EP 55: Spenser Skates (Co-Founder/CEO, Amplitude) - Going Public, Exercise Windows and Why Sales is More Important Than Engineering

Welcome to the 55th episode of The Logan Bartlett Show.

I am your host, Logan Bartlett, and what you're going to hear on this episode is a conversation I had with Spenser Skates, co-founder and CEO of Amplitude. Amplitude was actually an investment, uh, I was fortunate enough to make, work with, uh, when I was back at Battery Ventures. And so we talked through that path, us investing in the Series B, uh, their, uh, path to going public as well as, uh, the public markets and what it's been like since then. I think the company was valued at $8 or $9 billion at one point, now around $1.5 billion. And so what it's been like to go public and, uh, operate as a public company CEO in these markets. We go back to the early days about them finding product-market fit, them differentiating versus competitors, uh, a bunch of different stuff. Spenser has a lot of great opinions and insights on, uh, being a CEO. It's been a pleasure to work with him over the years, watch him grow and lead and, uh, build, build an important company in the public markets. And so we definitely have chemistry and a bunch of old stories that I think go to the amount of time that we've worked together. And so I really appreciate him coming on. I think you'll enjoy the discussion that we had. Before we go into that though, a reminder, the plug to please like, subscribe, share. We don't do advertising. We don't try to pitch you whatever mattress company that is in vogue these days. We instead just want to grow the podcast, make it as big as we can. So we appreciate everyone's support in doing so. Thanks everyone for listening. And now you'll hear me and Spenser Skates.

Spenser, thanks for doing this.

Absolutely. It's good to see you.

Skates, the founder and CEO, co-founder and CEO of Amplitude. Amplitude now is $200 million run rate business.

Yeah, we hit $230 million revenue. Yeah, we don't disclose run rates. It's one of these like public market things. Yeah, but yeah, growing a lot. I think we first met you when we were in like the— no, even before that. Yeah, you and Niraj came out to visit me. Back when we were like $100,000 in ARR and nothing as a company and like 6 people or something. Yes.

So we invested in the Series B when I was at Battery. And at that point you were probably like $6 million in ARR. Yeah, we were at $6 originally.

You guys got us at a good price too, because that was the 2016— the market corrected like SaaS, you know, LinkedIn came off 40% in one day.

LinkedIn and Tableau both.

Yeah. And you got it. You got a great deal.

$85 million off of $6 million in ARR.

Those were the days. Days, man.

Yeah. And it wasn't—

people were complaining about how hot stuff was back then.

I know it's hilarious. Like, that's one of the circular things of like every market seems hot and we were paying 11 times, 12 times ARR, whatever it was at that point in time. But yeah, it's great to see you. So yeah, so we've known each other for a long time and I think you're in a small group of actual investments I've made coming on. So feel free to correct anything I say or push back on your memory on stuff. But maybe just about lead off, what does Amplitude do? How would you characterize the business today?

Yeah, we're a digital analytics platform. We're a cockpit for your app or website that tells you how your customers are using it so that you can know what features they use, where they get stuck, what they like, what keeps coming, what keeps them coming back. It's all about helping companies drive growth through looking at product data. And so we work with companies everywhere from early-stage startups to massive tech companies like the Intuits and the DoorDashes of the world to traditional enterprises like Ford or Walmart or NBC. And I think what's happening is when we started the company, we had this thesis that the way people are gonna look at and use and build products is going to fundamentally change through product data. So let's build a company that builds all the infrastructure behind it.

I want to go into the founding journey because I think it's, I think it's interesting in a bunch of different ways and how you guys got to where you are. And there was obviously one business, then a pivot, then it was kind of mobile-centric, right? Which we can talk about as well, but went public, what, in '21?

Yeah, 2021, September of 2021.

So how long have you been in the public markets now?

That's, I guess, 6 quarters.

And you were early in the recent history, maybe not in the long history of tech companies, but early in founding to IPO was probably what, '12 you founded?

We founded the company in 2012. We were messing around and trying to figure out, and we didn't really start taking off till we launched the company in 2014. And then we grew from 0 to 1, $1 million in the first year and then $1 to $4.5, $4.5 to $14, and then, you know, so on all the way to we passed $100 million in ARR in 2020 and then went out, you know, went out public in 2021.

So that's on the smaller scale of recent SaaS IPOs. And I remember we, when I came over to Redpoint, I wasn't as current with what you guys were thinking and I saw you file and I was like, oh, interesting. Like, I didn't expect that.

What was You gotta put Amplitude on your resume logo.

Listen, it got me hired here. So, okay, that's good. What was the reason to go public when you did? Like, what was the motivation?

