Lessons From The Coach of Silicon Valley - Mike Grossman - EP#110

Blew up a deal that would have been very lucrative for the entire team. It was a $40 million offer. I said $200 million as a counter.

Mike Grossman is a 6-time CEO who spent 30 years leading venture-funded startups in Silicon Valley. He's been through all the ups and downs. He's raised money from 12 different venture firms, 3 public corporations. He's had CEO journeys end in 9-figure exits and one that ended in a fire sale. These days, he sits on 4 boards and spends a good chunk of his time mentoring first-time CEOs. I'm curious, because you've been part of so many companies, and maybe even more so, you've also spent time with so many CEOs, like, how do you think about luck and how that, you know, what role that plays in this journey?

I actually think it accounts for probably closer to 80 to 90%. You can control your input, how hard you work, you know, how hard the team works, how good the team is, but I don't think you can control the outcome. But recognize that luck Luck plays an enormous role. And I think a lot of the headlines about the big companies and the billionaires and so on, I have a feeling that if we deconstructed their stories, we would find that in almost every case, they just got lucky.

Today's guest is a 6-time CEO who spent 30 years leading venture-funded startups in Silicon Valley. He's been through all the ups and downs. He's raised money from 12 different venture firms, 3 public corporations. He's had CEO journeys end in 9-figure exits and one that ended in a fire sale. These days, he sits on 4 boards and spends a good chunk of his time mentoring first-time CEOs. He just published a book called Failure Is an Option: Reflections of a Silicon Valley CEO. 44 candid essays on what leadership actually looks like. I love the format. It's honest, it's easy to read, and the lessons are truly timeless. Mike Grossman, welcome to Not Another CEO podcast.

Thank you very much, David. It's great to be here.

I'm excited for this. I, I have the book literally right here. I was reading it in preparation for this. So first question, Mike, what is the one thing that you've done at all your companies, big or small, that's had the biggest impact and you would do again if you're CEO of another company in the future?

I strongly believe in actively managing culture. I mean, every company has a culture, but what my view is that you want to be intentional about that. So what does that mean? It means articulating a set of values that are aspirational, things like integrity and relentless velocity and analytical rigor, things of that sort. And then getting it in, into the DNA of the company and, and, and affecting every aspect of how the company is operated. So for example, when you hire somebody, the value should be a key piece of whether or not the person gets the offer or not. When you're evaluating somebody's job performance, the how well they exemplify or don't exemplify the value should be a key part of that performance review. Uh, and an ongoing basis, I believe in regularly surveying the company and trying to understand how well people in the company feel that, that we are exemplifying or not exemplifying those values. And when the answer is not exemplifying the values, have an action plan to try to fix it. So everything with intention, uh, try to achieve the culture you want. It doesn't happen by itself. It's something I've done at every company and I strongly advise the first-time CEOs I deal with to do something similar.

So when you talk about surveying the company, how often were you doing that?

I've, for much of 30 years, every quarter. And every quarter, every quarter. And whatever the results are, the good, the bad, and the ugly, I would show the whole company. Uh, not, I'm not a believer in spin. I'm a believer in authenticity. When the company isn't exemplifying the values from the perspective of the workforce, I think it's better to shine a light on that, make that visible, and try to figure out what to do about it.

And were those surveys anonymous, or were they anonymous surveys?

Anonymous surveys. And, uh, and you can slice and dice it so you could figure out whether certain departments were happier than other departments, whether certain geographies are happier than other geographies, and so on.

I, I I used to do something similar annually. Um, I love the quarterly, and I, I've had this debate actually with a number of people on the show before about anonymous first. Not— I am a believer in anonymous. I don't think you're going to get the honest answers unless you— you would hope, you would hope that people are going to give you the honest answer if you don't do it anonymously. But I do not believe— I don't believe it's— personally, I don't believe it's possible.

I, I would even go further and say that what I've seen is that a lot of times people are inclined to not give the honest answers, even if it is anonymous, because they worry that it in fact is not anonymous. So.

You're right, you're right.

So no, I'm a big believer in making it anonymous and speaking to the company very directly about things, saying, look, this is important. This is our company. If we want this company to have the values that we say are important, it requires people to be honest in the feedback they give. And in order to help in that effort, you know, we're gonna, make sure that this truly is anonymous.

Um, in terms of the interview process, how would you actually assess if someone is going to live up to those values? Because it's kind of hard. It's not really a skill per se, you know. So I'm saying from the, the candidate that you're interviewing. So like, how would you do that in the interview process?

So some of the questions are based on what the values are. So it depends on the values of the company. But let's say, for example, that analytical rigor is something that is one of the values that's written on the wall. Then in the questions that a candidate is asked, you would explore how analytically rigorous are you, and can you give specific examples of that? And then when evaluating the candidate, typically with some form where you say, you know, they're good at this or they're less good at that, one of the things on the form would be how analytically rigorous are they? And the values piece ends up representing 50% of the evaluation. Uh, so if, for example, somebody's substantively really strong but culturally doesn't seem all that well aligned, they don't get the job. And, uh, and I've been really rigorous about that, uh, through the course of my career. And, and the consequence has been that each of the companies, although the business models have been entirely different, each of the companies has had a consistently really good culture that actually reflects the values that No, that we've written down.

You've been the CEO of these 6 different companies. Were the values the same at the 6 different companies?

No. Uh, in some cases I was recruited in as CEO, and so I was inheriting a set of values and I might tweak the values or suggest new values or take a few of them out, but everything was always done in collaboration with the group. But there are some similarities. There are some that are close to my heart. I mentioned a couple of them earlier, so. Integrity without compromise, which is something that I first saw when I worked at Intuit. I really like that value. Another one is this idea of relentless velocity. I think that's important in an early stage.

