David Thacker | Retooling for Reality: Product Development in Pivotal Moments

Hey, everyone, this is Heather Mack with Greylock. You're listening to Grey Matter, where we share stories with company builders and business leaders. This episode is part of our new series focused on the people, technologies and business strategies that enable most of us to work from anywhere. And today I'm talking with David Thacker, who is an investor here at Greylock. David previously worked in product leadership roles at major tech companies such as Google, LinkedIn and Groupon. During his time as a product leader, David built, launched and scaled products and businesses across multiple industry verticals, including E commerce, social networking and enterprise SaaS, tools and marketplace businesses. He joined Greylock earlier this year, but he also spent time on the investment team from 2009 to 2011 when he worked on partnerships with startups including Pandora, Redfin and telepart. So my question is, how should entrepreneurs be thinking about product development at this time? It's a tough question. So we are fortunate to have David here with us today. He's going to share some insights on product development and strict, especially those that happen during transitional and uncertain times like we are in right now. David, thanks so much for joining me.

Thank you, Heather. It's great to be here.

So before we get into the specifics of building companies in today's environment, can we first hear a little bit more about your background in detail?

Yeah, sure. I've been working in tech my entire career. I majored in computer science at Duke and when I studied computer science there, it was one of the least popular majors on campus. I've now been told it is the most popular major for undergrads. But right out of college I got the startup bug and went to work at an enterprise software company startup called PC Order down in Austin. Had a great experience there and we scaled that, took the company public and then after that I ended up going to Google and joined Google. That's when I moved to Silicon Valley. This was 2003. At the time, Google was about 700 people, still a private company, but that was my first foray into product management and I stayed at Google five years, worked on the advertising engine, the AdWords product at Google and then left Google to go try venture capital at Greylock. So that was my first experience at Greylock for a few years. I ended up leaving Greylock to work at a couple different portfolio companies. The first was Groupon. So was VP of Product there and helped build out the local marketplace for Groupon and then transitioned to LinkedIn where I spent four years running the business products at LinkedIn across the different business lines and Then we got acquired by Microsoft. I stayed through that a little bit, but then Google recruited me back to run the productivity products at Google known as G Suite. And that's where I've been the last three years before just recently joining Google. So throughout my career I worked in a bunch of different companies at different stages. I've been through three different IPOs at three different companies. I've been acquired twice and I've seen companies from early stage startups all the way to when I left Google. Now just recently, the company was well over 100,000 people, $100 billion in revenue and trillion dollar market cap. So I've seen the full range of companies in Silicon Valley.

Yeah, and you've also been through. So what you were like right after the dot com boom and the Great Recession and then now the pandemic.

Yeah, I've seen the cycles, the boom and bust cycles several times.

Yeah. And you've been involved with the creation and commercialization of cyber of the most widely used tools there are like G Suite and LinkedIn's Talent Marketplace. And I'd imagine there was some pretty interesting macroeconomic forces going on at the time that led you to creating these products. Can you talk a little bit about that experience?

Yeah, you know, I think, you know, we start with G Suite, the Google Apps products like Gmail and Google Docs and Google Sheets. You know, when Google created those products, it was really just to build great consumer products that could be run in a browser. And at the time, you know, what year was that?

Sorry, by the way, when you started.

Working on Those, Gmail launched 2004, Doc Sheets and Slides were just a couple years after that. But the idea was, you know, Google really wanted to show what could be done in a browser and that you could really create rich dynamic applications, just like desktop applications. So you didn't have to build stuff in Windows, which at the time that these products launched, you know, Windows had a huge monopoly as an operating system and all Internet connected devices. So Google really wanted to push the boundaries of what could be done in the browser and was successful. Now G Suite, the business version of these products came up on a little bit later. I think it was 2006 it launched and that was because Google was trying to find a way to monetize these products. And Google's an advertising company at the time, but ads didn't really work well in these products. Really bad for the consumer experience. You know, Gmail has advertising, but it's actually very subtle today. Most users don't even notice it so the idea was, you know, businesses would get a lot of utility out of having these productivity solutions that were in the cloud. And so they were packaged together and sold as a, as a monthly subscription. So, you know, G suite, along with salesforce.com, those were two of the first sort of mainstream SaaS applications that companies could buy.

And LinkedIn's Talent Marketplace, how did that come about?

Yeah, LinkedIn's an interesting story. I mean, you know, most people don't realize that LinkedIn was not created explicitly as a job site. One of the co founders of LinkedIn, Alan Blue, used to say that LinkedIn was originally built as a platform to give and to get help. Right, As a business social network so people could help each other. Helping people find jobs was one use case, but that wasn't the only use case and it wasn't meant to be the primary use case. But in the early days of LinkedIn, you know, there wasn't really content on the platform, there wasn't a feed, there wasn't much to do on LinkedIn. And so what LinkedIn found is that, you know, the most heavily engaged users were recruiters looking to hire talent and find people. And then it was also, you know, people looking for jobs, because when you're looking for a job, it was a huge incentive to go to LinkedIn as sort of a digital resume and create and update your profile. And so those were the most engaged users on the platform at the time. And so, you know, LinkedIn decided to build a business around that and that became the primary business for LinkedIn, you know, helping companies and recruiters connect with talent, especially, you know, passive talent, you know, people that weren't actively looking for jobs but were on the platform and could be found.