The markets were for sure, you know, 2021 hottest markets of all time. And so if you're gonna do a public market transaction, that was the year to do it. So I think timing is part of it. Now, you know, you look at companies, it's like not even clear if folks will be able to go out for a whole bunch of years. And so, we definitely pushed it by being on the earlier side in a lot of ways. But no question in my mind, it was the right thing for the company. In terms of what are the advantages that it gives you as a company, I think there's a few. So the first is that you get a liquid currency for your stock where you can use that to do all sorts of transactions in the public market you wouldn't be able to. So M&A is like the very, very obvious one. Particularly in our category where there will be consolidation over the long term. Having that liquid currency that lets you acquire companies is a big positive and a big deal. The second thing is it increases your profile as a company. Now, I think the mistake people make on this one is they think it's like, oh yeah, all of a sudden, you know, all your customers are going to care that you're public. No, nobody, you know, customers don't care. They care if you're going to solve their problems with your software. But what it does do is for a lot of the rest of the ecosystem, so for analysts, like when you're doing analyst relations with Gartner and Forrester, with partners, with press, it raises your profile significantly because you're the one company that's public and everyone else is not. So if you can be out there first, particularly in a competitive market, which we were in, that gives you huge sorts of advantages and you want it kind of every single last piece of ammunition to kickstart the positive feedback loop and compound your business successfully. And then the last part, I think, and this is also underrated, is it really raises the bar for your expectations and execution as a company. CEOs like to complain a lot about public markets, but they actually give you tremendous leeway in how you define your business. You know, you're required to report your financials in compliance with GAAP, but then anything else you can talk about, you know, share whatever metrics you want, say, hey, here's the North Star we're going after, here's what you should look at for a business. And you have tremendous flexibility to do that. And the great companies, you know, live up to that and rise to that occasion. And I think public markets is kind of the next bar. It's like, you know, When you first found the company, you got nothing. And then venture capital, it's like, you know, you have to meet the bar for explaining what you do and providing a vision. And then public markets is just the next stage of that thing. And so it really forces everyone to up their game. It attracts a different level of talent into the organization. I mean, we've hired some great executives in the last few quarters. Thomas Hansen, president, like we, a huge part of it is that we are already public. And so that just puts us in a different class and different category of company when folks look at us. Same thing with KJ, who, runs our— who's our chief HR officer. She's been fantastic. She had a phenomenal run over the last 7 years at Okta. Just had Chris Harms, our new CFO, join. And so you just get a different caliber of talent because the bar is higher and you're kind of playing at the next level. Now, again, we did it on the early side, so we were, you know, pre-$200 million in revenue. I think that's a good thing because in my mind, once a company gets past $100 million ARR, you have enough of a business that the thing's not going to go away. You should be able to model and forecast and predict where your business is going sufficiently so that you can be a public company. And yes, there's all, you know, there's this tax and then there's this overhead where you have to explain the story. But I think great CEOs and great management teams rise to that occasion. And so that was a big part of it for me in Amplitude as well.

The double-edged sword of the public markets is the stock price in some ways, right? And the good thing is in hiring those executives, there was no debate. As to what the company was worth at any moment in time, right? When you brought them in, it was like, hey, well, it's worth this today. It was worth this yesterday. It's going to be worth this tomorrow. Versus in the private markets, we venture benefits from— you sort of put it in a jar and you forget about it for a while. And it's like then you look up in 2 years, 5 years, 10 years, and it's like, oh, what is this? What is this worth? But right now, when there's big volatility in that, one of the unusual things on the hiring side is trying to figure out What options do you grant? Like, what are the— what is the stock even worth if ultimately it was just one investor that said, hey, it was worth this, right? And so that is a double-edged sword. But the flip side that you've had to deal with is just public market volatility, right? And it's been sort of up and down. And we went from a very growth-on, risk-on standpoint to more of a balanced, cost-conscious mindset. How has that been, both the volatility as well as the the shift in mindset within the employee base that like, I mean, both of us are the same age, sort of grew up in this go-go time of venture, right? So how have those two things been?

