S8E7: Yin Wu's Journey of Empowering Startups with Pulley's Equity Management Solutions [LIVE]

Who do you want to help? Spotify, they really want to help music creators. Shopify, it's small business owners. Who you want to help, I think, is a really important question for all the founders to answer because you need to be obsessed with that user group. There's this irrational belief that we have is like, if there could be more startups in the world, I think it creates a better future because you get more entrepreneurs that's pushing the needle forward on what's possible.

Welcome back to season 8. Clauds, how we doing?

So well. Can't believe it's 8 seasons of The Room Podcast.

It feels like just yesterday we were getting started in the middle of COVID and had this vision for sharing the future of founding stories to let other founders be in the room where it happened and So much has changed for us since August 2020 when we first had this inception. You're now a founder and co-CEO of Priv, which is a startup unlocking and disrupting recurring revenue for e-commerce brands.

And Madison, you're crushing it in venture. You're now a partner overseeing investments at DefyVC, an early-stage venture firm in the Bay Area, and of course an investor in Priv. We're just two women navigating our careers and asking the people who inspire us to shed light on their stories. Unlocking Access starts with a conversation context, and as a reminder, we open the door to moments in technology history that traditionally happen behind closed doors. With our guests, we unpack the experiences that led to their success and look towards the future in their verticals.

And we hit an incredible milestone at the end of last season with Spotify sharing that we were a top 5% global shared podcast in the technology sector. And so we want to thank you for being a loyal listener. And helping us achieve this milestone of amplifying more equitable voices in the room where it happens. As you look towards season 8, get excited. We're excited. We have some incredible founders from the founder of Superhuman, the founder of Incredible Health, Webflow, Ty Haney with her new business TYB, and more. So join us every Tuesday where we sit down with leaders, founders, and funders who are changing the way it's always been done. You can expect themes across, of course, generative AI, navigating your startup in a downturn, the creator economy, and more. So be sure to hit subscribe, like, and follow so you don't miss any Tuesdays in the near future.

Silicon Valley Bank, now a division of First Citizens, remains fully committed to serving founders, executives, and investors across the innovation ecosystem. As the largest banking team focused on technology, life sciences, and healthcare, private equity, and venture capital, SVB is uniquely positioned to deliver specialized lending and financial solutions clients need to reach their ambitious goals. Find out more at svb.com.

Cooley is a global law firm built around startups and venture capital. Since forming the first institutional venture fund in Silicon Valley, Cooley has formed more venture capital funds than any other law firm in the world. The firm has 60+ years working with VCs, helping form managed funds, make investments, and to handle the myriad of issues that arise through a fund's lifetime. Learn more about the firm at cooley.com and also at cooleygo.com, Cooley's award-winning free legal resource for startups. Hi listeners, Madison here. As many of you know, we partner with incredible community builders and companies to bring these stories of innovation and creativity to you every week. About once a month, we find ways to take these stories from URL to IRL in San Francisco. Last month was no different. We partnered with Deal, CBRE, and Poly to tell the founding story of Poly. Yin Wu, CEO and founder of Poly, joined Claudia and me live on stage in downtown San Francisco to share her story of being a third-time YC founder. And imagining the future of cap table management with their software. The audience was the current Y Combinator batch of Winter 2023 and exclusively the Room Podcast community. If you're based in the Bay Area and want to join us for more community gatherings across builders, funders, and corporate partners, please do. I know we have one on the books in May for San Francisco Tech Week, and the best way to keep in touch is subscribing to our newsletter. For all of the up-to-date events. To do so, go to theroompodcast.com/newsletter. All right, listen on for a bonafide In the Room recording with Yin Wu. In today's episode, we are going to discuss insights and themes such as thinking in terms of decades rather than just a year for your cap table management, how to build your first sales team, and the myth of working smarter, not harder. Let's open the door. Yen, let's go! Hello!

Want to join us on stage?

Thanks, guys. Hi everyone.

Thanks for coming.

This is so much fun and one of our first live recording episodes. We've done one of these prior in the pandemic, but it was a little touch and go. Yen, thank you so much for joining us.

Absolutely. Thank you for having me.

I'm so excited to have you here. For everyone in the room, it's a majority YC founders, some of maybe the newest YC founders on the block as a part of the current batch. But you are a 3-time YC founder, and we're gonna dive into all of the stories along the way. But just to contextualize everyone in the room so they know a little bit of your background, but we're gonna dive into it too. You are founder and CEO of Polly. You sold your last company, Echo Lockscreen, to Microsoft in 2015, where you went to become the youngest Principal engineer at Microsoft. Prior to Microsoft, you were at Stanford where you successfully dropped out.

I love the framing, successfully dropped out.

Yeah, I do wish your parents probably were okay with it after they saw it play forward, but maybe there was some stressful moments in between. But you were part of the 2011 batch, the 2013 batch, and Winter '20 as well with Pulley. So we're going to touch on all of these topics, but thank you so much for joining us today.

Really excited for it.

Poly is on a mission to make it easier for everyone who is starting a company to envision a future where founder-led companies and employee-owns those companies. And we're going to touch on the product and the magic behind it. But we like to start at the beginning with our guests. So could you share a little bit more about where you grew up and how that shaped your view of the world?

