The Highs and Lows of Fundraising from Founders That Have Raised $1B w/ Calendly, Coda, LaunchDarkly

So our panelists here have raised nearly $1 billion in funding, and that's not easy to do. That's really hard. But maybe considering the market today, that is not so hard. So let's dive right into it. The market is bonkers. Valuations are super high. I think Edith was the most recent to raise your round of funding. How should founders think about fundraising and valuations, particularly in this market?

Yeah, so we announced our Series D of $200 million at a $3 billion valuation, which is pretty fun to say, by the way.

Is it fun?

Yeah.

All right. I mean, it's— but behind that is like, 7 years of grinding and the team working incredibly hard and us getting 2,000 customers and being recognized as the category leader. So like our first round of funding, I remember our co-founder and me celebrating about a $15K check from an angel. Like, we're like, okay, let's, you know, this is, you know, we were—

Get some ramen.

Yeah, we ground out our first round was like a $200K friends and family round and that was—

Oh, wow.

Excruciating.

Definitely. And then in terms of valuations right now, are they— what is it, 5x 2 years ago? Is it 10x? Like, how should founders think about— do they even command the valuation? Like, how did you go about it?

You know, the thing about evaluation is that you have to grow into it. I mean, David, I think, is actually a counterexample because he's— we were talking backstage, like, he's about to IPO. It's no secret, but, um, talking about— yeah, um, but you've raised very little money and been very efficient. So I, I kind of don't want people to just say like valuation when you're private company amount raised is the measure of success. It's really about actually producing value.

Definitely. What's your viewpoint on that, Jazir?

I mean, I think, I think the valuations have gone up because the— everybody's realized the markets are a lot bigger than they thought, and so it all sort of trickles down as you see these companies get much, much larger than people expected. So I think it's surprising to people that don't see the way technology is taking over industry after industry after industry.

Definitely. David, how about you? What do you think about it?

I think it's all bullshit. I think the reason the valuations are high is because there's a shit ton of money in the markets and it has no place to go. Like, we just printed, what, $3.5 trillion of stimulus money out of nowhere, and it went to a whole bunch of people that have no place to spend it. So it just goes into the banks. The banks have just like, they're just flush with cash. They give it a tiny fraction of the VCs and like, I don't give a shit where it goes to, it does not matter. There's a finite number of investments, they're just get super competitive, the money has to go somewhere. No one cares about any of this, like none of it makes any sense. And so I think that the idea, like I think there's a part of like, oh, the markets are bigger than we realize. The world didn't change, it's like it's the same fucking size. And so I think like maybe, maybe that's part of it. I actually don't think that's most of it. I think that most of it is None of this makes any sense. And so as a result, there's just a bunch of money going around and this is all chaos.

Can I briefly disagree?

Please.

I, I, I do think the market has gotten bigger for SaaS. Like I've been going to Saastr back when we, I know we were stuffed up on Nob Hill and, um, my, my joke to Jason is we, you get a bigger venue and it fills again. Um, but SaaS is not this new hot thing anymore. It's now an established category where you have people who are doing it and the universe is much bigger in terms of like, this is a way that you could build your business instead of it being seen as like a niche weird thing of will it last?

Yeah, but it's not like the market itself has changed. It's become, or rather it hasn't grown that much. There's hundreds of millions of businesses in the world and virtually none of them use any of our software. Um, it's like on a grand scheme of things, the entire sum of like SaaS is still like a rounding error of actually the global opportunity. But it's not that the opportunity hasn't been there all along. I think that we're just finally finding models that can acquire more of it. But I don't think the market's changed. More of the models have changed, perhaps. But even that, I still don't even think that's true. Because most of the companies raising this shit tons of money, they're not using like novel customer acquisition techniques that couldn't have worked 20 years ago. They're just willing to lose more money on it. And then the VCs are willing to allow them to lose more money on it.

I will again respectfully disagree. You know, when we started 7 years ago, it was a slog. Dialogue to sell SaaS.

Yeah.

Like we had our, like our initial customers would always say, do you have an on-prem version? And we would say, no, we believe in SaaS. And they'd say like, okay. And then they'd come back a year later and say, hey, we, we've actually moved out of our own data centers. We are ready to buy SaaS. So it has been this extreme uplift for us in terms of we're not arguing about cloud anymore.

But there's obviously truth to both sides of this. I mean, I don't, I, I think the, the markets are clearly bigger and there is a lot of money going around and they converge. I think the money also has other places to go other than SaaS. It doesn't have to come to us. Yeah. And it's choosing to come here because I do think it's— the markets are proving to be more open to these companies taking over business processes that they didn't used to be allowed to.

But I think what's interesting, what's interesting is David and I, we're all actually somewhat old timers of SaaS in different generations. We've been through like the three generations of post-Salesforce SaaS.

Yeah.

Salesforce 1, you and I started Salesforce 2. Edith was maybe 2.5, and then Coda now is maybe 2.7 or third generation. But you've been doing this for a decade and a half. I'll tell you, first of all, it was interesting when I did a podcast with René Lecerte from Build.com, and his point was there's still 6 million buyers of Build.com today, and there were when we started. So the TAM in a sense is the same.

Yeah.

But let me tell you the jaw-dropping statistic for us old-timers. In the BVP Cloud 100, which I think maybe LaunchDarkly was in, 25% of them are growing more than 100% at $100 million ARR. That is the difference in the cloud. The top quartile, not the top 1 or 2, the top quartile is growing triple digits at $100 million. And when you think about compounding, assuming those have NRRs approaching north of 100, that means they're all gonna hit a billion in revenue. So that is now, as silly as it sounds, that's commonplace, right? So what are the odds that any of us will do it? Well, you know, high. High, well, you know, and Coda's interesting. The bet is that it's high, right? Coda has the team and the technology, and you've taken advantage of the market to raise and attract valuations, but it's the same bet for— So when I tell old timers that number, like, their jaws drop a little. What? You mean the top quartile grows triple digits at $100 million? 'Cause going triple digits at $10 million a generation ago was like, That was the magic number. Could you actually sustain 100% growth at $10 million 5 or 8 years ago was— you're fucking going to be a unicorn, right?