Relentless velocity.

You have to keep moving, but it has to be real velocity. But, but, but I think it's important to move fast. And at the same time, I think it's important to be analytical and thoughtful about where you're going. And so there's this tension, intentional tension between velocity on the one hand, analytical rigor on the other hand. That's something that's been captured in, I think, all of the values of the various companies. But there are some others that vary depending on what the history of the company is, whether I founded the company or whether I was recruited.

Penélope. So, I really, I was telling you before we got started, like, I've been reading the book and I really truly, I mean, I really like the format. I think it's fast, it's easy to read. You have stories tied to everything. I love it. I have a couple chapters that I wanna kind of call out as we go through. And today we're talking about this like anonymous survey and getting the real feedback and all of that. So I read one of the chapters this morning, What the Hell Is Going On? And can you maybe talk a little bit about that particular chapter? 'Cause I think that that ties a little bit to this idea of how do you go get this information from the employee base?

One of the things I didn't realize when I first became a CEO was that it would be very difficult to actually figure out what was actually happening. And, and it gets to be a bigger problem the more that companies grow, because then you're not directly involved in everything and you're not managing through, I mean, you're managing through multiple layers. And the problem is that people just won't disclose what's happening either because they're afraid to disclose it. Or because they might be politically inclined and they want to hide something, or in some cases they're just not good at communicating and they forget to actually talk about it. There's a lot of reasons why getting visibility into what's happening is a real challenge for CEOs, again, especially as companies scale. And my mentor for many years, a guy named Bill Campbell, really was helpful to me in understanding how to deal with this issue. He said, listen, you cannot rely rely on your direct reports to tell you what's going on because either they don't know or they may not tell you. So, what you have to do is cut through people, cut through the management chain basically, figure out who it is that you can trust on the team. And they can be in any role in any part of the company, but figure out who the people are who will tell you the truth and invest in their careers. I mean, it's, it's a two-way street. You're trying to help them both in your company and then in a longer-term sense, but spend time with folks regularly every week or every month to really get a pulse on what is happening, who's happy, who's not happy, where is a process breaking down in a very big way, where is their frustration, where are there opportunities to improve, where are there problems that aren't being addressed? And so I took that on. I mean, it's— I think of it as one of the key responsibilities of the CEO is to actually be speaking to people all over the company at all times and not think—

And how do you do that? I mean, I used to do that and then I might— someone would be like, you're undercutting me because you're going around me and talking to, you know, this person on my team. Like, how did you— how did you get your leaders comfortable with that? How did you get the employees comfortable telling you something that maybe they didn't tell their leader or their leader? You know, how did you do that?

I, you know, first of all, since the culture was very much about collaboration and being open and being authentic, it was an easier discussion to have with people who reported to me because they understood that that was the spirit of what we're, you know, what we were trying to do. But I wouldn't tell people what to do if it reported to somebody else, but I would ask how they're doing. And I was very open with people on my team. I would say, you know, this is something that I do. I'm gonna talk to people all over the company and I'm gonna try to get a sense for how do they think things are going? And I'll let you know what they say. I'm going to be very open with you about when I get feedback that I think is going to be helpful to you. And I encourage the people who reported to me to do the same thing. It should be open to feedback, open to talking to people. Sometimes people can be sensitive to it. There's no question. But generally speaking, I found that if you don't hide what you learn— excuse me— if you don't hide what you learn and you're open about it, it can be really helpful to, to everybody.

I actually found that the people who didn't want me to talk to the people who were under them are the ones that usually there was something going on.

Absolutely. You know, absolutely right. And I will say that, you know, when I talk about this type of values survey, to some extent, you're really trying to identify what you're doing well, what you're not doing as well as a company, but it also is an early warning system. It highlights when there's a problem somewhere in the organization. And coming back to this question of what the hell is going on, when you, when you have these data-based indicators that say, hey, you got a problem here, it's a lot easier to then, you know, fix it or to do something about it. Otherwise, what ends up happening is things fester in different parts of the company and you may not even know about it as a CEO for a period of time. And a lot of damage can be done. You can sometimes lose great people without knowing that there's even an issue. And so I think it's—

That's the worst one. That's the worst.

I think that's the worst. And I think you have to be enormously vigilant about this. And a lot of my methodology, if you will, relates to being as vigilant as possible because otherwise when adversity strikes, which it always does in every company, you're at great risk of losing great people. But if you really build relationships and you have a really open environment that people enjoy and where people trust each other and they regard it as a great place to work, you're much more likely when adversity strikes to have people stick.

This is kind of a side note, but I actually just got off with a CEO that I've been talking to for a while, and this is a crazy story, but he joined a CEO. He's not the founder. And I told him, you should really go and talk to literally every employee at the company. He's like, every employee? I said, if I were you, I would do that. So at least to kind of gauge, you know, what's happened, everything you just said, and kind of get a sense for which departments there may be smoke. There may be. So he did that, and halfway through he's like, Dave, it's been great, but this is a lot of, like, there's a lot of meetings. And I said, and he told me some stuff that he found. I was like, you should keep going. Anyway, this is unrelated a little, but he told me he just finished all the employees and he found two North Korean operatives that had like come in through a fake, like, you know, because it's a remote company. And this is like a big problem actually, like big, you know, and they got a job. They had been working there for the last like 4 months before he got there.

Wow.