Yeah, absolutely. So I grew up in Florida and Kentucky, and there's not that many tech companies, I would say, in Kentucky. So didn't even understand like what the concept of starting a tech company was until I came out to the Bay Area for college. 'cause my perception of starting a company was that you get a big loan from a bank, you open a restaurant, and then 95% of them fail. So the idea that you could even get someone to invest in your company for a crazy idea and then maybe it works was amazing to think about even trying.

So it blew your mind coming out here. What was the inception of coming out here in the first place?

Coming out here for school, I went to Stanford. I, I think there's something about the ecosystem of being in this space where there's a lot of people that's thinking about starting the next thing. And when you also see people around you trying to do it, it feels like it's not as scary because that person's doing it. I'm in class with them. They don't seem to be that much stronger than me. It's like, why not just go and take a shot and try?

Absolutely. It sounds like being a founder wasn't maybe on your initial high school vision board. When was that first moment?

I would say dropping out of college was not on the vision board. Going down the pre-med path was something my parents would have loved. There, I think there was a number of things. One was when I was in college, I was actually really into social entrepreneurship. Seeing if there's more you can do to really use entrepreneurship to empower people around the world. And I ended up actually dropping out of college because I took time off to go and work at an NGO in Kenya. So when you see like what a lot of people around the world are trying to do and what this NGO was doing was trying to plant fast-growing trees so that you can both help farmers have another revenue stream as well as try to stop deforestation. It felt like, man, that's like really cool to be able to start something that didn't exist that can also help a lot of people too.

And so was that your first startup, Oven Labs?

That wasn't my first startup, but then the impetus for dropping out was my co-founder at the time got into YC, and it was a case of— I remember talking to the guidance counselor in college and they were saying, it was like, oh, it's actually really easy for you to like pause going to college and drop out and then try something new. For Stanford in particular, there are so many cases where people have left and it's worked out. It was almost easier than changing my meal plan at the time. So, for me, I do think there's a case where a lot of times people's perceptions of risk is not quite the same. Like, there's things that you think are really risky that may not actually be as risky, and the reverse is also true. I would say, like, getting a PhD for 7 years is actually a really risky endeavor. Maybe it's something that you are being encouraged to do because if you do something, you study for 7 years and you realize this isn't actually what I wanna do, you're really deep into it. Dropping outta college, the worst case that could happen when you're young and you don't have any obligations is you go back. You go through the normal recruiting process. So there's actually a really strong safety net. And I was also thinking it was like ramen profitable. I like ramen. There's no cost. I think it actually becomes harder to go into a startup. I think the more that you're giving up, if you're a VP at Google, if you have a huge family, the barrier to getting started, I think, becomes harder each stage versus why not just go and take a shot?

Totally. After Oven Labs, you launched Echo Lockscreen, which In 2013 was an Android lock screen app, and it was actually the first lock screen app that used machine learning to prioritize mobile notifications based on your location. Seems pretty relevant for today. That was actually acquired by Microsoft, and I can only imagine that experience really helped inform prioritization. Could you tell us a little bit more about that and kind of some of your learnings from Oven Labs into Echo?

Oven Labs was the company that we initially called the kind of umbrella suite of products we did. And I, I think what could be interesting is like taking a step back for how do we even decide to build that product? When I first decided to start a company, I, I really think it was a case where it was like, you didn't know that much, go and try it. We went through so many different pivots. We built everything from ad tech, like you could put a really cool image inside a video and make it look like it's part of the original scene. What we learned there was this was very much a technology in search of a solution, trying to make something work. We pivoted to same-day laundry delivery. This was around the time where there was a a lot of online to offline services. Uber was getting started. You had Homejoy, a home cleaning service. And I think DoorDash was just getting off the ground at that time. So thinking was like, why not do something that's one of our problems? Laundry. And I still had friends at Stanford at the time, so our costs were zero 'cause we would sneak into the dorms and use the dorm laundry to get it done. But what I realized after working on the business was like, I'm honestly just not that excited about the space. Like, do I wanna spend the next 10 years helping people do their laundry. But one of the challenges that we originally had was like, because when we started Prim, which was a laundry service, I would do a lot of the deliveries myself. So you're driving around San Francisco and you get a notification on your phone and it was like, is this another notification from Twitter or is this one of our customers actually messaging us saying they need to reschedule? I was like, there has to be a better way in order to handle this. And that's how we landed on Echo. So I would say like maybe the takeaway I would have is like so many times you hear about the end result of a startup, but not the path it takes to actually get there.

What did you apply to YC with then for that company?

We applied with the ad tech business and then pivoted to laundry and then pivoted to building something entirely different and then going through an acquisition with Microsoft. Actually, like over half of the companies in each YC batch end up pivoting because like you, you have two choices. Once you realize something isn't working, you really just keep grinding it out and make it work, in which case it's so important, I think, to have a mission that you believe in because that's what's going to take for you to get to the other side. The other option is you actually start over and think, if I were to start this business doing everything I know today, would this be what I actually pick? And for us, many steps along the way, it was like, this wouldn't be what we pick knowing what we know now.

I'm sure a lot of folks that are in YC who maybe not have pivoted yet probably will end up pivoting. We pivoted. I think it's something that most founders go through. And you mentioned how passion and kind of understanding what you're excited to build and what your mission is, is so core to making sure that you're working on the right thing so that through the hard yards you're excited to get up and keep going. What advice would you give the founders in the room around frameworks to think about? When is the right time to pivot? Tell us a little bit more about how you navigated those decisions.