So that's interesting. So the TAM hasn't changed. The business model also hasn't changed. But the awareness that it could scale has changed, perhaps. And so people are willing to project forward further now than they were before, which could explain the higher valuations as well.

It's made it easier to buy. But this begs the question that probably everyone's asking, right? And Jason had a great post on this. You talked about just because there's so much money in the market, should you raise right now? I remember you wrote that post. You still need the metrics. So when is the right time to raise? Maybe Jason, you share your thoughts there.

I'll defer to the panel.

I'll say—

and David could be, again, a fun challenge to it being capital efficient. Because look, every founder in the room, there's a trade-off. We'd all love to be capital efficient. Like, you look at your cap table, And you all wish a few slices weren't gone, right? Either there was that early investor where you got ripped off, or that middle round where you needed the money, and you look back, you're like, who owns 22% of my company? So we all respect capital efficient— because you can only sell 100% of your company, or 90%, 80%. But there are moments these days where you're an idiot not to take the money, right? You're just an idiot. And so if— and especially today, if like you can sell less than 5% of your company for an attractive price, right? I mean, LaunchDarkly, your next round, you only sold 7% in that round, right? You could probably sell $100 million at $6 billion today to someone just because they want to get in. $100 million, $50 million at $6 billion, you'd never even notice the extra $50 million, Will. So I think you almost have to take those crazy checks. And there's good challenges to it. Because I don't think there's no like down round drama, there's no issues. All this stuff that we used to care about, oh my God, if you, if you raise a 2i evaluation, the world will end. I mean, the world just gets a little worse, right? It just gets a little worse if the dilution, especially if the dilution's modest, right?

I mean, I think you said that you do have to be careful about growing in your valuation. I don't think it's a— and like you said, all of us have been around the industry long enough to have seen those things happen, and they can happen. So I don't think there is a level of responsibility. But it's definitely true that every round is, you know, ours was $100 million at $1.4. It's a heavily oversubscribed. We could easily take in more at a higher price.

Yeah.

And there's some— you do some math on where you think the right price of the company is. My view is don't take money from people if you don't think you can hit their investment goals. If you're misaligned with your investors, that's going to be trouble at some point. Yeah.

Yeah, definitely.

Yeah.

I mean, I look at taking funding as allowing us to invest. Like, so, you know, we talk a lot about CAC payback and say hypothetically you're at 18 months. That means you have to pay for all that sales and marketing 18 months before you get that turn.

Yeah.

So either that means that you have to build up this bank from your own, um, non, non-VC funded business, or you can get VC and say, hey, I'm gonna take this 18 months of capital, invest in sales and marketing, get the payback in a year and a half, and also, by the way, invest in my product so that I continue to create a category and outrun competitors.

Yeah.

So it's just a choice. I don't— they're both valid.

Yeah, I think you take money when you have a plan to spend it.

Yeah.

I think— because I kind of— one thing we're not talking about is there is a risk of being, I think, overcapitalized, in that it just changes your entire company. You lose the idea of caring about reality. And I think that at some point reality matters. Uh, now I think you can get a surprisingly long distance. In fact, your entire— most of Silicon Valley exits before reality even comes into the picture. And that's become our business model here. But I would say if you want— it's like there's kind of two business models. There's like build a viable business, um, which you care about things like profit margin, things like this, or you just sell to a bigger sucker. Overwhelmingly Silicon Valley is based upon the latter of those. Reality is at no point relevant in actually the entrepreneurial journey. So I think that if you're going the classic Silicon Valley route, yeah, raise money early, stock it as much as you can. It doesn't matter the terms. They're like, doesn't matter, nothing matters because you're gonna get out before the music stops, and if you don't, you're just gonna wash your hands and do it all over again. That is the entire strategy. So if your plan is to basically just take that classic strategy, raise as quickly and as often as you possibly can Don't give a shit about anything else. Take as much secondary as you can, take as much primary as you can, and just like, whatever. On the other hand, if you're trying to actually build a business and you care about things like, I need my employees to think about, you know, the customer and like, you know, the culture and scalability and like, I'm gonna be here for a long time, then I think there's actually a risk of being overcapitalized because it causes your team to not care about the important things until it's too late. And so I think that if you care about building a real business, you should view your equity as something that is— you should trade it for something when you have a plan to spend it. This whole idea of getting a gigantic war chest, I think that's bullshit. I think that is just a big waste of money and capital, and it just ruins your company's culture.

I mean, I think obviously raise money when—

Thank you. Thank you.

I think the truism of don't raise money you don't intend to spend, that seems— fairly obvious. I think there is a big difference in categories. There are certain categories where there is a race and certain categories where there's not. And, and, you know, the way the market is moving does matter to that. You know, our category, I think there's only so many blinking cursors that people will pick and you have to be ahead of that. And we can't, you know, so you have to invest faster or as fast as the rest of the market is moving on it. And in our category, there's like obvious big competitors with both Microsoft and Google kind of owning that space. And you have to, you know, you want to be as fast out there as possible in that. There's other categories where that doesn't matter and you, you can build your way up as at your own pace. But I think that matters too.

I, I actually completely agree with David that culture is super important. I think it's a false dichotomy though to say that if you take VC money, you're going to have a terrible culture.

Uh, what were you saying behind stage just earlier that basically you can't talk about culture because every big business sounds exactly the same.

Yes, although Edith had a good challenge there, and I'm going to defer to her learnings. But I did say it.

Oh, go ahead, Jason.

