What to do Better Next Time - A Lesson from Current CEOs

My name is Joanne, I'm a partner of Foundation Capital and I am super excited to be here. We're at the best SAS conference in the world, In the most beautiful city in the world, and look at this venue. So I think we need to give Jason and his team a round of applause. I am incredibly impressed. Thanks, Jason. So at foundation, we've been investing in early stage startups for 20 something years. And you know, we sit here and talk about our awesome founders who have started companies like Netflix and Lending Club and MobileIron. And it's really easy to sit here and talk about them, but the reality is it hasn't been all fun and games. It's been a long journey of mostly pain, hard work and a lot of mistakes. So I'm excited to be here today to talk with these awesome founders about all their mistakes and what lessons they have learned. And I'll ask each one of them to introduce themselves, starting with Fred here, maybe your company and how many employees you guys have right now.

Hello. Thank you very much. Super excited to be here as well. And thank you for getting me on stage. So my name is Fred Plais. I am from France. I run a company called Platform SH and we've got 80 people today, 30 in the US and 50 in Europe.

Awesome. Thank you. PJ.

Hey. So my name is PJ, co founder and CEO of Showpad. I born and raised and live in Ghent, Belgium. Yes, Ghent represents. We have Chopad has about. Until last week we had 300 employees, but we acquired a company with 50, so it's 350 employees now. About 50. 50 Europe, US and yeah. Enjoying the ride.

Hello, this is Hande. Paris is beautiful and I think this venue is also beautiful. Thank you very much for welcoming us and hosting us. I'm one of the co founders and CEO of Insider. Insider is a growth management platform headquartered in Singapore. We are currently in 16 different countries with 260 people.

I'm just here because I know some of the panel to interject any embarrassing stories I can come up with as we go through the questions.

So we're gonna make this fun. Since this is one of the last events before happy hour, we're gonna play a little game where I will ask our panelists what kind of mistakes they've made. And if they made the mistake, they will raise their round thing very high and maybe share a story or two. Does that work for you guys?

Sure.

Does that work for the audience?

Yeah.

Okay. All right. No, we're good. Okay, first question. One of the things that we Tell our founders is never let VPs learn on your dime. So who has made a bad VP hire? Raise your hand. All right, it sounds like PJ has a story for us.

I mean, ultimately, if you're scaling, if you're a startup that scales, I believe at you will at a certain stage realize that you've made a bad hire. But the fact is that at the time you made the hire, the chance is very high. It was actually the right hire at the right time, I believe. Jason, you write about that a lot, but you have several types of VPs, and if you're lucky in the early stage, you hire a stretch vp. It's somebody who can stay with you on the right for quite some time. But then ultimately there comes a point where the skills, the experience, maybe also sometimes the mindset of that person or the ego might slow you down. And that's when you have to make. You know, sometimes you make then the conclusion, ah, I hired the wrong person. In reality, as you probably could not get the VP that you then need to go to the next stage two or three years before that. So ultimately, the conclusion is most of the time, the hires you do, if you do it well, are the right hires. Sometimes, you know, some people are not suited for the next stage, and that's when you have to. Those are definitely the harder moments in startup life.

If you had to do this over again, how would you have done this differently?

I mean, on the VPs, I would always say for me, the big focus to avoid mishires is really there's a couple of key things. So when we moved to the U.S. i believe a mistake that we made is that we weren't like focused enough on really hiring that person that can really help us also scale. Usually you're looking functionally. I need a good VP of marketing, I need a good VP of sales. I need somebody to run customer success. But you actually need somebody on your side as well who can take the company to the next level. And, and so for me, in hindsight, a first hire when you're going abroad, that's somebody exceptional. And on VP hires, background reference checking. And if you hire somebody exceptional, they can then help you hire VPs for you. Because usually the first VP you hire, you never the first VP you hire, you never hired a person like that. So you can have your board members help out if you're lucky, and if you have good investors, they will do that. But still, at the end of the day, it's a combination of background checking, taking your time, and then Hiring through network or people that, you know.