What is it that you want to build or what's the market that you want to be in? And market definitely matters. Like a rising tide lifts all boats. If you had done anything in social in 2007, you probably would have been successful. But I think there's almost like an even more important question on top of that, which is Who do you want to help? If you think about just Spotify, uh, they really want to help music creators. If you think about Shopify, it's like small business owners. Who you want to help, I think, is a really important question for all the founders to answer because you need to be obsessed with that user group. If you're not, then someone else who is more obsessed than you is likely going to win. For me, in starting Puli with my co-founder, it was the case that we took a step back and thought like, we really just enjoy spending a lot of time with founders. There's this irrational belief that we have is like, if there could be more startups in the world, I think it creates a better future because you get more entrepreneurs that's pushing the needle forward on what's possible. Totally.

You didn't end with laundry or with Android lock screen apps or with Dirt Protocol. You're here today because you are one of the co-founders of Polly, which is incredibly cool. Shout out to all of the YC founders here. It wasn't too many years ago before you were in their seats. Could you tell us a little bit more around the aha moment around founding Polly and ultimately why you decided to go to YC?

Yeah, one of the things I feel like I always struggled with when I was a first-time founder is that there's so many things on your plate. Talking about this backstage where there's the TechCrunch perception of what it's like to be a founder where it's like everything's amazing, everything is working. And then there's reality where it's like you sign up to be a founder if you wanna get punched in the face every single day. 'Cause there's so many obstacles that you're actually facing. We all know there's like the emotional rollercoaster, I think, of being a founder, But I think the part that I didn't understand until I actually went through it was that emotional rollercoaster can be on an hour-by-hour basis. The timeframe is condensed. You think you're on top of the world when you close an amazing deal, and then you get an email literally the next second from a customer saying like, nothing is working. You're like, what's going on? For me, like one of the challenges I had when I was starting company is you're dealing with all of that, trying to find product market growth, trying to scale your company, trying to hire. And then there's like all the back office stuff that you have to handle just to form a company. Equity is actually one of those core pieces where I think it's the most valuable asset that your company owns. If your company becomes really successful, and there's a giant if, 'cause we know it's the case that not all startups succeed, but if it becomes successful, equity is what accrues in value. It is the only thing in your company that can 1,000x in value. It felt like I had such little understanding of how it worked. When you're going through fundraising, you're at an information disadvantage 'cause you're only raising for one company. The investor on the other side, this is their 10th deal of the week. When you're trying to get people to join your team, you can't compete on cash comp against Fein. So what you're really competing against is being able to sell the vision of how the company could be successful in the future and giving them a share via equity of the stream. What we want to do at Poly is really think about equity as an asset for the company. How do you make the most of this asset? It's not just about how do you manage a spreadsheet and make sure the numbers work, but really how do you help a company maximize the most valuable asset that it does own?

Hearing you talk about trying to find product-market fit while dealing with a lot of back office logistics. It hits too close to home. I'm embarrassed by how long it took us to get a 409A. There's a lot of different tasks that founders have to deal with, especially as they're company building for the first time. Why cap tables?

It goes back to— I think ownership is something that's really critical. One, when we think about Pullays, we're starting with helping companies in tech manage their cap tables and helping all the employees at these companies also share a part of what you help build. But extending beyond that, I think giving everyone a chance to own a small part of the place where they work and what they're helping to build is actually really impactful. Because if you're also an owner, you think in terms of value creation rather than clock in, clock out. So with Pooly, we also help private equity firms manage their ownership structures for everyone that works within a PE firm. We also help crypto and Web3 companies manage all their tokens. I think ownership can come in many different places. So that was a part that was like really exciting for us to think about scaling.

So ownership, equity, access. I think it's pretty clear that Poly's mission is very much aligned with helping this generation of startups navigate ownership and getting their employees excited. As a small sliver of many other things that you do, given that there are a lot of early-stage founders in the room here, what is one common mistake that founders often make when dealing with cap tables, putting together equity? What advice would you give?

I'd say there's 3 major components. One is that you should, at the basics, understand what your options are and what you're giving up. This is where Polly wants to help. We know it's the case that for a lot of times, the funding environment now— I don't think I have to tell anyone in this room— is challenging. It's really different than 2021. Public markets are down 80 to 90% for some of these companies. That affects all the investors because when they're looking at how the public markets are down, it cascades into the private markets. So we know it's the case of companies sometimes do need to make really challenging choices about like Great. I need to raise capital. Maybe the terms aren't great, but understand what you're actually giving up. Because when we talk to founders and ask them, it's like, how much of the company do you actually own? How much are you going to own after this round? Too many times the question is actually, I don't know. The reason that investors sometimes ask you about your cap table is that they want to know that you own more than 5% of the company. Because if you only own 5%, their question is, do you actually even have enough incentive to keep running the companies? There's implications for you, not just today, but really into the future of the company's growth. I think the second thing that we've also seen is when companies try to over-optimize on it, trying to get the best possible deals that they can. I think it's the case like your company journey is going to be really long. Overnight successes are really rare. The analogy I make is like the faster that the company shoots up, oftentimes the faster it can also fall. When I think about crypto, FTX would be a fantastic example of this. Anything that looks really great from the outside may not actually be great from the inside. So if you're really looking to build a long-term company and think in terms of decades, not just the next year, you don't want to just optimize in terms of pure financials, but get the right people on your cap table, get the right partners on board. Oftentimes, like really good investors that add value are the ones that may actually not invest at the highest valuation, but that could also be worth it. And then I say the third thing that is pretty impactful when you think about just managing a cap table or managing equity, think about the ownership for your team. And I think being generous here is actually a case where if you get people that are really bought in with your company, they also feel like more of an owner and feel more invested in success too.

