Mastering Startup Execution - Rudina Seseri - Glasswing Ventures - Episode #90

From day one, what are we doing as founders? We're going against the 99% odds of failure and believing that we are going to overcome them because of our, you know, the unique product and technology that we are creating. We are leveraging the market opportunity that we see and how we are going to be able to deliver the best. Well, how do I know that Dave is going to build the best product?

Welcome to Not Another CEO Podcast. 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. Today's guest is Rudina Cesare, founder and managing partner at Glasswing Ventures. Rudina is one of the most respected investors in the Boston venture ecosystem. Over her 20-plus years in venture, she's backed and worked closely with founders building category-defining companies across enterprise software, cybersecurity, insurtech, and AI. She's known for hustling for her companies and helping them build their early teams and get their first customers. And as if that doesn't keep her busy enough, she's also an executive fellow at Harvard Business School and a connection science fellow at MIT. She also sits on a number of public company boards, including M&T Bank and MSC Industrial Supplies. Please welcome Rudeena Seseri. Hey, Rudeena.

Hi, David. Thank you for having me.

I'm very excited for this. First question I ask every VC: what is the one thing that you look for in founders or companies that you invest in?

I would say the characteristic that I look for most, um, would be the the execution excellence, sort of that hustle that comes with being an exceptional founder. You know, there are founders who have great ideas, who have even visions of what markets will emerge to be like or new industries that will be created, but nothing can make up for that execution orientation. I call it ruthless execution, sort of that focus to deliver not just X, but X plus something beyond everyone's expectations. There is something about that kind of focus and that ability to deliver that enables those founders to be particularly successful.

How do you find that? Like when you're meeting with the founder first time, like how do you, you dig to find that if they have that?

Yeah, it's interesting. You know it when you see it, yet it's always hard to clearly articulate it. It would be things, even small things like, you know, as you know, we're a first capital in VC. So you meet the founder and then you meet them again the next time. Between those two meetings, they haven't just gotten done what they indicated they were planning on doing, but quite a bit more of that. Or, oh, you made the suggestion, they took it or didn't take it or reflected on it, it doesn't matter, but with that they made something out of it way bigger than you expected. It's a notion of they don't just sort of again have the vision or have the passion, but it's substantiated with substance and execution.

I, one of the things you said there, I want people to hear, founders who are listening to this to hear, which is from that first meeting to the second meeting, You, you are taking, you're paying attention to what they said that they were gonna do. And when they come back, they have to have done that or more, you know, and shown that they are. Because I, I think actually I, I had this experience early on where I, I pitched someone at Google Ventures and they were at a number of firms and they came back around many, many years later and they were at, um, KKR and they came into the meeting with me and they started asking me for updates on the business and And as I was giving them updates, they were looking at their phone and I said, and they said, you know, Dave, you did almost everything you told me you were gonna do when I met with you for the pre, for the seed round when I was at Google Ventures. I said, how do you even know that? He said, I keep everything in Evernote. Like, so he had been in multiple funds, but he literally was tracked when we were talking. He was checking to see if I did the things that I said I was gonna do. And, and I think, on a shorter window of time, the likelihood that the VC is paying attention to that is very high. And I don't know that everyone always processes that when they're meeting, you know what I'm saying?

I would, I would agree. And it's— I want to make sure that it doesn't come across— it's not a transactional thing. You told me this, have you done that? Sort of like a check mark. It's much more about from day one, what are we doing as founders? We're going against the 99% odds of failure and believing that we are going to overcome them because of our, you know, the unique product and technology that we are creating, we are leveraging the market opportunity that we see and how we are going to be able to deliver the best. Well, how do I know that Dave is going to build the best product? One way is to know to overcome challenges that come your way, and resilience is another key, key facet in execution. And not just resilience, I'm not gonna give up because I'm not gonna give up, But resilience in finding solutions at any problem that comes your way, whether it's a known one or an expected one or an unknown and a new one. So that's really, really critical.