Yeah. No, no, no, no, I did say that. But I do think Edith— look, Edith is an inspirational leader, and I think that's a really important point to dig in on for a moment is because we've all had some version of the experience that Dave brought up, which is that money or something or the fancy new outside CEO, or the whatever, kind of ruins the culture, right? And sometimes it's not even the round, it's someone spending tons of money. Like a VP comes in and blows $20 million on a marketing campaign. But Ilya's point, having gone from ultra scrappy, a $200K round, to a $200 million, is her challenge is, no, as a leader, you can maintain that culture even through the unicorn, right? And that's a good challenge to the binary thinking here, maybe, right?

Yeah, I mean, um, again, we're— I mean, LaunchDarkly is creating a category. We do feature management to allow people to ship software more safely. Um, we brag about 2,000 customers, but to David's point, the vast universe has not heard of us ever. So we, we, we raised the round so that we could have marketing dollars to evangelize a way of software that we felt was a lot better.

Yeah.

And when we struggled to raise prior rounds, I actually would run our financial models and we could get to this point where we were break even, but I was like, if we could get the money to invest in marketing, I know that it's going to pay off, and I know that we're going to have happy customers.

Yeah, I don't really understand the money leads to bad culture point. I, I think there's plenty of great examples of, you know, companies that raise no money that have shitty cultures too. I don't think there's any— oh yeah, I don't think there's any correlation.

There's a lot of ways to fail.

Yeah, yeah. So I, I mean, yeah, I think you have to raise money when you need it. You have to be, you know, I don't, I don't think that's That's rocket science. It wasn't part of my calculus that we're going to raise money and risk our culture. I didn't think about that at all.

I think the general theme here is have a plan to spend it. More people die of indigestion than starvation. But in this market, then, back in the day— or when I say back in the day, I'm talking about 2 years ago— metrics were required for each stage, right? You have a validated market. You raise a seed round. You have some unaffiliated customers. You go and raise an A, product market fit, high retention, Product channel fit, you raise it, be at scale. What are the metrics today? Or do they even matter? And I don't want to set the audience here to think that, oh, your metrics don't matter, just go and raise a lot of money, take some secondary. But really, what are the metrics today? And Jason, you're an investor, so maybe you kick this off.

I think just— I want to hear from the panel, but I think that when you don't understand a venture round, when you see a crazy competitor doing worse than you that raises a ton of money, Like, just bear in mind, no one's stupid. I know it's easy to think stupid. Everyone's making a bet, okay? And everyone— and the people writing these checks are experienced, with a few exceptions. We could talk about some new money categories. And what's different is when, when, when, when Dave started Expensify and I started Adobe Ecosign, those bets were— might end up being worth $100 million, and we're hoping it might be worth $1 billion. Okay, that was the general venture bet. So like, valuations had to be in the $20 to $30 million range for an A. That's interesting, because you couldn't make money on a $100 million exit. Forget about the seed. If the A was much north— and it was just math— if you're going to exit $100 with dilution, I only make 3 times my money even, even at $30 post, right? So today, every single bet either has a bet that someone else is going to mark it up, but it's still the same bet, or that it's going to be a decacorn.

So Edith raised—

that's interesting.

Think about this for a moment. Edith raised at $3 billion. OK, Coda at a billion, and no one's sweating on the stage, right? We used to sweat, right? There's no— both of them have committed to a $10 billion, a $10 billion and maybe a $15 billion out. These are the commitments you made to a $15 billion outcome. And that— and so, and so what's weird in venture is sometimes people will do that at a billion ARR, right? Or $100 million ARR. Sometimes they'll do it at a $1 million ARR, which just blows our fucking mind. Like, how can someone at a million ARR raise it? 200, 200. But it's the same bet, isn't it? And you saw it, right? Because it was hot and unhot and then hot. And so you saw people take that big bet on you, didn't you?

I don't, I don't think the metrics have fundamentally changed. The multiples have changed. I mean, I think the— what you said earlier about expectations, that everybody builds the same models, they show up with the same, the same, uh, look at your growth, look at your NRR, so on, and build out your forecast. The only change is how long do they think you can sustain sustain it. And, uh, and as your point is, we're now seeing many companies sustain it for much longer. Just size of market, size of model, like all those things matter. But I, I don't, I don't think any— we still had to go through all the same numbers and say, I don't think it's that different.

Yeah.

Yeah. I, I would think the numbers are probably the same and there's just as much bullshit as before. They're basically all lies and they're the same lies. Uh, cuz basically you go talk to a VC and they're like, um, and like you're, you know, a startup, you've got a couple of customers, you like scrappy, a whole bunch of different ads and stuff and they're like, cool. What is your cost of customer acquisition? Now, statistically, it's unfucking knowable. Like, we haven't done anything sustainably for long enough to actually have any confidence in any number, but you still get the question. What's your cost of customer acquisition? What's your lifetime value of your nonexistent random set of customers that you've only been looking at for a couple of months? It's like, it's 700. It doesn't fucking matter. None of this stuff is actually statistically relevant. They are all actually noise. All of these numbers is equally valid. And so I'd say, just say whatever they want to hear because they actually don't care. They just need to check a box, and they're so excited to invest money in you because they don't make their money based upon the outcomes. The vast majority of a VC's, of a typical VC's income will not come from their carry. It'll come from their management fees or some slice of that over the course of their career. They don't give a shit about the outcome or the success of your business. By and large, they hope they do. It's kind of like the house always wins in the sense that it's— they make money either way. It's like the VCs are not exactly stressing about you failing. Like, your failure actually simplifies their life in many cases. And so I think that the numbers are the same. They're still all bullshit. But I think the valuations are higher because they're willing to convince their LPs of a stronger story, and then they get paid along the way.

