alarm bell should go off in your mind because you, you don't want to cozy up to them too quickly because they can end up really limiting your exit outcomes, you know, and because they can basically, if, if they're the main buyer and you let them as a, as an investor and they have information rights and other things that can really, as, you know, that can really stifle the desire for other vendors to look at you as an acquisition target. So early on, we had this really interesting dilemma where we're like, hey, do we want to approach them or not? And I think we came down pretty categorically on the side of, yes, we want to, and we want to do it early, but we want to do it on our terms. And so we made sure that we raised money from them in very, very competitive rounds where we made it clear to them that some of their competitors were also interested in investing in Spiff, which was true. And we welcomed them into rounds where we had. I remember for the Series A, I want to say that we had six or seven very viable term sheets. And so Salesforce wanted to put more money into that round. They wanted to put like a factor of two or three times more money into the round than we let them put into the round. And so we felt like we were in the driver's seat, at least early on. Now we were so lucky because that relationship ended up being the gift that kept on giving. And when SaaS markets kind of went sideways, they ended up leading our Series C. And they had already reached out to us before that time and had expressed an interest in, in us as an acquisition target. So we knew quite early on, I mean, I would say three years, three And a half years into Spiff's journey, we knew that Salesforce was pretty interested in a potential acquisition scenario with Spiff. So we, so that's kind of how it came about. Now I'll say one other thing. You might think, oh, well, the ventures team of, or the corp dev team of a company is where you get most of your traction for acquisition. I've, at least in this particular instance and actually in almost every instance that I've seen where I've sold a company.

It'S actually someone in the product. Org or in the business itself that is the true driver of the acquisition. And that was true as well for Salesforce.

How did you think about who you were bringing on as an investor? Like, did they have to be on board with the, you know, were they also mission driven to fit into all of this? Was it more.

Someone told me the other day on an episode, the money was green. You know, like, like, you know, what, what, what. How did you think about that?

Yeah.

All money is definitely green, but I don't think that, that.

I think who you raise money from in the end matters a lot.

We got exceptionally lucky going back to this, you know, original conversation around people and who are, you know, who's around your business that has an impact. In the beginning, we had a very small group of investors and they were extraordinary.

The same investors that were a part of our series A basically were a part of our series B and our series C.

We had a very, very small group of people around dia and I think that.

Through all the ups and downs, having the depth of those relationships and, you know, the longevity of those relationships was actually an incredible help.

Where would you.

I'm going to lead you with the question, but it's one important one for me is did each investor add a lot of value in a bunch of different places or was it like this investor helped us with this, this investor helped us with that. You know what I'm trying to say?

Like, I mean, I think that they.

I, I think that one of the things that they did a really good job of doing is letting us tell them like where we needed the most help.

I mean, our investors, generally speaking, were previous operators. So they, they brought a ton of.

Previous operators at venture funds, like currently.

Currently venture investors, previously.

Wow, okay.

Operators.

That's semi rare.

I, I really cannot tell you. I think it, we had, we had people who were exceptions to this rule for sure. But I think that the idea of deploying massive amounts of capital without ever having run a business yourself is a little Risky to me, to put it lightly. I just think that the reality, like once a business hits any amount of scale, the reality of what actually happens and how things actually work and what it actually means to be running a business and an executive team and a product and scaling and all the rest of it.

Is a pretty critical set of experiences that I think are important to have if you have a seat at a board.

But they helped you. I mean, they, they moved the needle.

Yeah, we had an amazing board. We had an amazing board, we had amazing investors.

And I mean, it was definitely, it was our responsibility.

Right.

Like it wasn't.

It was ultimately, we got advice from them, we got a ton of help from them. They're amazing sounding board and some of the difficult decisions, but at the end of the day, like every decision was ours and every outcome therefore was ours to be accountable to.

I like that. Every decision was ours and every outcome was ours. Yeah, that's it.

And that's, I think that's the way that it has to be.

Yeah, you're right. Like a lot of time investors, they, they, they make recommendations. They do. But if you do what they suggest and it doesn't work, you're still the one responsible for the outcome.