Interesting. Now let's get more into like, what's happening right now with everyone working remotely. You recently hosted a Gray Matter episode with Adam d', Angelo, the CEO and co founder of Quora. On that episode, which I encourage everyone to listen to, the two of you discussed how his company adopted to remote first policy. But both of you said prior to the pandemic you weren't really fans of, of distributed workforces working remotely. And can you tell us about your experience with that and how it was then versus now?

Yeah, you know, my experience throughout my career, I think similar to a lot of people, was, you know, remote work was what we call a hybrid model. So typically in a company you'd have a lot of people in the office, in conference rooms working, and then you might have a remote person that was calling in from, from home or from, you know, some far flung location. And it's not a great model for the person that's remote. There's a bunch of reasons for that, but you're not in the room. And so even with video conferencing technology, when you're the one person on video conferencing, it's really tough to follow the conversation. Sometimes it's tough to get a word in on the conversation. Sometimes people in the room forget about you. And then, you know, when you're not in meetings, again, you know, you're not privy to the hallway conversations. You can be out of sight and out of mind. So sometimes you're not selected for the best projects. And depending on what tool sets your company is using, it may be very hard to collaborate with your coworkers. And so I think, you know, for myself, many others like this is what this hybrid model was about. And it's not great and it's not productive for remote workers. I think what Adam was talking about, which, which I think is an important shift, is a remote first work situation. And that's what we're all experiencing during the pandemic, which is everyone's remote. There's no one in the conference room, there's no one in the office. And so when everyone's remote, everyone's on a level playing field. And it's a totally different dynamic. You know, it's a much more productive dynamic in a lot of cases where, you know, everyone's in their own box on a video conference. Right. So you're all able to contribute equally. And then the tool sets we're using, it's, it's forced us to adapt and force all companies to adapt modern collaborative cloud based applications where you can work in real time with your colleagues, doesn't matter where you are in the world. So I think this remote first model is a much more interesting model and a much better model for teams to collaborate. I think, as Adam says, I think you'll see a shift where companies start to adopt recently adopt this type of model.

Right. And this pandemic's upending everything and it's making a lot of us more appreciative of technology than ever, but also more frustrated with it than ever because we're seeing all these areas that it could be improved or where it doesn't even exist yet. And it should. And so it's created a lot of opportunities. But what would you say are the areas that need it the most and what technology trends are converging that are making the development of new products possible.

The pandemic has been a huge accelerant for adoption, user and customer adoption across the board for many different consumer and enterprise technologies. Let's start with the enterprise example first. To give you an example, video conferencing has been one of the biggest beneficiaries here. And every organization in the world, whether it's a school or a business, has been forced to think about video conferencing as a solution to help their employees communicate and stay in touch. And so to give you an example, I was working, you know, until very recently on Google Meet at Google, our video conferencing product. And we just launched that a few years ago. But in the pandemic, you know, from the start of 2020 to the time I left in May, we saw 30x growth in daily usage. So this was several years of growth in the span of just a couple months.

Wow.

And when I left the company, you know, we were, in May, we were adding 3 million new active users per day, which is pretty staggering. In fact, on some days we saw huge spikes where we'd have 60% growth in usage. Right.

In a day.

In a day. Day over as businesses around the world and schools shut down during the early days of the pandemic. So just a few months before the pandemic, I was having conversations with CIOs of traditional enterprises, trying to convince them that video conferencing is a better solution for their employees than pure audio conferencing. Right. There was a lot of resistance to that from some really traditional companies. And now everybody has seen how powerful video can be in other sectors, of course, in education. With this pandemic, we've seen a huge acceleration in online learning solutions and tools. And then on the consumer side, we've seen similar adoption upticks and things like online streaming. I saw Disney plus Disney's new streaming service which launched last year. They hit their, I think three or four year goals within the first few months of this year, just because the pandemic really accelerated the adoption of that product. The same with food delivery, online ordering, online commerce, just massive accelerants because of the pandemic.

I'm thinking about there's a lot of products that are essentially the same thing. There's Google Hangouts, there's FaceTime, there's Skype, there's Zoom, there's all these different platforms. How do you think about just trying to make a better one when there are so many established incumbents, even if some of them aren't that great. Everyone just kind of has to use them. I do see some companies that are still working on video conferencing or things that we use all the time already, like, how do you break into a field like that?

The one tech company that may have been the biggest beneficiary of the pandemic has been Zoom. And when Zoom started a number of years ago, you know, some people thought video conferencing was a solved problem. And we didn't need. We had Cisco WebEx, we had Google Hangouts at the time, we had a bunch of other tools. We had Skype, for instance. But you, you know, there's always room for a product that's better than the existing incumbents. A lot of times users don't know it till they see it, until they experience it. But I think what Zoom really got right is that if you look at the other video conferencing players at the time, they were really optimizing for the conference room setup where you had hardware, you know, installed in your conference room. A lot of times these solutions like WebEx were on premise initially. And if you were in a conference room with the right hardware setup and the right software calling another conference room with an equivalent setup, you would actually have a good experience. Right. I think what Zoom got right is they kind of broke the mold of that, where Zoom was just focused on making video conferencing accessible to everyone, no matter what device you were on and no matter what type of Internet connection. So if you were on your mobile phone or if you were on your laptop calling from Starbucks WI Fi, you would have a great experience. And, you know, and the technology to make that happen is very complex and very difficult. But Zoom did an amazing job with it and created a world class product. And they made it very easy for anyone just to adopt this and through the mobile app or through the web browser, be able to access Zoom with a freemium model. So very low barriers to adoption. So because of that, you know, when the pandemic happened, that's how a lot of people were accessing video conferencing, right? They're not in the office, in a conference room with hardware set up. They're calling in from their home device and their home WI Fi. And so Zoom really solved that problem. Well now otherwise companies to figure that out, you know, and Google Meet, for instance, has made great strides in making that a great experience, you know, in terms of that situation. But Zoom was very savvy and very smart about figuring out that that's the way that would Enable the best user experience.