I think the valuations are higher because everyone that's non-traditional in the sense like Tiger Global and everyone else is— I spoke to 10 friends of mine here I caught up with. They're all mid-raise. They're all being chased by Tiger or some non-traditional VC at a much higher valuation. And a conversation that you couldn't have probably 2 years ago, every one of them are asking me, hey, how much should I take in secondary? The secondary— they're like— Secondary is not even an ask from them. People used to hesitate. I need to pay my house. But the secondary is a starting point from a VC like Tiger. Like, hey, how much do you want to take in secondary? What's your viewpoint on that?

Can I speak in defense of metrics for a second?

Yes.

Yes.

Speak in defense of metrics.

I do think VCs care about metrics. And I think you as a founder and entrepreneur should care too. Yeah. So I was at product at TripIt. So there's some faint rivalry because I worked at Concur. You know, we had meticulous dashboards about, you know, here's our funnels, here's what we're spending. And I took that into my own company of, you know, and you're right, at the early stage, what is your CAC? You have no idea.

Yeah.

But like just the in and out of like, I think a lot of startups lose track of their COGS in terms of AWS spend. It can actually go upside down. Tracking your net retention, being super meticulous and honest about your churn. So that when that VC does come knocking, and maybe there is a little bit of a storytelling, that you have all the numbers ready to go. 'Cause they're gonna drop it into all their proprietary models and whatever pretty slides you make to razzle dazzle them, the truth then comes out. So like it was weird when we raised, they were like, wow, your metrics are actually far better than we expected because everybody exaggerates. Like they throw out people who churn within 3 months, We keep them in and we're then honest about our—

Yeah, I mean, I would direct some of that too. I mean, first off, I would not lie about your metrics. Like, you can't— there's obviously some level of guesswork in every metric, but it's how you're running your business. I always— I always— my view of it is show your investors your board deck that you use to run your own company. And if you're not willing to do that, then that's a problem because you're running a company differently. Of course, with fast-growing cohorts and so on, there's only so much you can know. And I mean, I take your point on how well can you really know CAC and NRR if you're growing so fast. But you're running your business based on those decisions too. If you think it's a shitty business, don't keep running it. And just take whatever that is and hand it to your investors. I think the cynicism on VCs making their money off management fees— I don't want to defend the VC business model. There's lots of different parts of it that work and don't work. But it's absolutely not true that a VC that makes all their money off fees is going to continue to raise great funds. And, and these— I mean, all these funds are returning, you know, astronomical results. This is now— we're in a phase right now where this is all being, you know, these companies are getting bigger. This is not theoretical anymore. And, and for— I think the idea that VCs aren't looking for that is— I think that's a little cynical. But, you know, I think it's— they're just seeing companies sustain these growth rates for so much longer and they're just trying to spot it earlier. And that, and it's guesswork. And everybody's— we're all guessing too on, you know, is this thing going to work or not work? We're all making a choice to continue to run our business that way. But I think that's what we're seeing, just, just seeing multiples increase that way.

I like not— don't lie, just guess with conviction.

Guess with your own conviction, right? If you're going to run, just show them how you're running your business and let them make their call.

Yeah, but if you're running your business on noise that you call data, you're, you're doing it wrong. You should at least not lie to yourself. It's like, if you know that this is not statistically relevant, don't pretend like it is. Maybe pretend to others and guess with conviction to everyone else, but don't guess with conviction to yourself.

But it's also very stage dependent, right? I mean, when you're raising a pre-seed or a seed, you just need validation, and maybe you have some unaffiliated customers who've agreed to a paid pilot with you in the B2B space. But when you're maybe at half a million or a million in ARR, you have high retention, maybe 100% plus, NRR, customer NPS is high. So those are real metrics, right? If customers love your product and they don't leave and they're paying you for it a couple years. So what is that bar to hit, I guess, in today's market, a Series A or a Series B? You raised a Series D, right, Edith?

Yeah, and it's funny, rounds today, I feel just like I'm like, I used to buy a Coke for a nickel type envy. I'm like, wow, the rounds that they're raising. But it doesn't get easier though. I have a startup I'm friends with. They did a pretty decent-sized seed of, I'm not gonna, like $4 or $5 million, which just blew my mind. And then now they're trying to do the same grind that we did. They're like, how do we get our customers? How do we get our ACV up? How do we turn this into a business? That part does not get any easier.

Yeah. That's the real work.

Yeah. Yeah.

And so what is that number though? Maybe that number is arbitrary, but what is the growth rate you need and what is the revenue you need and what is the retention you need to get a B and a C in this market?

I don't have any— there's no magic formula. Like, a lot of people come to me for fundraising advice, and it's heartbreaking sometimes because they think they get fed into the model and a yes or a no gets spit out, Magic 8-Ball style. But really, it's a yes or a no, and then also, do I like your business? Did this partner, you know, have a bad lunch yesterday and they're still a little grumpy at the partner meeting? Like, it's not It's not— it's not automatic.

Like, the C and A are primarily just about, like, you and the story you tell. Like, especially the C. A, it's like you have to have some evidence that, like, you know, the story has some anecdotal evidence of some kind of traction. And then, like, B, it's like you need to, like, invent numbers that seem reasonable. And C, the numbers have to start seeming actually, like, solid. And by the D stage, like, these numbers might actually mean something. But, like— Your company is going to die way before you have any meaningful numbers. Uh, and so like by the time, like you're either going to like succeed or fail way before you have any numbers that actually matter. And so really the key thing I think as a founder is being a powerful storyteller. It's like understand, uh, you know, where the market's going, be able to state with conviction that the market actually is going there and express a story for how you're going to get there. And the strength of your story, it is like 90% of the success of like your first couple of rounds.

