Don't Raise Venture Capital: Hiten Shah's Route to Riches

The biggest thing about making remote work successful is, or distributed work, if you want to call it that, is to make sure that you have an environment where accountability is number one and the people on the team have a heavy, heavy, heavy level of accountability. Because if they don't and you don't have structures to ensure that, then you can easily run into the problem that you were hinting at. Where most managers are like, I just want to see the butt in the seat.

Welcome to the Startup CEO Show. If you're the CEO of a high growth company, you need to make sure that you're growing faster than your business business. On this podcast, you'll learn just how to do that. I'm your host, Mark McLeod. Let's get started.

Welcome to the Startup CEO Show. I'm your host, Mark McLeod. In this episode, I sit down with Heaton Shah, co founder and CEO of nirac. I've been a huge fan and follower of Heaton for many, many years. I'm sure you have been too. He did not disappoint in this episode. It could have been a much longer discussion and I'm definitely going to have him back. We went pretty deep into his thoughts on venture capital. He made a pretty bold statement. I'm not going to give away the punchline. You're just going to have to listen. We also went deep into remote work and many other topics. I really, really enjoyed this discussion. I hope you do too.

Evening.

Welcome to the Startup CEO Show. It's a true pleasure to have you here today. How are you doing?

I'm doing great. It's a pleasure to be here and I'm really glad that you're doing this podcast. It's such an important focus.

Thank you so much. Yeah, no, I really love doing it. And you know what, in my day job, I ask CEOs questions for a living, so this all feels very natural. That's super cool.

Yeah.

And I think everyone knows who you are and I'll make sure we cover that when we introduce you. Let's just jump right into it. And you know, you, for me, you know, have been one of the more visible founders in SF for a long time. You've done some companies that are self funded, some that are venture backed. I'd love to just jump right into your thoughts on, I guess, pros and cons of venture capital, like how founders should be thinking about it. Yeah. What are your thoughts on that?

Yeah, there's a couple things I would say here that I've kind of developed over the years. So first of all when you raise money, you're actually getting money ahead of your revenue. When you're self funded, you're using some kind of revenue, whether it's in the business or some other business you have and pouring it into the company. Right. So those two things are basically honestly the only differences. You still have to run a business, you still have to grow a business, you still have to manage a P and L of some kind. You still have to do all these things. And so when I think about it, it's not just a startup, but any business is a race to actuals in a spreadsheet. And are you able to get to those actuals with someone else's money? Because they're giving you money before you're actually earned it. Right. Like a loan. Like back in the day we would get a loan for our small businesses, go to the bank. What are they doing for us? They're giving us money ahead of our revenue in the hopes that we make enough money to pay them back. In the case of investors, that payback is way further out and it might not happen, especially on the venture backside because they're, they're playing a portfolio strategy, right? And people have given them money, so they're stewards of capital. And through that money giving it to you, you're now a steward of that capital. So that's just cutting all the crap. Not because I'm on a show where I'm speaking to someone who has a finance or had a finance career. It's because this is fundamentals of business that I think as a first time founder and CEO, you're not necessarily going to understand. And it's because you just haven't done it before and you don't have this fundamental business knowledge to understand how to keep things simple and make them basic. So I think the first tip I would have on just venture backed versus self funded is like find a way to understand who you're serving and who you're trying to align with in order to create value for the people you serve. So people you serve are users, customers, eventually employees, and then stakeholders like investors. But at the end of the day, that alignment with investors should be crystal clear. You should be working on an opportunity you could represent in such a way where they understand the potential and they believe that you and your team are the best people to go after that opportunity.

Right. A lot of so simple and there's wisdom and simplicity. So I love that you distilled it. What do you look for personally when you're choosing an investor?