And so when you're working on products, how do you know if you're very early stage, how do you know when the product itself is strong enough to build a company around?

Yeah, this is a tricky one because a lot of the best products, technology, products look like features at first. You know, certainly not products and certainly not companies. Right. They look like a feature and they can be dismissed because of that. But I think there's a few things you look at. You know, the first thing is your product should provide a very clear value proposition. It should be obvious what it's used for and it should solve the user problem in a world class way. Right? And what you're initially trying to do is just get deep engagement retention from your target users. Right? And ideally this usage will compound over time, this engagement will compound over time as people use the product more. The best products tend to have those kind of capabilities. But that's the first thing is just can you get deep engagement retention and solving a user pain point? I think the second thing is looking at now that you can solve a user problem, can you actually get a scalable path of distribution, user acquisition? And oftentimes this is more important than the product itself is can you have users discover the product, try it and use it. And organic adoption obviously is much better. But paid acquisition is okay too if you can make the economics work. So it's okay to pay to acquire your users through advertising or other mechanisms, as long as the economics work downstream. And we'll talk about that in a second. The third thing is once you've figured out your product really solves a user problem, you can retain your users, you can acquire users in a scalable way. The third thing is really can you prove that you can deliver enough value that your users are willing to pay for your product? And most products now, whether consumer enterprise have adopted freemium solutions, so you can try the product for free, very low barrier. But you have to prove you can convert some of those users, not all the users, but some of those users to the paid version of the product because they're getting so much value for it. And typically the ones likely to convert are the ones that are getting the most value for the product. So your deepest, most heavily engaged users. And then the fourth question is just, you know, looking at how big is the target market for your solution? If you can do the first three things, you can certainly build a company around your product. Now, can you build a venture backed company? And you know, venture capitalists typically are looking for companies that can be worth hundreds of millions of dollars or a billion plus dollars, then the target market's really important. And so there it's just understanding what's the addressable market for your users and for the paying users at the price point you're charging. And you don't have to have a huge market of addressable users to create a big product or a big business. You know, one example at LinkedIn, I worked on the recruiter product there, and that's the SaaS tool that recruiters use to find talent on LinkedIn and hire talent. And, you know, the number of recruiters in the industry is pretty small. In fact, at a typical company, it's a very small percentage of employees. But despite that small user base, our recruiter tool was incredibly valuable to the small population of employees and they had very deep engagement with it. And As a result, LinkedIn can sell its recruiter product for, I think the list price is something like $12,000 a seat per year, which for a SaaS product is very expensive. But because of that, you know, recruiters is well over a billion dollar product for LinkedIn. And so you don't necessarily have to have a huge user base. And there's also examples of some products like, you know, WhatsApp, for instance, which is a great company, has become a great product, you know, as part of Facebook, but has very low monetization. Right. Even though it has billions of users. So sometimes you have a massive product that has a very low business potential. But those are the considerations to think about when you're looking at your product.

I wanted to talk about pricing models, especially when advertising is drying up so much right now. Like if you're launching a company and you're thinking of having like paid acquisition strategies for customers and having ads like, that's got to be something really concerning for newer companies. Right?

It could actually be a great time to be acquiring users. You know, when you go through an economic cycle like this pandemic, ad spending was cut pretty dramatically during the start of the pandemic. If you look at what companies are saying as they report their earnings, it sounds like it's coming back not to where it was pre pandemic, but it's been bouncing back. As a small company, if you're using ads to acquire customers, it can actually be a good time to ramp up your ad spend when the bigger advertisers are ramping back their ad spend. Because most advertising models say, are auction based. And so it's not as competitive in the auction. So you might be able to acquire users at lower prices just because there's not as many advertisers competing for the impressions. So it could be a good time as a small company. Now, if you're a much larger advertiser, there's other considerations. Right. But I think small companies should be fine.

Good news. And we touched on this a little bit before, but this is another angle for it. So productivity tools are among the most important assets companies have today. And we've seen tech from major companies experience a huge surge in demand. We were just talking about Zoom, we were just talking about G Suite hangouts. How do earlier stage companies begin to think about challenging or competing them? And we did talk on that. But would the strategy be to be more category specific like we're seeing with like design collaboration tools like Figma or. I think, I guess Clubhouse is a good one for software collaboration.

