Startups Are Hard: My CoFounder Walked Out the Door, And 7 More Top Stories

Hey everybody, startups are hard. I am hardly the first to have said it. I think everyone have said this back to the old eras of ships and carry, the 16th century, the 17th century. I think Nicholas Tesla probably said startups were hard. I think Charles Goodyear when he lived on Staten island hunting for scraps for years trying to develop rubber new startups were hard. So I'm not saying anything we don't know, but I thought I could add some color to what I've learned. Where startups are have been hard for me, the hardest times and I'm not, not the most wildly successful founder nor the most wildly successful vc. But nothing I've done's failed. Everything I have done has been successful, but everything has almost failed. Like we've come close. So I thought I would share seven stories of the hardest parts of building a B2B startup. What are the hardest parts or hardest stories? Number one, my co founder walked out the door. So many founders have versions of this story. In my first startup we were doing something in hard tech. It was incredibly hard. In fact we were doing something that many folks said was impossible. But I had the best founders, I had the best co founder I had who is our VP of eng and I had the best cto. And the three of us were just insanely committed in different ways for different reasons. We had different reasons to be insanely committed, but at least the three of us were unstoppable. And that's how we did something that hundreds and hundreds of folks said was not doable. The second time with Adobe Sign and Echo Sign we had an even bigger outcome but we came up short of what we could have done because the co founding team just, we never got aligned. I had one co founder that fired another without even telling me in those early day frustrations and in a heated moment and I had to go grab when he walked out the door and told them he wasn't really fired, that was just said out of stress and frustration. And then I had another co founder that about 10 months in did walk out the door, never came back or never came back for many months, just walked out the door due to how hard it was. And it was hard. And some of it was, look, it's people. We were not a great, we were a great set of individuals, three incredible individuals, three incredibly successful individuals. But we weren't a great team for a variety of reasons. And so I think the life learning for co founders, it's gotta be both. You've gotta have A + co founders, B or C co Founders that are super nice but aren't insanely great. The world's too competitive today. Maybe it's always been, but it's so competitive. So that doesn't work. You have to have A plus co founders and you also have to have close to an A plus level of commitment. I know Mark Zuckerberg said the other day that when you're founding a company, don't truly go all in until you have some hint it will work. And I guess that's true. It's never been my way. I've always gone all in from day zero. But when I had a co founder walk out the door, we already had some traction. We were at about maybe 10k, 12k MRR. And look, that's something, right? But we weren't growing fast enough. And I had made insane commitments, which was on me. I had said we were going to hit 2 million our first year. Back in the day when SaaS was much smaller, it made no sense. I was using B2C models for B2B. And so we really felt like we were failing. We had maybe six months of Runway. But when he walked out the door, it was a tough blow. It was someone who deeply was better at product than I was, that deeply was better at building software than I was. And my CTO was great, but without that other co founder, it was tough. Losing. Losing that co founder was a huge blow. Two other toughest time as a co founder was right after that. After my co founder walked out the door, we'd spend all the money. We'd spent all the money. Now, I didn't literally let the gas tank go all the way to zero, but I should have done things a little bit differently. I went back, I worked a year, and I'd made a little bit of money before that from my first startup, but not that much. But I went a year without any salary. I reinvested all that money back into the company. We went hyper lean until we could get back up to about a million and a half in revenue and raise a little bit of additional capital. But boy, that is tough. And I know a lot of you will go through that. I don't know, I think maybe a majority of startups that raise outside capital spend too much of it. They spend too much of it, they misunderstand how that capital is supposed to last and they are too optimistic in the odds of raising another round. That's super common these days. For me, the issue wasn't that I wasn't optimistic about the next round. I actually didn't Even plan for. I just didn't know what to do. I had. We raised about $2 million in our seed round and I needed four great engineers and I needed a little bit of extra help. And that capital, the way we were spending, it only lasted 16 months. It only lasted 16 months