So tell us a little bit more about how Poly as a product and platform helps founders kind of navigate a lot of these dynamics and important problems that you just mentioned.

If you really think about more than just the cap table and really think about what do you actually need to get done, and two of the most important things is raising capital and then hiring. So on the raising capital part is like when you go into Poly, you can model out what does my next round look like? You can upload a term sheet and we'll explain to you what some of these terms mean. So if I throw out terms like liquidation preferences or preferred rights, all of these things, oftentimes we talk to founders like, I've not heard of it. But if an investor has like a 2x liquidation preference, that means your company needs to return their capital times 2 before you get anything. Great. So maybe you should know that so that you can make a decision between that versus another option that you have. And when it comes to hiring, the way we think about it is equity is a core component of how you can bring really great people onto your team. Fully has a great tool for you to actually help employees better understand what the value of their equity could be if the company does really well.

Something that we're seeing more and more right now is unfortunately some of the SAFE valuations not be what the priced rounds are getting done at. And when you had multiple SAFEs stacked on prior valuations that were caps rather than priced rounds, you start to snowball very quickly in estimating what that true valuation is.

Even if you need to take a round and add a significant haircut of what your last round is, That's one of the tough choices I think that you just make as a founder when growing your company. But know what you're also signing up for. One of our investors once told us once a year at his board meeting, he asked 3 questions. One is like, should we keep going? Should we shut down? Should we get acquired? Just knowing everything you know is like, great, let's think about this rationally. Intuition cost fallacy. How's the company doing today? Which of these options do I actually wanna take?

Well, you've been on your own fundraising journey whilst helping other people on their fundraising journey. To date, you've raised over $50 million from top-tier venture venture capitalists from YC Founders Fund and Caffeinated Capital. So huge congratulations for that milestone. We're curious, who was the first person to say yes to investing in Puli?

So Elad Gil was one of our angel investors, and he's one of the most prolific and also successful angel investors. So he was the first person to say yes and has been tremendously helpful. When I think about like the folks that we wanted on board to support Puli, I have a bias, not surprisingly, towards operators and founders. So Keith Rabois at Founders Fund led our round, and Keith was the CEO at Square and also CEO of his own company today. Allad was the CEO at Color. We have Jack from Lattice, we have Parker and Matt from Rippling. So the reason I have a bias towards operators, and we reserved a lot of our cap table for operators, is I think there's a huge difference between people that understand like how to roll up their sleeves and help on the tactical advice. And investors that maybe only have been professional investors that say they know how to help. But when something goes wrong, you want to be able to call someone and know that they have your back as well. And there's a lot of tactical advice that you can only know if you also have done the steps too.

In this current climate, things have definitely been unique. You alluded to the markets being down, what, 80 to 90% at the macro level. But when you were fundraising out of Winter '20, it was the depths of COVID We were the pandemic batch.

At the time it was like, oh, nothing is wrong. Keep coming to YC. It was still in person. We're all eating communal meals. Next day, somebody may have been exposed, but I think we're okay. And then like the meals get individually wrapped. And then the next day it was like, okay, just kidding. I think nobody can come in. And then it was like, hey, we're going to do remote Demo Day. So it was like a quick escalation. And it was also interesting because like, I think what people were expecting was that this was going to be the worst fundraising climate. And then I think we saw a V-shaped recovery where the markets were on fire and it ended up in a positive way. Ended up being a very beneficial fundraising climate. But I don't think that you could have known that at the time either.

No, I remember that virtual demo day was actually my first demo day as an investor, and I was kind of like looking around like, okay, what's going on? I don't do this. Contextualizing that with today, right? There's a lot of uncertainty in the market. This current batch is going out into fundraising right now. Some of them may be already fundraised or on that road. What advice would you have based on your experiences, not in even just the past batch that you were in, but the ones you've been in the last 10 years? Um, just some tips, things you could think about as they're going forth in this environment.

I think that if you do have options and if you have a term sheet, really consider consider it. I think funding is definitely down compared to what it was before. I mean, for Pooly, it's like, we, we also noticed this because we track the number of companies that are getting funded every single quarter. And if you look at Q4 of 2022, just last year, it was half the amount of companies getting funded in Q1 of 2022. So I say this not to, I guess, like, scare all the companies that are trying to raise funding, but more it's good to be aware of what the environment looks like so that you can know what your options actually are. If it's the case that you're having a really tough time also fundraising, you need to take a step back and figure out how can you stay really lean with the capital that you do have and make a ton of progress. Innovations like GPT can help a company go really far with potentially less capital as well.

Totally. You fundraise during a pretty good climate. Maybe things will be a little bit tougher now for early-stage founders, but I think in many ways when the rubber hits the road, really great businesses are being built.