The good news here for the SaaS startups that out there is that with the rise of SaaS, employees at companies, whether small businesses or large enterprises, can usually just start using tools on the web through a web browser right there. There's very few large companies that really lock down their IT system such that you can't use any software you want to. There are companies like that, but for the most part, employees can use the software that they want to use. And so if you have a bottom up SaaS model, if you build something that delivers a lot of value to an employee and can help them work smarter and work more efficiently and get their job done faster and better, you know, employees are very savvy. They'll find these tools, they'll download, they'll start using them and they all talk to each other. So these tools can spread via word of mouth pretty quickly if they're really helping people work smarter and faster. You know, once you get to a certain scale, then IT teams at companies tend to notice and they may try to tamp down the usage of your tool or your product or perceived security concerns or, you know, the budget that's going to it or things like that. And that can be very tricky for a startup that's having success to navigate that transition to selling into IT and to keep from getting blocked from it. And there's, we could spend a whole podcast on how to address that because I think a lot of startups that are successful in the SaaS category go through that. But in the early days you have an opportunity to delight users and there's plenty of white space here for companies. I mean, the model we're moving to is everything should be cloud based with collaboration built in. Every sort of SaaS tool with assistive technology usually powered by AI to help people get things done more efficiently. And employees want tools that are specific to their function and to their domain. So I think you mentioned Figma, which is great for designers. So you think of any tool category of employee, whether it's recruiters or salespeople, you know, they want tools that are custom and specific to their needs. There's a lot of different opportunities here. So I think it's, it's a great time to be starting tools in this space. If you can find a category that hasn't been, that isn't crowded and hasn't been, you know, completely addressed today.

And as founders are thinking about that, you know, there's a lot that goes on, obviously, you know, there's a lot goes on on inside of large companies that we don't get to see and what their strategy is, what they're thinking about. Like what should founders today trying to develop new products and companies be thinking about intern terms of what the big established incumbent strategy may be.

Yeah, I think for the most part, and I worked at both Microsoft and Google, the incumbents want to encourage expensability of their platforms, right? They want their platforms to be the center of work for their users. And so they would love to have third party tools integrate into their platforms. And so they've opened up APIs. Whether it's, you know, Microsoft with Office or Microsoft Teams or g suite, there's APIs, they have extensibility and add on frameworks so that as a startup you can integrate and that's oftentimes one of the most powerful distribution levers you can pull as a startup is to integrate into these bigger platforms because they have such large user bases. One of the things to think about though is as if you become really successful. These incumbents tend to get concerned when they see a couple of things happening. One, if they start to see these third party tools taking significant user attention away from their products and gravitating towards something else, incumbents become a little concerned. The other concern is if they see dollars shifting. So if there's third party tools that are, that are taking wallet share from customers away from them, they get a little more concerned. You know, you might find yourself in a situation where the incumbent decides to build a native capability, a native feature, a native product that addresses what you're doing and that's not the end of the world. You know, I think that given these incumbents the way they think about things they're not going to pull away API access from you typically. Right. Even if they create a native solution, they're going to continue to support you. And the reason they do that is because your joint customers that like your solution are going to get really angry with the incumbents if they pull away your ability for your solution to work. Right. They're also, you know, the bigger tech companies are under increasing antitrust scrutiny as well. Right. So they don't have an incentive to, to make it more difficult for third parties to work for them. So I think as long as you continue to prove that you can deliver a great product experience that's better than what's out there in the market, they're going to continue to work with you and support you. And then, you know, an example of that is look at Zoom for instance. Zoom is highly integrated with Microsoft's productivity suite. It's also tightly integrated with G Suite. Right. And you know, and it's because customers love Zoom and they want it to work with Outlook, Calendar and Google Calendar. And so Microsoft and Google have a vested interest in continuing to support that.

And you've worked with companies at pretty much every stage and at every size. And I want to talk about scaling strategies and of course we can't talk about without saying first, like a lot of companies are struggling right now and scaling is off the table, but a lot are also thriving and need to quickly expand and wondering how you think about strategies based on what's going on around you, based on the plan you might have had ahead of time or if there's like a prescriptive way to think about it no matter where you are in the company journey.

Yeah. The way I've always thought about this is, you know, the most important thing is, is to first find your product market fit. Right. So to really prove that you can delight your users, engage them and retain them. Right. That's number one. The second thing is after that is perfect your distribution. So, you know, prove you can successfully acquire users, whether organic or paid. And then three, it comes back to, you know, proving that you can monetize your users and that they're willing to pay for your solution. Once you've done those three things, I think it's time to scale up and that's scaling up distribution, ramping up distribution. And that can mean a lot of things. It can be ramping up ad spend to acquire users and customers. It can mean hiring your go to market team to start selling directly into customers, whether it's mid market, corporate or larger scale enterprises. And as you start to have more success, you typically move up the market. It's easiest to land SMBs as customers. They look a lot like consumers and the way they buy and they choose, you know, technology solutions. When you get to mid market companies, it becomes a little more difficult. There's a different playbook there and that's typically when you need to introduce more of a go to market team and presence. The trickiest is enterprise. You know, selling into large enterprises, say like the Fortune 500 or Fortune 1000, that requires a different playbook. It can require a lot of different product capabilities, right. To make something truly enterprise grade in terms of security and compliance. But it also enterprise buyers. It can be very difficult to navigate a sale into enterprise which is more of a top down enterprise sale where the user has less involvement. So that's the selling apparatus. And then once you've successfully demonstrated that a lot of companies will start to verticalize, right, and go much deeper into different verticals in terms of the way you position your product, but also to where you sell into different verticals. Because the most successful enterprise companies bring a lot of vertical expertise and experience to the solutions that they sell to customers because that's what the buyer wants.