Yeah, I just would like to double down on this. I think the issue is not so much the fact that, you know, when you're recruiting a VP, you're doing like 10, 15 interviews, you've seen a lot of people, so, you know, you're going to likely going to pick the right person in the first place and you've got these board members that can help you on actually making sure that you're getting the right person. So that's not the hard part, I would say. And if it doesn't work after three months, it's pretty easy to actually let the person go. There's no passion, you know, it's just like, you know, it's pretty easy because there's no history and the person hasn't taken the job. And so, you know, it's like it hasn't worked too bad. Maybe next time and, you know, shake hands and move on. Now the issue is when you get, you know, a VP that has been successful in the past and is no longer successful, and the hard decision is how do I let them go and do I let him go or go? And that's when passion is involved. That's when people are very disappointed because they've worked hard for you, they've worked hard for your company, they've been successful at some point and now they're no longer the right person. And that's when, as a founder, choices are hard. I would say, I think one of.

The things that we offer as advice to our founders is to make sure to get time series data when you're referencing a potential VP to make sure that that person is learning and growing and has a growth mindset as the company evolves. Startups are full of critical decision making. Right. And if you ask what when I ask kind of our CEOs who are running public companies, all of them have told me that they have made tons of critical or tons of mistakes in making critical decisions. And a lot of it was around timing. Right. So how do you guys think about that? Have you guys made the mistake of making a mistake around making a critical decision? Anybody has done that? Yes. Jason hasn't. All right. Hyundai seems like she has a story.

Well, also a little bit about related about VP think. Yes, it's crucial to hire your VPs after maybe $10 million of air ash. We have a very different story. Actually, I told it to Jason. I think he doesn't yet believe that much that we have six co founders and we are doing well in terms of not having conflicts. But we have a kind of a, you know, challenge about this. Of course, in the decision making side, sometimes critical decisions cannot be made very fastly when you have six co founders. Because the only way to motivate those six co founders is to get them involved in the decision making processes when you are making critical decisions. By the way, if I had a chance, I would have eight co founders. I would have 10 co founders, definitely. But the thing is there should be a balance. There should be a very crystal clear decision making processes. I am a 1x entrepreneur, actually. I had to learn my lessons from my previous business. But still, as insiders, we had two very important examples for the, you know, slow critical decision making process. One of them is the our second round series B round. We have been funded by Sequoia Capital almost six months ago, but we were a little bit late. This is why maybe it has affected our growth. And the other thing was about a very critical product which is going to keep us very competitive. But again, because of the involvement of the different parties, it was a little bit late decision. What we have done, we have very clearly defined the decision making processes, whom we are going to get involved and whom not. It was very important for us and it was one of the mistakes that I learned. Hopefully I learned. We will see.

What do you think you would have done differently the second time?

Well, this time actually everyone should have a chance and responsibility to make the decisions if the other parties will not have very certain value added to this decision. This is why we have written down crystal clear. And this is the thing that I would do again. I wouldn't do it again.

Awesome. Okay, third question for you guys. So I think building a startup is like building a religion. One of my favorite books, Sabiens, talks about religions and myths and company building. I recommend this book if you guys haven't read it. And I think it's so important to build a good culture. Right? Which is, which is a startup's religion. Part of that is making sure that your employees are happy and are bought into this culture. Have you guys faced bumps around employee happiness? Wow. Okay. Hyundai has a story.

We have offices in 16 different countries and where you are in 16 different countries, if some of the countries has relatively less people, they might become disconnected, they might feel that, you know, they are disengaged. They might think that you don't care about them and this leads to unhappiness in their sights. So I think alignment is very important. We have learned how to align the team. Still learning, for example, we have four practices I have as menting sessions every two weeks. They can ask me any questions. We have strategy meetings once in a month even. We announced the mark, the realization rates driven realizations to whole team and they can hear the whole strategy, what's going on, what's going well, what's not going well. And the third thing is we have retreats every year. It's costly still for a startup, but we are bringing whole insiders to our HQ and having retreats in order to share the whole year's strategy.

Got it. One of the things that we've experimented with is to ask all of our companies to do 360 reviews from, from day one, even when they're very, very small. Have you guys tried that and has that been effective at all?

