Decoding VC and Startup Growth with Logan Bartlett, Redpoint Ventures

I've just released a book, from grassroots to greatness 13 rules to help you build iconic brands with community led growth. We cover stories from big brands and small all the way from Harley Davidson to HubSpot to Nike Disaster to Gainsight to give you the frameworks to build a community led business that will take you from an obscure idea to a movement to a cult like phenomenon. Check it out at from grassroots to greatness.com the digital copy is on for 99 cents.

And so I think the best thing that private market founders can do is really just raise when you need to raise and raise at the terms that seem fair from the vast majority of people that you're talking to and not get too beholden on. Can I eke out an incremental 12 to 15%? If you go talk to people like Emmett Shearer, the CEO of Twitch, or Brian Halligan, the co founder of HubSpot, you go down the list. No one looks back and says, oh I wish I got another point of less dilution. Right? No one looks back on their journey and thinks of oh, what was the valuation I got at a series B or a series C? They do think about who are their investors involved. They do think about whether or not they raised enough capital. Those are really the most important things to think through. I would encourage founders to always get a fair price. No need to take discounts or try to give people unfair advantages.

But.

But also don't worry too much about what the exact valuation is because in the fullness of time, there's so many other things that could go wrong for your company and valuation shouldn't be one that you over rotate in solving for. I need some traction. You need some traction. Let's get some traction.

Hey, what's up innovators, entrepreneurs, visionaries and disruptors. This is your Traction podcast host, Lloyd Lobo. We're a community of over a hundred thousand people just like yourself, on a mission to help you get the methods, the money and the madness to explode your business growth. Featuring stories and tactical advice straight from those who've done it before, like Shopify, Twilio Asana, and many more. With the ongoing market uncertainty and lessons learned from the past year, many founders are revisiting growth strategies and avenues to ensure business success. So today we have Logan Bartlett, Managing Director at Redpoint, and we're going to dive into actionable tips and current advice. He's giving portfolio founders in areas like GTM strategy, key performance metrics, fundraising, valuations and more. Awesome. And Logan, you've invested in amazing companies. I think your list here of your portfolio successes like Ramp, Braze, Workado, Amplitude, Materialize is a list of unicorn porn. So we'll dive into your backstory as well.

I've never heard the term unicorn porn before. I like that. It's a good term to. I will add that to my vernacular going forward.

I use it a lot because what I say is in the past several years the media has perpetuated this addiction to unicorn porn which led to overvaluations and hype in the market. In reality, the world is run by camels, horses and donkeys. I do say that a lot. Before we dive into the session. Love to get your backstory. What made you go into investing?

Yeah, sure, totally. So I graduated school immediately after the financial crisis in 2008 and I was looking for jobs and I happened to find one in investment banking. It wasn't a super purposeful decision that I was saying this is the path that I definitely want to be on, but it felt like one that kept a bunch of optionality for me going forward and I absolutely hated it. It was hopefully the worst I will ever be at a job. It is very mundane work on a daily basis. Your schedule is owned by people up the food chain from you. You could have your weekend blown up at any time. I just wasn't very good at it. I didn't enjoy it very much and so I tried to find my way out of that and I went and worked with a buddy of mine at a boutique consultancy advisory firm that was working with a bunch of venture and private equity backed software companies. And so getting involved in Software in 2011, 2012 was a very fortuitous time to join the industry. And so I did that for a couple of years and then got to be friends with people at a bunch of different private equity firms as well as venture capital firms. Ended up interviewing at a few of them. Redpoint was one. They actually turned me down for a job in 2013. I have a very gracious pass email from my now partner Elliot and then one of the other ones I interviewed at was Battery Ventures and they were nice enough to make me an offer. So I was there for six years, had a great run investing in mostly B2B software companies, some of the names that you mentioned earlier here. And after six years at Battery, my now partner Elliot circled back around and said hey, we have an open spot, we would love for you to join. And the rest as they say is history. So I joined Redpoint. I guess I signed up to come over in December of 2019 and then officially got going right into a global pandemic, which was definitely an interesting time to join a venture capital firm. And we can talk through any of the specifics around that, but it's been a fun last three and a half years or so.

Definitely. And when you were at Battery, were you investing at in growth stages like you are right now or early stage companies?

Yeah, it was all post product market fit. So that's where I've product market fit is this ethereal thing. The way I think about it is will the dogs eat the dog food? Is there a reference ability within the customer base that will say hey, this product meets the needs of what we have. And some of it was series A, but it was series A after a company had a bunch of referenceable customers. Some was series B, some was series C. So largely similar to what I'm doing today, albeit now it's exclusively Series B and series C that I focus on. But the stage of the business is mostly the same. Awesome.

And in your journey pre Redpoint, what were some key learnings from investing at battery?

Battery is an amazing firm, very consistent returns, fund in and fund out and they do it in a bunch of different ways. So they have early stage venture, they have late stage venture, they have growth equity, they have, they have private equity, they have slow growth buy and build private equity. Battery is really just a firm filled with amazing investors and they're able to look at all these different sectors and make or asset classes and make decisions about the relative risk return and the trade offs of going into early stage venture at this moment in time versus private equity at that moment in time that leads to a broad based understanding of just how to invest and what are the value drivers that occur, be it at the early stage or at the growth equity stage. And so if you look at the people that came out of battery, it's really a laundry list of talented people that are now running venture capital firms that grew up within battery. And then battery obviously retained a bunch of people as well that are super successful. And so I think what was most informative to me was just like how to be a good investor. How do you think about the differences of these relative opportunities? And so while now I focus on a very narrow sliver of the entire asset class that Battery will focus on, it is helpful to be able to flip seats and think about maybe what our limited partners are going to be thinking about or what an exit could look like. Because some venture backed startups end up becoming private equity backed businesses in the future. And so that totality of experience I think really helped inform a flexible mindset with investing that has served me really well today at redpoint.