And he came in, figured this out and actually they fired these two people and got, you know, locked everything down. And anyway, but it was, it was, it is a very extreme example, but it was from going and meeting with every single person at the company. And, and he learned a bunch of other stuff. But it's just, I think that there's— I, I could— when I read that, you know, like, the bad news is just not going to get— no one's coming to you. Even if we don't think of ourselves as CEOs and anything important, like, the employees are scared shitless to come be like, hey, I'm gonna tell you, Mr., Mrs. CEO, I'm going to tell you the my manager sucks, we're doing this wrong with our cut. Like, they're not going to do that. Maybe 1 in 1,000 will do that, but most will not.

Yeah, I completely— I've never had anything quite as dramatic as North Korean operatives, at least none that I've discovered. But I completely agree with the idea of trying to talk to as many people in the company as possible. And, uh, in fact, the company that I ran most recently, when I joined, uh, I don't remember the exact number, but there were hundreds of people in the company. And it took a while, but I did get to everybody and for exactly the reason that you recommended. Yeah.

You seem to be big kind of on operating rhythm and communicate, obviously. I mean, even this thing you're talking about with values and can you talk a little bit about the operating rhythm? Like I'm a big believer in it. It's something I didn't do in the early days of my career or BetterCloud until I had an advisor come in and be like, Daze, This is the breathing apparatus of the business. Like, we, we gotta get— can you talk about how you think about that?

Yeah, I had a similar evolution. So when I first, I started my first company, I had a fairly significantly negative view of bureaucracy and process. And I thought, we're not gonna do that. We're gonna, we're just gonna be nimble and we're gonna move fast. And what I very quickly came to realize is that if you don't put a structure and a framework in place, chaos ensues. And if you don't define specific objectives and, and really what success is at a, in a, in a detailed, rigorous way, then people start moving in different directions and nobody really understands what success is. And it ends up being a tremendous problem if you really hope to scale the company in a, in a meaningful way. So I've ended up in a, you know, very process-oriented, I'd say, when it comes to entrepreneurial business. And from an early stage, I believe in defining a rigorous set of typically quarterly goals. And for each of the goals, I try to deconstruct it. So each goal has a set of supporting strategies, each of which has a set of supporting tactics, all of which have specific success metrics. And then on a basically monthly basis, the whole company again looks at how we're doing. Are we yellow, green, red? And I'm most interested, frankly, where we're yellow and red. Yes, because then it's something you can do about, you know, you can try to solve the issue. And again, showing that to the whole company. So, yeah, I'm a believer that these types of consistent, rigorous frameworks have an enormously positive impact. They make sure that everybody in the company is on the same page. They make clear what we're trying to accomplish as a group, as well as individually. Should be possible to go to anybody in the company, I think, and have them say, this is what I'm working on, this is what the goal is, and this is why it's important to the entire company. And I think that if you do that consistently, you end up with a more motivated workforce, a more predictable set of outcomes. Greater likelihood of success.

It is, you know, I was talking to a CEO the other day and he said to me, Dave, what I think I'm learning over time is that most of the things about building a company, 90% of the things are the same across any company. And he kept saying to me like, no, I'm going to do it differently and we're doing this and we're doing that. And then as I've been coaching him and we've been talking, this has been the conversation, literally what you're saying. And you feel like, why do we have to put all this process and these systems and all of this? And with AI, everyone's just going to do their job. Nothing's going to— and in reality, there's timeless things like the lessons in your book. There are just timeless things that I don't think they were the same 50 years ago and probably going to be the same in 50 years. And having communication alignment, you know, uh, uh, transparency, um, uh, uh, focus, all the things you literally just said. Like, yeah, it seems like extra work, but it's, it's necessary.

Yeah, I, I agree. And I also think that on some level it's sort of extra work, but what it really does is enables you to move much faster as a company. So it has this, it has this feeling that you, you're, you're you're taking so much time, you're moving less fast. But the reality is over the long term, you're able to move much faster because everybody's aligned. And I think it's really important.

So, this chapter or this story that I liked was plans are useless, planning is indispensable. Love this one. This one for me, when I was reading, I was like, yep, I have been through that. Can you talk a little bit about That one.

Yeah, it's one of my favorite quotes. It's a Dwight Eisenhower quote that he talked, and his context was the battlefield, literally. I mean, the moment you create a plan in an entrepreneurial business, the plan is obsolete in some way because things change so fast. And so that's the first part of it. Plans are useless because whatever plan you make is immediately out of date and you have to make adjustments to it.. But if you don't make any plan and you just do it on a seat-of-the-pants basis, everything is kind of ad hoc. What are we gonna do today? Oh, I've got this idea this morning and oh, this afternoon I have a different idea. You end up, you know, basically jerking the company around and people don't know what they're working on and they get frustrated and you don't focus on the right things because there's no explicit effort to prioritize in the correct way. And So I think it is important to always have a planning mindset, even though the plans will very frequently change. And as new information, you know, becomes available, and that's part of this idea of having a process and setting objectives and being very consistent about it. But inevitably, when you do that, let's say you do it on a quarterly basis at the end of the quarter, some of the goals are obsolete. I mentioned yellow, red, yellow. Yeah. Well, the other color I have is purple. And what purple means is the goal doesn't make sense anymore for some reason.

Do you, do you think that with founders, not CEOs specifically, but founders specifically, this is extra hard because they're founders and like everything they see, they see opportunity kind of everywhere, you know, and they see— because I feel like that, I feel like that's kind of one of the challenges is as a really like a, a great founder.

Yeah.

Arguably is pretty bad at like this kind of planning and this and that because what made them a good founder was figuring it out and doing this and changing this and, you know, going from zero to one.

Yeah.

They probably didn't have a lot of plans, you know.