I think like throughout the years I was actually pretty confused about this, especially when I first started raising money. And it wasn't until that I started talking to LPs and started talking to folks who sold their companies, frankly, venture backed companies, that I started triangulating the ecosystem. So if we were to like draw this on a whiteboard, it would be like, hey, there's limited partners here. They could be wealthy individuals. There could, they could be, you know, funds of funds which are funds that put in other funds. Or they could be literally like endowments with billions and billions of dollars, where this is just a small asset class for them. And historically it's been an asset class that can get incredible returns, a hundred x thousand x. No other asset class from my understanding gets those kind of returns. But with those returns comes a lot of risk. So I think once I started understanding the LP perspective, the questions they asked me about the investment that they're making into these funds, my opinion as a founder, it started shaping for me this understanding of how the money flows. It's basically like LPs which are usually folks who have an aggregate of money from a group like a school endowment or a police fund. Like there's just all these things, right? And they're called institutional investors, right? And so they give money and not a high percentage of the money they have actually a fairly low, but they have like 20 billion, 100 billion, 500 billion. They have like real money and they give a small percentage to venture capitalists like Sequoia, A16Z, Angels, whatever. Obviously there's a small pipeline of money of wealthy individuals putting in these funds too, usually earlier stage. And then those people are stewards of capital. They're taking this capital that's not theirs and they're putting it in companies like mine, right? And that's it. So then you're just thinking about this, you're like, wait, it's just a whole bunny tree all the way down, right? To us as a startup business that wants money ahead of revenue and in order to go fund our operations, in order to do sales and all those things to basically make money. And then at some point either we go public or somebody buys us or we fail and there's either a return for investors or there's not, right? When you think about it all like that, it's almost like all the capital you get is a means to an end. And you have to understand what that end actually is and whether you have alignment with investors on that end or not. And if you don't have alignment with investors on that end, it's not going to end well for you. That's why you see a lot of the drama, hate, you know, opinions about investors, them being evil, et cetera. But just think about what I said. It's not even their money. They're stewards of capital. They have two customers in my opinion. You could argue there's more, but let's say there's two. There's you, the founder, which is not their primary customer, and then there's the LPs, the limited partners that gave them money, that's actually their real, most primary customer. Because without that money they can't make you a customer of theirs as a founder. So when you think of all that and then you think about how to raise money and think about what an investor is looking for, everything becomes crystal clear. And that's why I go back to what is the opportunity, what's your story of how far you've gotten? So what's your traction? And then how can you represent that in a way where the other party, the investors, believe you and believe that you can do things that are nearly impossible, which is build a massive business.

On that note, do you think there's too much risk in venture? You know, you brought up the 100x, the thousandx and of course those things do happen. But you look in aggregate across venture as an asset class and most funds actually are not successful and you drill down even further and most individual investments are not. Do you think maybe there, there's too much, I don't know, wasted investments there, too much risk going on? What are your thoughts?

You know, it's like if an investor is not risky and willing to take risk, they probably shouldn't be a venture capital investor that invests in startups because startups are some of the, not some of the, they are the riskiest type of business you can take on. And I mean venture backed startups because again, yeah, for sure you're taking someone's money ahead of your ability to make money. And so the bet is that you can make money straight up, right? And everything underneath that is like user growth, sales, marketing, all this stuff is your operational skills. So they're really buying your time for your operational skills in order to get an incredible return. That's extremely risky because it's all reliant on their ability to pick. And their ability to pick is not reliant on anything else but their opinion point blank. Maybe an investor won't tell you that, but I'll tell you that it's just their opinion. Yep. And so then you're just trying to sway their opinion towards giving you money. That's it. Like, it's so. I know I'm going in circles on.

This, but like sounds so simple. How do I get.

I know I'm going in circles on this, but I'm doing that intentionally because at the end of the day I believe that if you're in it to make a lot of money for yourself and have the highest chances of doing that, do not raise money from any kind of investors, period.

Wow. So that's an important statement. You're saying if you're looking to maximize your wealth, don't raise outside capital.

Correct. Because your alignment with them isn't that I'm going to become rich as the founder. Your alignment with them is I'm going to build such a big business that there's a massive return on the capital you give me. That has nothing to do with you getting rich. I'm sorry. Right, so if you want to get rich and make a lot of money for yourself, build a self funded business. If you want to go on an adventure, that's why they call it adventure capital, which everyone, adventure. Remember you asked me about risk? I believe the investors that are the best are very, very good at taking even more risk with the capital that they're stewarding than a founder. Founder's job is to take the level of risk investors does. Right? Yeah.