Awesome. And your thesis today at redpoint, what is interesting for you?

Yeah, so we invest in a few different sectors. We do, I would say the vast majority IS software or B2B in some way, shape or form. And so that's a mix of application level stuff and infrastructure stuff. So application level I think of as things that have UIs that you log into and do the work within the product infrastructure are things that will do the work for you. And, and so while they might have UIs, things like security, data warehouses, DevOps, all of that stuff as well. And so we do a healthy mix of those two. We'll also do a little bit of fintech and health care as well. And then underpinning all that stuff is obviously artificial intelligence today, which is the topic du jour, it seems. And so I happen to think of AI as I think right now it's probably a standalone category, but it really underpins all those other categories that we work on and that we focus on. And then what we're looking for in businesses, I mentioned the stage series B and series C. We're investing post product market fit. So we want reference ability of customers. We want to be able to talk to people and validate that the dogs are eating the dog food. We want these businesses to be in big markets or potentially big markets. Oftentimes the the best businesses start in very small markets. Think Facebook at Ivy League colleges back in the early days. But they're able to ride a wave and a path to very big markets. And so those are actually good businesses to get involved at. Stripe was in the early days one of our investments and they served really Internet first tech companies and then as over the course of the last 10 years they've been able to ride that initial entry into a much bigger market as well. And so big markets are important. And then we want durable businesses over time. And so that usually is IP related. Hey, they've actually solved a very technically difficult problem to go after. And so it can be IP related differentiation, but there's also things like network effects, right? Compounding advantage that go along with it. Sometimes brand can be a differentiator, although definitely an ephemeral one. So we try not to look too much into that. But those are the rough heuristics that we'll use across companies when we make investments. And then obviously we wouldn't have great companies without great founders and so we want to truly back like the special people going after these markets.

Awesome. Now, in your journey, what was the biggest investment failure you made and you regret making, or rather the biggest miss?

The biggest miss I think back on is a company that we were actually investors in at Red Point that I was looking at at RE Ventures was a. It was a company called Snowflake. And the mistake I made was not thinking about what could go right and instead focusing on what could go wrong. So Now Snowflake's a $50 billion business and feels like it was always destined to be that. I'm sure with hindsight bias, but at the time, if you remember, they were going head to head against Amazon's fastest growing product called Redshift, and Snowflake was going to build a better, more technically capable version of that Redshift product. And what I thought to myself at the time was, can a startup really out Amazon, like actually build a better technical product? And in 2014, there was a lot of nervousness that Amazon was just going to take over all of infrastructure and that they were going to dominate all the different categories and that you would be foolish to invest in someone competing in general with Amazon, let alone head to head with its fastest growing product. And so instead of focusing on what the potential of Snowflake could be if they happen to achieve what they were going after, I think I got a little too wrapped around the axle of what could go wrong or what the most likely outcome was, which. The most likely outcome at all times, especially in startup investing, is that it doesn't work out for you. And so the winners more than make up for all the failures. And having that mindset, that failing is actually okay if you're taking the right level of risk. That's the one that I look back on and think, gosh, it wasn't that I just made the wrong decision, but my framework for making the decision was off. And so that's definitely informed the types of investments I pursue today where I forced myself to ask the question, what could go right if this business executes the way that they could and how much equity value would that create?

And I think that this is predating Frank Slootman taking over as CEO.

That's right. That's right. Yeah. Bob Mugler was the CEO then, who was an excellent operator and got the company to a really, I think it was probably $5 billion at the time. And the round we were looking at was roughly, I think, 200 million. And so Bob deserves an infinite amount of credit for getting the company both to that round as well as where he ultimately stepped off the ride of Snowflake. And then Frank's done an amazing job of taking it from here.

But pre Frank, how do you know when you're looking at a company at say, let's call it 50 to 200 million valuation, what are some key traits they exhibit? You walked away from the deal looking at market conditions like Amazon's going to eat their lunch, you're going to fail if you compete with Google, that type of thing. But what are some key traits they had exhibited to you that you think played a big part in them becoming this icon today?

One of the things that you need to. I referenced earlier the market adoption curve and making sure you're landing with a, in some ways a narrow market initially, but that you think it can be broadly applicable over time. And one of the things that we looked at the time with Snowflake was most of their company customers were actually in ad tech that we spoke to in 2014 or 2015, 16, whatever this was, and you had to ask yourself the question, was ad tech the tip of the spear for what people in the future, across all businesses are going to do? Or was ad tech its own unique market that had its own unique set of characterizations? Now, in hindsight, it's pretty obvious what the answer was. Ad tech was the tip of the spear, the early adopters to this data management and scalability problem that other people have seen over the next, whatever, eight years. But it wasn't totally obvious that all the scalability issues that ad tech companies were going through were going to be mainstream in the way that they proved to be. And so that was one of the things that when we did the customer reference calls, we could tell they had very clear product market fit within this very narrow kind of niche market. And the question we had to ask ourselves is, do we believe this trend and what the early adopters are doing today will be broadly true in the future for. For the mainstream of the market? Hindsight now, it's pretty obvious, but we definitely spent some times wrapped around the axle on the technical components of the architecture and whether or not that was going to be a real differentiator for the mainstream going forward from all your.

Investments that you've done highlight your most significant success and how did this experience shape your mindset going forward?