I don't know if you agree with this, but to me what I feel like, and I know you've been investing in AI for a long time, um, before it was cool, um, you know, the, um, you know, it was cool in my book. Yeah, yeah, yeah. Well, that's true. Yeah. Okay. Fair. Um, but, but I think that, you know, what I see with a lot of the AI companies that are coming around now, a lot of the founders and everything, like there are so many of every cat— like so many companies per category, so many companies solving very similar problems because it's frankly much easier to build than it ever, ever in the history of building technology companies. It's the easiest it's ever been. And actually execution becomes, I would argue, actually more important in a, in a time like this when anyone can have an idea, anyone can vibe code something, anyone can, you know, build a wrapper around ChatGPT, but actually to take that and make a business out of that, that, that doesn't just happen overnight. That requires the execution. So I actually feel like now it's a bigger differentiator. I mean, I'm sure it's always been a massive differentiator, but it feels like it's even bigger. Would you agree with that?

Very strongly, in fact. You know, I remember when we talk to founders, but like, I remember my early investment memos where I would say, we don't invest in products, we invest in building companies. The product alone is not enough, just like a business commercial mindset alone is not enough. You need the, you know, all the various pieces, the confluence of them to come together. So absolutely critically important. And it's interesting, right? Because Every company feels like it's jumping on the AI bandwagon, and that's, as you noted, is a function of the market times of this wave of disruption. Yet the best ones will be differentiated on account of their execution, i.e., how they build the code. Yes, you can build 8x the amount of code with, you know, with a team that would deliver 1/8 of that last year by using AI tools. So Productivity is much, much higher, but that's not enough. You gotta find the, you know, right market opportunity and that's not enough. You gotta find your edge. What's your, what's your hook? Why, why not Dave? Why Dave and not with enough? And, and, and by the way, you're seeing with AI, truly AI native companies to get to $0 to $3 million in ARR, they're doing that much, much, much faster than we've seen before. Can they retain that? What are the renewal rates? Because we're at the stage of, especially if you think about, you know, mass consumption tools, you know, the usuals, we are at a stage where there are many, many tools, you know, think ChatGPT, think Gemini, you know, there are many, many tools that are fairly similar and, you know, from release to release, then, you know, these platforms are competing on which one performs better. And what we're seeing is a lot of users, I mean, these are the consumer examples, but same goal holds for enterprise, don't have a particular loyalty to one or the other. They can move. The barriers to switching are very, very low. Just because you've got a customer, wonderful, big deal. Can you retain them? Renewal rates become very important, I think, in this stage that we're at around AI adoption.

Yeah, you know, actually, I, I spent my whole career before SaaS and cloud were even terms that were being used is when I started in that. And when you look at the run-up to 2020, 2021, and you look at kind of what happened in those years, especially at that end of '20, beginning of '21, I feel like that for SaaS is what is happening now for AI, where in end of '21, '22, people had 5 project management tools 2 virtual whiteboarding tools, 4 video conferencing things, 2 virtual event, you know, and it's, it feels to me like we're going through the, what you're saying is kind of that right now because everyone is saying I have to use AI, I have to try everything that's in the market because who knows which is going to be better. And there's probably $5, $6 being spent today for what will be probably long-term more like $2 being spent in a category. And so the execution becomes even more like it actually even more and more understanding how to acquire and retain the customers is much more than just building good product.

Absolutely. If I may pull a couple of threads from what you said, Dave, one is actually I have this term I use, AI false indication of interest with my portfolio companies because AI is so new and every enterprise, you know, is hearing it from the board and the CEO down. We gotta leverage AI, we gotta leverage AI. We're in a stage where there, there's a lot of interest, but it's discovery interest, not intent to use. So, you know, think of with your founder hat on, you get a call with so-and-so, you think, gosh, you know, it's qualified, it's bullseye, I'm getting a shot. And yes, you are, you know, higher likelihood than if you didn't speak to that. But do they have a budget? Are they really interested? No, most of the time, well, I shouldn't say most of the time, but at least a good chunk of the time, if you use the term AI, they're being told AI, they're there to learn. That's not as much of a qualified lead or ICP as you normally would've seen. Hmm. You know, focusing on the value proposition. So what I guide my companies to do is to actually lead with value prop impact, and only when they get to the how, talk about, you know, the AI piece of it. So that way the calls that you get on, there might be fewer calls in volume, but they're much more bullseye and, you know, and on ICP. So that's an important piece. The other piece that you reminded me on is this notion, where does the budget come from? You know, you remark that what's being spent $5 or $6 a day, it's experimental and, you know, a steady state, it will be $2. What I would build on that is that, and oh, by the way, these are dollars that come out of innovation budgets. They're not the enterprise dollars, true P&L dollars. Experimental budgets and innovation budgets are not sticky. Some are, I don't wanna overgeneralize, but for the most part, you really wanna be out there, you know, with a, with a core P&L. So, you know, hard for founders to say, oh, I don't want your innovation dollars, I want your real dollars when they're just launching and any win is an important win, but important to distinguish between those types.