That's fascinating. I honestly feel like we could do an entire podcast just on ripping apart that statement because obviously the promise of venture is okay. Yeah, you're going to give me, I don't know, 20% of your company, but then you're going to build something bigger and faster than if you didn't. Now, most of the time, as a guy who's done billions of exits, that's not the case. And I sold lots of companies for a decent multiple of revenue where the founders got a card out because the prep stack was so high that their shares were worthless.

Right.

So it's like that, that promise of venture doesn't work out all the time. But then you have the Mark Zuckerbergs, the Toby's. You do have the ones that have built these generational companies that they couldn't.

Have without venture, Google, Facebook, Meta, whatever you want to call it, Shopify, Spotify, like you name it, like this is totally true. But these are all the outliers. And so if we keep focusing on the outliers, like as founders, we're not doing ourselves a service. If the investors keep focusing on focusing on the outliers they're doing to their themselves a service. And this is where the dissonance comes from. You should be focused on, yes, building the biggest company you can, but you can't expect to be any of those ones that we just mentioned. So then what's real? Like, what are you doing? You're doing this so that you can get capital to attempt something greater than what you can do yourself on your own and faster. And that, that whole like context and understanding, I don't see most founders even having that even second time, third time found. It's just not right. Not something natural to us because we are operator. We want to build, we want to grow our businesses. We don't always think about what that investor is really in it for.

Right. Is it fair to say you choose a person over a firm? Like, it's not that I want Andreessen Horowitz on my cap table, it's that I want a specific partner at Andreessen as an example.

If anyone understands firm dynamics, they would tell you it depends.

Okay.

And the reason I say that is if you pick a partner and you think that partner's doing well today, you have to assess that partner on their ability to pick, because that's what's going to influence their ability to continue backing you in the future. So have they picked things that have that are looking good right now? But here's the problem. Something that some other startup that's funded that's not yours by this investor that's looking good right now might not look good tomorrow. And then what happens to that partner's ability and influence within their firm? Right. And I've seen that over and over again. We all have, if we've been around long enough. Of course, if you get a managing director or a general partner and it's a legit managing director or general partner, it's very, very rare for that person to lose their influence within their organization. But so there, if you can, you should get money from the people that head up the firm. If you can't, then why are you taking the firm's money? Is what you should be asking yourself. Not that I'm saying it's bad to take money from someone else there, but if you're focused too much on the person, that can go wrong. Unless it's a GP or manage director. But even those people go away sometimes. They retire or something goes wrong, they want to start their own fund or something goes great and they want to start their own fund or they want to go operate again. There's so many factors here at play of that. Then you have the other side, which is you're picking the firm. Why would you pick the firm? You'd pick the firm because some badge of honor by being funded by them means something. So again, YC is not a traditional firm, but they're a good example of this. That YC stamp actually means a lot more than anything else out there in the startup world. It just does. We don't need to argue about it, we don't need to debate it. They have such a great brand, it opens doors that that's not even counting the fact that if you're selling to companies that are YC companies or like other startups or other like even mid, mid stage companies, it's one of the best pools to basically sell product to and learn from and do customer development and all that good stuff. So the way I think about this is it's not the firm, it's not the partner. It's more about can you get along with these people? And it's more about is it your vibe or not? And I know that's like, you know, maybe it's your shirt that says shut up, I'm manifesting, maybe it's your bead, maybe, maybe you've got hippie on me. Which is totally fine. I live in the Bay Area, so I'm familiar. I went to Berkeley, so I'm even more familiar. But at the end of the day, like the vibes don't lie. If you're on a call or meeting them in person and you can cut through their crap if they're trying to sell you or cut or not sell you, and you can really just get along with them and have a very honest, direct conversation. That's not like, oh, here are all my problems in the business. But it's more like, hey, here's the things. Like, so what I love is when folks understand this so much on the founder side that they're telling investors why they shouldn't invest too, or they're talking about the risks. So it's like if you have a plan and you know that, like, hey, I want to achieve these milestones with your money, you should speak to the risks of that and you should see how the investor feels about that. And if you can have this honest discussion about essentially the operational things. And I don't mean that you want their feedback, not at all. In some cases. Yeah. I'm saying that you have alignment with them on the opportunity and you need to make sure you have that. So to Me, it's more about alignment on the opportunity and your team. Because if the opportunity changes, you need to be able to tweak that. And how do you tweak that? Because they believe in your team. They didn't just buy into, oh, this is going to be big in this category. And then all of a sudden you want to go into another category because then you're going to have dissonance with them. So you need to kind of build that trust of like, I almost call it operational trust. Not because I want their feedback operationally, it's because I am the person as a founder that's going to be reporting back to them. And I want to make sure that when I do that, I know how to communicate with them. So one trick that I don't hear anyone talking about is when I write something to an investor, like whether it's a board deck or some kind of memo or an email with details or even an investor update, I do my best to think of it as if I were an analyst on their team. How would I be speaking to this, speaking about this company, speaking to this opportunity? Because the things that they read the most are going to be memos about companies. Memos are very neutral and they're usually written by an analyst. And they don't have a ton of opinion, but they have ton of objective, provable facts in the best case scenario. So I think that's a hack or a trick. And it's not even a hack or a trick. It's the right way to approach this audience when you're talking to them about your business. Make it about the business. Make it as if it's an inside, outside view on the business that's very objective. And then talk about options of what to do. Not. I'm going to do this because I believe this. No, no, no. Here's what's going on in the business. Here's where we think the opportunities are, and here are the things we're going to do to capitalize on them. And then you give that to them and you say, do you folks agree? Do you have anything to add? Do you have any input here that would help me go faster, go harder, anything like that? Because then you're setting the stage to kind of own that conversation and own that communication, but not in a way that I hear a lot of founders get into, which is like, but I wanted to do this and they disagreed with me and this and that. I'm like, no, no, no. It's your job to provide such a clear context about your business in an objective way, that the things you want to do just make sense to other people. That's your job. That's a communications job. That's a job you need to do internally, too. It's just different internally because you have the power, so to speak. But with an investor, you don't. With an investor, you have influence and an ability to figure out how they can help you. They can't help you if you're not speaking the same language.