Yeah, the volatility, I mean, you know, so the first immediate thing is it feels brutal because you're having, so I used to do high-frequency trading, so I used to be in the finance world before doing Amplitude. And one of the, ideas is that the market is a random walk. And so on any day it may be up and down. The problem is psychologically a loss is twice as devastating as the equivalent gain to you. And so if you're just fluctuating, you know, up and down, but the long-term trajectory is just flat, that's actually a net negative for you psychologically. And so I think that's the one big downside from my standpoint. And so A lot of CEOs talk about stock price. I actually don't look at it unless someone tells me what it is. That's very, very deliberate because it's not reflective of particularly short-term movements. Short-term movements are all about market structure, so what players are coming in and out of a particular thing. Long-term movements are all about, okay, how is the underlying value of this thing changing? Absolutely very relevant and great to have that scorecard. I think drives a lot of accountability and I think is one of the great structures of capitalism. But the short-term nature of the thing is psychologically a net negative. So that's the one really big downside in my opinion. Now, the upside is that you are going to be priced to market. There's an active market for what you do all the time. And if someone thinks it's too low and disagrees with it, they can come in and buy and make a bunch of money. And someone thinks it's too high, They can sell it or short it or what have you. And so you get this— you get a much better continual price discovery process for what is the fair value of equity. Now, I will say one of the problems as an operator is that like, I don't even need the thing to go up in the short term. Like, obviously, you know, the goal is to grow the value of the equity over the long term, but in the short term, I don't really care. I just need the thing to to be stable because price— one of the reasons that you want price stability in any economy, including your stock if you're a company, is that allows you to plan and predict how much compensation am I going to give here, what sort of transactions should I focus on, and allows you to run an organization. Because an organization can only adapt so fast to the change in the value, the price of your equity. Like, it takes time to say, okay, we're going to change how we grant stock, or we're going to run this, uh, you know, fundraising process, or we're going to do a share buyback or whatever. It takes time to do all this. And so the swings you have at periods like this definitely make it harder. Now, that all said, the interesting part about it is I'd still rather be public than private, because when you're private, you actually don't have that price discovery. I can't tell you how many candidates I've talked to who have joined companies in 2021, quote their 2021 equity grants that have now been slashed by like a factor of 4 or 5, especially, you know, for a lot of these late-stage growth companies, um, and then think that, you know, this is what their fair comp should be. And so, you know, I'm just like, no, like, you know, there's no way, you know, there's no way you're getting that now, and your current stuff isn't worth that. So if you think that, you can stay there. And so it's almost like being late-stage private is worse because you're in denial about the true state of the value of that equity. And so as painful as it is, it's like, man, at least you're taking them You're taking the pain and you're adjusting to the real-time price of your stock immediately as opposed to waiting for the future.

It's a really important point. Someone was asking me at a $10 billion+ public company what venture-backed startups they should go into that were de-risked but still had a bunch of upside. I was like, I'll tell you, look at the companies that have a $1 billion to $3 billion public market cap. Have gotten beaten up in the stock price in the last, whatever, 18 months, like that's where a lot of the return is because at least it's priced accurately. Sure, maybe 1 out of every 5, certainly all my portfolio companies at late stage are very accurately priced and great opportunities to go join, but like by and large—

What are the hot ones you got? We've got it.

We can go down the list. I'll put it in the show notes for people to go through, but there's certainly, at least there's like a fair grant that the markets determine. And so the opacity of the private markets when there's this volatility that exists, This makes it really hard to hire and compensate and all that.

Totally. And like, yeah. And like the discounts, even the private companies are getting, like, are not close to reflective of what's happening in the public market.

It's funny. I just got—

you might get like, you know, Stripe got cut by a third and people were freaking out. I'm like, dude, like if this company equivalent, it would be cut by more than, you know, 50%.

I was looking at the brokerage, like we get those secondary transactions kind of sent around and it was like, you know, 8% discount to the last round. And I was like, 8% discount to the last round happened in 2021. It should be 80% discount to this. Yeah, 100%. So now what about psychologically? Because you have had an employee—

Sorry, this is also why you see a lot of VC funds starting to buy in public markets. So like, you know, Sequoia, you know, public, you know, has a public markets fund. Andreessen Horowitz has public markets funds where actually they bought some Amplitude stock, I saw.

And so there's no collusion going on there?

No, no, no, absolutely not.

Spenser's wife works at Andreessen as a detailer.

No, no, no, all that stuff is separate. Church and state is separate.

Very separate.

Very separate. That's why you see that happening, because that is where the good deals are now.

It's an interesting thing. I'm glad that our fund size is such that we don't have $4 or $5 billion to put to work. If you had that big of a fund and you were expecting to do these billion-dollar crossover things, 100%, the better opportunities in the public markets today. Those bigger funds, there's no doubt that that's where opportunity exists. Your employees also are probably mostly, I don't know the average employee at Amplitude's age, but probably early 30s, late 20s or something. Yeah, 30s. They grew up in this go-go market, right?

Yeah.

Venture, not as a scarcity and tons of money and opportunity and all that. How has been the psychological shift within the employee base to think about cost consciousness and all of that?