I like that a lot. I like that a lot. Yeah. 'Cause there's a lot of founders who tell me I got to $3 million, I got to find whatever it is. And then it's like, okay, cool. But is that people playing? You know, there was, I met some companies, multiple, I think I met 3 different companies that were doing voice AI for fast food drive-thrus, just as an example. And they had amazing early traction. And really, even for me, I was like, wow, this is crazy. And then someone announced, you know, there was some news article that said Taco Bell is having all these issues with the voice AI, so they're removing it from all their drive-thrus. And then McDonald's said they were removing it from all the drive-thrus. And then, you know, and, and it was experimental. It— now, will people be using voice AI for drive-thrus? I'm pretty sure yes. I mean, it seems like a pretty obvious thing. But right now that was an experimental budget that was kind of being played with, you know, and it's figuring out how to make that, to your point, into the enterprise kind of budget.

The other thing is AI is so new in terms of this type of adoption and this type of interest and also very, very ill-defined. If you and I polled 5 individuals today and asked them what they understand with AI, I'm fairly confident we would get 5 very, very different answers in large part because AI is not a particular technology. AI is an outcome. And yet I talk about, you know, my AI portfolio and, you know, Anders talk about being an AI company. Really important, um, to sort of pause on that because by not defining it well, what we are doing is building this level of expectations on what it can deliver. That are unrealistic. So, you know, you go, AI is going to do this and it's transformative as a founder, whether, you know, you're pitching them for funding or when you're pitching a customer, and then you are, will be followed by a trough of disillusionment. Not because the technology or the enabling technology is not transformative. It's absolutely the biggest transformation we will go through from a tech point of view, but because in the amount of time we're putting a huge burden on what it can deliver in the short term and what will disappoint.

I like that. I like that a lot. That, that, um, that is how you put it more eloquently. This is exactly how I've been feeling recently, is with all the talk about all of this, a lot of the companies that I work with, when I see their solution, they're, they're good, they're, they really are amazing, but they're not— people think it's just going to remove all, all human beings and it's just, it's just going to do your work for you. No humans in the loop, one employee and 500 agents per employee, you know, and in reality maybe we get there, maybe we get there at some point. But when you set the expectation there, everything is below that bar. You know, exactly what you were saying.

Especially because in the stage of maturity or immaturity that we are with AI, you, we might wanna argue that, you know, it can do many things and you have many agents. The reality is though that We're in a stage where AI is mimicking reasoning. If I just focus on GenAI and LLMs, which is what has caught on fire, so to speak, you know, there is no true reasoning. So no one in the short term, make no mistake, no one is taking their hands entirely off the wheel and saying, and go for it. The human in the loop becomes very, very important and remains very important. And in fact, even if you look at the dollars that are getting spent, it's interesting, right? Because you think all of it is going into the LLMs, A lot of experimental dollars are going into GenAI. A lot of, from a customer perspective, a lot of the actual enterprise dollars are going into, you know, classical machine learning or combinations of ensemble models. Some of the more tried and true facets of machine learning. So, you know, it tells you that a big end or even a mid-sized enterprise, there is a lot of governance and risk that needs to be mitigated. So they are absolutely trying, starting with the tried and true, the closer you get to the core of the enterprise. Third thing that you mentioned is sort of this paradigm of one individual, one employee, and many, many agents. Well, let's have some fun. When you say agent, what do you mean? When I say agent, what do I mean? You know, in full candor, chatbots like the ones where you'd say A, pick A or B, there was no freedom. Those were an early form of agents. Today you can have some level of simplistic engagement with I'm just using chatbots as an example. You know, customer success agents, I guess we can call them. And they understand meaning even though we might be using different words up to a point. It gets complex, they pass it on to a human. We have a long way to getting to this agents. We have this framework at Glasswing and it's on the website glasswingventures.bc. We call it the, you know, autonomy, agent autonomy framework. And it's about where will the agents be? How do they communicate with each other? What are the systems? We've talked about like this swarm, you know, model. So there, there's a lot of complexity and somehow we overlook all that and go to the end state. And yes, there will be an end state where we, we refer to it as ambient AI. Wherever I go, I'm surrounded by intelligence, my personal agent, my professional agent, functional agents. So there will be hierarchical structures around them, but we are a ways away from that. And even then, I'm not 100% convinced that everything, the human will be out of the loop. Hmm.