Right. So wise. I love it. It's funny, you talked about communicating the risks as well and making sure the investor understands that. When we raised the big growth round at FreshBooks, we literally had a deck called the 5 Reasons not to in Fresh. And of course, SMB SaaS churn was one of them.

Right.

We had meaningful churn. And so we ripped it apart and segmented it. And like, here you make your decision. You. This is the wart. You have to be comfortable with it. We didn't try and hide it. We put a spotlight on it.

So I really love that because I was talking to a company just a couple days ago that I'm an investor in, a longtime investor, huge fan of them. They have high SMB growth in the tens of thousands of signups a month. Their churn is 7 to 11% monthly.

Whoa. So much gravity.

That's right. And the first thing I told them was, like, you're not going to be able to raise unless we unpack that. Let's find cohorts that are like, actually not churning that high, that are like 2, 3% or less. And that happens to be the obvious cohort on freemium, because it's a freemium business, which is team. Right. And the company's already making a push towards those teams, and they're already seeing great success getting upsells to teams and having the churn on people who are upsold to teams be very reasonable. So then to reframe the whole business and the opportunity around freemium gets us the lowest customer acquisition cost. It comes with this high churn. We're farming that usage and that base to go get people on the team's product and the team's features. And those are sticky because then people start collaborating and this, that, and the other. Of course, there's more nuances, but in general, like, that's the narrative when you have churn. Guess what? That's the narrative you talk to investors about, and that's the one you want alignment with. And if you just, like, skirt around that stuff, you're not going to get the investment or they're going to invest in something and have an expectation that you didn't align with them on and then it just goes all wrong.

That's right. So I want to go back to this, I'm going to say provocative statement that hey, if you want to solve for wealth, don't raise capital and you've been an angel, do you want the companies that you invest in as an angel to not go down the venture path?