I guess I'm curious about in times of rapid scale, what's a common mistake you've seen companies make?

A big mistake people make is pouring fuel on the fire before they've really perfected product market fit or they've really figured out distribution. Because if you try to distribute your product aggressively through say like paid acquisition and you don't have great product market fit, you're going to have a leaky bucket, you're going to acquire a lot of users that, that churn out and that's very costly. Like you can't grow a sustainable business that way. And so I think that's, you know, one of the mistakes sometimes companies make is they, they think they figured it out and they start to scale and they scale too soon. You know, you really got to get this stuff right if you, if you want to grow your business in a, in a sustainable way. And there's, there's a lot of pressures to scale up faster before maybe you found the perfect product market fit or before you've really identified your distribution. And as founders or CEOs, you have to balance that, balance your desire to scale up, but also balance the desire to perfect the models around that. And so it's one of the trickiest things in navigating a startup. But I think there's definitely a Balance that can be achieved there.

Now, throughout your career, you've toggled back and forth between enterprise and consumer products the whole time, or even worked on both simultaneously, if I'm correct in saying that. And is that a perspective startups should also bring to their product development? Like right now, during this environment? Like, do enterprise focused startups need to focus on consumer and vice versa?

Yeah. One of the most common questions I got asked when I was working at Google on G Suite was, you know, what's the difference between how you address business users in the enterprise versus consumer users? And products like Gmail have over 2 billion users. Almost all those are consumer users. Right. And the answer I would give is, you know, we didn't treat them differently. An end user is just a person and that person, whether they're in their job working at a company or whether they're at home or whether there's a hybrid approach where they're somewhere in between, like they're the same person and they have the same expectations around product experience and how good a product should be in terms of how simple and intuitive, how fast it should be, how well it should get the job done, how assistive it can be for them. And so we didn't treat enterprise users differently. Now, you know, in some cases, enterprise users may have different compliance needs and things like that, but for the most part it's the same person, it should be the same product. And that's this trend. You know, you've probably heard of the trend consumerization of the enterprise, which has been popularized over the last seven or eight years, where, you know, it used to be, if you look 10 or 20 years ago, Enterprise products were very clunky. And some of them still are some of the legacy products. And the reason for that is the enterprise products were bought by the CIO and the IT team. And the way they chose a product to buy was typically they'd run an RFP process, They'd have a bunch of checkboxes on what types of features does this product meet. And whatever product met the most, checkboxes would be the product they would choose. They really didn't think about user experience. And once the IT team chose the product, users were forced to use it. They had no choice right in the company and employees how to use it. Now with SaaS, things have totally changed. You know, with SaaS companies, as I mentioned earlier, employees can just download or start using software on the web if they have a web browser. And most IT teams don't block that today. So users have a lot of choice. So they gravitate toward the best tools and the best products. As a result, it's totally changed the IT buying process. And so when I would talk to CIOs over the last few years, you know, many of them now, the most important consideration in the products they build is what do their users want, what do the end users want? So they'll run surveys, they'll ask the employees, they'll run the pilots with employees to see what tools they prefer. But they want to give their employees and their talent the best products experiences. And, you know, the employees demand that because they have these products in their consumer lives. They have great experiences, whether it's on a mobile device or the consumer apps they use. They want to see the same types of apps in the enterprise. And it's become a big thing for hiring talent. Right? You know, employees want to go work at companies that have modern tool sets that feel like modern environments. They care really deeply about that. And when you've got, you know, employees that have grown up in school using modern tools like productivity solutions, for instance, have been using modern tools in their, in their personal lives, they just expect it in the enterprise. They don't want to feel like they're, they're going back in time.

Do you have experience with companies starting out consumer focus and then trying to expand to enterprise and it not quite working? Or like, what's that experience like if you do have them separated from the beginning?

You know, there's been a number of companies that have tried to transition from B2C to B2B, and oftentimes that happens because they realize that in B2C their product's not resonating and they can't get to a, you know, a scalable user base or they figure out they can't monetize the B2C component. Whatever solution they're providing, consumers aren't willing to pay for. And consumers are really fickle, right? So they spend. You know, consumers now on the Internet are so accustomed to having free technology. There's a pretty high bar to getting a consumer to pay for something. And so oftentimes, you know, companies will pivot to enterprise because they think they can sell their solution and do it there. And that's not too dissimilar from what happened, I think, with Google, with G Suite, where, you know, realizing that the larger opportunity was to package up Google Docs and Google Drive and sell it to enterprises because most consumers just wanted to use those products for free and weren't really willing to pay. And so there have been some big success stories now. Have there been companies that have failed in that? Yes, I mean there have been companies that have tried to make that transition to enterprise. It's tricky because it requires a different set of DNA in terms of the way you want to operate your company. Selling an enterprise means listening to customers. It means building out a go to market team, your customer success team selling into large enterprises. Again, your product may be very similar, but the way you operate your company and your product organization is very different when you're going after an enterprise opportunity. And some companies, they really struggle making that transition.

Now I think that we've talked about this quite a bit, but in terms of not wasting a crisis, have you had experience where you guys developed a product or any of your other roles or where it was during an economic downturn and like just releasing the product seemed kind of risky or, or anything like that where you didn't, you just wanted to try.