So let me talk about tech broadly and then I'll talk about Amplitude. For sure, for tech, it's been brutal. I mean, people are like, man, you know, I thought Google was a family. You know, we're always gonna get these sweet perks And you see that it's, it's, it's rough, you know, resetting that psychology, especially after 12 years or 13 years of a bull market. That's really hard to do. You know, I mean, I think within Amplitude, I think a few things. One is that the limiting factor has never been more money or dollars poured into the thing. It's always been, do I have the right leaders in place and can I deploy capital behind those folks to scale what we're doing, you know, and are we ready organizationally? And so because of that, we've never been like, okay, let's just pour more costs on this thing and let's add all this headcount. Like, one of the measures I always look at is the ratio of account executive headcount to all supporting headcount. So managers, SDRs, SEs, partnerships, marketing, you know, the list goes on and on and on. And I think what happened over the last few years is all that supporting headcount grew like crazy. In fact, that happened to a lesser extent at Amplitude too. Again, not directly revenue driving. And if you realize what was going on, you're setting yourself up for an unsustainable long-term business model. And yes, okay, if interest rates are zero and capital is almost free, then kind of makes sense to do something like that. But in any sort of normal market where interest rates are not zero and you have, you know, more normal environment like the one we're in today, then it's like, okay, you can't do that growth, growth at all cost model. And so we've been incredibly lucky in that we haven't had to make any major adjustments to how we operate as a business. Not like we had to go through layoffs. It's not like, you know, we slowed down headcount hiring a ton., but we're still hiring on the margin, where Amplitude's like, we've always been that kind of cost conscious, like, hey, like, you know, we need to get dollars into the business. Like engineering cares about how much revenue we bring in and deals. And so it hasn't been as drastic of an adjustment. That's kind of the good on the Amplitude and, you know, how it's been. Now that also—

I think you got to $6, by the way, $6 million in ARR when we invested by burning, I don't know, $3 or $4 or something like that. You're, for a long time, I guess today especially, the amount of capital you've consumed versus the revenue or the ARR of the business has always been more ARR than capital consumed, I feel like, which is rare. That's a rare thing to have. But you guys were always pretty prudent about that. At different points in time, it felt like the org was potentially gonna break in the early days because you were maybe too prudent about it, but it benefited you well psychologically.

You know, we didn't, I didn't hire executives and leaders fast enough, and I was kind of like, well, let's just do the work myself and go and grind and ship the next feature and close the next deal and just keep doing that again and again and again. And that's what is gonna lead to long-term success. So I don't think, so it's always been a little bit in our DNA. I think it really comes back to, I remember, so I went to MIT, I would always see these really special, incredible engineers go out into the world and build products that were just beautiful things, beautiful design, beautiful code bases, but would hit end users and customers and not hit the mark and they don't even care. And so I'm like, I got to do whatever I can to make sure that doesn't happen to me. And so that obsession with here's how we're gonna drive revenue and actually make this thing into a business and just be really, really good at that motion has been part of the DNA from day one. I think like the prototypical company for me as CEO has always been early Microsoft under Bill Gates where they were just relentless. Like they didn't always have the best product, but they were just relentless on outshipping everyone and going on to dominate market after market after market after market. And so that's very much, like how I thought about what it means to build a, you know, a great, a great B2B company.

At a tactical level, you did something interesting at your all-hands recently where you crowdsourced ideas for like incremental cost savings, though. What can you tell that story of like what you actually did and what some of the interesting insights were?

Yeah. So I, we were back in December, it was clear that we're going into a recessionary environment. Stuff is going to be bad for some amount of time. And that we need to set ourselves on a different path as a company where we get to profitability much more quickly. We rein in costs in order to set ourselves up for long-term success because, you know, cost of capital has just gone way up. You know, you need to run a business differently. The question is, okay, well, what can you do about it? And so I challenge the Amplitude team with, let's go find cost savings in the business. And that's not just something I want to do as CEO. Like, that's something we all can do to make Amplitude successful. I didn't know how it was going to go over because, you know, I would talk to different executives who'd be like, most people don't give a fuck about cost savings. They just want, you know, more benefits and more spend and less accountability and all this stuff. And I'm like, what? Like, no, no, no, we are way too small to like be like that, you know, to be like that as a company. So I said, I want to challenge everyone, like, we can all, like, it's not just something that's coming from me. We can all play a part in this. So, like, let's crowdsource ideas to save costs within the company. And so I said that, I challenged the team out in all hands. We sent out a survey. We got over 500 responses back. And you have 850 people. Yeah, 750. 750 people. Okay. We've always been very headcount efficient. Very important to get right. From the team. And some people got really, really into it. There were some really extreme examples. Someone was like, well, if we turn off the heat at the office, and I'm like, well, we're not at that level yet. But there were some great ideas like optimizing how we do catering, optimizing some of the benefits and perks, like some of the swag, it's not as exciting. Cutting down software spend, ironically enough, was a big one. There were so many great ideas that came from the team. I think it did two things. One, obviously you get a ton of— find more cost savings that you didn't even realize existed in the business, and that helps you set up efficiently. We got to share that fact on our last earnings call, and we beat expectations from public markets about when we'd be cash flow positive. We said people thought cash flow positive was going to be a number of years out, but we said, you know, we're going to get there this year. And that was a huge deal. Um, and that effort was, was, was a real, was a real big part of it. And so I share that just because that's a really, really important part of the DNA in terms of how I run and approach Amplitude, which is my expectation is where everyone here is an owner of the business, everyone here can set Amplitude up for success. It was fantastic to see people step up to that moment.