I think you're right. I think a lot of the best entrepreneurs that I've met are people who pivot quickly. They, they, they're always listening. They're always looking for opportunity. Something new emerges and they quickly adjust and then they adjust again and they pivot and they adjust and they're bobbing and weaving and trying to figure out where the opportunity is. But the problem is that as a company grows, if you do that as the head of the company every day, the rest of the company has tremendous difficulty understanding why you're doing what you're doing, and it can lead to a significant dissatisfaction. So I've learned to be more patient than is my natural personality in a lot of ways. So for example, if somebody is working on something because for good reason we've said that's one of the top priorities, if I impulsively the next day have an instinct that maybe we should make something else the top priority, in the old days, I would've immediately said, okay, we gotta start working on the new things. These days I would say, let's try to, let's do a little bit more research. Let's talk to the person. Let's try to explain, you know, why we might need to pivot in a different direction. And you might take an extra week or 2 weeks or, you know, even a month., but in the end you'll have better alignment with the person who's doing the work or the people who are doing the work. So I've had to learn that. I mean, I started out as a founder entrepreneur. I became a CEO because somebody had to run the company. And then it turns out that I actually liked being a CEO. And in some respects, I think I was a very good fit. I've been a very good fit for that. But it wasn't my intention, but I have to do things differently than if I'm just wearing an entrepreneur founder hat. I think those are very different roles. And that's something that I didn't understand or appreciate when I started in this game.

Yeah. The only negative feedback, I don't want to say only, but biggest negative feedback I got from my board at one point was, Dave, we love that you have all these ideas. We love it. You know, we love that you're coming with this and this and let's take this channel and this product. They're like, focus, focus. And, and, and it was only when we got to, you know, $2, $3 million of ARR, something like that, when they said that to me. And I had to go through that transition to your point of becoming an, a CEO, you know? And, and, uh, that was hard. But I, I kind of, I'm with you. I, as later on, I kind of was like, wow, how did I do all of this? You know, whipsawing everyone around and changing the priorities every day. And, and to me it felt good because I felt like that's what's gonna make, you know, to your point about velocity, I was like, this is velocity. Velocity. Yeah, but it's not— it may be velocity for you, the founder, but that's— it's not the velocity for the 200 people that work for you.

Yeah, that's exactly it. And I, I think I didn't think enough about the impact of what I was doing on those people when I was early in my career. And when I started to think more from their perspective, I, I modified how I would do things. I also had a sort of similar experience to you. You know, I, I mentioned it in the book. There was one specific situation where I realized we needed to pivot and I tried to pre-sell that with the board and I thought everybody was aligned with that. But when I went into the board meeting, they all rejected what I was recommending. And the reason to a significant extent is because there had been a history of me pivoting and pivoting and pivoting. And so they thought that I was too inclined to pivot. And as a result, they wanted me to be patient and focus. And I realized, focused, and I realized we needed to pivot. It was an interesting moment. And I think that had I been more methodical about pivoting previously, when I went to them and said we needed to pivot, they would have supported it much more quickly. And instead, I had to take a few months to get them on board. And I had created that situation, I think, to a medium extent.

Do you Today you're working with a number of first-time CEOs, coaching them, advising them. What do you think is the number one challenge that, that they are facing that, that is like timely to now? You know, not, not obviously there's all the things that we've talked about, but like what in this moment in time in the market that we're in today, what, what is the, what is the number one challenge you're seeing across these?

The number one challenge I see is not really specific to the time period we're in. It's that I think that all of them, to a lesser or greater extent, struggle with their mental health, that they feel an enormous amount of anxiety, that there is lots of ups and downs, and they tie their identity to a great extent to whether the company is doing well or doing less well, and they have nobody to talk to. It's a very isolating experience. And for those of us who have done it, we know exactly what it feels like. But for those who haven't done it before, you know, they don't have that context. And who do they talk to? Very often they can't talk to investors because they feel if they show weakness or vulnerability, that that's uncomfortable and they might get penalized for it in some sense. The role I play often in in helping and coach these guys is to make them understand that this is normal. This is what everybody feels. It's not an easy path. Every— there's ups and downs and it's emotionally challenging at times. And you're constantly dealing with adversity and you are not your situation. So when things are going well, that's great, but it'll probably go worse in the future. And if things are going poorly, you know, if you stick to it, it'll probably go better in the future. So I would say that's a common theme, even though the business models and the personalities are totally different from one to the next.

Yeah, I— we did a dinner with a bunch of founders months ago and it was one of these dinners that for me was— it was all about this actually. And it was, it was specific on one topic and it was CEO support system and all of this stuff. And the conversation was about this and people talking about like, I can't talk to my spouse about it because they don't want to hear me talk about it anymore. And I can't talk to my employees about it. I can't even talk to my co-founder because my co-founder is not the CEO. And I can't talk to my investors because I'm scared that they're going to think I'm weak. And I can't speak to my friends because they think I'm, I'm a billionaire because I have a startup, you know, like, and they were going through this. And I'm like, it's a, it's, it's valid. And it's, and it's, um, and it's the most lonely, it's a terrible, you know, when people tell me like, oh, I want to be a CEO one day, I'm like, do you? 'Cause I don't know, you know, like it sounds cool. It sounds cool until you have to do it.

There's a mythology around, you know, some technology companies, Silicon Valley and entrepreneurship and being a CEO. And the reality is not the same as the myth. And it's not for everybody. I mean, I personally actually like it. I don't know, maybe that makes me a masochist in some ways, but, or maybe I learned to like it to some extent, but there's no question that it's hard. And it's not glamorous. There may be moments that are, but day to day, it's not. It's a grind. It's difficult. And it's difficult logistically. It's difficult, you know, practically. But it's mainly difficult emotionally because all of these companies have a kind of, you know, marathon quality to them or triathlon quality to them. And, and, uh, with lots of, uh, roller coaster-like experiences.