I guess since I've joined Redpoint, it's been three and a half years and I'm fortunate to work with half a dozen companies or so. None have gone public. So I'm not quite ready to post the ticker day parade for calling it a win, but I did have a company recently raised another round at a really nice valuation and they continue to execute at a really high level. The name of that business is is Ramp in the corporate card and spend management space. And I think what they did right and what I've learned from that experience is a few fold. One, I was looking at the market from a slightly different angle. I thought that there was going to be a pure software solution that kind of managed spend within mid market companies and could ultimately make its way up to the enterprise. When I spoke to the software only vendors in that space, it was clear that they just didn't have the momentum that was telling me this can be a really big outcome. They were growing, they were doing fine, but they weren't hockey stick up into the right and so I wrote off the category and was like that thesis was wrong here. Then I stumbled onto the Ramp team through the folks over at Founders Fund and it was just readily apparent that the tip of the spear with corporate cards was flying and was working really well and that gave them then a wedge to go do a bunch of other stuff. I spent time with the team and realized that they were very special individuals with a super high competency and capability of shipping product quickly. And I thought it could be a really big market if they could continue to ride their early momentum and build product at the speed at which they were doing so. And so what that taught me is it was one of the lessons that I probably made a mistake on with Snowflake is hey, be sure to focus on what can go right as these companies scale. And when you bring very special people founders into a market that's clearly working, don't underestimate the team that they're going to hire and the product that they're going to build to accelerate on the path to being a really important company. And so I think all that has proven out in spades. But the biggest takeaway I think that I had overall is like the market in some ways will speak to you and don't try to overthink what you think at a laboratory should happen out in the world. The world will tell you when you talk to customers or look at the momentum that lightning has struck and then it's our job to ride that wave to what the company's potential can be.

Mike Tyson once said, everyone has a plan until you're punched in the face.

That's right. That's a great one.

Noted poet Mike Tyson Noted poet and philosopher, startup philosopher. Awesome. Let's switch gears here to investing in the current market. So we went from a world infatuated by unicorn porn in the last two years of one and a half unicorns per day minted to markets following valuations tanking, interest rates rising, a lot of overvalued zombie companies. I personally know quite a few friends that on a few million in revenue have raised at half a billion billion dollar valuations that have laid off people that they're not sure they can raise the next round that their whole cap table is going to go to crap. So we're in that situation now, but it seems like things are stabilizing. So one, why do you think the craziness of the last two years happened?

You know, it's easy to say with hindsight that interest rates over the course of the COVID period in time, as the risk free rate went down to 0% 1%, people were very risk seeking and what their returns could come from. It's very much a virtuous cycle of hey, these public companies trade up in a meaningful way because they're growing at a fast rate and the risk free rate is super low. And so people, as you discount back all the future cash flows and all the stuff associated with finance, you pull that forward and it leads to pursuing growth over profitability. So then that happens in the public markets. And LPs are sitting there with these ungodly gains from their public positions and they're looking for other places to put them. And private investors are looking at how valuable some of these businesses are worth. And Snowflake is $100 billion plus company and Shopify is $100 billion plus company. And they're looking at those and so they think, oh well, if this is the end state of what these businesses can be worth, then we can be willing to pay a higher price in the private markets. And so then private investors are coming to the entrepreneurs and saying, hey, if you think you can be the next Snowflake or the next Shopify, 500 million or a billion dollars isn't that big of a valuation in the grand scheme of things if the upside of it could be a hundred billion dollars. And so then private investors are saying, okay, that's what we're going to pursue. We're going to pursue these huge outcomes and we're not going to focus too much on whether a company's worth 500 million or a billion, because in the fullness of time, maybe they can be worth a Shopify or a Snowflake to the upside. And then you raise bigger funds and bigger funds lead to a need to write bigger checks, which leads to a higher valuations because the founders don't want to take the same level of dilution. And so it's a very virtuous cycle that really all started with the interest rates in the public market trading, but it flowed through all the way through the system. And now what you've seen on the pullback side is as interest rates go up, valuations of those companies go down. And now we're seeing all the ramifications flow through the market of, hey, if Snowflake's actually a $50 billion company and not $100 billion plus, if Shopify is whatever $60 billion or $40 billion or whatever they are today and not $150 billion what they were at the peak of the pandemic, then that really informs the entry price at which you're going to be able to pay for these private companies. And so all this stuff flows through, not to mention as there's layoffs and you're selling into other venture backed startups, the businesses can't grow as quickly because maybe people are more focused on seat based expansion or what they're paying for these contracts. And it just all these things flow through in an impactful way. And the implications and consequences from interest rates and public market valuations end up being pretty impactful to people's day to day in the private markets.

Definitely. Now what do you think is happening now? Are we stabilizing what's driving investment decisions? Let's say with your earlier stage peers at Seed Series A and then with Red Point and peers on the growth stages?