I don't even think taking investment from angels is a good idea if you want to get rich. Because I think once you take money, you're, you've taken money and I know there's a ton of like, you know, we can mention all the funds and the names of people who are funding like the kind of middle ground where it's like, I don't know if I want to, I don't know if this is venture scale, but I want some money. Hey, all good. But the purest form of getting rich is a self funded business. And the reason I say that is you're more likely to be able to make more money faster as a self funded business than a venture backed business if your goal is personal wealth. Now, tons of caveats, tons of other like ways to look at it, but I like to get to the basics. The basics are when you look at all the stats, I don't even know what they are. It's just obvious, right? Self funded gets more wealth to the team or the founders than a venture backed business. Because the whole idea of venture backed businesses is to take massive amounts of risk. If you're going to raise money, you should be taking massive amounts of risk. I think that includes the angel side because the second you take angel money, what is the incentive for the angels? The incentive for the angels isn't that your business is profitable. It isn't that your business necessarily goes public. It isn't even that your business sells. It's that it's this. It's very simple. If I gave you money on a precede or seed round, the only way that I can show my success in the first two to three years of that round is that you get another round. There's no other way for me to justify my check unless my thesis is like those firms or those parties or groups out there that take a percentage, maybe make it a dividend type of business or just don't have that expectation. But they always have terms that allow them to get capital and return get capital back to them over time. Right? If they don't then they're just another angel who wants you to get that next round. So I think what founders tend to miss out is like, just thinking through this stuff. Very, like sober, not drunk on, I can raise money. I mean, I'll tell you another quick example. Some 20 year old text DM'd me after listening to one of my podcast episodes. And he's like, hey, I've been pitching investors with my idea and right away I already knew what to tell him and he was struggling with it. And I'm like, hey, can you just build your thing? Who cares about money? Can you just build your thing? And then he went off on how he's building the thing, talking to customers, getting pre sales, and I'm like, dude, don't raise money, just go after it. And then if. If money is the thing, that makes sense for this. Sure. But why are you trying to pitch investors on just an idea? Like, it's not going to work. It's a struggle. And like, even if he was able to get money, I wouldn't suggest it. If he's just pitching an idea, get further, show the traction. But even then, like, by the time you get there, you might be like, wait, I don't need the money. And the best time to raise money is when you don't need it and it's just a silly game.

That's right. I just had Zach Linisco from Dribble along and he was talking about in the early days, they started doing the pitches and it took a few months or whatever. And by the time they were getting to the tail end of that, it just had really improved the margins in the business. Like, I don't even know what I'm going to do with the money. This is an expense, expensive check. So they stopped and then with no additional capital, you know, he grew it to 50 million in revenue.

There you go.

Yeah. Pretty wild.

That's right.

Do you. So you are an angel. Like, I've been in, I'm also a masochist, meaning I've also done angel investing. And I've had mixed feelings because I know that the sweet spot of exit, like the vast majority of exit happen at like sub $50 million price points. And those price points tend to just not move the needle for the vast majority of venture funds, but are actually great for an angel. And so I've had mixed feelings on whether I want my companies to go down the venture path or not. Yeah. Do you have any thoughts on that for your portfolio?

Again, if I gave them money, they should go after the venture path, unless I gave them money with an agreement or an understanding that they're not going to. So I think that needs to be decided upfront. And then if we find ourselves in a situation where they don't want to raise more money and it's making money, what's wrong with that? Nothing. The only problem is let's, let's speak to that for a second. They probably shouldn't have raised money in the first place. Yeah.

I do think most founders raise too early and I look at some of my biggest successes like Shopify and FreshBooks. They were all many years old. I think Shopify was six years old when we went to raise the A Bessemer asked hey, can we see your cohorts? And we thought about it, you know that like that's a bit of a trust leap. But then we said yeah, okay. And then they just came back with a term sheet. That was it. They just. There was so much goodness there. It was de risk like boom, here you go. And then you know, fresh books. We were 130 people when we raised the first venture round. So those are maybe extreme examples but much further along and was a informed decision on both sides.

You know, if you're getting money ahead of revenue, you better know how to spend that money to make revenue. And at the earliest stages pre seed. Seed you don't.

That's right.

So then you better believe that the opportunity you're going after and the mental fortitude you have is for a venture backed company. If not. Yeah, don't raise any money or go through some of those intermediary sort of options or middle ground options and go get money from them if you're not sure. This is something that I just wish more people would understand.