Yeah, the positive light here is The funding that's easiest to get, like funding is hard across the board at every single stage. Early-stage founders, I would actually say, have the best opportunity right now. If you're a company that raised like a Series D at crazy valuations, an investor is looking at it like, I can buy stock in a public company with instant liquidity, has better financials than a late-stage company that doesn't give me any liquidity today. So the more that you need to raise, I think the harder it is to do those rounds. But if you're early stage and you need to raise a couple hundred thousand or you need to raise a million, decrease the amount you need to raise because the more that you decrease it tactically, the easier it is for you to also close that round.

That's a great tip for the group here. Going through those tough times is inevitable as a founder. We've all been there. I would love to dig in and learn a little bit more about a moment that you faced building Polly that didn't quite go as planned.

I feel like that's honestly like day to day.

That's everyone's answer.

Joe Kraus, who is one of the founders at Excite, the OG search engine, He used to think that fundraising would solve all his problems. And then what he realized was that it really doesn't because you're just signing up for a harder race. So like, say you are a runner, you compete at the region level. Great. Amazing. You make it to the state level. Amazing. Then you make it to the national level and now you're at the Olympics, but you're literally competing against the very best people in the world. I feel like that whenever you're like running any company where you hit a milestone and the only thing that matters is whether you hit that next milestone. I think the good news is that you level up and at each stage you get better. One of the toughest parts is really thinking about building out the team and building out the culture of Poly. And it's tough because sometimes you are in situations where it feels like it's not a win-win. If it was the case that we could hire everyone that applied that was a good candidate, great. We would love to do that. If we had 100% success rate in hiring, that'd be amazing. But I think some of the challenges would be like when you have a tough conversation with someone on the team, that isn't performing well and thinking about how do you make some of these calls and trade-offs where it's just not clear what you do.

What frameworks would you say have really helped you with those difficult conversations, whether it's having to lay off an employee or make a decision where it feels like there's no good outcome?

I got a really good piece of advice when I was starting out with Poly. Ultimately, it's your call and you have to be opinionated. If you go and talk to people that you respect and if everyone is saying the same thing, just go and do that thing. But more than likely, with the tough challenges that you face, two people are gonna say X and two people are gonna say Y. If that's the case, that means there's no right answer and you need to own that decision either way. Going back and figuring out, I was like, what is the decision that you may actually regret the least if you were gonna make it? I think is a framework. I think that one thing I've had to let go is wanting to be liked as a founder. I think if you try to hold onto that, you may not actually make the best decisions for your company as a whole. With Pouli, one of the things that we say that's more opinionated is that, and this is very intentional, is that we're not a family. We compare ourselves more to a high-performance sports team. And I think there's a lot of cultures for startups that say like, hey, we are like a family and that's great. And if you're looking for that, I think as someone looking to join a startup, you should go work in those places. The reason we say that we're not a family and more like a high-performance sports team is actually because of that very reason. If my mother-in-law makes a meal that's not great, I can't fire her, but give her like 10 pointers on what she can do next time. Just enjoy it and really appreciate the time that she put into it. But with a sports team, I think is more like you have a goal, there's like a championship that you wanna win and you wanna win the next one. You need to make sure you have the right people on deck. And if you're not hitting your goals, you need to do a rush to figure out what is it that we need to do. Because if you don't, then great, you may not have a shot to continue growing the company too.

Thank you for sharing that.

We're talking about a couple different things. Some factors that are in our control as founders, which is how you think about building your team and what you can put in and put out. And some are not in our control, like the macro financial market. But you guys have gotten to over 3,000 customers and 3,000 companies using Polly today. Hopefully there's some Polly users in the room and maybe some soon-to-be Polly users in the room as well. But I'd love to talk about what's in your control around go-to-market strategy and maybe some lessons you've learned along the way, and specifically touching on the cohort of startups, which tends to have a high churn nature as your customer base.

Our biggest source of attrition is that companies die. What we have seen is like with cap tables, it's sticky. Otherwise no one is really looking to change cap table tools unless it really can't grow with you as a company grows. So when we saw that venture funding was going down, this is also, I would say, a case for like if you're earlier stage, it's actually a little bit easier for you as a startup because for Puli to 10x in growth, the sheer amount of our 10x is not that massive. Google is not going to 10x. You can only do that if the economy suddenly, for whatever reason, expanded massively because of a huge innovation. For us, like when we started to see like there were some of these market shifts, we thought about what are different product lines that we can go into that can maybe diversify our offerings beyond just core startups. So we also work with crypto Web3 companies managing their tokens. That is also a very volatile market. But then to counter that, we work with private equity firms and all the portfolio companies that they acquire to manage their profits interests. So there's oftentimes, I think, opportunities to also think about how do you expand the TAM versus the one that you're in. The question is like, why are you the right company to do it? Like, for Pooly to pivot into becoming another productivity tool probably doesn't make sense because we don't have a competitive advantage. But managing ownership rights for companies across different verticals is still actually a massive space too.

And so in that go-to-market motion, there's probably a dynamic around inbound and outbound. How have you guys thought about building a product around self-service or products that can scale with larger companies?