Yeah, I think all the same trends that we were excited about two years ago are still true today. There's definitely been some AI pixie dust that's been added to the cauldron, if you will, particularly in the Seed in Series A part of the market. I think that we're going to see a bunch of different opportunities emerge from that. And the vectors that I think about are one, what is the enabling infrastructure that is needed to deal with AI? And so that could be things like databases that store data in a different way, that could be things like Hugging Face, which is effectively a GitHub for AI models that could be different monitoring and management and tooling for observing your models. There's a bunch of different things that are enabling infrastructure for artificial intelligence and I think that's going to be exciting. Then there's the question of what businesses might have been okay, companies in a prior period, but now with the introduction of large language models, they're able to automate some of these things and turn them potentially from a services business into a software business that'll have much better recurring revenue, unique economics, predictability, all of that stuff. And so some of the fields that we've been thinking, thinking about, and I don't know if this is entirely novel, but are things within legal, accounting, healthcare, government, where there's a bunch of manual process and it was really hard to sell into those areas. But now with AI, it's possible that what required a human to do and wasn't particularly scalable now can be done through artificial intelligence and can make a better business that could be venture backed in a way that wasn't possible in the past. And so that's a, that's another vector. I think that this is going to be a productivity boost for all businesses in some way as well. And so being cognizant of some of the things related to customer support or gross margins that AI is going to be an uplift for, I think that's something that we're also thinking about. And then the last one is just the AI specific stuff. And so what I would put in this bucket is obviously foundation models like OpenAI and Anthropic and just companies that are going after AI in a very novel way as well as businesses like Mid Desk or, sorry, Mid Desk, excuse me, businesses like Mid Journey and Runway and some of the image generation stuff or companies that are rethinking processes from a first principle standpoint in a way that's only possible with artificial intelligence. And so the most obvious one is image generation and video generation. And what is that going to do for society? I don't know the answer to it, but it's certainly cool. It's fun to play around with all those things and be able to do text to image or text to video. And so that's another vector that we're thinking about, about what is the end state of investing behind some of these things.

Definitely, you know, I particularly like the services angle. So I mean, you know, everyone asks us about boast AI, but we had the dot AI domain in our name seven years ago. Six, seven years ago. And we were services. We started by, we bootstrapped the company to 10 million. We did a service in the government space because there's large market that was largely manual and it's regulated, so it's a mode in and of itself. And then started automating that with AI in the early Days. And the way we chanced upon the government stuff is the AI for the government funding or government tax credits is we did a chatbot in 2013 that failed and AI driven sales assistant in 2015 was ahead of its time. So I'm really bullish in one automating services with AI, particularly for bootstrap founders who are who've been delivering a service manually and now it's like generative AI. You leverage no code, low code platforms and in a third party solutions like Zapier to have that first MVP and then scale from there. So I'm excited that you thought you think of that as a great space as well. The services, the automation, the digitization of services finally being done properly.

Yes, 100%. You guys were very prescient in adopting the AI domain early on. I can imagine you would need to pay a lot more for that domain today than you did whenever you got it back in 2014 or 16 or whatever it was.

Definitely. And a name with four letters, five letters, boast high up. So that's been great. Awesome. So how should founders think about valuations then? Because I think the VCs have largely corrected to valuations. As an individual, when it's on you, it's very hard to correct. Right. Like you're at a certain high and tapering your expectations is very difficult, but that's the reality of the market. So what metrics and valuations are setting the stage at? Let's say a series A, A B and a C. Yeah, you know, we.

Can go through each of the number, the rough valuation heuristics and, and ranges on that. And the way I think about it is at series A you're often raising off of the potential of what the company can be and less of a specific valuation related to your revenue. And it's usually something where people are focused downfield on. All right, if this works, works, how big can it be? And you're willing to pay 100, 200, 300 times revenue in some cases to invest in these businesses. Because if it works, it can be really big. And is it really going to matter if you invested at 50 million, 60 million, 70 million, 80 million? Probably not. Right. As you move down the curve, valuation sensitivity ends up coming up more and more. And I think for the period between 2020, 17 to 2020, I think a very fair series B valuation was typically like 30 times revenue, maybe 50 at the absolute highest end, 12, 8 to 12 at the lower end. Right. This is assuming some growth rate north of 100%. That felt like a very reasonable fair valuation. We haven't quite gotten back to that stage yet, but it's an inevitability. That's where we land. If you think about, back to the earlier conversation about the public markets being the leading indicator for a lot of these private considerations, if you look at the basket of public companies that are profitable and still growing at a good clip, those businesses are trading at six to eight times next 12 months revenue, something like that, roughly. And so if that's the end state that you're going to be valued at, if you're going to go public, you need to work back from there and say, all right, if I want to go public or if I want to be acquired by a public company, they're going to be valued on that or I'm going to be valued on that. And so I need to think through what are the milestones I need to hit on that journey and what will an investor be willing to pay such that they can make a 3.5x plus on their investment if things go right? And so I think that ends up landing in the 10 to 20 times revenue bucket in the next year, probably for the vast majority of companies. We're not quite there yet. And there will always be outliers. I remember when Stripe was going on at the Series B, which we were fortunate enough to invest in at Redpoint, it was, oh, that's a crazy price. What are they thinking? And when Slack was getting valued at a billion dollars after they had caught lightning in a bottle, it was, oh, that's a crazy price. And you sort through some of the iconic names and there's always a point in time in which people say those prices are crazy. And so I say that as a long winded way of making sure founders don't get too beholded on single data points and try to say, oh, this company got this and therefore I should get that. I think that's a false precision. Who knows what their growth rate was, what their profitability was, what the investor was thinking about when they made that decision. And so I think the best thing that private market founders can do is really just raise when you need to raise and raise at the terms that seem fair from the vast majority of people that you're talking to and not get too beholden on. Can I eke out an incremental 12 to 15%? If you go talk to some of the people I've interviewed on my podcast, like Emmett Shearer, the CEO of Twitch, or Brian Halligan, the co founder and CEO of or former CEO of HubSpot, you go down the list. No one looks back and says, oh, I wish I got another point of less dilution. Right? No one looks back on their journey and thinks of oh, what was the valuation I got at a series B or a series C. They do think about who are their investors involved. They do think about whether or not they raised enough capital. Those are really the most important things to think through. And so I would just encourage founders. It's a little bit self serving, but I would encourage founders to always get a fair price, no need to take discounts or try to give people unfair advantages. But also don't worry too much about what the exact valuation is because in the fullness of time there's so many other things that could go wrong for your company and valuation shouldn't be one that you over rotate in solving for.