Yeah, I love this. I have a million questions because VC is and fundraising is a passion of mine. But maybe let's, let's switch gears during COVID I remember, I think this is the company before Nira or maybe this became Nira. But everyone was trying to figure out how to do remote and you came up with a guide on remote and would just love. And you've had companies even before we were forced to do remote that were remote. It's just like what. And then I have many CEOs who kind of equate culture with being in the office which is obviously not necessarily. They're not synonymous. Like yeah, what are your thoughts on. On remote? Do you think that's just the way to go? And what do you think? What do you think's the key to getting remote, right?

Yeah, it's always something I have a lot to say about. So I had the privilege of being involved in both Buffer and Automatic fairly early. And these are both Remote first companies before Remote first was a thing. So they were very weird when they did this. I love people like I just do. I love the energy of an office. But what I don't love is the fact that when you're in school, you're told what to do, what time to show up, what time to eat, what time to change classes. Do we really want that as adults? So I think is are that they're like an extension of school. And the biggest example I have is Google. It might as well have been another college campus. I think that's why companies call these things campuses. They definitely push this trend of providing so much for you didn't want to leave haircuts, everything, even dentists, all that, like I've heard all of it. I think it got pretty insane. And that's the way they attracted talent. And that's the culture that became prevalent not just in large companies like Google or Fresh tech companies, but also startups, Twitter, Square, I mean, all of them adopted a lot of these things. For better or worse. It's not a judgment at all. And in a remote work environment, the team members have 100 times more freedom. And so the biggest thing about making remote work successful is, or distributed work, if you want to call it that, is to make sure that you have an environment where accountability is number one. And the people on the team have a heavy, heavy, heavy level of accountability. Because if they don't and you don't have structures to ensure that, then you can easily run into the problem that you were hinting at. Where most managers are like, I just want to see the butt in the seat because I know that that person's working. And if the butt's not in the seat, they're not working. And that's very simple binary thing. Well, does a, you know, green in Slack for that team member mean that they're in the seat or not? And that's kind of the existential question when you think about what we've been used to and what we have to get used to now with remote work. But here's the thing that this really gets me, Mark. At scale, companies are completely distributed. They have multiple offices. Like it's insane, right? If that's the case, why not just embrace that early on and create all the async processes and the processes to work when anyone's anywhere it's kind of my argument now. It's like, wait, at scale they look like distributed, remote, whatever companies, right?

That Microsoft. Right. Offices all over the world.

So we got to get good at that stuff anyway. Why not just get good at it from day zero? That's my probably biggest throwdown on this one. After many years of like having to talk to people about it and all that. Just, just figure out how to be Async as much as possible and figure out how to get. Get as much as the company needs to get done Async. And I think that's like the, it's. It's not really remote first or distributor first. I think it's Async first. And I'd be wanting to build a company Async first, regardless of any other factor. Because even if you say I'm always going to be in an office, blah blah, blah. What about when someone's out? What about when someone's sick? How do you get them to catch up with everything that was done? Do you really want someone who is out sick or on vacation to feel like they gotta come back and catch up and don't know how to and they gotta have all these meetings with people to catch up. It's kind of messed up. And of course the tools all exist now partly cause Covid accelerated all of this. But even before COVID I've been doing remote since the first company I started back in 2003. What's the problem now? There's one other thing. I'll say. Open source has always been remote and Async.

So true. Wow, so true. You're absolutely right.

So you're really saying that everyone should have an open source ethos when it comes to how they operate. And then you break it all down from there. And it's probably just the amount of time I've spent thinking about Automatic as a business back in the day and what makes them different and what makes it work, et cetera. That probably got me thinking like this. And then on the other side, it's a level of transparency Buffer has always had between those two things.

Next level transparency between those two things.

Which is like automatic and for all intents and purposes an open source first company. And then buffer being transparency first company. You think about those two things. They come together in open source. The transparency is the code and how you write the code, how you maintain the code, how you communicate about the code, about the releases, all this stuff. How is that different than what you need to do in every department in a company at scale so why don't we just embrace that initially in a company, whether we're working in an office together or whether we're a distributed team across the globe.