Yeah, I think that's a great question. So for us, given where our ACV is, for early-stage company is a couple thousand dollars. We can't depend on only outbound because you run the numbers on how much it would take for us to reach out to every customer, have it be high-touch, and it doesn't work out. So it's really different, I think, for every single company that you're doing. If you're selling like a $100,000 deal to a large enterprise, absolutely, you need to be high-touch because nobody's going to self-serve and pay $100,000. So we think about how is it that we can build out an inbound-driven marketing engine How do we touch the founders at multiple touchpoints? So over 60% of all the companies within each YC batch end up choosing Pooley. And it's not just because we send them an email, but rather for every single batch, some of you guys may see me multiple times. We try to write articles that are useful for founders. I think our view when it comes to marketing is just how do you add value with every interaction that you have, especially for our audience of founders? They can tell when they're being marketed to. And I think there is this allergy when you're a founder to not want that. So we try to find ways in which we can actually add utility and then they're taking a bet on the product would be useful to.

I'd love to focus a little bit more on building out this go-to-market team. Coming from a product engineering background, figuring out go-to-market, hiring a sales team, managing that sales team, that was a really daunting task for me, and I know it is for a lot of founders. Tell us a little bit about the journey of building out that initial team and what advice you would have there.

One of my fears was actually sales. In my mind, sales is like you're just trying to pitch someone and close them. and it's really hard for me to sell something I think I also don't believe in. But I think actually the good news on sales, and I'm curious if you also have the same experience, is it's something that you can very much learn. We started out with founder-led sales, and I think that's what most founders have to do. Your product is just flat out not gonna be good enough when you first launch it, cuz you need that feedback loop. It's only gonna get better if you get users to use it. We can only get users if you can convince them to take a shot on you. So to get that flywheel going is like you gotta find some way to get people on board. So when we were going through YC the first time around, I did what was like the Caldwell Brother install. So Patrick and John, to get people on Stripe, would literally sit next to them and say like, hey, what are you using for a payment processor? It's like, oh, nothing yet. And then most people would probably just say like, okay, cool, when you're ready, let me send you a link and maybe you can try it. But they would sit next to them and just say like, great, let me go and install Stripe for you. Can we open up your computer and do it? Going, I think, that little bit of an extra mile can help so much. So I would sit next to the founders and say like, hey, how are you thinking about fundraising? What does your cap table look like? And oftentimes the answer would be like, I don't even know what a cap table is. Well, like, let me share with you some of the things that you may want to know when you're fundraising come demo day. They're taking a bet on basically you as a founder more than what the product is. And it's half consulting, half product. And what you're trying to figure out is like, how do I become more of a product rather than consulting? The next step was then you go and hire tactically. I would say like 2 account executives if you have the funding for that. And the reason you hire 2 is so that you can know, is the reason one person's not performing well because the person, or is it because of the product? So you train them how to do it, they shadow you, and once they're good enough, we actually in the stage also worked with a sales coach. Didn't realize this was a thing you could do, but like you can learn anything. Like, great, you can hire a tutor, help you program. You can go and hire like a sales coach to help you walk through the steps of what do you need to do on these calls. That helped us. And then the next step that we took was Let's go hire a head of sales. And then he was actually able to come in, I think, set up a system that allowed us to scale to the next stage. And I think that half of it is really about understanding what does a person on the other side like want? Ask them enough questions. What are their actual problems? If you can really understand what is it they want, being able to give it to them and close that sale is pretty straightforward too.

And I think the other comforting thing as an early-stage founder is you don't have to be the most slick salesperson to sell your product to get initial customers, because if that is the burden of proof to close a sale, then you're probably not solving a problem. Speaking a little bit around market dynamics, I think a lot of early-stage founders are in the position where they're adopting that disruptor strategy. There might be a larger incumbent in the space that you're going to go head-to-head with on a sort of sales loop. What advice would you give founders around thinking about competitive dynamics, especially in kind of a disruptor incumbent?

There's a large competitor in our market that every single investor we talk to asks about. The way I think about a large competitor is like, you basically have like two options. One is that you know who your competitor is today, or your market is so small that it's not worth it for you. Because if your market is big enough, then somebody is going to come into the market and be one of your competitors. Worry, I would say, less maybe about what your competitors are doing. And the question is like, what's your view of the world and how do you think you can compete against them? There's a great book called The Seven Powers that talks about like What are ways in which you can disrupt a competitor? And an example of this would be like when Vanguard first came on the market. It's the sense that you could automate money management. Why is it that they could win and none of the existing money managers could do that? Because the existing money managers were charging on a time basis. You can't do that when it's automated. So if you change the business model completely, that's one way in which you can disrupt the competitors. Others is like, great, if you do product-led growth and your competitors depend on a massive sales team, for them to pivot to your strategy also is really hard. I think the competitor part is actually usually overblown because it's a question like when you need to compete against someone rather than like if you do.

Thank you for sharing that. Switching gears a little bit as we come up on the final few questions of the podcast before we hand over the mic to you, you're just a few weeks away from your due date. First of all, congratulations.

Thank you.

Such an exciting life milestone. As hopeful mothers, we're curious, How did you think about setting up your team for success during your transition?