Yeah, for sure.

Look, I think that like in every.

Profession, there's a wide spectrum of investors. I've certainly heard from other founders, all kinds of, you know, less positive experiences with board members and investors.

But I think that's the part of, you know, someone said this to me when we first started raising money and it was true. You can divorce your husband before you can divorce your investor.

That's true.

Right.

And so that's true.

You should. People, when people say all money is green, I mean that's true. But you're not just taking their money, you're taking their expectations, you're taking their decision making, you're taking their presence as a part of your company. And the earlier you bring them on, the longer they're going to have a presence in your business.

And so I think that's a good reminder.

Yeah, I think it's like kind of ironic because people think that it's a really good reminder, you know, early investors.

It'S like a co founder, I mean, the early investors are kind of another.

They'Re another form of co founders for sure. And if you're lucky, you're doing this for a while, which means that you're working with them for a while.

Right.

And I just think that who the people are really matters.

So to get here, you've raised $85 million. You have some amazing investors in terms of their brands. Can you talk about kind of what that. Let's go to the very first round you raised. How much did you raise at the first.

Yeah, well, we raised some pre seed money from xfar. Our first kind of proper institutional round was a seed round from Excel. They've been great over the years. Interestingly, we were working with a different partner and then he left Excel and we kind of got to pick our new partner effectively or at least sort of request one. And we said we want to work with this guy Voss. And Voss was, I think he led the series A in segment the CDP frame IO. He's been in some great companies and VAS has been a great partner of ours over the years.

How did you get that Excel round? Like, because Excel obviously top, I don't know, five investors in the world or whatever. How did you, how did you. Was that easy?

I got connected to a partner over there through, through an old friend from, from Microsoft. So a lot of it was kind of working, working through my network. You know, I think a mistake that I made during the seed round was kind of like dragging it out a little bit. And I think you want to sort of compress it, create a sense of urgency. You don't want to over compress it and overdo it. I think we probably spoke to 15, 20 firms before we spoke to Excel. Had a pretty good meeting with them, quite frankly. I thought it was just okay. And then the next day was like, we've already called three of your customers. We're super. Can you send over this data? And I think we had a term sheet within a couple days.

Wow.

So that was sort of another learning is like create a sense of urgency, create scarcity during a fundraising process. And also like you're going to get a lot of signal within the first couple days. Like, are they leaning in or not? If you're having to chase somebody or they're ghosting you so you can't get them back back on the hook. Sometimes folks need to do their homework or they're on vacation or whatever.

But when the person says, yeah, when you find a lead and you cross 20 billion of revenue, you know, come back and sure, yeah, yeah, I'll be, I'm very interested when you get to that point.

Yeah. And I would say, like, you need to get folks up to speed on what you're doing. But I think by and large, like people either get it or they don't. And you're not necessarily going to Convince somebody of your vision or your business like they're kind of going to get it immediately or not. It's really about finding folks who kind of get it, who believe.

So we had Excel as an investor as well. I'm curious from your view. They were in, as you said, first round, first real institutional round. Where do you see the value of a firm like Excel? Like obviously you mentioned Voss, but as a firm, like what is the value of having a firm like that?

I would say they've been a great partner to us over the years and they've kind of obviously have an early stage fund and a growth fund, but they helped us in the earliest days and they've helped us scale and think about what our path to being a unicorn and then some. Looks like we have a lot of great investors. We have had a lot of great early stage investors who are really helpful with kind of crafting early product vision or at least how we storytelled around it. Story told, storytelled, made intros to series A, series B stage investors. But it's been tough for them to be helpful at the growth stage. We also have some great growth stage investors. Insight Partners led our series C. They're very quantitative, they're used to scale ups and they're helpful in a different way than some of our early stage investors. And Excel's been really helpful with both. I would also say, you know, there's a couple different sort of investor or board archetypes. You've got the professional investors, you've got the former founders, you've got the seasoned operators. If I were to maybe bucket them three ways, we've historically had a lot of kind of professional investors, but once we were very founder oriented and so I think figuring out how maybe you have some diversity in terms of ways they can help, size role they can play on the board, in terms of advice they can offer is definitely helpful.