I want to go back to the conversation in the beginning to talk about what you're looking for in these founders and this execution. How long is it when you first meet with the founder, you first have that conversation, first meeting, how long is it before you know that you're— you want to keep going, that you're excited, that you're interested, that maybe even in the back of your mind saying to yourself, I would do this deal? Like, how, how long is that?

So it's very interesting. I'm gonna be vulnerably honest here. It's the first 5 minutes and the first 20 minutes. And here's what I mean by that. Typically when I go into a call, I know a little something about the company. Very rarely do I go into a call where I have absolutely no idea. In fact, I can't, I cannot remember the last time when that happened. And then in the first 5 minutes, you kind of get an impression around the people. Um, and then you go, hmm, is this, is this what I want to back? Are they the right people? Do they know each other? Are they both, or the 3 of them, however many are on the, in the in-person or on Zoom interacting with each other. You kind of get an early feeling. That's just, then in 20 minutes or so into it, you kind of know, you either know that What they're building is different than what you perceived it. Um, you're not excited about it. It's too old school, too naive. And keep in mind, the reason why I'm raising the barriers, by the way, is because most of the time you don't end up actually investing in the company. We're in the business of saying no and needing to be liked. So when we say yes, we win the deal. It's a very interesting dynamic and conundrum that, you know, the venture capital industry, myself included, have. So what I try to do is I try to be very, very honest with the founders. I find that a quick no is very, a thoughtful no, the real why you're passing rather than I'd like to see a little bit more traction, right? You know, it's much more appreciated than a lingering process that leads into nowhere and then the founders get gulfed. Interested. Just, that's horrible to do. So to answer your question, the first 20 minutes I have a good sense. And by the way, sometimes I start the call with that 5 minutes ago, oh, I'm not gonna like it. And by the 20 minutes I go, wow, they're on to something. So the first 5 is sort of just a merely sense of, and as often, if not more often, I change my mind. But by the 20 minutes I kind of know, and then I'm focusing on If it's I want to learn more, what are the 3 or 4 risks that I want to tackle next and learn more about?

So one of the things you said there is about, you know, being upfront and sharing the kind of the, the reason why you're passing. And I, I can only imagine how hard that is to do because you basically have to do that all day, every day, just by the math. Um, there are so many dynamics, at least now taking a step back and spending a lot of time with VCs. There there are so many dynamics at play at a firm and in your own portfolio. Yeah, I mean, even yourself, like, do you explain that to the— like, will you explain all of that to the founder? Oh well, you know, we have— we had a bad experience with this, and so one of my partners doesn't really like to, you know, get involved with, you know, do you— I don't know if that makes sense, but I'm just like, that's what I seem to be seeing. Like, you see all these dynamics I didn't even know were happening.

So a couple of things. One, that type of dynamic honestly transpires once you've gotten very close to, yeah, I see, like in the first, if you know that you have no support and will have a lot of pushback within your partnership on a particular opportunity, why are you taking her call? So that typically doesn't manifest until later in the process.

Got it. That makes sense. That makes sense. Yeah.

The early, you know, innings are, oh gosh, this, you know, I know this space inside out because this is my 5th or 6th, or, you know, I have this many portfolio. I don't know, logistics, supply chain. Like I do, I love vertical AI. I think there's a lot of opportunity not to have 10 companies solving the same thing. So there's a lot of opportunity to create moats. But that aside, you know, how are they approaching it? Oh gosh, they're completely miss the point of this barrier that exists.

Hmm.