So let's actually talk about the roller coaster experiences. Um, it's a nice transition to the Hey Kool-Aid chapter. Um, so maybe can you talk a little bit about that chapter? I actually, I really like that because, uh, I think that that is a chapter that a lot of people today need to read. Because I think there's a lot of people today who are drinking the Kool-Aid. And anyway, can you maybe share a little bit?

Yeah, it was my first company and, you know, we had spent a few years in the wilderness and finding our way, but then we started to get really good traction and all of a sudden we were hot and we had a lot of investment interest and all of a sudden we had an acquisition offer that was pretty significant. And I was overconfident about what would happen if we didn't do the deal. Basically, I, I kind of, I, you know, I, I sort of thought, you know, we don't need to do this deal. And if we're gonna do the deal, it should, you know, the, the value should be extremely high. And, and I didn't take enough time to really think about what the strengths and weaknesses are and, and what the, the challenges were in front of us. I kind of got swept up in, in the situation, maybe my own rhetoric to some extent. I ended up overplaying my hand in the negotiation. I blew up a deal that would have been very lucrative for the entire team, including my best friend and co-founder. And the other co-founder is my father. So it would have had a very big impact on my family. And I overplayed it. And it was, it was because I sort of had come to believe that how much attention we were getting and how much value seemed to be ascribed to the business was something that was going to be a perpetual opportunity. And of course, it didn't play out that way. I regret that to this day. It's the one thing in my career that happened more than 25 years ago now. And I sometimes wake up at 2 or 3 in the morning and then I think, oh God, that was such a dumb decision on my part to take that approach.

So, and that was basically, if I read it correct, if I remember correctly, it was some, I'm trying to remember, it was like $60 million offer and you came back with like a $200 million.

Yeah.

It was, or something like that.

It was a $40 million offer, but it's pretty clear we could have gotten them up to something like $60 million.

Right, right, right, right.

And just speaking personally and both, you know, my father and I controlled a huge percentage of the company at that point in time. I think it was about half of the company. So in effect, we were being offered $30 million for something that wasn't really all that far along. And yeah, I, I said $200 million as a, as a counter. And, and I had a rationale for it. You know, the company that was making the bid had gone public recently and they had an inflated value. And I said, well, if you're worth that, we're, We've got to be worth this. But the truth was that I, I rushed the response and the response reflected a certain level of, I don't know, ego, I guess, to some extent, lack of self-awareness, overoptimism. Maybe that's it. And I talk about, you know, drinking the Kool-Aid. It's, you know, hey, Kool-Aid is— I just had come to believe we were going to be enormously valuable. That this company that we had built was gonna be transformative. It was gonna be huge. And yeah, that was my goal. But just because it was my goal and just because we were getting a lot of attention didn't mean that that was the reality. So it's, it's very easy to get overly excited about the progress that a company is making at an early stage. And very often it doesn't play out that way. And I learned a lesson, a hard lesson from that. We sold that company 6 years later, but for meaningfully less money. And, but more significantly, by that point, the cap table had been changed a lot and I had much less ownership and so on. So, you know, it cost me—

That's the lesson right now. This lesson right now is, I really believe this right in this moment in time is something people need to hear because I talk to founders AI founder, company's doing a million of revenue, someone offers them, you know, a $200 million valuation, and they literally believe they're worth $200 million. Like, they're like, yeah, I'm doing a million of revenue and I'm worth $200 million. And it's like, well, I've seen the story too many times. You're not worth $200 million. Then someone offers them $200 million to buy the company, like, why would I sell it for $200 million? You know, I'm gonna be worth $2 billion in 2 years, you know. And I've had this conversation with people and I'm like, I promise you could, you could be. There are examples of that. Yes, but they're not like 1 in 100 or 1 in 1,000. They're more like 1 in 10,000. But we read them online as if they're 1 in 10.

Amen. Absolutely. And that was— I learned that the hard way. What I should have done is I should have said yes to the deal. We would have made a lot of money and then a couple of years later started a new company. From a position of much, from a much stronger financial position. And that's, that was the lesson. And, you know, when somebody is interested in, in buying your company, I think one of the, the key learnings is don't assume that you're going to get another credible offer anytime soon. Those things often are far and few between. So you get an offer from somebody that's got deep pockets, take it seriously. Because when the smoke clears, you might not get another one like it, or it might happen 5 years or 7 years or 10 years later.

I— those liquidity windows are very— when you're— when you actually go through it, you're like, yeah, and I'll do this. And, you know, you're telling your investors like, and we'll sell to this company, they already told me they want to buy me, you know. And, and you have no control. I say this a lot, like, you don't have control. You don't even know the macro— who knew that COVID was going to hit? Like, who knew the war's gonna start.

Who's—

you have no control, and that may impact the acquirer, the macro markets, the interest rates. And even if you're doing amazing, I talk to people on this show who I'm very close with who've gone from $100 million of revenue to $300 million of revenue, $50 million to $200, whatever, these kinds of numbers, and they're worth less today than they were when they were a quarter of the size. You know, and that, that to me, like when those things are happening, you're kind of like, you know, that, that's, that's painful to, you know, especially the 2021 batch, like of that peak valuations, you know, those companies are 4x bigger and worth less than they were. And public companies, you can look at the comps. That's, that's the dynamic. But we feel when we're in it, when it's our company. No, no, my company. I'm going to, I'm going to do it. I'm going to be worth more. Someone else is going to offer me more money tomorrow.