Fantastic. Well said. I've just released a book, from grassroots to greatness 13 rules to help you build iconic brands with community led growth. We cover stories from big brands and small all the way from Harley Davidson to HubSpot to Nike to Saster to Gainsight to give you the frameworks to build a community led business that will take you from an obscure idea to a movement to a cult like phenomena. Check it out at From Grassroots to Greatness. Com. The digital copy is on for 99 cents. Now, as you look at what happened in the first half of 2023, what are some key lessons coming out for both investors and founders? Like how are you advising or how is Redpoint looking at things and what are you advising other founders in your portfolio?

Yeah, I think that there has been a reckoning of the trade off between growth and profitability that's occurred over the, of course the course of the last six months. It definitely happened in 2022. I don't know if we're at the end of that. I think that there will probably. It's interesting, in the private markets you really only come up for air to raise money and get poked and prodded by outside investors once a year. During the peak of the bull market it was every six months. Now it's every two years it feels. But that's a healthy hygiene to go through. And so I think until a lot of these businesses actually go out and fundraise, you're not going to get pushed in the way that you need to be pushed to think about all these trade offs. And so we certainly try to be voices of reason on the balance of growth and profitability and unit economics and all that stuff as Board members and active investors. But there is a sanitization process that occurs when you go out and show your numbers to a whole bunch of investors and get feedback on what's working and what's not. And until that really happens, I think it's hard as a founder to internalize what are the considerations you really need to make as a business with regard to growth and profitability. And so I would guess maybe a third of companies that raised in 2021 have gone out and fundraised. Until that next 2/3 go out, I think people aren't going to appreciate the fullness of what the market's going to tell you about what your business should be valued at, what the right trade offs are of growth and profitability, how to think about union economics, how to position your story and all of that. And so we're trying to do as much prep as we can with our businesses to help them realize all this stuff. But at some point you might need outside voices to come in and say those same things or give a slightly different variation of the of that same thing. And so we're definitely trying to preach that not in a reactive way. I think we definitely should be thoughtful about continuing to keep your eyes on the prize downfield and not be overly beholden to suddenly slamming on the brakes and being super profitable. But understanding there's a trade off between all these things that you're going to need to balance definitely.

Now in terms of where founders should be investing more and where they should be pulling back, what are the trends you're seeing in your portfolio and around.

I think that sales and marketing has been one of the biggest areas of scrutiny as you think through how to manage your cash. And so ultimately a lot of our businesses in technology, your costs are really your people in a large way and your growth is really associated with your hiring or your marketing spend or things like that. Scrutiny that is being placed on different types of discretionary spend within the sales and marketing stack. How do you do more with less is something that a lot of companies are thinking through. The way you can go about that usually there's some level of low performers in your organization that have been able to coast by in the GO markets. And now as things have gotten a little more difficult, figuring out who those people are that weren't the top tier, that's often one way to get by with less. I've seen a lot of my companies actually try to get more efficient and they actually grew faster with less people just because the amount of coordination and communication and all that stuff ends up being bogged down by each incremental person you have. And so going a little bit leaner actually could lead to higher growth. And then other things are around automation. And what are some of the things that you may be that software could solve for you in some way, shape or form or access to data products or whatever it is that you can leverage in a variable spending way rather than necessarily needing to just hire tons of people and throw bodies at the problem as well. And so I think those are probably the two areas of scrutiny that we've seen the most on. But every part of the stack has needed to get more efficient. Your marketing org has, your product org has, your engineering org has, your success and support orgs have. So all of these things are definitely under enhanced scrutiny. It's just usually the vast majority of headcount tends to reside in one of two areas. It's usually your product and engineering or your sales and marketing. And there's only so low you can go with each. And so scrutinizing those levers I think is the most important thing certainly.

And in terms of making educated decisions, I think having the data is really important. What I've seen is historically it's easier to predict in sales and marketing actually sales probably being the most predictable one because you have the data, you know how many touches to how many meetings to how many meetings to the close. Marketing I think is still hard in most organizations where it's not down to a complete science, multi touch attribution and whatnot. And then engineering is all over the map. Generally I've seen engineering is like a black box and so you got to break that black box to have the data so you can make these informed decisions. What is your outlook for the rest of 2023 and 2024? Looking into that, what are some, maybe three to five things that you think will happen? The Logan Bartlett predictions I think that.