I mean, I think that's probably the most important point is investor— I mean, if I look at the companies that succeed in raising, don't— obviously, if you're not growing and you don't have any of those indicators, it's hard to raise. But it's not— that's necessarily not sufficient. Investors are making a bet on your category, on your TAM, and then your chances of acquiring it. And I think the great founders, there's a reason why they're all great storytellers is they have a way of talking about their market that helps people dream about it. And I think that's really important. In some cases it's obvious. I mean, there's cases where you're creating brand new categories. You have to tell a lot of stories. Cases where, like our case, our category is somewhat obvious. People spend a lot of money on productivity software. It's all a question of can we earn our share of that or not? Um, but other cases where you have to tell a lot of hard stories on why is this market gonna be big, and then people will use that to calculate, do I think this, this company can be a meaningful leader of that or not? Um, I, I think that's a really important piece of it.

You know, I don't know if any of you have open-sourced your decks, but one of the best evolution of round decks I've seen is Front. Matilde Collin, she had her seed, Series A, Series B, Series C decks. It's on SlideShare. Check it out. You'll see that evolution of deck 1 and 2, very vision-focused, and then the Series B, Series C, extremely numbers-focused. Still shares the story, but It shows that we're growing. And there's a lot of other examples, but probably as we were raising, I referenced that a lot. David, you raised a while ago. You raised about, what, $20 million?

Something like that. Yeah, but we've been raising like— I can't remember— like 5, 6 years, something like that.

Why did you raise when you raised?

Because I was dumb. I mean, because they're just coming like, want $1 million? And I'm like, that sounds like a lot of money. Yeah, I'd like $1 million. And then like, you want more? I'm like, shut— It seems like it. I think it's— I mean, I don't know. I've been pretty cynical up here. But I think that comes down to Silicon Valley is just such a grinder. I think that— and we elevate as our heroes the whole idea of a serial entrepreneur. The only other time we use the word serial is serial killer. And I think the— and there's a similarity to that. Because it's like, we talk about as founders, we're like, yes, I worked so hard. I built this product. I am so committed to this social network for kittens. It's all I've ever wanted to do since I was a child. I brought in my teammates— no, no, no, not my team, my family. I worked with my family. I grew them. I mentored them. And then I sold them again. It's just like, what the fuck? It's like the idea that you build a company, and then you just like— and that's where the secondary comes in. It's all like bribery. It's just like, hey, how much of your family will you sell me to go into this round? It's like everything about it is just so morbid. If you kind of think about it from like the perspective of what you're actually trying to do, like it's such a rarity to actually try to build a business that you want to work at forever. It's such a rarity. It's almost like you're laughed at. Like when I started Expensify, I'm like, yeah, I'm going to build a company. I think I can make this insanely profitable, like the most cash efficient cash cow business in the world. And they're like, but why? Like, because I mean, profit's kind of good. And like, I don't know, a job is nice. And they're like, yeah, whatever. And I was like, people just roll their eyes at me. The idea of trying to make a company that I wanted to work at forever. And so I think that I did it at the start because I bought into the serial killer mythology. Uh, and then over time just realized it was like, no, that's a horrible lifestyle. It's terrible for your employees. It's not good for, uh, creating real value for your customers and so forth. And so no, I think that, uh, I did it until I got smart enough to realize actually that's just not the future that I wanted to have.

How many people here want to build a company they want to work at forever? Show of hands.

I'm so glad to see that. I'm skeptical because I would say if that were true, you would be doing a whole bunch of things that I doubt most of you are doing. Like, how many of those same people just brought in some kind of outside executive from their VCs? Yeah, you just fucked your entire company because by doing that, you just indicated to every one of your employees, You cannot grow here. We value skills that you cannot get here. And so basically, you put a cap on all of your best people, and they will absolutely leave. And so I'd say, if you care about your employees, that means you have to do things from day one to demonstrate that. You don't take this giant fucking secondary round, and it's just like, hey, employees, thank you so much for grinding. I'm just going to be over here with this huge check, like the Mailchimp guys. Don't worry, we're never gonna sell, we're never gonna sell. Sorry, suckers! It's like, again and again, every single big round we have, the employees get fucked. And there's a whole bunch of reasons for that. It's like the VCs always win, the founders sometimes win, the employees rarely win.

I think— I mean, you asked the secondary question earlier, and I think maybe that's one of the biggest challenges with secondaries is I think we've done a secondary in every round. Employees go first, founders go last. And I think that's very important. One of the boards I sit on is Spotify.

Well, let's slow down for a minute because that's interesting for folks that don't know what is— what the hell is a secondary? It used to be very rare in a venture round that the founders or employees could sell in that round.

Yeah.

And then maybe— I mean, we're dating ourselves. And then maybe 5, 6 years ago when you did a bigger round, $200, $300, $400 million, like when you were about to get big, the VCs would offer you a little extra money because they wanted to buy 10% but they could only get 8%. So to bridge that gap, they would say, look, I can't get my 10% but Edith, can I buy a couple of your shares, right? Sure, can I buy a couple of shares? And it would happen later, right? When you were likely at $20, $100 million in ARR. And then what's happened the last few years is it's happened earlier and earlier. And then what started to happen in hot seed and A rounds. Anyone— because bigger funds would come in, and they'd want to— and so it would happen at valuations at $30, $40, $50, $60 million, which we could talk about. And then it's become hyper-aggressive as a way just to get into an expensive IRAC. So it's changed. But that's a lot of— what to be aware of is the good news for founders and the employees— employees versus founders is a good topic— is you don't have to get to an exit to make a few bucks anymore. And that was maybe my biggest mistake as a founder is I sold in 2011. I sold in 2011 to Adobe, and a VC offered me $10 million in secondary, OK, to not sell. And I just didn't know what the— what's this?

What?

What do you mean by sec— how does that— I can't get— like, my head's hurting. What do you— I'm like, oh, sounds good. That's more than I made off my last startup. But it was just starting. And bear in mind, it's hard, right? You have to be in the elite of— these are elite companies, OK? Don't forget that. Money's hard. No matter how it looks in TechCrunch, it's the elite companies get launched. Darkly didn't get $200 million until it was a top 3% startup, right? Coda didn't get it either. So you have to be elite. So don't get confused. But if you're top decile, you can cash out a little bit, like you can get millions of dollars and not have to wait 10, 20, 15 years.