all in. And it wasn't enough. It wasn't enough. We needed 26 months. So how did I do it? A combination of things. Getting better at prepayments from customers, taking no salary, myself and a number of other things. We barely made the money stretch. But spending all the money is hard. It's really hard. Third one in my first drop. This one sounds crazy, but there was so much drama around the funding together for my first startup that a bunch of things happened. One thing that happened was I had a term sheet and the VCs pulled the term sheet. They pulled a signed term sheet. Now, before you get all agitated and say VCs are terrible, there's always a reason for this. People ascribe the wrong behavior to VCs want to make money and they want to invest in the best founders and they want them to be wildly successful because that's the only way they make any money. There are fewer games than you think. But what actually happened here? Why did the VCs pull my term sheet? It was for a good reason. I had this really quirky CEO who was one of the most beloved people, maybe not beloved, respected people in the industry. And most importantly, our lead customer loved him. Loved him. And our lead customer was going to give us a $6 million contract because the CEO, and after we signed the term sheet, but before we closed the deal, the CEO pulled out, decided he didn't want to do it. He'd already done this in life and he didn't want to do a startup again. He pulled out. Now, he did ultimately save that customer and close them for 6 million. But it introduced a massive level of risk. So that VC pulled out and I had to put together a hodgepodge of investors to do that seed round. And it was tough and I had to. We couldn't make payroll, which has happened to many of you. And at the end of the day, they had a crazy ass, which was that I signed a $750,000 full recourse note to do intermediate funding to the company. Now, this made no sense. I didn't even have $750,000 of savings. But they wanted, I guess they wanted to make sure I was serious enough that I had blood and skin in the game. So they made me sign a $750,000 full recourse note. The second set of investors. And that meant that at least in theory, they could come after anything. They could come after I had bought a house with a small down payment I had bought. They come after the house, they could take the cars. I don't know what else they could take. Didn't have much jewelry, but with the full recourse note they could take anything. I signed it. It was a crazy ass by VCs. I don't think we'd see that today. Very commonly you might see it from nonstandard folks, but I did it because that's what it took to get it off the ground. And 12 and a half months later we sold the company for 50 million. But that was a crazy time. Couldn't make payroll. Everything was collapsing. I had one option. Shut it down or signed a $750,000 personal full recourse note until the next VCs decided if they really wanted to invest. Crazy times. Crazy times. Okay, fourth time. Things were really hard when in my first startup, our product failed at our largest potential customer. Now this was again when we had a, when we had, when we're doing more deep tech, when it was harder when. And it was tough because we were hunting whales. There were only a handful of customers and they all were going to give us millions and millions of dollars per year. So you really couldn't. The problem with whales is you can't really fail with too many. When we launched my second startup, Adobe Sign, Echo Sign, when we launched, actually it was a disaster. The initial product was terrible. It was my fault. The team actually didn't want to launch it, but we were running out of money like we talked about before. I knew we didn't have enough time, so I launched us on TechCrunch on New Year's Day and we, we did get a lot of traffic back then, but the product just didn't do enough and it was a miss. And we basically had to relaunch 90 days later. And we lost a lot of momentum and other things. But it's software, right? You can patch, you can do another release. You can get better even if you lose some momentum. With this one it was tough. We lost a multimillion dollar a year customer because we shipped too early. We lost trust with the customer and we never got it back. We never got it back. We never got that multimillion dollar customer back. And so I think about this a lot. If you launch too late, you run out of. You may, may or may not run out of time. You usually have more time than you think. Most leaders were not the first. Google wasn't the first. OpenAI wasn't the first. Salesforce wasn't the first. But if you wait too long, you can lose a window. You can lose a window. But if you launch too early, I've learned it's, it can be equally disastrous, less disastrous in basic software than in other categories, but disastrous. So I don't know the answer. I think this is a existential challenge for founders to not launch too early or too late. But I know both times my drive to get it done, to not run out of money to get it going, led me both times to launch too