We'Re going to see more. Unfortunately I don't want to be the bearer of bad news, but I think we're going to see more down rounds and just reckoning with, hey, maybe if the public market is down 70% in the last, the last 12 months or 18 months or whatever it is, our valuation that we got in 2021 isn't what it would be today. And so I think that's definitely going to be one is just more consideration around price and ultimately people resetting their valuations in the private markets. I would say two, we're definitely going to see a lot more activity and activity is going to be good. It's going to be more, more companies fundraising and adding money to their coffers. It could also be bad. We're going to see definitely some elements of haves and have nots where the have nots that aren't going to be able to raise are unfortunately going to go out of business. And it's definitely a difficult thing to be staring down the barrel of. But I think that it's an inevitability in the next 12 months that not everyone's going to get funded. A bunch of places are going to. A bunch of companies are going to ultimately going to need to sell. And I think that will be to the benefit of the businesses that have been prudent with their cash, pragmatic in their hiring and are in a position of strength to lean into these opportunities and circumstances. And so I think what that's going to mean is the winners are going to win even more. And so the if you have category leadership in some area and I think that your number three four competitor that shows up randomly in deals but always drops price, doesn't have the same functionality, requires you to sell around what their issues are, my guess is that those companies aren't going to make it. And so I think life actually could get a lot easier for the companies that are in market leadership positions in the areas that they focus on. Those are the big ones. I also think that we've been in a, in an AI bubble over the course of the last six months. We have seen a bunch of the sins that maybe we saw in. You referenced the bot space once upon a time or mobile even before that, most recently web3 crypto. We definitely saw elements of bubble and mania and then I guess you could just say the entire venture asset class over the course of 2021ish. And I think we've seen a lot of the same sins that people made of not focusing on the business fundamentals but instead looking at the upside of what these things can be worth over time. I think we've seen a lot of people drill in on that stuff. And so my guess is we're going to see a pretty big retrenchment from AI as a hyped area and instead more of a focus on all right, what is the long term durable value that these companies are going to create. I happen to be very optimistic about AI's long term prospects to serve as a lifter to GDP and productivity. And I think there'll be businesses created that build tens of billions of dollars of equity Value going after these areas. But I think on the path to that we saw we've seen at least one bubble here in the last nine months since ChatGPT was released. And my guess is we're probably going to see that bubble burst a little bit and have a little bit of a downslope on the path to. To all that equity value creation I referenced.

Awesome. That is well said. And you know, what a crappy time to become an angel investor. I came into some money during the pandemic and I went to town angel investing in friends, LP and funds. And then I realized one of the best quotes from Warren Buffett which says when the world gets greedy, be fearful when the world and get greedy when others are fearful. Right.

So yeah, I know it's a very popular saying and it's an easy thing to espouse and a very difficult thing to do in practice. I think everyone knows that's something that they should be doing and leaning in when there's risk, when people are going risk off, you should be leaning into the risk aperture. Doing that in practice is actually really difficult. In Silicon Valley in particular lives in this echo chamber of people talking to one another in very online communication. And it can lead to a lot of group think. And I think that in some ways that could be good and in some ways that can have very negative ramifications. If you look at what transpired with svb, for example, in First Republic, right. If you have a bunch of very online people talking to one another, it can be problematic in certain situations. And I think it does lead to a, to a difficulty. If you're living on Twitter every day or talking to your friends all the time about what's going on in the market. The ability to go and do something contrarian is actually really hard to do. And so it's one of these things that I feel a lot of investors will espouse that but then actually doing it in practice when it's possible you'll look like the idiot at the table is really hard thing to actually act on. And so I appreciate what Warren Buffett in such a meaningful way because he's been able to do it cycle in and cycle out.

Definitely he has now shifting gears to GTM as we close this out. You look at a lot of companies, what is best in class GTM motion for B2B SaaS you're seeing especially in this market like middle of the funnel, et cetera.

I think that there's sort of in two areas that I think about distinct go to market Motions that people will have and one is has been very in vogue over the course of the last five years and that's the product led growth kind of bottoms up PLG motion that involves free trials or a freemium product or some form of try before you buy. And I think increasingly that is the way a lot of people want to buy. And I think that those components of how you go to market are super important. That said, I think we probably over rotated on the the aspiration of product like growth. It's something that always sounds so good in theory and it definitely appeals to technical founders because technical founders want to buy that way. They say, oh well, I don't want to be contacted by an enterprise sales rep. And so why would anyone want to be contacted by an enterprise sales rep? It turns out that for the last 50 years that software has been an asset class. There is that other motion which is enterprise sales that has worked and created the vast majority of the equity value that exists. And so I think that we maybe went a little too far on product led growth is going to disrupt the traditional sales motion. And in truth there still is this old tried and true enterprise sales where reps are making 300,400k on target earnings with quotas of a million and a half to two million to two and a half million bucks. And they're out in the field and they're generating their own leads and they're going through the med pick and the medic sales methodology and all that stuff. And so I happen to still be a big believer in enterprise sales. I don't think it needs to be an either or thing. I think there's definitely a world for both of them. But I do think enterprise sales is here to stay and people were a little too quick to celebrate its demise over the last couple years.

Definitely. I agree as well, because as much as I love plg, it's hard with a complex sale, right People, especially when you're giving critical sensitive data like in our case we're accessing people's product development data. You need to build trust and credibility. And it's not like a cheap monthly product that people want to try and use any product where customers want an outcome, they don't just want software, which is probably a lot of the enterprise products you're going to need humans in the loop and that's hard to solve with pure plg. Now of course there's no excuse for having crappy software that's not usable and building a cottage industry of consultants as a virtue of that. But to make the product easy to use. But you need still humans. And I think there was a post that just went viral on somebody saying they switched their vendor because all they were doing was checking in at renewal time versus providing true customer success. And that post have 10,000 likes, which just shows that I don't think enterprise sales and enterprise success is over, yes, 100%.

And showing that ongoing value, that's a component of just the subscription business model that we've seen manifest itself over the course of the last 20 years, at least with regard to B2B sales. You can't drop off a box of shelfware and walk away and take a big perpetual license and call it a day. Right? This is very much ongoing relationship with your customer. And that's why you see things like customer success and product analytics and all of those become very much in vogue, is because you do need to deliver that ongoing value. And you can't just check in immediately before renewal to see if customers are deriving the value that you said they were going to. We live in a very hyper connected world and these LinkedIn posts can go viral, Twitter posts can go viral. And all customers seem to find ways to reference you with, with one another. And you need to be cognizant that you're an existing customer isn't just a customer, but it's also a renewal that's coming up at some point. It's also a potential lead source that could offer you potential leads down the line because they know people. It's also going to be a marketing channel for you because it's on your website.