You know, so it's, so try to think about, can I see this company get to multi-billion dollars and why? And what do these guys bring to, or gals bring to the table? And so during that first conversation, I'm thinking all about that. What's unique about their technology? You know, do they get access to data that they're training the algorithms that are highly, highly differentiated or not? So it's, it's that sort of dynamic. Then in future rounds, you know, okay, I'm bringing in my advisors. Hey, the tech is checking out, but there's nothing particularly unique here. This is going to be an entire exercise in execution. Okay. No, it's not a no, but it's a different type of risk profile. Or hey, they have something really unique on the product, but they have zero go-to-market DNA. Okay, the product is great, but it won't sell itself. So in every step you're saying, okay, what do I have? Great, check that box. Now, how do I need to help support these founders? How do I help augment them? Listen, do I help them with a team? Which customers? ICP? And can I do it? Sometimes it's so much that needs to be done or they're going about it the wrong way that you can't undertake the risk. And other times you go, ooh, I have these 3 people I want to connect them to. You know, potentially this individual could be an extension to the team, da da da. So you're building in your head at least how I approach venture.

Yeah, I feel like from what we, you know, what I said in the intro and from what I understand from people who've worked with you is you really do, like in the early stage of a company, you wanna hustle for the company. You wanna help them put together that team. You wanna help them with their first set of customers. How do you do, like, do you, you yourself, or is there someone on your team? Like, how— how— because you have so many companies and you have the firm that you're running and, you know, all the different— the boards. Like, how do you do that for these companies?

Um, so it's yes to all of the above. Um, you know, the— as managing partner, I've come to appreciate sort of how much of my behavior sets the tenor of the firm and where we prioritize. It's fascinating, you know. I'm sure There are plenty of business school case studies that get written about this, but just experiencing it myself. So just, I will give you an illustration because I think it's an example, because I think it's going to make the point. So like many other VCs, we review our portfolio companies. We do this typically on Thursday. So on Mondays we review new opportunities, on Thursdays we review the portfolio. So we have a, you know, two-sided document when we print it, but a two-pager, um, where on the first page we're reviewing how did the company do financially, how, you know, what's the team, what are the challenges, da da da da, what's the product, what's coming next. On the second page, we're actually reviewing what have we done for the company since the last time we discussed it. What have we done for them lately to deserve to— So yes, we provided capital, but that's not enough in my book. So you said early in the early days, yes, talent and customers, but I have portfolio companies that are Series B and Series C that we're still helping, you know, bring customers to. So very important to have that embedded in your DNA. Now your question of how, so a number of ways, our network. So you mentioned, you know, what I do in ecosystem, I mean leveraging our network, you know, being embedded in the enterprise. So it's not the high and mighty VC. We're not just passing on, you know, prescriptions and advice. We're actually out there and seeing what enterprises that are, you know, looking to adopt tech, what are they struggling with? How do you match make? We have a number of operating partners in the firm that basically are focused in helping these companies scale faster and more effectively than they otherwise would. We have over 65 advisors that are contractually exclusive to Glasswing. Operators, big companies, C-levels, you know, tech folks. Again, we tap into them where there is a win-win around customer introductions or helping on the product. Everything is set up that I tell, you know, respective founders, we are purpose-built to support them, to do ICP and get them scaling faster than they otherwise would. And I'm very passionate about that.

So I like— well, a couple of things. First of all, I think when you talk about how your behavior, you know, everyone will start to mimic, mirror your behavior, I think it's the same as a founder. You know, I tell founders all the time, the company will keep your pace with you if you're, if you're driving, if you're, you know, it's just so same thing. You're the founder of the fund. Like, you know, you, you— I'm not surprised by that. I'm curious, how often do you review each company? Obviously not weekly each company. Is it like once a quarter or—

No, I think it would probably be every, I would say, 3 to 5 weeks depending for each company. Um, but, but that's at the full partnership level. Then the individuals that are on a particular, working for a particular company would typically be a partner and a non-partner. So it's 2 of us at least on every company. Then on top of that, you have the operating partners, which depending on the need, are helping across, you know, 5 companies, then tomorrow it's another set or a mixture. So it's many, many, many folks that are getting involved and we're getting, I mean, it's as simple as, hey, you know, what's the best accounting firm that I should be using to, hey, I'm trying to get this customer introduction to, hey, I have these 4 partnerships going, 2 of them could be more strategic, i.e., making the waiver acquisition. How do I think about this? How do I structure it? To, can we introduce so-and-so to, I'm getting ready to raise the next round of financing, help me think through positioning, deck, open the Rolodex, all and all of the above.