I think part of the problem is that when you're running a company, you're constantly presenting about the company and you're meeting with investors and you're explaining why the company is going to be so successful. It's very easy to start believing the rhetoric because, you know, you're saying it all the time.

Yeah, exactly. Um, so, um, in terms of, you know, I want to talk about this actually because it kind of goes— it ties to this. Like, I, I wrote an article recently on the Substack a lot about, like, about luck. And how my view of, of, you know, kind of this job and really about the ultimate outcomes, you know, of these companies. 50% of it is luck, in my opinion. You know, you can make your own luck, but can you? I mean, you get lucky sometimes on this customer. I wrote this thing, I found this great LinkedIn post about Twilio and how they got Uber early on in Twilio's days when they were a very small company. And Uber was a small company, and then Uber became massive, and it became, I don't know, 20% of Twilio's revenue. Like, that was, that was luck. I mean, that's not skill, that's luck. No one knew that that was going to be the case. Like, you know, some of these things, you hire that person and that one person is the game changer. Like, yeah, you could say you were good at hiring, but you were probably lucky. Like, I'm curious, because you've been part of so many companies, and maybe even more so, you've also now spent time with so many CEOs. Like, How do you think about luck and how that, you know, what, what role that plays in this journey?

I, I, you said you think that luck accounts for 50% of the result. I actually think it accounts for probably closer to 80 to 90%.

Excellent.

Well, I, I, and, and I'm basing that on my own experience in terms of how things have worked out. I mean, there's been a constant theme, I think, through all 6 of the companies that I've run. I think we've had, very good teams. I mean, some a little better than others, but very good teams. I think the teams have worked hard, have met a lot of smart people, have been addressing things that are actually real needs. I think, you know, I think I've done a good job, but some have been much more successful than others. And what has the difference been? A lot of times it's been random. I had one company that pivoted several times and then started succeeding significantly.. And we went from nothing to a $30 million run rate in less than a year. We were growing very fast. And then we came into work the next day and Congress had approved an amendment to the Durbin, uh, to the, to the Dodd-Frank Act that legislated our business model out of existence. So that was very bad luck and it was nothing we could have done about it. But I've had the opposite experience too. I had a company that was on the verge of going public. COVID hit, all of a sudden we couldn't go public. We looked at other liquidity options. Nothing was breaking our way. We actually made 5 separate efforts either to sell the company or to go public or, or to raise growth capital and so on. And for one reason or another, over a period of years, each of them failed even though the business was doing pretty well. And then the smoke cleared and a big acquirer came along and paid us a lot of money to buy the company, more than we would've made had we gone public in the first place. So, I just think you can control your input, how hard you worked, you know, how hard the team works, how good the team is, your effort. But I don't think you can control the outcome. And I think there's all sorts of things that intrude, macroeconomics or government or just sort of, you know, strange things. And— And I think that that often determines the outcome. I mean, in my case, I think of my career really, let me say this better, venture capitalists have the benefit of having a portfolio. Yeah, and if you have 10 or 20 companies or 30 companies, a lot of them are gonna fail, some of them will do okay, and a few of them will do very well. It's a great business model. But if you're an entrepreneur CEO, you have an n 1. And that means that the risk is much higher. You might succeed significantly, you might succeed decently, or you might fail, but you have one, that, you know, one, uh, possibility at any moment in time. Over the course of 30 years, like in my case, I've had an n equals 6. And so it, it ends up looking like a more normal distribution where some of them have done very well, some of them have done less well, most of them are somewhere in the middle. And I think the main difference has been luck. That really is my assessment of it. And as a result, my view, and I say this to the CEOs that I, you know, mentor, is try to just focus on what you can control. Try not to worry too much about the outcome. It's not that results don't matter. It's just that don't get too anxious about what's happening at any moment in time because you All you can control is what you try to do about it. And that happens— I mean, but recognize that luck plays an enormous role. And I think a lot of the headlines about the big companies and the billionaires and so on, I have the feeling that if we deconstructed their stories, we would find that in almost every case, they just got lucky. It's not to say they're not good, they're not smart, and so on, but they also were extremely lucky.

I, when I interview people and we have this conversation, I love when, when the most successful people I've interviewed who tell me, yeah, I got lucky. And I've also had conversations with people who they are, they're not good actually. And they're not, they're not that skilled and they got lucky and almost can't, they won't say that they got lucky, you know, like they, they believe that they, they're good. And, and, um, I, I think that the, the multi-time founders, the, the, the one, the founders that I find the hardest to talk to, work with, invest in, whatever, are the ones that got super lucky in their first go-around. And it's almost like a debilitating win. It's like they did so well the first go-around. They had a company doing $2 million of revenue. They sold it for $400 million, just whatever, because of whatever luck. And now they present themselves as like, well, that— I was good. I'm just going to go do that again. And now it's like 5 years later, they're $2 million. They can't raise a round at $20 million. And like, I don't understand. You know, last time I was at $2 million and sold for— that dynamic is the one, you know, I almost would prefer the person who's done it, had the bad luck, but really great at execution.

Yeah.

And then is doing it again. Like, I don't know, but I don't know if that makes sense, but that's kind of how I—

It does. My fifth company, one of the co-founders had a great track record and he had been initially one of the key people at Netscape when browsers were first being introduced, which at least for a period of time was enormously successful.

Yeah.

And then he had co-founded a company that also did very well, at least for a period of time. And this was now his next venture, the one that I was being recruited into as CEO. And the issue with this company is that it hadn't gotten traction and he was mystified by it. He really just couldn't understand. He said, I did all the same things as the first two times. Exactly. And I don't understand why it isn't working. And it was more than that. He didn't want to deal with it anymore. I mean, he was done with it because it was just too distressing to him to be in a context where it just wasn't working. As easily as what he was accustomed to. And I remember sort of, I can't remember what I said, but I know what I thought, which is, well, you know, you're very talented, but you got lucky. And this is actually normal what you're experiencing. It's not always easy. It's usually not easy.