Right.

And people are going to check with them as well. And so a customer is a very holistic thing for your business and provides oxygen in a bunch of different directions. And so making sure you don't treat it like a transactional relationship, but instead an ongoing one is super important.

The one thing I do and playing devil's advocate here is PLG has perpetuated this notion that all software needs to be cheap or free, not only easy to try. And I think that's driven some fear in the sense that how does an enterprise company that's selling a fifty hundred thousand dollars deal targeted at some enterprise or government or large healthcare problem throw that price on the website and say, okay, sign up, try it and buy it. What is your take here? Because there's a lot of. I see a lot of PLG gurus bashing the enterprise guys, enterprise folks saying, oh, why don't you just put your pricing on the website and make people Sign up decisions at enterprises having sold like past company I sold to Tiffany, Armani, Simon and Schuster big multi million dollar deals, multi hundred decisions there are not done that way. They don't just go and sign up for a large it depends. Right? It's not like they're signing up for a $10 a month, 20, $50 a month when they're buying 100, 200, $300,000 solution. It's not as simple as that. Right. So what is your take here? Because I feel like PLG is trivializing the PLG gurus are trivializing the issue of pricing and value deliverance and transparency for enterprise SaaS companies.

Yeah, kind of a Goldilocks situation where there's the low medium high of all this stuff related to the complexity of the price point and obviously PLG at the very low end. Companies like HubSpot or Atlassian or Zapier or Calendly that have done a great job democratizing this bottoms up motion have very transparent pricing and they do a great job of that. Then there's the medium version of it which maybe they have a low end premium product, but there's also a call me when you want certain features and functionality around it. And then there's the enterprise only. No price on the website, no visibility into how things are going to are going to go. And pricing is a vector by which you help formulate the sales process. And it could be ultimately all customers will reference with one another at some point what they're paying for your product. And I don't think not having your price on the website is necessarily a lack of transparency or purposefully a lack of transparency, but instead it's forcing a conversation with more constituents that might be commiserate with your buying cycle. And so not having the price on the website could be that it's just super complex to articulate exactly how the product your matrix for which the considerations go for pricing the product. It could also be you want to gate a bunch of the discussion that you want to have with a customer so that you can go through the discovery process and make sure they're pulling in the appropriate constituents to have the conversation for the product. Because sometimes you're buying tactical solutions that serve a point product within your organization and an individual can benefit from it. Calendly is a great example. Or sometimes you're buying these things that can be org wide transformational processes and you really want to upgrade level your discussion and who you're talking to before you start to say all right, here's the different value vectors that we think about. And so pricing isn't just the number that's on the website, but it's also the means at which you want to have a discussion and go through the buying journey with the customer. And so it's overly simplistic, I feel like, to say, oh yes, why aren't you transparent? You're actually trying to hide this from people when in truth, all customers talk. And so if you sign up up Armani and then Gucci is at your customer conference, so you can imagine both of them are going to reference the price point with one another. So ultimately this stuff comes out in the wash eventually and you're going to have to reckon with fair pricing and value, but it's just moving it slightly further down the value cycle, which I think is any company's prerogative to do. The answer shouldn't be only transparency on one side and full democratization of the information. Or all companies should hide their price point and force you to talk to a sales rep. Each motion and buying center and price point and all that require nuances within it.

Certainly. Now, shifting gears here in the GTM landscape and the future of GTM, you have a phenomenal personal brand LinkedIn presence. Let's dive into the importance of personal branding and community building for founders in today's landscape and your key lessons from creating your audience.

Sure, yeah, yeah. I've been fortunate, funny enough. I started a podcast because the market was so competitive in 2021, and then I started it in 2022 and then I wouldn't have had time to do it, but the venture market slowed down over the course of 2022, and so I was fortunate to have more time to actually invest in the podcast. I would say that having a, for me, inventure is a weird job in that you can justify doing anything with your time in some ways. Should I go take that incremental meeting tomorrow? Should I reach out to that founder? Should I get to know the customer, the CISO at XYZ or organization? Should I go to a network happy hour with people? You can justify doing any of those things or doing none of those things. Right. It's hard to say that any individual one of those is going to lead to the deal that's going to make your career. And so the hard balance in all this is how do you go about shaping people's perceptions of you and building in a scalable way, a reputation for yourself and some level of familiarity so that if you're fundraising and it comes time for you to want A series B investor. You have some level of familiarity with me. And the ways at which I thought about that were you can just do good investments, right? And that's certainly what I would always aspire for. But then the other component of it was how do I actually go about building a little bit more of a scaled personal reputation or familiarity with me? And the thing that I stumbled on, mostly because I didn't have any other ideas, was a podcast. And so I think it's hard for me to point to it and say, hey, this specifically led to a deal for me that wouldn't have happened otherwise. I can definitely come up with examples, examples of things that made my life easier because I have a podcast and I was able to get to XYZ person who could have a reference on this executive because I had them on the podcast before. I can definitely point to like very tactical things, but if my job is to make great investments, I can't point to a single one. That said, all right, without this podcast, I wouldn't have had it. That said, the fullness of benefit and soft intangible things that show up on a daily basis lead me to believe that it's a net benefit to me to keep at it and keep having these conversations with people and keep building a reputation for myself of thoughtful conversations with founders and investors in Silicon Valley. And so in terms of how it applies to actual CEOs and founders, I think every market's going to be unique with the back to the buying centers and the price points and all of that. I think every market will have its own nuances and considerations and your ability to be a thought leader in that sector. That said, it's hard for me to say that not being well known or that being well known could be bad for you in starting your company, right? I think the net benefits of who you'll get access to, customers, willingness to talk to you, potential executives that will say, oh, I've heard of that person, or oh yes, I know the past company, or oh yes, I listen to their podcast or oh yes, I see their LinkedIn post posts or whatever. It is the breadth of people that you can impact by having your own personal brand definitely has accumulating benefit and value to your startup. And so I think a bunch of different people do this in different ways. And one extreme, Elon Musk definitely has its own his own brand in a certain field. And then you have PLG gurus or enterprise sales guru gurus at the other. And so I think everyone needs to do what's authentic to them and what makes sense for their MBA market. But from my personal vantage point, I think it's been a net benefit to me.