Anyways, when I was last at Greylock was actually during the economic recession. Right. So this was 2009, 2010. Right. And so, but if you go back in time and you look that now, what 12 years ago, we had a number of the most successful startups in Silicon Valley were started in and around that time, you know, both consumer and enterprise companies, companies like Airbnb grew up during that time. You know, companies like Okta for instance, were growing up and starting around that time, you know, it can be a great time, a recession to build out your product because you know, as a startup, you're somewhat immune if you're selling a solution that's really going to help companies solve a problem that they need and give them new capabilities. And especially if it's going to create more efficiencies and potentially save them dollars long term, they can be very receptive to that. And as a startup, you know, you can power through a recession or a pandemic and continue to grow and continue to perfect your solution and make it better. And then when the economy starts to normalize or come back, you're really well positioned to start scaling up fast and taking share. So, you know, I think that's one of the great things about Silicon Valley and entrepreneurship is we're somewhat immune. You know, at an early stage, you're somewhat immune to the larger macroeconomic cycles. And in fact, there can be advantages of starting a company during a time with high unemployments because, or a recession because it's easier, a little easier to find talent and recruit talent. It's a little less costly to find office Space. And so there are a number of advantages as well to this type of time.

Yeah, just make something people want first. Make sure. Yeah. That brings us right into like, what are you hearing from young entrepreneurs today? What are the main questions that they're asking you? And maybe what are some of the hardest things they're dealing with right now?

Yeah, I think the top thing from my conversations the last couple months, it's, you know, I'd say it's a tale of two cities. So either the pandemic is accelerating your business model or it's creating huge headwinds to your business models. And it's pretty binary. I mean, most startups, it seems to be, it's one or the other for them. And if it's acceleration, there's a whole set of challenges there in terms of how do you scale up much faster. Right. And handle the growth. And then if it's creating headwinds, there's another set of challenges, which is how do you manage through this crisis? Which may mean lowering your burn rate. It could mean layoffs, it could mean being very, very focused on your product roadmap and what you're trying to accomplish. And so that's the top thing I think every startup is trying to navigate, depending on which side of the coin you're on with that. Other than that, the number one challenge for entrepreneurs is similar to what it's been for probably the last five, six years, which is just hiring talent. It continues to be number one concern, particularly engineers and designers, everything from entry level to mid level, even executives. It's just there's a scarcity and shortage of talents in the industry. And this is one of the things where we talked earlier about the shift to remote work from the pandemic and how that is going to become a little bit more mainstream. I think companies are beginning to become a lot more tolerant of remote work. And I think startups, it used to be pre pandemic, if you were a completely remote startup. And there's been a number of startups that have been very successful as completely remote startups. But I would say by and large there was kind of a stigma to companies that were completely remote. I mean, you know, employees didn't necessarily want to go work at those companies. Venture capitalists tend to shy away from them. Now, again, there had been some very successful companies that are completely remote, but there definitely was this stigma going about it. And I think with the pandemic, people can see how well remote can work. And so it will create this shift to remote work. I Think some companies like Core will go remote first. I think other companies will be more tolerant of hybrid models or having employees work remotely or, you know, part of the time, maybe three or four days a week. But what that does is it opens up the talent pool for companies. For startups that are willing to embrace that they can now hire talent anywhere. You know, it used to be when I worked at Google recently, my team was in 10 offices around the world. And these were Google offices, typically expensive office space in downtown city centers where we were providing lots of great benefits to employees, but not cheap to run that. And most startups can't afford to do that. Google could afford to do that. But Google's philosophy around that was opening these R and D centers all over the world was the best talent doesn't necessarily want to move to Silicon Valley. So we should open great offices in places like Zurich and Stockholm where you can find great engineering talent. Bangalore is another place. But now with the shift to remote work, you really open it further. You know, if you're a startup and you're willing to embrace that, you can hire talent in any city in the world and you don't have to open up a physical office space. Your employees can just work from home. And so I think that is really going to help fill this talent gap. And you know, there's been other issues around hiring. You know, immigration has been tough. Getting visas for employees internationally has been very tough in this environment. Again, the shift to remote work breaks down a lot of those barriers. You don't need visas if someone wants to work from their home country. So it's actually a pretty exciting time to be in the recruiting and talent business because I think this is going to open up a lot of opportunities, not just for the companies, but also for great tech talent. They're now going to have a lot more options of the companies they want to work for or could work for.

Lots of silver linings there. It's nice to point them out. So a lot of companies have had to change course or at least reprioritize their projects during the pandemic. But how do you figure out exactly where to focus your attention in terms of like, if you're building an entirely new product or if you decide like now is a good time to fast track the delivery of something you're already working on, or maybe it's a better time to iterate on a previously launched product. How do you think about that?