I love it. So good. I'm so glad I asked that. Such a crisp insight. You're absolutely right. At scale, it's distributed. It's funny you brought up those companies. I'm actually an investor in Automatic myself. Pretty wild to see that journey. And back in my investment banking days, I had three clients that were remote by default from day one. Buffer was one of them, hotjar and taxjar the other two. And all three had the highest employee engagement and net promoter score of any of my clients and were the most capital efficient. Like, so remote obviously does work. But yeah, it was intentional from day one. You know, TaxJar just ran everything on Basecamp. Yeah, Literally everything was documented there. That was the first place to go. It wasn't a conversation first, it was words first. That's right.

Yeah.

I was looking at your Twitter bio before we spoke, just to see how do you describe yourself and you use the term customer obsession? I'd love to know how you define that and what your bar is to meet the level of obsession.

Yeah, I think customers are the lifeblood of our businesses, no matter how you look at it. Amazon has come out and said they're customer obsessed. And when you look at their core business and even the other businesses, like, they live and breathe it, regardless of what your opinion is on how they treat us sometimes. But like prime, like Amazon, prime is a great example of that. They know and deeply understand the customer to the point where they know what they value from Amazon and the speed to getting something beats almost everything else. And so they double down on that. So I think the inspiration is Amazon on this because they really popularize the terminology. But my belief in it, especially when you start talking about the bar, there's no bar. There's only standards. And what standard of quality do you hold yourself to against what standard of quality your customer should expect from you? Not the standard of quality they expect. It's a standard of quality they should expect. And this is such a high bar that, like now, lately, when I talk to people that are not in my company, I actually give them one full grade below as acceptable compared to what I'd accept in my company. So if I look at something and it's. It would be a B plus in my company, it's an A plus in someone else's when it comes to product or execution. And it's not even product, it's execution against customer needs. So my bar is one grade, my rule book or whatever, my scale is one grade above what you will see in almost any other company out there. I think there's some exceptions but like that's what I mean by customer obsessed. It's are you customer obsessed to a fault is kind of my question. And it's not a judgment, it's just like what we expect internally at our company. And expectation on customer obsession is very high. And the reason for that is in a world where it's chaotic, competition is insane in every category, all you have is your relationship with the customer and how you treat them.

One of the earliest examples of a company that was known for customer obsession that I was familiar with was Zappos, if you remember them, the shoe retailer. Is that that kind of thing where I know your support people are empowered to do whatever it takes to delight your customers. Like that kind of thinking? Or is it more just in the product experience, the ui, like just the features or just so mind blowing that you know, my expectations are surpassed or all of the above?

All the above. Like I'll give an example in my own business. I think in the last 18 months we've had not more than five support tickets. We don't have, we don't have publicly available support docs. Why? If we have publicly available support docs, that means we have problems with our product that should be solved by improving the product, not improving the documentation. And yes, I'm not insane, I understand the value of those things. In fact, at the last two companies I started, well, last two companies, yeah, products are definitely more. But last two companies I ran support for the first two years as CEO.

Wow, amazing.

So to me it's just this extreme obsession with getting it right. And what does that mean? That means that the customer expectation is met and exceeded every turn. We can possibly make that happen. Because here's the thing, everything else becomes easier if you do that. It's probably the hardest thing to do. But I don't need as many customer success and support people, period. Because if there is a issue, we are on top of it like crazy. And then not just me, not my co founder, not the csm, the whole company care that much. So to me it's like a level of care. I've been walking around now looking at other people's products and using them in my head be like, oh they don't care. Oh they didn't care. It really disappoints me. But again, my bar is one scale higher than Anyone I've met so far and I get it. I mean, I have friends that have that high of a bar, but I think we all struggled to like meet it. And in the business I'm in today with Nira, I'm very proud of the product we've built. And the reason for that is we get on demos and it's instantly understood. We build a product for IT and security teams, but anyone who's not in IT and security, we also have an employee side of it that's almost exactly the same as the IT and security side. Think of it that way. Traditionally you sell to enterprise, which is it, security teams, if you're, if you got it, security team, you're getting in mid market, enterprise, et cetera, especially larger. Their tools suck.

Right?

Well, why? There's no good reason. No one has ever given me a good answer and they cannot, right? Complexity, all that. No, that's our job. We're the builders. We're supposed to take that complexity and make it feel so smooth. And if we don't, what are we doing? We're wasting everyone's time. So there's a lot of rants like that, but the short of it is like people don't understand the impact of just fixing your damn product.