early. And it was an error. It was an error in judgment that I probably have at least more life experience today to not make. Okay, fifth one fifth crazy startup story. The time my VP of sales wrote a letter to my board and told them I was incompetent. Now I had, at my second startup, I had hired a VP of sales. And this was what I've learned before we dive in. I've learned when you make a, when you make a vp, that hire that doesn't work out, when you make any hire that doesn't work out, but especially a vp, it's your fault, not theirs. There are so many different types of VPs. And for a quirky startup without a massive brand, without massive resources, without massive teams, 95, 98% of folks will not be successful at your startup even if they were successful somewhere else, even if they were great at Datadog or LinkedIn or Cloudflare or Notion or wherever. There's a 95% chance any VP you meet that is good, that someone says is good, just will not be good for your startups. So it's on you. And I made the classic mistake that so many have made ever since is I overhied for a logo. I wanted someone from one of our customers, from one of our partners. So I hired the VP of sales that came out of one of, that had the right LinkedIn and I overlooked the fact that this was just too small and too early an environment for him to be successful. So what happened was, as you will find when you make a misiron, sales went down. After I hired him, it was me and one sales rep doing founder led sales that got us to about a million. And then he came in, hired 10 reps and all of a sudden we were doing less sales with 10 times the number of reps and the burn had tripled. The burn had tripled and he frustrated me and I got upset and mad about it, but I shouldn't have. It was my fault for making the mishire. There's no way he could have known enough about the opportunity. We seemed hot, we had a lot going for us, people loved us. So he thought we were maybe bigger, had more gravitas and more corpus than we did. But it didn't work. And so he had at it for about 10 months and tried. We had come to Jesus talk about six months in about why it wasn't working. And I think all that really led to him was going to look for another job faster. But the day the moment came when he realized he just couldn't do it. He couldn't do it and was a weird moment. He called the team meeting with the sales team early in the morning before I got in. And I was always one of the earliest in. But he got in super early, maybe 7am, brought the sales team together and told them how sales was going to be without him, that he was resigning essentially without telling me. And then he handed me a letter and he told me to read it and walked out the door. And he also sent this letter to both of my investors and the investors said it was my fault that he wasn't successful because it was too early and I didn't know how to do sales. It was my fault because I didn't know how to do sales. Now there's a lot of logical inconsistencies in that. And the funny thing was I'd luckily already found my next VP of sales. And a happy coincidence. Brendan Cassidy, who had been head of the first head of sales at LinkedIn, had been one of our customers and he'd reached out to me for his next role just as this first mishire was leaving. It was one of the once in a while those coincidences and timings bounce your way. I hadn't actually talked to him about the role, but we're already actually scheduled to meet the next week. I only had a one week gap without a vp. Thank God. Thank you, Brendan. I was lucky. But this letter, it was funny, I didn't even read it until after we sold the company. I just put it in my drawer and one of my investors called me up. He said, oh, I got this crazy letter from your VP of sales. You might want to read it. I said, I don't have time. I already found the VP of sales. I believe in that. I love I don't have time. I'm not going to read this letter. And I read it five years later, four years later. But it was crazy. The VP of Sales literally told my board I was incompetent. Could have handled that situation better myself. I blamed him. I was wrong. It was me. It was my fault for falling in love with the LinkedIn, falling in love with the logo on the resume. And it was actually my fault for not taking action more quickly. When we met six months in and it was clear there was no chance. And he. He said, I'll do better, but there was no chance. I should have just said, listen, we did our best. Take your time, take a month, take some severance, take whatever you need, but it's not working. Let's find a new strategy. I shouldn't have let him go on another four months flailing. That was my mistake. Okay, story number six or learning number six. This is a tough one. This is a tough one. And folks that are early stage will disagree with it, but folks that have been doing it for years get it, which is that your family will never understand. Your family will never understand. I had a mentor who was an executive, but became an accidental CEO. He actually was working at a startup that ultimately sold for