Yeah, we're monitoring an employee moral every other six months we are getting surveys and getting some really good feedback from the team of what they like, what they dislike. Anecdotally we also have a random channel and a complaints channel on Slack. Well actually people do post a lot of things, the complaints channel and we also have a commendation channel. So people can also say when they like things, but they're pretty bullish. I mean it's, it's one of the most used channel and people actually tell things when they, when they really face issues and people reply and that actually helps quite, quite a bit. But in general I think startups are roller coasters. Roller coasters for the founders, roller coasters for the employees. When it's, when there's UPS, it's IHOPs. You know, everybody's super excited and the company is very heavy when it's down. You know, we're working in a place where you sometimes get incidents and it's horrible. You know, we feel the pressure in our flesh when that happens and every employee does. And I, you know, I think it's, it's a great adventure. It's very, very exciting. It can be very harsh at times as well. So you know, I think it's, it's part of the job, it's part of startups world to see ups and downs and live with it and try to mitigate the problems. But you know, you need to live with it and accept that it's part of the job. Right.

It's especially hard because you guys run international startups, right? With many different offices and employees of different backgrounds and cultures. Have any of you faced any issues expanding into the US or into other geographies? Okay, pj.

Yeah. So chopad. First two years we were, you Know, we founded a company in Belgium. First two years everybody was in Ghent. We raised our first round of funding. My co founder moved to San Francisco and actually at a very early stage already we started building a company in two continents. And then it really resonated what Hyundai was referring to in terms of the moment you start having two offices. Chopad now has actually seven offices. It becomes challenging on the culture side because people are always wondering, where's the headquarters? Who makes which decisions? And so I think going to the US for, I guess there's a lot of European startups here, founders here. And so going to the US is one of the hardest things. And it can cost you a lot of money. It can, you know, destroy your company culture if you're not careful. It can generate founder conflict. It can, you know, it triggers a lot of things and. Sorry, go ahead.

One thing I learned observing Chopad from the early days and now I've seen this happen again and again, is you come to the US and you split it. You have the co founders, you split up. But the US is so expensive. And it's not just that it costs twice as much, but you already have this European revenue. So those extra dollars consume all your capital because you have a brand, you might have a brand in Europe and once you have a brand, your cost to acquire customers for a while shrinks. And then you go to the US and oh my God, it's like a dollar to get 50 cents of revenue or a dollar and it. And how do you. Any lessons look? And I think that caused some stress at Showpad. How do you load, balance the investment and would you do it? Would you spend more in the US earlier again, would you spend less? What'd you learn for next time?

I would spend more aggressively in the U.S. i think earlier we were too cheap, even too cheap on hiring talent. So I would spend more aggressively. But then you need to have the right investors backing your company. And also obviously you need to have a solid plan, keep track of the metrics, have an eye on your, especially on the sale. I think on the sales and marketing side, that's where you can derail pretty quickly if you don't pay attention. But definitely be more aggressive, be careful where you open up your first office in terms of cultural fit, access to talent, I think that's all things you have to really take into account, the access to talent. When Chopad came to the US we had no brands, nobody knew us. It's hard to attract the right people. Lucky that we met Jason to help us with that. But it's hard and so it costs more money, it costs more time. It takes more time to ramp up your sales team, your CSM team. Because if the product gets built and the engineering and product and everything happens in Europe, it also takes more time for people to understand the product, the go to market. So be patient as well.

Patience is a virtue. Hyundai, you have six co founders. Has that been helpful with expansion? Hurtful. How do you, how do you manage that?

Yeah, definitely, because one of them is our VP of growth. He is going into a new market, just establishing the team and train them, get the first clients and then he goes for another country. It helps a lot. The others has different responsibilities and for all the growth and expansion, it helped a lot. But regarding going in the us, we don't, we still don't have a story of going US because we are planning to do it by the beginning of 2019. But we are currently in Japan, we are currently in Korea, we are in uk, we are in Poland. And those cultures are very diverse cultures. And for us in Japan everything was different and very difficult because you have to first learn the culture, you have to first how to do sales in Japan. So our practices of growing into another new country didn't work in Japan. So it was a struggle for us. It is also an expensive country. If we will spend more, we will be more successful. No, but it takes definitely more time to crack those markets because you can only crack them after you understand the culture and the way of doing business. For example, we do direct sales, we go to the field and we do have client meetings. We have a very efficient sales engine which haven't worked in Japan because the things are working in Japan with agencies and also in the dinners, the things are changing a lot in the dinners, in the business dinners. So it was a challenge for us to have an existence in Japan, but I think we did it.