To bring it back to the public point though, I don't know if you necessarily have people operating with the same ownership mindset with without the stock price being something that is out there as well, right? If it's kind of this black box and the last round was done at $2 billion or whatever it was, and it's over there and you're not seeing the impact that actually occurs on the earnings call because you say you're gonna be cash flow positive, I think there's something to the stock price allowing you to think even more like an owner. Obviously everyone's an owner that has stock options, right? But actually there's some element of the scoreboard being out there and you can actually see the impact of it happen in a fairly short period of time.

Totally, totally. For sure, having looked at it, it does take longer. You know, I'd say I actually most particularly see it with executives where I think, you know, they see that, you know, hey, they can drive success in the business and that correlates directly to the success and the growth and the value of the equity. It is really important at the same time to be long-term oriented about it. There are a lot of moves you can do at an organization that will make things short-term look better, whether you do bad deals on the sales side, whether you stop investing in important things that drive long-term growth but can drive short-term profitability. So there are traps with it that you have to be very conscious and careful of. But ultimately, if you get the right leaders who have the right mindset in place, then the whole setup becomes— yeah, you can drive like the direct tie between your performance and the success of the equity is so much closer.

Yeah. So I want to shift gears. We got to the somewhat of not the end because you're still in the early stages of Amplitude's journey, but at least to the most recent point in time, which is your most recent earnings. Again, congratulations on that. But maybe we'll go back entrepreneurialism and how you got there. I heard you say something I thought was interesting, that you need to be very purposeful and thoughtful about who you are and what you want to get out of life. And in terms of like making the career decision, being an entrepreneur, I know for you was something that you wanted to do because of the impact it could have. Maybe talk a little bit about that and some of the influences that actually led you to starting a company, because it wasn't that you had some insight that you had to go pursue, right? You wanted to be an entrepreneur.