Why did you stop operating as a CEO?

I sold my last company 4 years ago and decided to take a break. And then during that break, among other things, I wrote the book that we talked about. And, but I actually don't think of myself as having stopped operating. I've run 6 companies. I'll probably run a 7th at some point. I, as it's still in my blood, I guess I would say. So I guess I've been impersonating a retired person as opposed to actually being a retired person.

What, I'm curious about the, actually, yeah, I'm curious about the book because I, at one point I'd like to write a book you know, and this, this reading, this inspired me a lot. Like, how, what was that process like? How long did that take you? Why did you do it? How long did it take?

Yeah, it was funny. It was very organic the way it came about. I never actually thought I would write a book. It came about by accident to a great extent. And a lot of the best things in my life have emerged spontaneously and by accident. And this was one of them. I was speaking to a former colleague and I was, telling some story or pontificating about something or other. And he said, you know, Mike, you should consider writing a book. And my initial response was, mm, I don't think so. And that just so happened at lunch the same day I was meeting with another former colleague. I mentioned what the first colleague had said, and he reinforced the idea that it would be a good idea. And then I more or less spontaneously decided, you know something, I'm going to try to do it. So that was where it got started. It ended up taking about a year to write, but really 90 days was the, was the time where about 85% of it got written. And it was a real effort and I didn't actually enjoy writing it all that much. I, I, I would say that I enjoy having written it as opposed to, you know, enjoying the actual writing process because every day I would wake up early, I would in this sit in this room and I was my, one of my cats next to me on the, on the desk. And I would try to write for the next 6 hours. I did this 90 days in a row, and some days I would write, you know, a couple pages, and some days I would write a sentence. And, uh, and I, I'd read about authors like Stephen King who were unbelievably prolific. Like, I guess every day for 50 years he sat down and wrote 5 pages. Well, that's not me, I can tell you that. Um, and so it was very challenging, uh, but, uh, in the end, I would say very rewarding. As for the approach I took, once I decided to write a book, I wasn't sure how to actually go about doing it. But I did have a writing experience over a period of 25 years that helped inform the approach I ultimately took. So I started writing an annual holiday letter. You know, people, a lot of people do this. You know, here's what we did last year. And this is at a time when these types of letters were less common. And I wrote a couple of them, you know, one year, the next year. And the third year I realized that what I was writing wasn't very interesting. It was just kind of saying, we did this and this and this. And I thought, I'm not interested in writing it. I don't think people would be interested in reading it. What if I turned this into more of a creative writing exercise? And what then evolved was this idea that these holiday letters were kind of like a patchwork quilt that I was creating over a period of years, telling the story of our family's life. And, and each year it was very different from every previous year in terms of the approach I took. Uh, it featured one person in the family or maybe a certain writing style, but what ended up happening over the course of those 25 years is I taught myself to tell stories in 2 or 3 or 4 pages. And so when I was thinking about how to write the book, I initially thought, I don't know how to write a book. And I thought, but I do know how to write holiday letters. I know how to write these 2 or 3 or 4 page stories that are pretty tight and engaging and have a theme. And I thought, that's what I'm going to do. I'm going to write a lot of holiday letters, more or less. And that's what the book is.

Which is these little chapters. Yes, it makes sense. You mentioned your family, like you CEO 6 companies, hard job. We talked about that already. How did you balance family and work? And did you balance? Is there a balance? You know, what did you, what sacrifices were you making along the way? Did you change how that oper— you know, from the early CEO days to later CEO days as your family, your kids were getting older? Like, how, how did you deal with that?

I would say that these types of entrepreneurial experiences put a lot of strain on families and relationships, at least in my experience. Having said that, I always have prioritized family extremely highly. So, uh, I made time for everything. I mean, I wouldn't miss events and I, you know, I would avoid traveling at certain times or schedule meetings around so I could go to, you know, one of the kids' soccer games or basketball games or things of that sort. I will say that I wasn't able to do anything else. In other words, you know, between the job and between family activities, I didn't have time for anything, including anything creative like writing a book. There was no chance of that. So, it was a challenge. I think you have to be very time efficient and I, I think I'm pretty good at that, which has been helpful. But the hardest part is that you bring, you bring it with you. You bring, I mean, you, you know, you're, you're always thinking about the business or you're always anxious about something. And then when you're with your family, you're kind of half with them, but you're half in your own head still thinking about the business. And I have to say, I don't think I ever got very good at that, um, through the years. But, you know, I have a great relationship with my wife and kids, and I think it's worked out pretty well in the end. But there was certainly a price to be paid for being so immersed in these types of crazy companies.

Yeah, I think, I think that the not being present is a very common thing that I, that I hear. And I, of course, I had the entire time, my entire career of just always having— there's a part of your brain that's just you can't turn it off, actually. And, um, and I've had those conversations where my wife is like, you are not here, you are definitely somewhere else thinking about, you know. And she would sometimes be like, why don't you just go and get whatever that is out of your— like, go write whatever email you need to write or whatever. And, um, and I think that back to your point before, you were talking about like the mental health of founders and the people you talk to, and I think this is an example of one of those things that people need to know is the case for everyone, and you're not unique if you're dealing with that. And even more so what you said, like, yeah, maybe you can do work and family, maybe, but you can't do work, family, friends. You can't do work, family, some hobby. You can't do work for like, you really can only do, I forgot who it was. I think it was someone, there's some like speech, one of like the, commencement speakers, I forgot who it was, who said like, you can only do 2 things great, you know, at any given time or something like that. And, or anyway, so I think, I just think it's important for people to hear that because I talk to people and sometimes you're like, yeah, I'm going to have like the work-life balance. I'm like, I don't think it's possible. I don't, I have yet to interview someone, literally 100 interviews. I've yet to interview someone who said, yeah, yeah. I had work-life balance, definitely.