Yeah, I think, you know, in terms of geographic expansions, you know, I think there's not one strategy that works really. I mean it's as many strategies as I can think of really. But you know, still want to point out that the US market like for a industry like ours, the US market is such, such an attractive country on the platform as a service market which we belong to. It's 10 billion in the US and 2 billion in Europe, all told every country. So I mean it's a one to five report. So you know, for us, succeeding as a company means succeeding in us. It's pretty as you know, as simple as that. So My takeaway, you know, I've been to the US for two years as a, as a CEO. I think if I had been there four years, we'd be in even better state, I'm sure. And so I think, you know, for our industry, you know, you never go fast enough. In fact, so many of you guys.

Have talked about not spending money fast enough. Do any of you guys feel like you spend money too fast? Has that been a concern?

I mean, usually that happens on the sales and marketing side where I feel. So there's. If I talk about being more aggressive in the US it means for me, like hiring, like paying higher salaries and attracting those first, two, three, four, don't be cheap on those first hires because they're critical. But it can quickly derail on the marketing side or on the. We've had an instance where we've had a VP of marketing build out the team, quite a big spend and metrics were really bad. We made a decision to actually relocate. We found another, better marketer in another city. We decided to completely restart the team. And at a certain point we actually stopped. So we had to let go of like half of the marketing team. Our marketing spend was halved. And actually it didn't hurt the. It didn't hurt inbound or performance or outbound. And then you're like, oh my God, like we spent, you know, all those months so much money and actually, then, you know, it actually it didn't matter. There was like two or three months. We almost didn't have a marketing team. We weren't spending money and still like leads were flowing in quite nicely and we were still performing on the revenue side. And then, then that makes you more critical of really making sure that on your marketing spend, on your sales spend. I think that's super important.

I totally agree that and I have one more addition. I have an interesting challenge. I believe we are coming as a six co founders. We are coming from very, let's say humble backgrounds with the, you know, very normal or average living standards. So to me, still, when I look at different countries, there are different rates for the salaries. If you are going to hire a country director, for example, I tell to myself, how come I repay this money to those, you know, people. But it's very normal and we need to overcome this. But I think now we had to. We know that we had to pay it in order to get best people on board.

What is the advice that you would give founders here who are thinking of expanding to the US in terms of hiring.

Advice? The thing is you can't do that without these people. At the end of the day, it's all about people. When you have your prioritization, you need to, you shouldn't forget that it starts with people to me, to a foreign side and then product and then profit. And when the company grows, when the revenues are growing fast, you need to delegate. I'm also trying to learn how to delegate. And when this time comes, without these people, you cannot grow.

So it's all about people. And people are startup's biggest assets. Have you guys ever lost a VP that you wish you kept. Being honest?

No. I think, you know, to come back on the, on recruitment and advice on the U.S. really, I think the tech people that have done it before, it's like, you know, you said don't go too cheap. I think, you know, I totally agree with that. I think, you know, the, it's such a big market, such a competitive market that you really want to get the people that you know can show you the way and rely on them because, you know, you as a founder, especially for us coming from Europe, you don't know that market. You don't know the way to operate. You don't know the way of selling. I mean, it looks like the same people. It's not the same people. It's not the same culture at all. It's very different. And so before you, you know, if you want to learn it by yourself, you're going to spend years and not necessarily be successful where if you find the right people, then, you know, things could go fast. And that's actually one, you know, that's one of the things I think I've done right, which is, you know, going after people that were already in the industry, in the spot, working and actually selling similar products in the same ecosystem. So they came in, they knew, you know, who to talk to. How was the sales process working? And you know, it went well.

I mean, for Chopad, we've done last year what I would call a transformational hire. So we were looking for a president COO in the U.S. so Louis, myself, for European founders. Louis lived in San Francisco. But the team was getting bigger and bigger and at a certain stage we both realized, look, if Chopad wants to be a billion dollar company, wants to be a massive success, we need to hire somebody local, who knows, who knows our market, who knows how to attract talent and who also knows how to, who's an operator and can run the company. It took us, we hired a recruiter, it took us a year to land that person we actually, in hindsight, we almost hired somebody. And then at the last moment, our gut feel said like, okay, we're not gonna do it. And you know, the board actually also kind of agreed, like, yeah, it's like started looking harder. At the end of the year, suddenly this candidate comes on my radar. Jason Holmes, former COO of Marketo, has been at Marketo for seven years, joined at 20 million ARR or ISH, and then left the company at 300 million post IPO, post take private. And then we run a very thorough process, a ton of interviews. But for me, the moment I knew it was the right candidate, and it's a great story. It's like I had a dinner with him in Ghent. He flew to Belgium. We were supposed to go to dinner to this fancy restaurant. My wife was abroad for her work. I was actually alone with the kids. My babysitter cancels on me and I'm like, ah, shit. I have this dinner, I invite him to my place. And actually the first two hours we spent babysitting my kids and at that, seeing him interact with my kids and then the conversations we had, I was like, that's the guy.