Do you take board seats in all the companies? Yeah, we do. That you invest in?

Yes, we do. Yes, we do. I think it's interesting. I grew up, at this point I can say I grew up in venture and, you know, what constitutes a seed round has changed, and it's changing.

Understatement.

Yeah, it's changing yet again as we speak. Um, it's sort of the seed is becoming the Series A, in which case I reserve the right to use different nomenclature describing the stage we go in and invest as early stage, you know, first capital in firm. But, um, but I find that being at the governance level, one, you know, you're more embedded with a company, and it's a lot easier to be, you know, at arm's length and, um, not support the company. In that case, you can do a lot more checks and kind of check in periodically. Hmm. For us, once we're in, we're fully in. We don't just write that initial check. We will participate in the, you know, Series A and the Series B and beyond. And so, you know, it's a high conviction, high concentration portfolio of companies. So we will not do 100 companies or what, something of that nature in a fund. It's, you know, like Fund 3 will probably do, which is over $200 million, will probably do 26 companies plus or minus. So, you know, that way you help on the governance, but you can really add value and help them scale faster.

What do you think people, founders specifically, do not understand or misunderstand about your side of the table the job of a VC? Like, you know, what, what, what do you think is, is misunderstood?

So, oh gosh, let me, let me think through this. So a couple of things. One, I don't know that there has ever been a good explanation for founders around where does the money come from. In some cases, it's my rich dad and my, you know, rich aunt. In some cases. But in most cases, especially for institutionally backed VCs, we're an institutionally backed VC, the funding is coming from endowments, foundations, like literally hospitals. These are hospitals and foundations where with the returns that we generate, so we invest the money, the companies exit, presumably they do very well, or, you know, A number of them do very well to cover for the ones that don't. And so we have multiplied several fold the returns to this foundation. And hospitals and whatnot, they turn around and utilize that to support patients, to support their operations. Pension funds, right? So this is, you know, sometimes I like to say to my team, you know, we are making a determination with our actions as to whether, you know, XYZ pension fund can pay their retirees pension that they worked for all their whole lives. And I share that because it's the VC and what the VC is doing relative to the portfolio company. But there is actually, we're representing, we have a fiduciary on behalf of the folks at the end institutions that are providing us with this capital to increase their capital, to not lose their capital. That piece gets, um, it gets lost oftentimes. It feels like, well, why can't the VC give me more capital? Or why can't they deviate? Because we have committed to this strategy because I am liable. I need to properly manage the capital of the institutions that have entrusted us with it. I think very little is talked about in that context.

I, I think most first-time founders have literally no idea. I, I think most people have no idea where the money comes from, how it works, everything you just described. Actually, I would go past the founders. I, what I, what I learned over my years of running companies is the employee bases don't understand that at all. Actually, most— I think most employees at venture-backed companies think the money is your money, is the money like that the whole thing comes from the venture capitalists themselves, you know. And I know that many times you invest in the funds, but they think like— but they think that all the money, you know, they, they— and, and I think that that actually would be helpful for the broader population of venture-backed employees to understand, 'cause I think it changes the meaning actually of the work you're doing. Of course, there's the, the mission of the company itself, but when you think about that and you're one of those companies that becomes worth tens of billions and sells and returns the fund 100 times over and the pension fund gets that return, like that's, that's a pretty big deal.

Yeah. So I, I subscribe to this view that, you know, you can do do well and do good in the process. And that'll be a perfect example of doing well. For sure, I'm not a nonprofit. I'm here, as the industry name would indicate, to, you know, to generate outsized returns. But by doing so, I'm doing good as well. I find that very inspiring. Shifting gears for a second, you said most first-time founders wouldn't know that. You know what else most founders sort of don't fully appreciate, it's, um, that negotiations with the VC are not a one-term negotiation. I, I find it fascinating, the obsession over valuation, for all the right reasons. I completely know it's a zero-sum game, um, and yet they don't pay attention as much as they should to the structure, any non-participating, you You know, downside protective provisions, what can you decide on by yourself? What do you need investors for? And, and, and good counsel, do good lawyers absolutely help them with that? But in the term sheet phase, it never fails with, you know, second time and repeat founders, it's a multi, you know, part negotiation. With first time founders, for the most part, that is the make or break. So very different dynamic and and it's hard because you're on the other side until you get, you know, become part of the company or an extension of the company through the investment. So you're having to do both educating and negotiating, and by default you can't be initially, it's, you know, you need to build that trust. So I find that dynamic very, very interesting.