hundreds of millions of dollars, but did not intend to be the CEO. But the first CEO just left. It didn't work out for some of the reasons we're talking about. And he had a field promotion to CEO. He'd never intended to be CEO, and. And eventually that he recruited an outside CEO, but he had to be CEO for quite a while. And he said his number one learning to me was your fam. You can't take it home forever. You can take it home the first six months. You can tell the stories about how you can't find the VP of Sales, how you're running out of money, how the customers won't buy, how it's so hard. But these incredibly visceral, sometimes borderline traumatic stories, you can't tell them to your family every night. You just can't. 99.9% of the world is not wired to understand just how visceral and hard these founder issues. No, not startup founder. Because as hard as it is to work at a startup, as hard as it is to be a vp, which is hard, almost every VP that then becomes a CEO tells me the same story. I thought I knew how hard it was to do a startup, but it's even harder being a vp, as hard as it is founder is even hard. And so I think it's okay to take it home with you in the early days. And I Think it's always good to share. It's always good to be 80% transparent as you scale. But just like most founders realize that about the right amount of transparency in a team meeting as you get bigger is about 80%. You can't tell them everything. It's too much. It's too much detail. It's probably the right amount to take home too. 60%, 70%, 80%. But if every day you bring home how you almost failed that day, or how the competition's going to kill you, or how you have four months and then three months and then two months of cash, you it's too much. It's asking too much from your family. And again, a lot of folks when I bring this up will say no, my partner or whatever is always there for me. But usually those are early stage founders or founders that have not gone long or have not scaled to tens of millions. Most of the founders I talked to that have scaled to tens of millions in ar, Beyonce, yeah, that's key, like share. But your family will never fully understand what it's like to be a founder, nor should you. Don't take that much home so that they have to understand it. It is a unique, it is a many times quiet journey that only other founders will truly understand. Okay, seventh point. I went through terrible recessions. Okay. What I say this because many of you are going through a downturn and the reason I say one of the seventh hardest part of startups that I've done is going through recessions is they're always an excuse. Many of you are in a downturn right now. Not everybody AI is on fire. B2B2C is often on fire. The app economy is on fire. Security remains so on fire, it's overheated. There are many elements that vertical SaaS that are on fire because those industries are doing well. B2B is really like B2B2B in many cases. If you're selling sales tools to web sales professionals, that's a downTurn. Today it's B2B2B. But folks that are in B2B2C well look, the US economy is remains strong. Unemployment is close to all time lows, the S and P is at all time highs. So if you're selling to restaurants like toast or even though shopify at a slightly rough quarter, the overall trends are very strong there. Folks sell into the normal economy are doing well. But for for those of us in B2B2B we're going into year three of a downturn. We're going into year three of a Downturn. And look, this one is different for folks that weren't around then 2008 to 2009 that I went through, that was the first downturn I knew I was going through 2008. 2009 was in many ways a hundred times worse than we're going through today. The global economies shut down. Korea banned the export of currency. We were in downtown Palo Alto. If you walked in downtown Palo Alto in 2008, almost every retail store was boarded shut down. Guys, almost every retail store is more shut. And one of the early Saster posts I wrote, I think in 2012 was finally the first store in downtown Palo Alto that was boarded up, reopened four years later. So from 2000 it took from 2008 to 2012 to fully get out of this global meltdown we had. But looking back in sas, actually it didn't last that long. It lasted about five or six quarters until folks started to buy again and more importantly, until churn rebounded. Churn was the big issue in that first downturn, 2008 because folks panicked and tried to cut everything. So when I look back on our data and I posted it on Saster, our net customer acquisition was down a bit during that downturn, but it was this panic churn that just killed us. But it was over after about 18 months. There was. I just saw my Facebook. It's 10 years since Zendesk's IPO. And right before that there was a flash crash where it looked like I was just learning how to invest. I was just coming out of selling my company. I just learned. And there was a flash downturn and, and, and folks thought Zendesk wouldn't be able to IPO, but it only lasted a few months. Two years later, 2016 at the Saster annual February 