Who's the partner at Insight?

Matt Gatto. Got it here in New York.

He's great.

And yeah, I think what's interesting also is what I tell founders. I'm curious if you've seen this is, you know when you're going out for that first seed round to an Excel, it's about you, it's about your co founder, it's about the broad vision. But when you go to Insight and now it's a later stage business growth stage, like you said, now we're talking about numbers now they could love you, but if the numbers aren't there, they're not investing. And I think it Changes the fundraising kind of process and.

Priorities, I guess.

Yeah. I think, you know, when you're, when you're selling to a customer, you're trying to do discovery and understand what, what a customer wants from your product. What's a good outcome? Like, it's important to understand what an investor is trying to get out of investing. Like, what are they underwriting to? What do they care about? What else is in their portfolio? Do you fit their thesis? What does a great outcome look like to them in three, five, 10 years? And so I think being able to understand that, speak to that, and ultimately you're taking their money, build towards that and follow through on that.

So let's talk about the money. So you've raised, I think, 60, maybe 60 million.

Yeah, right around 60.

Yeah. So can you talk me through kind of as, as you just mentioned, this beginning part of the, the journey. How did you go out and raise that money? It's in the middle of COVID right? Or I guess towards the end of COVID kind of period. And what was that process like? Was that very easy? Was like, was that an easy thing to do for you guys because of your connections and background and everything?

No, I wouldn't say it was easy. It was only easy when compared to the challenges of fundraising, you know, as we went further and further along in our history. But it sort of started hard and then got more and more hard. But so the early, the earliest fundraise, you know, we were really lucky to get a seed round together with an investor named Andrew Beebe at Obvious Ventures, who is just an, you know, awesome and awesome guy, really good investor. I had known him from my time at Proterra. He was. He was a small. A small investor in Proterra. And he. Yeah, he was the first guy to really believe in us and what we were building. It was still hard. I mean, he's, you know, he is an astute investor. And, you know, we had a PowerPoint deck in the two of us and not much else. So it took, you know, it took. It took some. Took some work. But that was. That was kind of the first. Yeah, the first milestone. And then. Yeah. And then we've since done two more, you know, two more capital raises, and like I said, like, each one was, I think, harder than the last.

Why? Why is it getting harder?

It's really funny because our business is, you know, like, everyone says their business is crushing it, and we're, you know, going to the moon or whatever. And I believe that. But I, I think objectively, every. Every Round we did, we were, you know, we, we did and are continuing to make incredible amount of progress. So it's like you think, you think it should get easier because it was like it was two guys in a PowerPoint deck. And then the next round was a real team, a good team and you know, some real technology. And then the next round was like a product and a really awesome team and a ton of commercial traction. And.

What I think is happening is, or this is my own sort of like education of the venture capital process. And the reality is that.

Maybe a little jaded, everyone thinks venture capital is like a way of funding startups. And that's kind of true.

But.

The expression I use of someone is like I feel like venture capital is like Liam Neeson in one of those movies where like I have a very, what's his quote? It's like I have a very, you know, specific set of skills. And that's kind of what venture capital is. It's like it's not really meant to fund all sorts of companies or all sorts of stages of companies.

And.

There'S sort of like hype cycles and there's investor pattern recognition and we are a company that I think we started out in a hype cycle. Like EVs were hype, sort of on top of a hype cycle. Now they're very much on the downside of a hype cycle. Hardware is always really hard. As far as I can tell. The venture capital model is totally, you can sort of see it like comes out of software, deep tech and some of this stuff is like getting a lot of airtime now. But it's.

More often than not it's sort of like some kind of hardware that's attached to software and like AI and has some sort of growth hack.

So.

A long way of saying, I think like starting a venture backed RV business like complex hardware is, it's a little crazy frankly.

It's not right down the fairway by any stretch of the imagination in terms of what venture capitalists want to do. And then the later you get. My misconception was even though we were making so much progress, you just look at the, you know, how the return map works for venture like they, they want to do early and sort of like the further you go and the harder it is for them to, to make a return, the fewer you have, you know, the fewer investors you have who want to sort of participate in that, that round.