Your kids helped you close as CEO of Marketo.

He told me, it's helped in the closing. It's true.

Speaking of closing candidates, I think that's one of the toughest things to do as an early stage startup founder. Any advice on that dimension since you're talking about the CEO of Marketo?

No. I mean, you know, pitching our company is what we do every single day, every single hour, every single minute. And, you know, it goes first with people. I mean, if you want to, you know, the same way you want to sell your customer, you want to sell people on your own joining board and, you know, you know, coming to your super exciting company, that does, you know, so many things to change the world. I mean, you know, you really, you know, you really want to, you know, pitch them the same way as you would pitch anybody, any stakeholder, any vc, you know, in the same, same game. Right? Just, just to come back on the retention. You know, there's one thing I've learned, and I want to share that tip because we didn't lose a vp, but we could have lost a VP at that time. And, you know, I think I, if that was to do it again, I would do very differently. I hired somebody in HR after 40 people. We were already here, 40 people. And I should have done it at 10 people. And we should have paid very much attention on the onboarding process. Very Very early on, because one of the best VP I've got right now, we actually got him an offer in July. July is, the next month is August and in France, you know, August is pretty low as a month. And the Guy came in October 1st and he had nobody around. Basically the whole team was off pto and you know, the guy was actually completely stressed. He was saying, well, what sort of company is this? You know, what am I doing here? We gave him a few things to read, but you know, he was done in two days. And he spent 10 days thinking, why did I lose? You know, why did I quit my job? I was successful, I'm getting to this company and this is how I'm getting treated. And you know, that resonate the next. The next day. We actually set up an onboarding process. Now we pay a lot of attention on the onboarding process. We get a distributed channel so people work from home. But we have a full process for six weeks. It's very intense, it's very well organized. We got people that are dedicated to this and I think this is the first moment of you and that new employee coming in and you don't want to screw up. You really want to make sure that you're doing the right thing. So the start is good and then the next will probably follow.

About the recruitment, I would add that from the very first day, I think you should create very good recruitment machine. We are now 14. We have 14 people in our talent acquisition team. And this team is also very crucial for the onboarding of the people. It is very important because it might be even a reason for churn if you cannot onboard the people well. But the most important lesson I learned about recruitment is yes, those guys, your recruitment or your talent acquisition team can bring in good candidates. But at the end of the day, it's your job to recruit your VPs because you are the only person who can attract them, who can bring them to the company, who can impress them. And I always see that it's really important to find someone who has this hunger and passion regarding the pitching. By the way, pitching is very important because I believe that you should always Three different pitch deck ready. One is your culture deck, one is your employer deck, employment deck and the third one is your of course, investment deck.

It really resonates with me. Obviously you're always pitching and I think there's different messages that resonate. I think as well as a founder CEO, you should always hiring. So definitely VPs and even director level showpads now around 350 people 50% of my time goes to 50, maybe even more. But, like, 55. Zero goes to recruiting or helping my managers recruit or improving the. I think those are, like, the levers you have to pull to be successful if you want to scale beyond the 10 million. And even in the early stage, obviously, it's even more critical to be involved in every single hire. Obviously.

Absolutely. So we have time for one last question. I'm going to ask the three of you. Show of hands. There was a list of 10 mistakes that Jason had tweeted out earlier. How many of you guys have made all ten mistakes? How about nine? Okay, come on.

Eight.

Jason, what were the mistakes? What was the list? Summarize it.

Yeah, I can't remember, so I don't know. I don't remember.

I think you were hiring culture, VCs, all that.