Once again, such a crisp, simple insight which kind of brings up, you know, first of all, I wish this was a two hour discussion, but we'll just do it again. I love it, but I feel like listening to you and some of this like, you know, your first startup was over 20 years ago, so that's a huge aspect of this. But I feel like listening to you, you've come up with like a set of philosophies or principles and I feel like, I don't know, you're like naval sitting around and meditating and thinking about this stuff and letting these insights bubble up. Is that true? Like, how did you arrive, how did you distill all of that? I don't think it comes from just grinding. I think those insights only come actually from creating space. And so I'm just wondering how you create space for yourself.

Imagine if you didn't need to create the space, what would that feel like? That's the philosophical response to that. So I think for me, things that I think should be subconscious, I try to make subconscious that a lot of people would consider consciousness. So a good example of that is this word that I've been told about myself, which is you have a lot of agency. And it's like, yeah, that's because I don't take a lot of general believed things to be true. So one of them is what you just said. Imagine if you didn't need the space to have the synthesizing, what would you do? How would you do it? And so I spent incredible amounts of time figuring out what are those things for me that allow me to take an insight or something I learned or something that's just happened and take the lessons and make them subconscious. So to me, this idea of I said it or I did it and then I explained it is much more valuable than I can explain it and then do it. And that's what kind of kicks your subconscious to go, oh, oh, I don't need to. It's actually not your subconscious. It's what gets your mind to understand that you don't need to understand what you're doing. You just need to internalize what you're doing. And that little nuance is probably a very long conversation. But it really. I felt like saying it just because of your shirt and your beads. And I'm like, your audience might be like, this guy's insane, but, like, it comes from the world of not just spirituality, but it comes from the word of world of energy. We don't.

They're all energy.

Right? So. And I've been known to say that, like, it's not about time, it's about energy. Do I have the energy for this? Is this draining my energy or is it giving me energy? I don't worry about time, I worry about that.

Yeah.

And then I optimize everything I do around things that give me energy. And I don't mean if something doesn't give me energy, stop doing it. No, change my perspective on it.

Okay.

And it's always, first change my perspective, then decide whether I stop doing it or not.

Got it.

So I would say it's an energetic thing, and it's very extreme that it's. I've taken that to an extreme level, is probably a simple way to put it, so that I don't feel like I need to go synthesize or meditate. I love meditating. I do that. But that's not where the insight exactly kind of come from.

This also. So I think we could have done an episode just on your thoughts on Venture. We probably could have done an episode definitely on this notion of, hey, if you want to be wealthy, don't raise capital. And, you know, we are all energy. I've been on the spiritual path for a very long time, and I actually think that the older we get, the more spiritual we become, I just think that's just we're born enlightened, we get confused and then we may or may not find our way back. And so I could have done definitely an episode on this last topic. So we're definitely going to have to have you back. But on the topic of podcasts, you have one as well. So maybe let's, let's tell folks about that.

Appreciate it. Yeah, I started a podcast because it's these kind of conversations that I tend to have with founders that are very contextual and not just generic advice. I do my best to do that on Twitter and wherever I share, but it's very hard because context is always missing. So it's these one on one things that I wanted to take and put into a show and I found a team that wants to work in the way that I want to around iteration and all that. And so started the show. It's called the Heaton Show. That's my name and it's at Heaton Show. So H I T E N show. That's all I would tell you about myself. You can follow me on Twitter but like that's the thing that I'm going to do my best to do it for the next 20 plus years.

Amazing. Awesome. Well, I've listened, it's great. And caught the last one where you were doing the pitch coaching. So I definitely recommend it to folks. This has been a true pleasure and I can't wait for the next conversation. And yeah, I know what we're going to be talking about. So thank you so much for making the time.

Thanks for listening to the Startup CEO show. If you'd like to connect with me, be sure to visit my website at markmcloud me or follow me on LinkedIn at the Mark McLeod or Twitter arkmcleodore. And if you want to tune in again next week, be sure to subscribe on YouTube, Spotify, Apple or wherever you get your podcasts. We'll see you next time.