2016 I didn't get it. But most of the VCs there were morose because public SaaS companies fell 50%. They fell 50% in 2016 and a panic set in. A panic set in that SaaS wasn't real, that it wasn't scalable. And LinkedIn had a panic sale to Microsoft even though they were very profitable. There was no reason for LinkedIn as a public profitable company to sell to Microsoft. But everyone panicked. Vista swooped in and bought Marketo and ultimately quadrupled their investment quickly. It was just a crazy time. But that one actually didn't even last a year. That downturn, now we're in a weird one. If you're in a downturn, you may be in the third year of it. And that's what's different. And that's what makes this one hard. It's hard, it's hard to see what will come out of it. And a lot of folks are quiet quitting. A lot of folks are half quitting. A lot of folks in SaaS are giving up on growth. They've said, hey, we got, our board said we gotta be profitable. So they've cut everything. They've cut marketing, they've cut spend, they've cut outbound, they've cut sales and hooray, they're, they're break even. But the growth is 0 or 5%. That, that doesn't get you anywhere. That doesn't get you where you can't cut your way to. You can cut your way to survive, but you can't cut your way to success. So look, my point as I went through recessions is this one is, I thought this one would be similar to other ones. It is different because it's narrow and it's long. It's long. It is not across our economy and it is not across all of software. But this B2B2B, it started to fall off a cliff in early 2022 and now we're in the third year of it and I actually don't see any signs we're coming out of it right now. There are, I think if you look at some of the leaders that are doing well. HubSpot still growing 20 some odd percent at 2 1/2 billion in revenue. Yamini Rangan, the CEO, just said it's not getting easier there yet. It's not getting easier yet. They had a little bump at the end of December, but even though they're doing well and their net customer acquisition, their net customer count is going up 20 some odd percent. So they're still even at well over 200,000. Customers are still increasing that count 20% a year. But it's not easy for them. It's not easy for them. ZoomInfo has said, look, our non tech customers are growing 20% but our tech customers are shrinking and we have not rounded the bend. And so this one's tough. So if you want a reason to quit, folks, you've got every excuse. As founders, you've got every excuse. We're going into the third year first segment of SaaS. We're going into the third year of this downt. So you want an excuse, you've got it. All I can tell you as a founder is I never quit in these times. I thought about it. You might have thought about it. But power through it. And the last piece of just meta advice I'll give you on this downturn is just this. When you consumer is faster, B2C is faster. We just did this presentation with a company called revenuecat where I was the first investor and they automate mobile subscriptions for mobile devices. So 30% of all mobile devices in the US that have subscriptions use them to manage those mobile subscriptions, to manage the payments. They call it consumer SaaS. They had a brutal downturn in 2021 or so because things exploded during lockdown and then they decelerated just as rapidly. All the things we want to do on our phones, once we could get out of the house, we stopped doing so. They saw it up and go down. But it also came back 12 months later to me. So this consumer SaaS has been back for almost two years. That says to me, maybe 2025 is the year 2025. We were hoping that everything would bounce back, but as Yamini and others said, it hasn't yet. Even if you're doing reasonably well in B2B, it's not easier yet. It's. It's still just as hard as it has been. We just did a survey to over a thousand people on Saster and more folks said sales cycles have lengthened this year that have shrunk or stayed the same. But the our friends in consumer SAS say it's already been back for 18 to 24 months. It gives me optimism for next year that it will get easier next year. But in any event, I could. You could quit for all these reasons. Here's the meta point about startups being hard. My co founder walked out the door. I spent all the money I had to sign a $750,000 note when I didn't even have that much in the bank. Our product failed at our top customer. My VP of sales told my investors I was incompetent. My family couldn't understand. I asked too much of them and I went through recession after recession. As some of you are many reasons to quit. It's up to you. Every founder will make their own decision. Do they want to keep going? Do they want to bring someone in? Do they want to wind it down? Or do they want to fake it a little bit? Fake it a little bit. It's up to you. My advice is if you have something, if you have anything that's good, if you've got 10 happy customers, 100 happy customers, if you're even growing a bit, if you're even growing 10 or 20, 30% double down. It's almost always worth it.