Yeah, I, um, so I graduated from MIT in 2010, and I was incredibly lucky at the time to have a lot of great career options. I could have gone into finance, I could have gone into big tech companies, could have gone into consulting, could have gone into, uh, you know, starting my own company. I could have done a lot of different things, and I was very, very lucky to be in that situation. And It made me really take a step back and, and want to think really hard about, okay, well, I can be lots of different careers, like, what is actually the right thing for me to do? One of the most interesting things was that I, I would look at people who had already graduated and see where their lives ended up a few years after. And one of the really interesting things was the folks who were most successful and doesn't matter what sort of industry you look at, whether it's business and tech or finance or if it's going into medicine or going into entertainment or sports or whatever the thing was, the people who were most successful in their field would always do it to be part of something larger than themselves. And that was true no matter what place you looked at it. It wasn't about self-success. It was about, hey, I can be part of something greater. And then you look at the people who were unhappy. Like, I saw so many of my classmates go into med school and just be like, why'd you go? Well, this is like the thing you do if you're smart. And, you know, I got Asian parents and they wanted me to become a doctor. You know, it's high social status. My friends are doing it. So it's cool if they're doing it for those reasons. A lot— so many of them would end up unhappy. And then it's like, oh, do I just keep grinding it out or do I leave and do something else? What do I even do? And so it was really clear to me that I wanna do great things and I wanna be something, be part of something that's bigger than myself. One of the stories I came across at the time that deeply resonated with me as a 21-year-old was the story of this guy named Noran Borlaug, who to this day is, That guy is like my, you know, all-time humanity's number one hero. So he was an agriculture expert in the 1950s, and one of the things that was going on in the 1950s was the world was going through massive population growth. So the— it was like an exponential function, like every 10 or 15 years you're adding a billion more people to the world's population. The problem the world was facing though is if you look at the amount of food distribution, it was only growing linearly. So, you know, the graph looked like this, whereas population looked like this. And so if you plot those two curves against each other, you realize that there's this huge gap. And what's going to happen is the world's going to run out of food pretty quickly. And there was actually a lot of kind of doomsaying around the Malthusian crisis that we'd have. There's a famous book, Limits to Growth, published in 1970 that predicted by the year 2000 there would be mass starvation and famine and wars over limited resources. And we just lived in this total, like, Mad Max type hellscape. Now, if you look back, it didn't happen. Why didn't it happen? Well, a huge part of that change was the efforts of this one guy. So what he did, Norman Borlaug, he brought modern farming techniques to the developing world. So he started out his career in Mexico, and Mexico at the time in the '50s, developing nation, had to import food from the United States to feed its growing population, you know, was one of the places where a food crisis was likely to happen. He created a strain of wheat that was 4 times more productive per unit area, was disease resistant, had this other trait called dwarfism, which is important because if crops, if you have high yield crops, but they grow too tall, the stalk falls off and dies. And so you want them, which, and plants naturally grow tall because they wanna compete for sunlight. So had all these traits that made it really good for high yield farming. And as a result, quadrupled Mexico's wheat production in the span of food— a span of a few years, changed it from a food importer to a food exporter, totally solved the food problem for, for Mexico. A few years after that, he went to India and did the exact same thing. India was even more screwed up at the time, just gotten independence from Britain, split with Pakistan, massively, really fast-growing population, hadn't industrialized like China, and so was really on kind of the— it was just trying to get through the next year and dealing with crisis after crisis where you've had, you know, famines and all this terrible stuff. But did the exact same thing, made India food sufficient and self-sufficient in the course of a few years. Went to Pakistan, did the same thing there. Went to Africa a few years after that, did the same thing there. And if you look at the sum total of his work, He ended up completely changing the food equation for the entire world. And as a result, we now live in a world where food is no longer a problem. We actually have the opposite problem where there are more people that have too much food than too little today. And it's like a solved thing for us as a society. Like, incredible. It's been a limitation for the last 10,000 years since the start of agriculture. All of a sudden, through the efforts of this one guy, totally solved it. Now we get to work on bigger and better things like how do we deal with energy crisis, how do we deal with climate change, how do we deal with political problems, but the food thing totally solved. If you look at the sum total of his work, saved hundreds of millions if not billions of lives. He got the Nobel Peace Prize a few decades later. So it's not a story that you hear about a ton, but in terms of someone who had a massive impact on the trajectory of us as a society, there's nothing bigger than that. That story made such an impression on me as a 21-year-old. I said, "If I can have a fraction of the impact that that guy has, then I will be happy with my life. I just want to make society better. However I can do that, sign me up." So I looked at what do I know how to do? Well, I know how to program. I know how to code. What's the biggest way I can make an impact with that? Well, if you start a company and it becomes big and it has this massive reach and impact on tons of people across all of society. So I'm like, "Okay, let me go figure out how to do that because that's the biggest and the best way I can have impact on this world with my skill set." I came out here a few years later, started really bad at making an impact with software in the early days, but eventually figured it out. Came on to, you know, started with Sonolight, that didn't work out, came on to Amplitude, and now, you know, you look at it, we're still very early days, but what we get to do is we get to make all of these digital products better out there. You know, we get to make you, one of my favorite stories is, so we work with, Peloton. They are literally the most addicting fitness product out there. And that's a core problem with fitness products. How do you get someone to develop a habit? Because, you know, people get motivated, their New Year's resolutions, they go, they go, you know, get the gym membership. But then, you know, a few weeks later they stop going. Whereas you look at Peloton, incredible story. It has made us so much healthier as a society. You know, they have something, something crazy like, you know, 90%+ 1-year retention. I think I saw some Super Bowl commercial about it recently. The crazy thing is we got to be a part of helping them do that and that story. One of the things that they actually— so they were an Amplitude customer from the early days, and one of the things they found out through looking at the product data was one of the best ways to get people to come back and do workouts was to have a social experience while doing a workout. So if you get to work out with a friend or if your instructor calls you out by name, and so they found that out through Amplitude, and so what they did was they they created a bunch more features that helped you do that in other ways. So you can high-five people while writing, or they created leaderboards so you can compete with your friends asynchronously. And that's made their product more addicting and sticky and great. And so as a result, we now have this thing that helps us be more fit as a society. You know, that's what I want to do with Amplitude, which is like, how do we impact the world's products? How do we make them better? How do we let them help people achieve what they want to achieve, whether it's better fitness or, nutrition or advice or their finances or healthcare or, you know, whatever else.

It's, uh, I'm reminded of the early days with the Calm story, right? As well with Peloton, which I'll let you tell. But I guess just fundamentally, uh, the shift and I'll use my words and you correct me if I'm wrong, but, uh, it used to be cohorting and analysis of user behavior was mostly based on time. That was a big unit that people tracked, and so it's, "Hey, Logan logged into the Peloton app. Let's track what he does from there, right? And Spenser also logged in at the same time, and so let's track what each of them did." Well, our behavior of what we do in the app is actually far more indicative of how the app's been built, and so it doesn't really matter if Spenser did it 2 days ago or 2 days from now. If we're both doing that social feature within Peloton, then that's probably telling you some unique insight that you're able to discern because of your behavioral cohorting that you're able to do, right?