I think that's, I think that's a key point. So, um, one of the— I sit on the Spotify board and one of the— Spotify sort of opened up the direct listing. They're not the first to do it, but the biggest. At the time, one stat about Spotify, one of the reasons it worked, 60% of employees had sold at least some stock before the IPO, and that allowed Daniel to take a longer view on it, not have to worry about lockups. The heart of what makes an IPO work is you constrain supply. And he didn't have to do that because it wasn't going to be this run for the exits. I think it's really important that right now you hire employees and many of them have an offer that they consider to be completely liquid from a large public company. An offer from yours where they think their stock is a lottery ticket. And the more you can help them understand that, no, no, I intend for your stock to be worth something, that's really important. So for me, even if it's symbolic, we have a secondary every round. It's always oversubscribed from investors. Employees almost never sell anything. And they— you give them the option, they sell as much as they want. And some people have their circumstances, they're buying a house or doing whatever, but they're making their choice at that moment. Am I investing in the company or not? And they're hearing a commitment from the founder that I intend to make your stock worth something. So I think it's actually quite important.

That's great. Yeah, I haven't really heard of that as a regular strategy. I think that's a great model.

Yeah, that is indeed. I, I want you guys to—

and I think just to summarize for founders, and tell me what your recent experiences are, I think if you can make it to $10 million ARR, and let's use a rough number just in your head, and you're able to raise north of 20, okay, and then don't get me wrong, statistically that's still hard to do no matter how it looks on TechCrunch. But if you do it, those investors are probably going to offer you secondary. OK, so just know as a founder, if you can get to $10 million and you can get— I'm not saying take it, right? I will tell you the single best investment I've ever made, the founder refused to take secondary at $300 million, $1 billion, $3 billion, and again at $10 billion. You don't have to take it, OK? But just knowing that if you're able to slug it out to that level and one of these fancy funds wants to invest, it's par for the course today in your term sheet, right?

There's one other thing. This is a very tactical suggestion, but I got this early on. There's a, there's a type of stock called founders preferred stock that I don't know why more companies don't use this. But when we were starting the company, I got this advice from another founder that if you structure your stock this way, people aren't familiar with it. It's often referred to as FF stock because the Founders Fund came up with it. It works just like common stock, except during a round it can convert into that series of stock and be sold to the investor as that series. Like we had a Series D, they can buy founders preferred stock converted into Series D. Mechanically, it makes the investors— it makes secondary much more attractive to the investor because they They can now take the exact same class of stock. Um, at Coda, every employee, 20% of their stock is founders preferred. And it's a way of telling every employee, we want your equity to feel semi-liquid. I think then, then they think like investors, which I think is the heart of how you hire great people, is you make them feel like investors in the company. And that's a signal. That's, uh, of how it's going to work.

You should open source that playbook on Coda.

It's not mine. Yeah, actually, it's— Founders Fund did it.

But the, uh, But we, uh, we found this one, did it, but they didn't productize it the way you're talking.

They didn't productize it.

Yeah, yeah.

Awesome.

Would, uh, would love to get, uh, one other thing I wanted to hit, just, just to get the, the panel slots. And yours, Lloyd, because you just raised— when you talked about Front, right, I was an angel investor in Front, and it's— and, and I saw something happen in Front. I'm sometimes slow, that now in 2021 has become commonplace, which was the last round in Front, which I think was at $600 or $700 million, was all founders. Okay, it was Ryan Smith from Qualtrics. I forget who else, the other billion— our friend— friends, the billionaires of SaaS. But they all, I think, led that round instead of a VC. And at first I'm like, well, that's great for the— that's great for Matilda and the company. But now this happens every week, right? So many founders have their own funds. And should you take— did you— should you take advantage of that, right? Um, and do you even need VCs for a while if you're fortunate enough to get these alternative sources of capital. These aren't crazy weird offshore sources of capital. It could be— Edith could have her own. If Edith wanted a $50 million fund, I don't know what you do in angel investing, they would give it to you, right? Your investors would give it to you if you wanted. So is it— what do you think of this trend? Is it good?

Um, I actually was gonna— I think it's weird, to be honest.

Weird.

Like, I am— I have a full-time job. Yeah, like I'm CEO and founder of LaunchDarkly. That's—

that's a full-time, 100-hour-a-week job right there.

Yeah.

I mean, I have a very small angel fund just because sometimes I was talking to somebody who wanted advice. I was like, you don't need advice. You actually need money. Like, you need to get that first angel in. And like, it's just— it was so inspiring. There's somebody I invested in that I'd only counseled over the phone. And I met her in person and she said, you were the first person that ever invested. And when you wrote me that email, she just started getting extremely emotional that somebody believed in her, like on this entrepreneurial journey.

Yeah.

So I think entrepreneurship is really valuable and the ability to help people with that, it feels so good, but it's not a full-time job if you're a founder.

Yeah, absolutely not.

Is that, is that your question? Should you take it or should you give it? Is that the—

I think there's a lot of interesting questions, but even in the last 12 months, there's all these new sources of capital. And you can raise a seed or even an A today without ever needing a traditional VC, but still from folks you would look up to and respect. This wasn't even possible, I don't think, fully a year ago.

I think the risk with that is that the pro rata in—

A lot of risks.

—in subsequent rounds just gets bigger and bigger and bigger. Yeah.

So I wanted to get into the process, right? Like, you raised a $200 million round. Everyone here— or how many people have raised a round of funding here? And how many people are looking to raise their next round? OK, a whole bunch. Yeah. What is the process you guys followed? Maybe starting with David, because you raised $20 million. What was the process?

To Jason's point, the world's changed so much, and I don't know anything about this world anymore.

You're feeling— it really has changed. It really has changed. We'll get you up to speed.