Yeah, I've always thought about this as your product investment. Your R and D investment is a Portfolio approach. And so, you know, one of the things that we had in the earlier days of Google that our founders came up with was this 72010 rule which basically suggested that 70% of your resources, you know, your engineers, product managers, designers, should be working on their core products, 20% should be working on sort of adjacent product opportunities and then 10% should be working on more long term speculative venture type investments. You know, innovation, big innovation bets that may or may not pay out, but have a higher beta. And I've tried to focus that whether you're in good times or bad times, you know, having this sort of portfolio approach I think is very important. Where most companies go wrong, especially as they start to see some success is I've seen is they lose focus on the core and it drops below sort of that 70% threshold where you've got a much smaller percentage of your employees working on the core product. You've got more people working on sort of the adjacent and the more speculative products. I think that happens for a number of reasons. I think, you know, one is employees love to work on the next new thing. Especially like really bright, ambitious tech employees that are, that are in startups, you know, working on the core isn't as interesting. They'd rather create something from scratch. A lot of times what also happens is just the CEOs and the founders of the companies get really excited and attached to the newer initiatives of the company and the leadership is focusing. Their time is where the employees will gravitate to. So you have more people that will want to work on this. But I think it's really important to focus on that core because if your core is not working or you don't maintain an edge in your core product space, your company is going to suffer. And oftentimes companies realize that too late when they have another competitor or an incumbent come into their space very rapidly and they've lost their edge in terms of their product. And so that's the way I look at it. And I think that applies whether you're in a pandemic situation or not, is that focus and that balance between the projects in your company is really important. And one other thing on that, you know, sometimes it's really important to understand it's okay to shut down projects that aren't working. I think you should give every new project or initiative ample time to sort of prove itself. But you have to realize when something's not working and you've got to shut it down because it's, there's a huge opportunity cost to having Resources focused on something that's not working, you've got to free it up to apply it to the next new thing. And at the same time, you should double down on things that are working. And sometimes startups are surprised. Maybe a product that you didn't think would be as successful or you didn't think it would be in a certain way, you're surprised because it is used in that way, or you are seeing usage or customer growth from an area you weren't expecting. And sometimes you need to pivot and orient around investing because that's a huge opportunity. It's really hard to get growth and to get things to work and to find the product market fit. And when you find it, you really need to exploit that and focus on it.

How does it feel to have to shut down something?

It's really painful. At Google, a few years ago, I shut down Google, the consumer social network, which was one of the products I inherited. And that was a big, massive product that a lot of people had been working on for many years. And so I think what happens is there's, you know, people have pride of ownership of the things that they've worked on and they've built. And you know, sometimes though, if it's not a strategic priority or it's not as successful as you hoped it to be, you've got to make that hard call. And oftentimes that disappoints a lot of employees, but it can also disappoint a lot of users. I mean, there, you know, we did shut down Google and part of the reason for that is we didn't think consumer social networking was an important priority for Google overall in terms of strategy anymore, but also just wasn't resonating with the broader user base. We looked at the data. Our sessions were very shallow. We had a lot of users, but if I recall, 90% of the sessions were less than 5 seconds. So users are coming in, balancing out. Now, there were a set of users in a Google scale. This is millions of users that loved the product and were really using it. And so when you shut something down, obviously users are very disappointed too. Right. And so you've got to handle that very gracefully, giving them alternatives, giving them the ability and ample time to export their data. But because it's so hard to shut down products, it's oftentimes leaders aren't willing to make those calls because they don't want to deal with that or don't want to deal with that now. And so they can let these things persist. And the longer goes on. It's just again, the bigger the opportunity cost and the harder it is to eventually shut it down. So, so I think it's incumbent upon CEOs and founders to make those hard calls to help their company move forward. And oftentimes employees, not just employees, but users and customers, want that clarity around whether you're investing in something. And on the enterprise side, enterprise trust is very important. So if you're building enterprise products, these companies that are buying your product want to make sure you're going to be around supporting this product for many, many years if they're going to invest in it. And so if you start shutting stuff down on the enterprise side with very little notice, or without giving customers alternatives, that can cause a lot of problems with customers and cause a lot of trust issues with customers. And so the best enterprise companies really support their products. Which means that when you decide to build a new product or invest in a product, it's a much more considered decision because you need to think about, once we have customers on this and they're paying for it, we really need to support this for the long term and invest in it or you're going to lose that enterprise trust.

We talked about this a little bit, but given the economic downturn, how should companies think about pricing models? How did you factor this in when you were working at other companies during other economic downturns?

In an economic downturn, your customers are hurting. Oftentimes you'll see demand for your products go down. I think there's a temptation to lower price, especially if you're a SaaS product, to kind of counteract that. I would discourage that. I think when you set a price for a product that customers come in at, whether it's consumer or enterprise, they anchor on that price. And it's very tough to do price increases over time. I mean, the best companies will do price increases periodically, but there's always a lot of customer angst and churn around a price increase. So if you set really low prices as an entry point, that could be really problematic long term when the economy rebounds. So what I recommend is it's much better to have a temporary discount or an extended free trial in this type of time period. So if you want to get customer acquisition on again at Google, with our Google Meet video conferencing product, we gave away all the premium features away for free for a period of several months because we knew our customers were hurting, we knew customers were looking for solutions. And when something's free, it's much easier to get someone to Trial it. But we built in the expectation that we would charge for the product once the promotional period ended. Right. And so you want to set that expectation with your customers so they know what's coming and that's really important for IT budget planning as well. So that would be my recommendation is do temporary discounts, do extended free trials. That'll help with acquisition and it shouldn't hurt you in the long term.

What trends do you think are here to stay versus which are those that people will maybe gladly stop once, no longer they have to like I know I'm not going to take as many video calls. I'll probably still use it. But what are the last seen changes that we have here from the current situation?