Totally. So this, this is the promise of product data. For the first time with products, you can directly observe how people behave, and that is the number one indicator of what they're gonna do in the future. And so if you're building a product, that will help you make your product let your users achieve what they want to achieve. And so the, you know, Peloton story is one, the Calm example is another great one. So Calm, When you think of Calm, what do you— Logan, what do you think of their purpose as an application? Meditation. Say more. Like, what about meditation? Why do you download Calm?

To get people to use, to go through some meditative process with some level of regularity.

So you actually hit it. What's funny was, so the early Calm team thought their application was all about teaching people how to do a meditation. Hey, I want to do a meditation today. Let me open the app. It's going to guide me through a 15-minute set of breathing exercises and stretches and poses to help me meditate. They thought that was their app's purpose. One of the things that they were asking, so they were an early Amplitude customer as well, and they were looking at their product data, and they wanted to know what is it that leads people to develop a habit around meditation? What keeps them coming back? They thought it was, well, maybe if certain types of meditations resonate really well with their customer base, or maybe it's if you have a— depending on your length of your meditation, or depending on your geography or where you're from, maybe— it turns out none of those had a massive impact on whether you come back. The number one predictor was if you set a daily reminder to meditate. Now, the funny thing was this was buried deep in their application. So you had to go to settings and reminder and then like set something up. And so only a few percent of their users actually turn this feature on to set a daily reminder. But the ones who did had 3 times the long-term retention of the rest of the user base. And what they realized was the value in their application was not just guiding you through a meditation, it was helping you develop a habit around it. The habit part was really valuable. You actually hit on that. They should have hired you really early on to do product design. I think I've heard this story before at this point, so maybe my brain's a little warped. They ended up changing the entire signup process of the app. Now when you sign up and first set up, you're like, "Okay, let's talk about what sort of habit." One of the things they found people want to do at the same time every day, people want a daily habit. They help you do that, and then overnight, more than half of their new customers use this. Their retention skyrocketed. They become one of the— Apple's App of the Year in 2018, one of the best meditation apps, the number one meditation out there, built an amazing product and business and helped all these people be more successful. Now it's like a whole category of thing, and they got competitors and all this other stuff. But that all came back from their realization that it was all about their product's purpose was not just to guide you through, it was to help you develop a healthier habit. So that was a really cool thing that they never would have found. They had lots of smart people who were really passionate about meditation and really passionate about spreading that to the world, but never would have figured that out without looking at the data.

[Speaker:DAVID] So you're inspired by Norman Borlaug and the impact that he had with the world and you say, I'm gonna make a company. So at that point, you're friends with Curtis out of undergrad. And so the two of you initially Sonolite. So how did you go from Sonolite to YC to Amplitude, Jeffrey, you know, maybe that period of time and in particular the discovery of product market fit, right? Because you had Sonolite, which, didn't have product-market fit.

I think had a lot of users. It didn't end up working out.

It didn't end up working out. But how did you determine that that wasn't working? How did you land on Amplitude and ultimately validate it to get to this point?