One of the things, I mean, I've never been in hardware at anything. You know, my career has only Been in software services. And when I looked, you know, when Nick first told me about the company, I started researching it and like watching all the videos and I was like, this is the coolest looking. This thing is amazing. And like, I can't imagine what it takes to build this and how long it takes. And like, you can build a software. You can like, vibe code a software product tonight and tomorrow, like, you got like a UI and you're. But this thing, it's impossible. I mean, I guess. What are those stages? Pure curiosity of like, what are those stages of.

Venture when it comes to hardware? Like, is it team? Is like, that's, that's kind of team and a PowerPoint and a nice design and that gets you the first thing and the next one is showing prototype. You know, I'm curious about that because in software you literally could be like, here's my product. I just, especially now, like, people are just like, here's my product. And the VCs, like, I don't like that. The next day they're like, okay, I threw that one out. Here's my new product. Like, you could do that. I've seen people do that. And when I look at what you're building, I'm like, man, this should takes forever. I mean, it must take, you know, takes a long time. And I'm curious what you think or if there's some standards that are like, out there for like the stages.

Yeah.

You know, in hardware, it show.

It shows how deeply hardware I am because I like vibe coding. I've like heard that word, but I don't like. I don't even know what deepness is.

It's funny. Yeah. I mean, it's fio depends on what investor you talk to. And there are definitely investors that are better at doing hardware and more practice and sort of like, get it.

And there's probably some similarities, but you know, earliest stages, it's like, you know, team Tam Traction. Right. It's probably pretty similar to how.

How, how software works. But. But then I. But then the stages, like getting up to say like your, you know, your Series A or your Series B, it's like showing that obviously the team like de risking the technology.

Proving somehow and there's different ways to do it, that you have product market fit.

And ideally and especially in down markets, like, like showing you have, you know, real, real commercial traction and you have to do it in kind of weird, weird ways because it's not like a software product where you can have just like, I have real customers who are paying real Money. Like, like maybe there's some hardware is faster than others, but what we're doing is, you know, complex automotive hardware. We're like launching a vehicle platform. We're doing it in less than three years. And compared to like automotive, that is insanely fast. Like your average automotive development cycle for a new product is probably like five to seven years. And yet for a lot of, a lot of venture investors, like three years is like way too long.

Right, right.

So yeah, demonstrating that commercial traction, it's like it's, you have to be kind of creative. It's like, do you do pre orders? Do you do like a MVP version of the product? Like you do like a Founders edition that like you just try to sell a little bit.

And then ultimately, you know, you have to kind of like scrap along somehow and to the point of actually having the product. And then investors want to see like, just like what any, you know, later stage investor want to see. Like, show me the money. Like, like, like, let's do the sales. We want to understand that you're on a path to profitability for where Lightship is now that we're very much in the, in that stage of like, okay, cool guys, you've raised 60 million. Like, get the product in the market. Customers need to like it. We, you know, want to see like, you know, real, real sales and we want to, we want to see you making money. And that's like, it makes sense. And I'd say it's, it's really reinforced by all the EV companies that have kind of gone before us. Many, many, many, many of them not profitable. And you know, raising hundreds of millions, billions of dollars to fund losses. And that's not something that investors like much at all.

I'll take this lesson. Give full credit to my investors from.

Excel who used to come into the.

Early service channel meetings and say, Tom, everything's on track. It's really nice. It's extremely boring.

You're running, you're running all running plays.

Maybe you forgot, we're venture capitalists. We'd like to see a couple passing.

Plays in here once in a while.

Run a trick play, run a flea flicker. It's not always the most logical, risk free conclusion that you should execute on. Take a shot, do some things. We don't want to win the game 5 to 3. We want to win the game 41 to nothing, right?

That's a wrap for this week's episode of Not Another CEO Podcast. Thanks for joining us. For show notes and more, please Visit not another CEOPodcast.com. we'll see you next week.