Yeah, I think even before the pandemic, the last few years, one of the shifts we were seeing in the way that work, the working world works is for professional work had really started to change. Where the professional working world now is much more about project teams and that's how work is oriented. So project team is a diverse set of people coming together to accomplish something, usually something discreet. And that could be, you know, a short term project to create, say like a sales presentation. You might pull a bunch of people together for a two or three day project or it could be a long running project that spans many years. Right. Including some new product or something like that. But the people that are working on these projects could be from different functions, different departments, different offices, different locations around the world. Oftentimes they may be people that are composed of people inside your company but also outside your companies, whether that's contractors or party, third. Third parties or customers. One of the most popular features of Slack now is something called shared channels, which is the ability for two different organizations or companies or multiple organizations to have a shared working space. Right. And communication channel. So you're seeing more and more work across companies. And so I think that trend has been accelerated by Pandemic and will persist post pandemic. But what it means is that when you think about if this is the way the working world's working, you need the right tool sets that'll support this way of working. And so this is tool sets that allow for remote work. And so, you know, video. You mentioned video conferencing first. Now I think that is a trend that will persist. Whereas, you know, most of the world was still in an audio conferencing working style before the pandemic. Video is a much more engaging format for holding a meeting where you can see someone's face. I mean, humans are Visual creatures they like to see. And so I think that will persist. And a lot of people hadn't really been immersed in video conferencing culture until the pandemic. Now people will still have in person meetings and that will displace video. But I think rather than picking up the call, people are much more likely to converse via video. I also think you'll see communication via video, asynchronous video, displacing things like email. So you know, there's companies out there and tools like Loom for instance, which allows you to record a video and a screencast and then share that with someone else asynchronously so they can watch it again. It's a lot better mechanism for communicating a lot different types of information. Whether it's you're trying to give feedback on a product design or something like that, that can be a better format. So I think that will persist. And then I think there's a lot of still legacy on premise tools and solutions and those tools don't work well in this modern working style. So I think you're going to continue to see the trend of every tool will be real time, will be collaborative and will be cloud based. Right. Will work well on mobile just as well as it does on web or on desktop. So again that will, that will be the same. Now I think the world will start to get back to a more normal working style at some point. But I still think things like business travel will be slow to come back. I think for a lot of different types of meetings where you would have hopped on a plane before, you will now just attend via video. And I think that will have implications for things like the corporate event space where I think if you're running a corporate event, you have to have a virtual alternative that's really engaging and, and for most events they might throw up a live webcast or something of a speaker, keynote or something. But again, not very engaging, very immersive. But I think for events going forward you'll want to be able to have that same sort of in person experience as you could virtually. Now companies will still have some in person events once we have a vaccine in the future. But I think there could be a lot of events that move to a purely virtual format because in a lot of ways it's, it's a lot cheaper and it can be a lot more effective both for the participants, but also the speakers and the attendees. And so I think that will persist. So I think a lot of these trends that you're seeing with the Pandemic, which have accelerated the adoption of some types of technology are more likely to persist than to dissipate over time.

Yeah, and it seems like people are more, you were saying, like people will only go to like really high value events or people are really only going to take a call if they're really going to get something out of it. People might be more engaged with the technology too and actually get more done. I feel like people's attention spans might actually improve over all of this.

Yeah. And I think that's a big startup opportunity is to, can you create tools to make virtual events and virtual meetings just as effective as, as in person? And the more we can do that, the more you'll see us display some of these in person and physical events. You know, one example is I think, you know, business travel will still be around for, for very high value interactions such as, you know, if I'm an executive and I need to go talk to the CEO of one of my customers, I'm probably gonna go to a plane and see them in person. But you can think of, is there a, you know, because that's just more, more effective than zoom and more personal. But is there a way that we can create a better communication experience where we can make that just as immersive as going in person? Right. So I think, you know, startups, there's, there's plenty of problems to be solved here and it's, there's a lot of opportunities in this space.

What's your favorite tool right now? Like, what's your favorite product?

You know, one of the great tools that I had up until recently at Google, you know, I was running our user experience team for G Suite and we were increasingly standardizing as Figma as just the solution we use to collaborate around and create designs. And it's, it's a really great solution. You know, we started using it for running all of our design reviews just looking live at, at Figma. It's the way we collaborate on designs. Our designers loved it and felt they were just a lot more productive and we had tried a lot of different tools. But yeah, Figma is a really great tool and it just makes you think that there's got to be a Figma for every single category of worker, type of role and function in the workforce. They need a collaboration tool that, that's good. So I think there's lots of interesting opportunities out there.

Yeah, no, that sounds great. And we're actually going to have Dylan on from Figma on Gray Matter soon. So we can hear a lot more about that because I understand they've had such success with users that they're really expanding their capabilities quite quickly.

We covered a lot of ground here and appreciate you having me on and this was great. So yeah, hopefully we'll get through this pandemic soon and things will get back to more normal. But in the meantime we'll continue to try to build companies.

Yeah, I'm not going to hold my breath on the pandemic, but I'm sure that I will see a lot of great new companies and new technology out there so that I'm looking forward. Well, thank you so much, David. It's been a joy.

Thank you.

Okay everyone, that concludes this episode of Gray Matter. You can subscribe to our podcast on soundcloud.com greylock partners or you can find new episodes and blogs on our website greylock.com youm can also follow us on Twitter at greylockvc. I'm Heather Mack and thanks for listening.