Fascinating. In fact. Yeah, I, I actually, I tell so, I, I probably said on the podcast, I can't remember, but I tell so many founders when I talk to them one-on-one, stories of myself and other founders who actually took lower valuations in rounds that they did for cleaner structure or for the, the firm that they want or the part. And I think that we as founders, because of, it's always the case, but even more so in times like this where our self-worth a lot of times gets tied to the valuation of the company because the other person who came out of our YC class or the person who was the other investor, they got a higher valuation. And so now, oh, well, they're worth a billion, I'm only worth $200 million. That means therefore I am a worse company or I'm a worse founder, which is not, it's actually really not the case. But I, I, I tend to agree with you that, that, that, that's all you look at. By the way, my first company, we had to raise money in 2008 when the market crashed and we took money at a decent valuation, about 2.5 times liquidation preference. And when the company sold, none of the, you know, common shareholders really made money because it was all going to those investors, you know.

And, and you know what, those structured term sheets are very, very dangerous for that reason. I, I don't like structured term sheets. I don't like to issue them. I don't like to receive them. Um, they, they have real consequences. But good luck explaining, you know, to a first-time founder, the, you know,, the pref, the liquidation stack. Now, the good news is at least in the stage that I go in, there is not a lot of that. Right. We very early, but, but that's a really, really important facet to, to keep in mind, especially for young founders. Hmm. When they receive advice, when young founders receive advice that says, oh, you should be worth a lot more, I, I always wanna challenge them and I say, great, whoever gave you the advice, are they writing the term sheet? Because I am voting with my dollars and my capital. Are they writing a term sheet for me? If they are, by all means. So this comparison, we're, listen, I want my founders to be competitive. I'm competitive. It's a bit weird in the business of wanting to win or just, you know, advice without substance only gets you so far. By the same token, it's in my interest this also gets forgotten, for the founders to own enough of the company. Yes. Yes. That they can prove it in the long term. I, I invested in a company that's actually an incredible high flyer in my portfolio, in my direct portfolio. And, um, they, it was one of those rare instances where they'd raised some pre-seed money before we went in, but with very little pre-seed money. I mean, you know, first time over 50%, 5-0 of the company had been hijacked from them. And that just, I think that's an abomination. And so, um, you know, not all VCs are evil. What, what we did in that instance, we actually, you know, gave them a certain valuation, et cetera. But then we also made them whole so that they— more than 50% of the company. It's, if you don't do it for the right reasons, which is do the right thing, if you don't believe in that, do it for your own self-interest, which is you want the founders to be there for the long term.

Well, yeah, I, I, um, I couldn't agree. Obviously I couldn't agree with that more. That, that's a good, um, so, so what I want to ask, which kind of goes to all this, is that you as a, you know, are, are, are founders picking the firms or are they picking the partners? Because, because, um, there are great firms that I know very well with very bad partners. Some very bad, and there are some firms that no one's ever heard of with very good partners. You know, how do you think about that when you're talking to a founder? Are they, you know, how would you recommend that to a founder of yours that's looking to raise the next round?

Yeah, it's a very interesting conundrum. Um, I actually focus on advising my founders to raise from the best firm with the best partner for the stage that they're at. Yes, you get a lot of bragging rights in a cocktail party saying I raised from XYZ, but if you're a drop in the bucket of that particular, you know, partner because they don't have enough in you or because you're somehow in the big picture, you don't matter a lot. Um, or the partner is a great person, but they don't care, have much juice within the firm. From stage to stage, the needs of the company may change. So yes, the reality is, will someone pay attention right up front if you say, and I'm back by fill in the blank, very large firm? Sure. But then what? As opposed to, I almost like firms that, you know, have domain expertise, have a solid brand, and equally importantly, what have this partner and his or her team done for you lately? Mm-hmm. That's a two-pager. What have we done for the founder lately? That's what I, what I'm looking for. And brands matter and brands and capital can make or break you. So I don't take that lightly, but I'd like to see both focus on the particular portfolio company by the firm and that particular partner and a strong brand. They're not mutually exclusive.