What I found, especially in my journey, bootstrapping is if you're visible and you're credible, the profitability follows, right? When you're venture funded, you have the resources to spend on different marketing channels, but being credible and having the social proof in your audience short circuits some great deals is what I found now.

Yes, 100%, I'm sure. You see, if you tried to buy the number of impressions that you can get on a LinkedIn or Twitter post or YouTube video or whatever it is, it would be quite literally very expensive to do that in a repeatable way just to get the number of impressions and get your product out there in the wild. But if you can do it in an authentic way, not only is it far cheaper than needing to go for paid advertising, but it's also much more credible because you've gone about building the foundation of trust with the people that are exposed to you.

And trust is the cornerstone of all relationships. This has been a fantastic conversation, Logan. Last as we close out any unconventional advice that founders ignore but shouldn't, I.

Actually think this is a, maybe a cliched one that of course a VC will say this, but I think that there's a lot of options for capitalizing your business. And I'm not sure venture capital is always the right one for companies. And so I think founders should really ask themselves what would success for this business look like? And the path that you go down with the capital you raise ultimately informs the off ramps that you can have on the journey. And so I wish more founders were more thoughtful about the early stages of dilution and capitalization that they take and not just go for the glamour of raising venture and being able to pay yourself a decent salary early on. I think we would be much better off in the world if we had a lot of companies selling for 10, 20, 30, 50 million bucks and having the founder own the founder and the employees own the totality of that, then the pursuit of pure venture capital in businesses that are trying to reach that unicorn status. And pursuing all of that, I think we over rotated to the pursuit of venture and I would like to see more and more companies that kind of just put one foot in front of the other and build profitable businesses and can control your own destiny in a way that venture capital might not allow you to.

Definitely, you know, a lot of founders actually, they're enamored by this sizzle. The Unicorn porn, the media, right. Glamorizing it. What they don't realize is alignment is key. Going into any relationship with your spouse, with your co founder and your investor. The reality of the situation is every fund takes money from LPs that they need to show X return to. Even me, if I put money in a fund, I want to see a return. I'm not doing it for charity, otherwise I'll put it in the S&P 500. So as a founder, if you're not aligned with that and you're doing pitch gymnastics to show a big market, but internally actually you really don't want to go in that journey. I think it's more important that you ask yourself, what is my personal definition of success? What life do I want to live? How long do I want to run this company for and how much money do I want on my, in my bank account? And be really real with yourself and your co founders because if you don't do that, then you'll sign up for a journey. And then the first sign things get difficult or you're burnt out, you're going to tap out, right? 100% a lot.

And having that alignment conversation early on with a investor and your team of, hey, what will success in this look like? And there, there are some investors that would be very happy to give you a million, 2 million bucks and if you decide to pursue $30 million, 20 million dollar 50 million outcome, then that would be great and they would be super supportive. But there's a lot of venture investors that are going to want you to unicorn or bust on the journey and that might not be the right decision for you personally. And so having that transparent conversation with the potential investors as well as your co founders and really looking in the mirror and saying, what would success in this venture look like for me? And that might choose, that might lead you to choose different considerations from a capitalization standpoint going forward.

Certainly this has been a fantastic conversation, Logan. I think we can dive into many parts of these as podcasts alone, as solo podcasts or themes on their own in the future. Where can we follow you? You have the Logan bartlett show on YouTube. I love your graphics, the cartoons and everything.

Oh, thank you. It's great.

And then on Spotify as well, and Logan Bartlett on LinkedIn, you post really thoughtful content, so I'm thankful to you for that. I'm learning a ton from you.

Thank you very much. Yeah, I think all those channels are great. Wherever you get your podcasts, my show will be there and it'll be conversations with the best people I can get on and venture capital and founders of businesses and trying to have discussions that you won't hear elsewhere about what their journey was like. And a little bit of behind the scenes from my vantage point as well. So any of those channels would be great.

Awesome. Logan. Thank you so much for joining us folks. Tune into the Logan bartlett show on YouTube, Spotify and follow him on LinkedIn. And if you haven't already, go to from grassroots to greatness.com and get my book 13 Rules to Build Iconic Brands with Community Led Growth. Thank you Logan. Have a good one.

Thanks for having me on. I need some traction.

I've just released a book, from grassroots to greatness 13 rules to help you build iconic brands with community led growth. We cover stories from big brands and small all the way from Harley Davidson to HubSpot to Nike Disaster to Gainsight to give you the frameworks to build a community led business that will take you from an obscure idea to a movement to a cult like phenomenon. Check it out at from grassroots to greatness.com the digital copy is on for 99 cents. Thank you for listening and we hope you enjoyed this week's episode of the Traction podcast. If you enjoyed the show, please leave us a five star review and you can find more information and all the resources mentioned in today's episode at. Boast AI that's B o a S T a I forward slash blog.