I also have an almost 3-year-old son, and I had him when we were just starting Puli. So it was almost like juggling two stars at the same time. I think the positive side of that is it's a really good forcing function to also reset. Even if I'm having a really crappy day at work and I go home, he has no idea. He's just like, blow bubbles. Maybe that's all that really matters and you shouldn't be so stressed. About like, how are my ads performing right now? Are we getting enough leads? The joy that he has, I think, is a very pure one. When I think about, I would say tactically, what it takes to do both at the same time, I think it is tough. It's the case where like we try to get as much help as we can. My parents are nearby, my in-laws are nearby for the very reason of like, great, how do we get a lot of support around us? I think the other part is like one of the benefits if you are a founder is that you have a lot of flexibility with your time. You can choose what your schedule is. One point I would maybe like disagree on from popular opinion would be that there's a saying, it's like you, you don't have to work hard, you just have to work smart. I think the problem with that is you're competing with smart people who also happen to work incredibly hard. So, if you only are smart and you don't work as hard as them, maybe you won't be super successful. And I think it's one of those things where you talk about like, what are the trade-offs that you're willing to make? So sometimes it's the case like, yes, I do open emails on evenings. I do have to open emails sometimes on the weekends. And for us it's the case is like, how do I find the time to both hang out with my son as well as go and work on the startup? It's sometimes honestly just a struggle too.

We've talked a lot about your journey as a multi-time founder, the vision for Polly and the future of equity-owned and shared ownership across startups, and then also some really tactical things around go-to-market strategy, hiring. So incredibly helpful nuggets in here. As we look towards the future, though, of Poly, what's next for you and your team?

I'm really excited about, like, all the things that we also have in flight at Poly. We want to keep focus on our core market of helping founders start more companies and continue to scale with them. We think it's a tremendously large market, and if we keep doing that well for founders, I think it's a really good service for the world. For us, as we think about ownership, it really does extend beyond tech. The future I would see that would be, like, really exciting is that everyone in the world can own a small part of what they help contribute to. I think it really shifts the mindset of what you're working towards and can make it a better society too.

I'm excited about the tool suite of people's back office that is handling global hiring with Deal and has Poly working and managing all of your backend with cap table ownership. And then of course, the CVRE space. Okay, this is our last question that we're gonna ask up here on stage, and then we'd love for you guys to ask some questions too. And so please be thinking about it, but this is our hero question. We ask it with every podcast guest we've ever had. And it's, who is a woman in your life that has had a profound impact on you and your career?

I did have a manager that made like a really big impact on my career because after we got acquired by Microsoft, it was a case where I'd never actually worked for anyone before. And I think if you've only been a founder, there was like just a question in my head. I was like, how do I even know if I'm good? I've never worked at a place. And they really shaped my perspective because you have to lean into, I think, what makes you different than rather than trying to be everyone else. I think when you are within a really big organization, there can be a natural tendency of like, how do I think about managing up? How do I think about all the politics within the organization? How do I think about navigating that? I was like, don't worry about it. Just focus on doing really good work. And that's the thing that actually matters in the end. I'd say the other thing for folks that I really look to and respect is there's a lot of women on the Polly team. Really admire all the things that they've done as well, because I feel like I'm learning from them every day.

Love that. Thank you so much for joining us today on stage and staying up here for some amazing in-the-room questions. So we got a couple mics. If you want to just raise your hand. Oh yes, thank you for the bold person in the back by the railing. Maybe you say your name, your company, and your question.

Hi, I'm Tanmay.

So you've done this a few times over, right? I'm really curious, what do you dread the most? And more importantly, what are you most excited about each time you start off on this journey again?

What do I dread the most? I call myself a paranoid optimist in that long term I think everything will work out. Incredibly optimistic about the future of the world and then paranoid because I'm always looking for, I think, the other shoe to drop. What do I dread? It's everything from like, is the macro climate going to change to like, are we hiring fast enough to like, are we going to meet our sales target for this month? I think all of that. The thing I think I look forward to the most is to like build out the team of people that you want to work with and be opinionated about what's the culture that you want to set. I'm really excited about, like, coming to work every day because I get to work with incredible people on our team too. So I think that is like what gets me up and excited on a day-to-day basis.

Paranoid optimist. That's a first for me.

Good term.

I like it. I like it. Any other questions for Yan and her journey to starting Poly?

I'm Seth, founder of Corgi AI. We're doing fraud prevention for payments, and B2B sales is hard, and I found that out over the past 4 or 5 months. So this is more tactical question, but what did you look for in your first sales hire, like to head up sales on your side? Because you obviously want to get the best person, but it's hard to afford that at some point.

Yeah.

So how do you identify the person? How did you lure them in?

The first salesperson that we hired, they actually had been like out of a job for 8 months because as you said, like when you're still early stage, you can't maybe afford like someone that looks stellar on resume. And this is actually my opinion generally with like really good people you can hire. Which is look for people with atypical resumes. And then you have to have a good instinct of being able to spot people who are really good, maybe despite what their resume said. So for this person, it was like they had been out of a job for 8 months because the last company they worked at had shut down. So it was this unfair situation for them where they were actually really good at sales, but were in a situation that on resume didn't look really great. I had no idea how do you actually hire a salesperson, but I knew what they had to do was basically get on the call and do a good pitch. So had them go and study Poly and see if they could pitch Poly back to me. We interviewed, I think, 10 candidates by this stage, and they were the one that could do it the best. So when we think about interviewing and hiring in general, two of the things that I would say Poly does a little bit atypical is one, we give candidates the option of like actually working with us for a week or so so that they can see what it's like to be at Poly. And we can also get a better in-depth perception of what they're like to work with. And this gives you a chance, I think, to spot outlier talent. And the other is also like take a bet on people that may seem inexperienced, especially when you're starting out. Oftentimes it's the case that people can also surprise you because you're really betting on the slope of the individual versus like what they're coming in with too.

Thank you.