Yeah, yeah. Did you have fun?

It got better. It's better. Isn't it better? It's better, right?

I wonder. I think the early rounds are entirely different than the later rounds.

But let's say an A or a B, right? Edith raised a D, but I don't know if it's that much dissimilar than a C or a B. For the early rounds, The process is weird.

I mean, you're meeting people, you're, you know, everybody is not quite sure what the business is. There's no metrics to look at. It's how well you tell your story. So on later rounds, it's a little bit more standard. This is, these are the set of people you can talk to. These set of people are too early, these set are too late. They require this type of model of doing it. I mean, the biggest thing I tell people is compress the process. You can, you know, I think one thing we can all agree on, you should spend most of your time not fundraising. And so, Do whatever you can to take that process, and when you start it, finish it as fast as possible. Turns out that's actually very helpful for the process, 'cause there is an incredible amount of FOMO in these processes. And so, you know, make sure— I had one founder that he's raised money for 5 different companies, and I guess he's a serial entrepreneur. And his rule of thumb is no process over a week. So he'll start on Mondays, tell everybody, here's, here's, here's what I'm raising. I'm taking the best offer at the end of the week. And if I don't have a great offer, then it is what it is. Um, but I'm not letting it expand out. I think, I think compressing the process is very important that way, but it's very different early and late. Yeah.

I mean, um, early again, it's been a while for me, but early you're just trying to scrap money together. Yeah. Like I literally had a spreadsheet of everybody I knew that had money. Like, 'cause I'd been, I'd been early at TripIt, I'd been at Vignette, I'd been at Concur, and I was like, do they have money? Can I ask them for some? And I just worked my way through the list and scrapped together the money. But late stage, it is much more about running it more like an enterprise sales process because your own time is valuable.

Yeah. 4 to 6 week sales cycle, bring people along at the same time. And it's also a very stressful process, right? When you got a lot of VCs in the mix, everyone wants you to meet to somebody that, let me show you what I can do for you. Let me introduce you to this partner, that partner, everyone else. It's a huge time suck. So we actually, and I can speak about this, we were pulled into the Series B preemptively with 21 VCs. And I was having a kid, and we had all these new execs that just been for 2 months. And we ran this, I mean, we got pulled into the process, but the following Friday when everyone wanted to dive in the data room, like 21 people like punted the raise. We just got together a board and said, the timing is not right. Execs have not been at bats for even 2 quarters. How do we know even this model they're putting together is gonna even play out? So we just punted it and we said, let's talk in Q1. But that created a whole bunch of FOMO, them reaching out to our board saying, do they want in secondary? Make sure, like, can we preempt? All of this stuff, right? It's just, as a founder, you wanna run your company and you should spend all your time running the company. So compress the process.

Yeah, I think those early days, it's like, yeah, I think there's so much hustle. So I'd say some specific advice would be, one, make your slide deck full of pictures but no numbers. And two, when they say, and then when you reach out to a VC, they say like, I'm not sure if I'm going to raise, but I'm thinking about it, and I really like you, so I'd love your advice. Because it's kind of like, if you want money, ask for advice. Because if you ask for money, you're just going to get advice.

That was in a song by Pitbull as well.

I'd say that the converse though is if it's an angel, just ask for the money, because otherwise they don't know.

No, no, no, everyone likes to feel like they're super smart. You're like, you're so smart, I love your advice, I read your shit, and so I'm thinking about raising, what do you think? And of course they're a venture capitalist, their answer's always going to be yes. And so never mail your deck ahead of time, because then they'll make their decision before they see you. Show up, gesticulate, speak very loudly, swear a little bit, you know, be edgy, and then say like, hey, it's really great. And I think— and just say whatever number they want to hear because it doesn't matter anyway. And yeah, and just like— oh, and then— but even then, before that, I would probably do a Kickstarter. Free money, something like that. As much as I can get. I'd do an ICO. Is that a thing anymore? I'd try it anyway, because why not? David, I don't know if you're just trolling us at this point or not. There's all sorts of great options out there. As the early days, you've got to fucking hustle. And so yeah, I would do all these things. I would scrape together all of this, and I would avoid the VCs as long as possible, because they're the devil. Now, don't get me wrong. Sometimes you need to do a deal with the devil, but you're probably going to get fucked in the process. And that's OK. Maybe that's just acceptable for the path you're going to take.

So Dave and I agree on one thing. Don't have a deck. Don't what? Send the deck?

Don't have a deck.

Out of all that, that was one piece.

Actually, I'll go one step further. The deck is actually— I agree. Tell your story whichever way you can. I like to use whatever I presented to the board last as my starting point. But the one thing I would encourage writing is write the investment memo that you think they should write to their partners. One of the things I think founders often miss is you're pitching a person who's gonna become your advocate, right? And then think about it in enterprise sales terms, this is your sponsor. That person cannot say yes, that person can only say no. So help that person turn around to their partners and pitch their story on your behalf. So that's the one thing I would encourage writing.

Or even at the end of your meeting with them, say, well, how would you pitch my company? Yeah, yeah. And then you can see if you've just like—

Oh, that's also a great one. If you're asking for advice, Then if they ever catch you on something, you say like, man, thank you so much for finding that. How would you recommend I answer that question that you just caught me on? Because it puts them into a collaborative mindset rather than an antagonistic one.