I'm pretty sure. Look, the reason why we're here is ultimately, I think everybody, all the time, you're making mistakes. And we've probably made. We've got like a list of, like, 15 questions. And I think everybody here said, like, you know, we've made most of those mistakes. And for me, it's a matter of. And there's a way how you internally deal with mistakes. And that's like. You know, in the beginning, when I was an entrepreneur, I, and probably every entrepreneur, CEO, founder has an ego. But as your company grows and scales, I felt like your ego goes down a bit. And you have to do that because you're making a ton of mistakes. But you also have to recognize that towards your team, towards your investors, the more open you communicate about it and the quicker you get into a mindset of just moving on but also solving what's wrong, I think that's ultimately how you keep making progress.

Can I add one more? I know we're over, but after this, we're going to take a break and then we're going to break out to these VC sessions and we'll have, like, eight. So take a break, have a cocktail. I think the bar is going to start soon. And then here are eight sessions that we've done. But one thing I know, we're over, but since it's CEO confidential, one thing on my list was dilution. So we asked pj, what would you do next? I don't. You know, I came to America, Everything's expensive. I don't want to pay more than 50 grand for a VP of Sales. I would have spent more, but that cost of capital in the early days is so high. Six co founders. I gotta Be honest, I think about dilution of just what my six co founders have. My first startup, I raised money in 2004. This was the worst time in the history of our lifetimes to raise. I had to sell 80% of my company in my CDNA round. That's the way the world worked in 2000. So I have a little scar tissue and I went the other way. So there's so much capital today. All of you guys have crossed. How much did platform finally just raise? How much did you raise?

34 million.

34 million after a gap. Right. And Showpad's raised how much now?

120 million.

120 million. And you just raised some score. You've got 250 employees. So now it's more dilution than access to capital.

Right.

So would you take less dilution, more dilution, raise more like how do you think about or do you not. Do you ignore dilution? Do you think about it every night before you go to bed? Like my. Just so we think because it's the flip side of like the. The unicorn age, isn't it?

I think we are going to digest more because we have a shareholdership program. We have currently 44 shareholders in the company. The two methodology. I think in our last round we have also some secondaries. So Sequoia only hasn't didn't get the, you know, shares from us also from the angel investors a lot because I have already get a promise from our cities rounds. Yes investors if there will be a next round then they will be also do some secondaries. So I'm trying to keep the balance as this because I would like to increase the number of shareholders, you know, even up to 100 or 150 in time. Hopefully. Let's see. And the. And the second thing is for the dilution of course maybe everyone knows, but I want to repeat it one more time if it helps. You shouldn't get more money. You shouldn't get money than you need. More than you need. In the last round, it's supposed to be maybe around for $20 million for us, but we only need for the upcoming two years, like you know, eight to $10 million. So we get it. I know that it's. Sometimes you might feel that, okay, it's kind of a protection instead of just two years, you should think about three years, four years. No, because it will also in time your valuation will increase definitely. And you will have better, better valuations with less dilution. So I think we should all get the money in the amount that we need.

Yeah. And Jason, the way I'm thinking about it, yeah, buffer is good. And the way I'm thinking about it is, you know, we are in the all time up right now. The market is crazy. It's, you know, the biggest valuations ever. And I think you want to take the money now. So that's my first thinking. And the second thinking is, you know, it's all about having the means to be relevant in three years before thinking about dilution. You know, I want to make sure that I can successfully grow the company and get it in the next stage. And that's really more important than dilution in my mind for me.

So I'm not. I'm thinking about dilution, but I'm also thinking it in a way like you want to be a combination of capital efficient, but then also like weighing your options and Chopin. Now, actually, we've raised in the last two years almost $100 million, but basically, in some, let's call it, Mike, we chopped it up. But we knew it was, like, available. But every we just. So it was. The money we raised could always get us at least 12 to 18 months further. But I also always had a plan. If it was 24 months or 36, I had a plan ready. And if it would and if the numbers are good and the metrics are good, I knew that my current investors, we're happy to put in additional dollars, but then I would still make sure I get term sheets from other people to make sure, keep them honest. And I think that's, you know, that's how I've minimized dilution.

So key takeaway. The market is hot. Goals raise a lot of money. And if you're a founder facing challenges, just remember that you're not alone. Everyone goes through a lot of things before they can claim fame. And remember that Saster is an awesome community where you have all sorts of founders that you can contact and reach out to and share in your joys and pains. Thank you, everybody.