We have time for like 2 more.

Cool. Thanks for the time today. My name is Richard. I started a company called Ciro. We're a data product for companies that sell to the SMB base. My question for you, Yin, is how did you find PMF? Maybe you could give us a couple of the sort of findings that you had discovered, and then how do you think about growth before PMF and customer acquisition?

Man, it's such a tough question to answer because I think it is so different for every single company for how do you find product market fit. Like if you're a consumer company versus if you're a SaaS company versus you're a biotech company. The path there is going to be very different and it's, it's just not going to be linear. So I think the best way I would actually answer this question is maybe throw out a few examples. For us, the way that I think we discovered it was we were able to talk to a lot of founders, reach out to them, get them on board, and then realize like, hey, we have something there because we're repeatedly able to sell to the customer. If your background is engineering or product, I think one of the things we often see like engineering-based founders overoptimize for is a product. So product-market fit is two words: product and how do you bring it to market? And both of those things need to connect. So I think for me, especially like having done the startup a couple of times before, is like we wanted to get the product out to market actually earlier before than what we thought was ready, with the bet that if you actually are solving a big enough of a problem that people would be willing to overlook some of the things that didn't work with your product. Trying to sell the product, I think, before it's fully there can also give you a really good signal of like what are some of the questions that people are actually asking about your product? How would they want it to improve? There was another founder I talked to where it was like, great. The way that they got to PMF was like almost on the last leg of their funding journey. They had emailed a ton of different users and got no response. And then this one client at Reddit got back to them and this was like their last Hail Mary and then did everything they could to serve that client well. So the reason I say is like there's not a single path is like I think the road to PMF is like trying something, see if it works, iterating based on that, and then try something different and try to do that as quickly as you can before you either get tired or you run out of resources to keep trying.

Maybe one final question over here.

We have two final questions. I like it. Okay, we'll go up here first in the back and then close out over with Kyle.

Hi, I'm Mohit from Magic. I'm a Vera VC company, Winter '23 batch. And my question to you is when you went to investors and they were asked telling you about like, how are you competitive against the other competitors? How did you answer that? And was the way that you position your product already very consciously positioned in a way that you would be able to get customers despite the competitors being there?

I think this is actually a trick question sometimes by investors. They're not really looking for a right answer because there's no one right answer. They're just looking to understand how do you think about your business and how do you think about potential threats that it could have? What we did the first time around when we were applying to YC, we actually wrote down a whole huge list of questions that we would have about our business, the things that kept us at night, and wrote the answers to all of them. This is me and my co-founder at the time. So like, if I think about this, it was like, how do you think about the competitors? It really depends on what your business— but you can say anything. What they're looking to understand is, have you thought about your competitor and how are you going to compete against them? Is it that you're going to have a different go-to-market path? Is it that you're going to do a different vertical than what they initially tackled? Is it that you're going to apply AI because it's the hot topic of the moment to like this vertical? There's so many things that you can say as a response, but what they're really looking for is like, have you actually thought about this? Because they fully expect that you're going to have so many of these new competitors in the future and want to know that you can at least get over that first hurdle of having a good response to the question.

Hello. First of all, thanks so much for taking the time. It's been really fun to hear you just talk about your journey and the story. Shout out to Madison and Claudia for yet another amazing show. So thank you for what you do. My name's Cole. At the very beginning, you were talking about equity as an asset and something that's uniquely able to scale as your company does in ways that other assets in the organization maybe can't. I'm just wondering about like your process of pulling together that narrative around Polly, if it's something that's deeply internal, if it's something that you're constantly iterating with your team. Who you involve in that process and how the story of the business evolves as the business itself evolves.

I think it's a case where this one I would be actually more opinionated that it has to come from you more internally. The analogy I would make is like if you're starting a company, it's almost like you're creating a movie. We've all probably seen movies where it's like, huh, this feels like a bunch of executives got into a room and just said, can we add pieces of the best performing movies of all time and make it into a single mega movie? It doesn't quite fit the way that I think you tell the story of your company really well is that it has to be something that you really believe in. And if it's something that you believe in, I think how you also tell that story also comes across really genuinely to the people that you're sharing to. What's the future that you want to create? What's the future you want to be part of? And I think starting from there is like a really good point too.

Thank you so much.

And thank you all for joining us today in the room. Again, a pleasure to have you.

This is really fun.

We appreciate it. And it's so fun to get to share your story. So many amazing nuggets. If you guys like and want to hear more stories like this, please subscribe and follow the podcast. We interview amazing founders like yourself. And just special thanks to CBRE, the Deal Team, Skylight, and all of the many working hands that made this happen. We have drinks and snacks right over along the way, so just exit here, go straight across, all inside, and you can keep mingling. We have investors and founders in the room, and some of the Poly deal, CVR teams will all be over there as well. So if you wanna say hi to any of us, we'll be there in like 5 minutes. So just go head over that way and come grab hats. We have hats in the front and stickers. If you're in the back, make sure you get one. Thank you all for coming. Thank you so much for joining us at The Room Podcast. If you want more from The Room every week, subscribe to our newsletter. At theroompodcast.com/newsletter. We'll be back next week with a new episode Tuesday, 10 AM Eastern, 7 AM Pacific. See you in the room.

All opinions expressed by Claudia Madison and podcast guests are solely their own opinions and do not reflect the opinion of The5VC. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.