Can I just add one quantitative piece on this? I know we're out of time. So did you guys know Mark Roberge? He spoke on Tuesday. He was CRO of HubSpot. So he's at Harvard Business School now. And he started investing a couple of years ago. I think he raised an $8 million initial fund for operators and revenue. And he just raised $80. And I was talking with him in the green room, and I'm like, how's the investing going? And he's like, you gave me some great advice. He's like, yeah, when we started, you know, 2 or 3 years ago, we'd get 3 to 4 interesting, interesting inbounds a week. He said, now we get 100. Not random, not randos, not weird in-mails. 100 good companies. So all— there's all this advice on the internet, but remember, you have to actually break out so much more than you used to. This, this coffee advice I will tell you, I didn't— during our digital events, I did one called, uh, it was called SaaS Your Money, and I asked Keith Rabois, David Sachs, Eileen Lee, Christophe Jantz, and, um, Satya Patel from Homebrew, all sitting on massive gains. Every single one of them said they read every single cold email they get, and every single one of them invests in one week. So that's the way the world changed. Now, that sounds interesting, but even if Mark, who I love but is new to venture, gets 100 There are so many SaaS companies today. If he gets 100, how are you going to break through that 100? Do you want coffee? Do you want to not send the deck? Do you want to just talk about your theory of collaboration software or feature flags? I don't think any of that works anymore when there's a— when Mark's getting— and he's, I mean, he's got a brand, don't get me wrong, he's a magnet, but 100 a week. And then he flies out to SaaStr, he's another 100 behind because it came out from Boston. So just think Think about how the odds have changed, and don't get all the headline things confused, 'cause statistically in a way, odds might be harder, right? But once you break through, it's easier, right? I mean, LaunchDarkly, fuck, $200K from Concur people, but now $200 million in a week, right? I mean, it's just such, but you had to break through to the obvious category, right? So just don't forget those 100 a week. No VC can process 100, even with a team, it's too many, isn't it? No matter what anybody says. You could do like 3, right? If you really wanted to have a conversation, as CEOs, how many deep conversations can you have a week? A couple, right? A couple. So just think about the odds.

But that's a good question to perhaps close out with, or maybe we'll do another one. What is the best way to build relationships with VCs and break out? You're getting 100 in your inbox. Jason's a proponent of cold emails. Some VCs are not. But like, what is the best way to build relationships? Well, what is the best way to get that coffee meeting when Mark Roberge's or Jason M. Lemkin's inbox is thousands of emails?

I think you deliver results first, and then they wait for them to come to you. Focus all your time on building a product that customers care about, and then the VCs will care about you. Doing the reverse, I think, is very, very hard. And also, quick pitch, I'm doing a panel, or I'm doing another session at 11:30. Please stop by. It's called Conan Economics, and so it's going to be exciting.

This is surprising, but I actually agree with David again. Great. You know, how is this possible? You know, focus on your business. You know, focus on your business, build up your customer base. Your customers will start talking. They are the ones who will tell the VC what they're using in-house or what the new tools are, and that will build your brand for you. To build the actual relationship, I do really like— it sounds stereotypical, but like a coffee or a lunch and just slotting that into your schedule every month month so that way you can meet 12 different VCs in a year. And so that when it is time to actually run a fundraising process, you're not starting from a cold start of like, that's clever, do I even like this person at all? Do they like me? Do they get me?

I think, I think the, um, obviously agreed on the focus on your business first. I'd give two suggestions. One is when you're pitching, um, take advice from people one stage, investors that are one stage forward or back from wherever you're pitching. Just go, you know, if you're pitching people for a normal B, go talk to a few people that would normally be C and D raisers. Show them this is the investment memo I'm pre-writing, what do you think? And they'll know they're not in the market for it and they'll give you real advice. And they all know they're kind of, I want to be involved in this raise, I'm getting an early peek, it's something that might come later. You can do that early too, is like, go have the seed investor guy join your A. That's one thing. The other thing is just find— I mean, they're all people. Just find a way to connect with them that doesn't have anything to do with raising money. And I always tell candidates ask me that question all the time. How do I get a job at Google? I said, number one thing, don't show up in the recruiting folder. Show up in some other folder of why you're reaching out. And everybody has different ways of doing it. For me, I have a lot of other— because of the way Coda works and the way we like to promote ourselves, I'll generally reach out to people about how they run their companies, how their other companies run. That turns out to be a very good way for me to stay connected with people. Everybody has their own way of doing it. Some people do it with sports or events or whatever. But I think just don't show up in their fundraising folder until you actually want to be in their fundraising folder.

I think we're just about overlaid.

Yeah, yeah, just— I want to take one last question. It's going to be fun. But for you, if you got 3 intros, like if Marc Robert introduces you to somebody and maybe 2 other VCs you really respect saying, hey, you got to talk to this portfolio company, you're going to take that intro, right? Or no?

I just want to say two things, and maybe let's, let's wrap up because this panel is going to go forever. One is don't, don't fall into the trap that you have to have a warm intro to meet an investor. Cold emails work. I did this thing online. I asked five of the top investors, including Eileen, Keith. They all read the cold. Now, no one at the Series C level reads the cold email, okay? Because they all assume, they all assume that companies at this stage know everybody. It don't work. But don't assume you have to. It sucks if you're not privileged. It sucks if you didn't come out of Google or Y Combinator. It does suck. But you can break through it. This is our job as founders. So don't feel like cold emails don't work. They do work. And the one thing I just want to— all the advice you hear, it's back and forth. Edith said something which distills all of it. Fundraising is sales. And fundraising has pre-brand sales and post-brand sales, just like SaaS does. Once you have a brand, it's all different. They will come to you. It doesn't mean you'll close all the deals, but the leads start coming in in venture. Don't confuse the two stages. Until you have a brand, until you're maybe even at $10 million ARR, it's sales hustle. If you think hiding stuff is good in sales, fucking go hide the deck, okay? If you think coffee enterprise sales works for you, go do it, but remember it's sales. I say in sales, put your best foot forward. Do it the way you know how to do. And it's selling stock. And founders get really, really good at it. You're hearing almost too good of advice. Because by the time you've sold stock 5 times, you've met with 500 investors, and founders get fucking good at this, right? But it's sales. And if you're not good at it, be thoughtful and take the risk to do whatever it takes to close the deal.

That's great advice. Thank you, Lloyd.