Like, I think if you're building— so I think if you're really trying to build something significant and transformative, I think there's no chance of, you know, that, you know, I, you know, some people are better at compartmentalizing than others. And I see this in the CEOs that I coach. You know, some are relatively good at that, some are relatively poor at it. The ones who are relatively good at it still struggle to balance. You know, there is no balance in some sense. I guess what they lose is sleep. And yeah, yeah, yeah, exactly. But the ones who can't compartmentalize, forget it. I mean, if you're, if you're really bad at compartmentalizing, work will end up consuming you. And, and that can be very unhealthy actually. And, and I think actually can have a very adverse effect on the, on the work results. Uh, in the—

talk about maybe Bill Campbell, cuz you mentioned him now a couple times and, um, seems like a very important person in your career and life. Maybe share a little bit about, about him for people who don't know who he was.

Yeah, Bill was a remarkable guy. He started out his career as a college football coach, and then when he was about 40 years old, he decided that he was going to go into business instead. And he had a meteoric rise where within about 5 years he was the head of sales and marketing for Apple. And then in subsequent years, he ended up becoming the CEO of Intuit. And then eventually came to be known in Silicon Valley as the coach of Silicon Valley. He was on the board of Apple. He was, you know, Steve Jobs' most trusted right-hand guy. He played a very critical role in helping Google and the senior people at Google, a lot of the most prominent Silicon Valley folks. But he also more quietly helped a lot of people who were less well-known and folks like myself who were trying to build an early-stage company. And he would provide an enormous amount of time. I mean, I met with him once or twice a week for about 10 years. He was always accessible at any moment in time. He would, he would just, you needed to get him, he would take the call. He had no agenda beyond trying to be helpful. I think that's the most profound thing. I mean, on one level, he was incredibly talented. He was, You would give him a small number of facts and he would immediately see the entire picture. He was very savvy, very smart, and enormously empathetic. But he also, as I said, had no agenda. He wasn't doing it for money. He was doing it because he wanted to just be helpful to people who needed the help. He was a coach still, you know, the college football coach. He was still that coach. And he had a very big impact on how I learned to do the job of CEO. My first company, I mean, the house I'm sitting in right now, I own this house because of the advice that Bill gave me at a very critical moment in time. So that's a very tangible benefit that came from that. And frankly, the book that I wrote to a very significant extent and the help I provide to CEOs as a reflection of what I learned from Bill. I, you know, I basically decided I want to pay it forward. I'd like to, in a very similar spirit, try to be helpful with no real agenda beyond that. And that's due to Bill. Yeah, he's remarkable. There was a book that was pretty well known called Trillion Dollar Coach that was written about Bill Campbell. And I've never met anybody like him in my career. He was remarkable.

Oh, yeah. I've heard a number of people mention him, and I need to read that book, actually. It's amazing. Last question for you. Knowing everything you know today and all the experiences that you've had in your life and your career, what is the one piece of advice that you would go back and give yourself before you started your first job ever?

I think it would be two things. The first is that you're on the right track, Mike, in terms of what you're interested in doing. So, I mean, I'm glad that I did the, you know, pursued the career that I've pursued. But the piece of advice would be focus on the input, don't focus on the outcome. It's because you don't control the outcome. Just try to be in the moment and do as good of a job as you can do in all the different dimensions that are associated with that. But try not to get wrapped up in whether things are going well or going poorly. Just try to be more level. It's something that I taught myself over time, but it's not something I knew at the beginning.

Hey, and you said this before, which I want to call out, which I really liked when you said before of, you know, if you're on a high, it's probably going to come down. And if you're low, it's probably going to come up like that. That's just, it's like a sine curve or something. And it's like, you're going to, you're going to go through that. And, and all you can do is focus on the inputs because you're not, you're not controlling those outputs.

I taught myself to be level and the expression I heard once is be like sand. And, and so yeah, when things get, get up and they're great, I expect them to get worse. I don't get too excited when things are not going so well. I assume they're gonna get better because I've seen that many times, so I don't get too upset about it. And in a company context, you know, dealing with a team of people, I try to, you know, preach that to some extent. It's like, it's fine, we're okay. Just sort of, let's work the problem. We're trying, think in terms of the long term. Don't get too upset. Don't get too excited either. I mean, it's just, let's try to, Enjoy what we're doing, try to do it as best we can. And if we do that, the odds are that in the end we'll have some level of success. I don't know exactly what that's going to look like, but let's try to do it well. Let's be proud of that. Do as good of a job as we can for customers, create the best environment we can for employees. Just try to do a great job. Focus on that.

Good. Mike, thank you so much for doing this. I really, I really have enjoyed reading this book and I love the format. I think any— anyone who's a founder should be reading this. And, and it's, it's easy, and it's also just— you'll read it and go, oh shit, yep, I'm going through that. Oh yeah. Like, so thank you for writing it. Thank you for doing this with me. I, I really enjoyed—

yeah, thanks for having me on, David. I really enjoyed the conversation. Thank you very much.

Awesome, awesome. For those of you listening, I hope you enjoyed also. If you did, please share this out with your networks, and we'll see you for the next episode of Not Another CEO podcast.