Yeah, I think so. Because I, my experience with that from some of the companies I work with is you may get the great brand. But to your point, you actually said it right. If the partner doesn't have that juice in the, in the firm, when you go ask the partner, hey, can you help introduce me to your other portfolio company so I can sell my product, for example, or get feedback? If that person doesn't have the juice, they are not gonna go make the intros. I don't think founders understand they have to go to the partners who are the partners on those deals and ask them to make intros to their company, you know, and, and that takes, You got to use some, you know, of the, of the juice that you've built up, you know, over, over time inside the firm, whatever the case may be. So I think there's that. I think also I've had experiences with one of the companies I work with where the board member has like 30 boards. I don't even know how the physically— I'm not— 40 boards. It's so many. I'm not sure physically how they, how they can do it. And so even just scheduling a board meeting is literally like a nightmare. You can't even schedule the board meeting. And then when you do, they want to join virtually. When it's an in-person board, And I think it's those things where I don't blame the investor really, but I also, you know, as the founder, you want to know exactly what you're kind of getting into.

So oftentimes people are surprised at Glasswing because, you know, we have 3 funds under our belt, but still a relatively young firm and we have a team of 14 about to become 15. And they go, why? How? Exactly that. As you add more boards, you need to get scale. So yes, we leverage AI for ourselves and all that, but there is a lot of this role is still very human-centric. So what we do for What Is Worth, Dave, is in every company we will have a partner and we have a second or, you know, an observer. So there are things that are very tactical. Connect so-and-so founder with this person. Let's make sure we provide this tool, da-da-da-da. You know, you leverage that young and hungry person and then the partner, in my case, myself, for example, and I'm engaged in more strategic things or, you know, so you get, I joke that you get two for the price of one, but you've gotta find a way to be responsive to the companies. You also better manage fund sizes and number of companies and match that with a team size because at, you know, at 40 boards, that assumes, just think about that, it assumes that 40 days out of a quarter, exactly.

I mean, it's a whole quarter basically.

That's true. And that assumes that you're meeting once a quarter. Most of my board meetings are at the beginning monthly, but most of them are every other month. So wait a minute, that's 80 board meetings roughly. So when are you spending, uh, when do you have time to add value? When do you have time to meet other companies? That, that's hard to scale.

Yeah. Um, last question for you. Um, I could probably talk to you for many, many hours, but last question for you is, Why did you become an investor? Like, what drew you to this? And you kind of, you know, started as an investor and then obviously started this firm.

Like, why did you decide this is what you want to do with your life? So I was not a technologist by training. I actually started in investment banking in 2000, but technology investment banking. And, you know, that was a very, I worked at the CSMB, Frank Quattrone ran that team and very exciting times. And then, you know, the bubble, the web or internet bubble burst. So very sort of challenging times and interesting times at the same time. But I fell in love with tech. So then I went to business school, continued to pursue tech, ran the tech conference, et cetera, then joined Microsoft. And I love, love, love this notion of transformation, you know, what starts as an idea with the, you know, execution to come full circle to your first question, becomes a company and from a company becomes a market leader. And I, you know, I, I joke that I'm stay, I will always stay young because of the founders and that energy of building. I love building. And, and you see that not just sort of in the investments and how we approach the investments, It's not about, you know, here's the VC questioning every number. It's about how are we building together all the way to having founded, co-founded Glasswing with my partner Rick. Um, you know, it's not for the faint-hearted. A lot of my founders would have software to demo, whereas Woodware, here's my track record, here's my strategy, write me a check. So, but, you know, but it's the best thing and probably the hardest thing I've ever done. So. From that perspective, I'd love to be part of the transformational journey. Glasswing is the idea of a butterfly that transforms. I've gone through the journey myself. Cannot stress enough how important that understanding is, and you get to write the future.

Thank you very much, Rudeina. This really— I enjoyed this conversation tremendously. Could probably talk for hours, but there was a lot of good learnings in here that I think for founders who are going through the process, preparing for a pre-seed, seed, understanding all these dynamics, I, I really, I think, um, can really help people just to navigate it when you don't, when you don't understand these things. So anyway, thank you very much for doing this.

My pleasure. Thank you for having me, Dave.

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