After I'd realized that I wanted to build a company, a technology company, I started trying to recruit lots of my friends from MIT. And, you know, to their credit, at their time, most of the vast majority of them said no. You know, it's just like I didn't know what I was doing in terms of building a company. The single person who said yes was one of my very close friends from MIT, Curtis Liu. And what he told me, and he was, Curtis was an incredible engineer. He was the best algorithms engineer in our graduating class. He was like, he was a teacher's assistant in like a grad-level algorithms class his junior year and was like this like crazy overachiever. And he said, okay, Spenser, I'll work with you on building a company, but let me go to Google for a year first and work there. Because I want to learn a little bit and then I want to join a company. I'm like, oh man, fuck, like if he goes to Google, he's never coming out of that thing. It's just over. I see so many people going off to Google who have the same aspirations but just get sucked into the machine there. So what we ended up doing is we work on side projects on nights and weekends. I was in finance at the time. I had taken a detour there for a year. He was working as a software engineer on what was going to become Google+., and, um, we just, you know, and other people would join us from time to time, but the core was always the two of us, um, and we work on all sorts of stupid stuff. We had no idea what we're doing. We worked on a website for photographers that would let you book photographers online, even though we had no idea about what photographers want or need. We're just like, oh, this is a need. Um, we worked on, uh, the one thing we actually did work on that did have traction was we worked on a website for the alumni of our class to mark where they went. One of the problems we had was we didn't know where different people had gone after graduation. There's no easy way to visualize that. So we created a website called Alum Map that you could put as a social network, except location-based, so you could see where all your friends were and you could see who was in the city when you went to visit them. We actually got a few hundred people to sign up for it, which was like, wow, this is so cool. Someone's actually using some software that we built. Anyway, so, so eventually I ended up after 9 months in high frequency trading, I ended up leaving that job, moving to California to move in with Curtis and just live on his apartment floor until he left his job at Google. So, you know, I just got a mattress, you know, camped out there and just waited for him to leave. And that was, that was, by the way, that was brutal because it was like working. I'm— some people can work by themselves. I'm not one of those. It was really bad. Like wake up I'd wake up at noon, I'd play StarCraft until 4:00 PM, and then Curtis would be coming home. I'm like, "Man, I need to convince him it's still a good idea to leave his job and actually start a company with me, and I'm going to do work." And so I'd work on code for an hour until he came home around 5:00 or 5:30, and I'd be like, "Curtis, look at all this cool shit I built today. Isn't this so amazing?" And he's more than twice as good of a coder than I am, so he could probably tell that I was just not really doing any work. I don't know, he'd keep up the charade and be like, yeah, it looks cool, Spenser. And then we work for a few hours. Yeah. And then I'd stay up late playing and then he'd go to sleep and I'd stay up late playing StarCraft. And it was like such a— I was like, oh man, I hope this is going to work out. Like, but to his credit, after a few months of doing that, he ended up leaving his job at Google. And then when him and I were— it was so motivating to just be with someone else that you're partnering with. We ended up throwing out everything we had worked on previously. We were like, okay, What do we think is actually at the boundary of technology that's interesting and that has the potential for success? Again, we're just two 22-year-olds just out of college, don't really know anything about the real world. One of the interesting pieces of technology at the time was voice recognition. This was actually before Siri had come out. Our thing was like, hey, we need to build a voice recognition app for phones that you can talk to and it talks back to you. We actually developed this really cool piece of technology on Android phones where it would listen in the background and while the phone was asleep in your pocket, and you could talk to it and it would talk back to you, and you could use it to send and receive text messages. We were actually the first technology on the market that could do that at the time. This was way before Siri or Alexa or any of these other guys. And we actually had some okay success with it. We got into YC a little bit after launching it. We were up on stage at Demo Day in the start of 2012. We actually got the most press out of any app because I had this really slick demo where I'd have my phone and I'd put it in my jacket pocket and I'd have a conversation with it and I'd be like, I'm living in the future, this is so cool. And everyone was like, whoa, really cool demo. At the— so, so a few things happened. So one was our churn was just incredibly high. A lot of people would try it out, use it, be like, this cool piece of tech demo, but it's hard to use effectively day to day. Like, voice as an interface wasn't quite there, the accuracy wasn't there. You know, there was only so much we could build on the app side because we were just two developers. And so we wanted to know what was it that led— just like the Com story, just like the Peloton story— what was it that led to people coming back in the app. How much did the voice recognition accuracy matter? How much did other factors matter? What could we tease out of that so we could improve the product market fit? We ended up spending half our time building our own analytics database. We were typical hubristic engineers, like, oh, we'll just build a tool that lets us get it out. We actually came out with lots of great insights around it, like voice recognition accuracy turns out matters a lot if you're have an accurate first match when you first use the app, you're twice as likely to retain long-term as if you didn't. And so it was like, okay, cool. So if we get, you know, 1% improvement on the voice recognition accuracy, then that'll translate to 1% improvement on retention. What it made us realize is the technology's just not there yet. One of the interesting things though, as we took those data points and shared them with other companies, companies were like, holy smokes, how'd you build this? Like, we really want this data and we really want this insight. So many other startups in our batch asked for the same thing. And so when it came time to shut down Sonolight, uh, we realized there might be potential in this idea. And so that was June of 2012, uh, of, of 2012, um, and we decided, okay, let's go, uh, whole hog on this, uh, data analytics thing.

And then the validation cycle you went through, like, you knew anecdotally from the YC cohort of people people you were talking to as well as intuitively for what you had done, that there was something there, but you didn't actually build product right away. So how did you go about validating that like this is actually something that should be built and what you should build to commercially make this available?

Yeah, so there was, we were two engineers at the time and our tendency was to build product as the first order thing, 'cause like that's how you knew how to do. We don't know how to like talk to customers or ask them for money.

User research.

Yeah, we did a little bit of user research,, but it was pretty minimal. It was like, oh, I just hire someone to do it, or I don't know what happens on that. And I realized that that was one of our top mistakes with Sonolites. We weren't active users of our own product. We didn't spend a lot of time with our customers. We didn't really grok who they were. And so I said, let me flip that now that I'm starting something new. Before I even build anything, we're gonna go talk to 30 different potential customers. And see if people actually have a need for this thing. So we didn't build anything. We just went to talk to 30 different companies at the time. And what was really interesting is that there were actually a good number of them that had that need. Some of them, you know, they already had something. Some of them, you know, it wasn't the right time for them, but there were actually a pretty good number that expressed, that said that you could see there was real business value in doing that. And so that's what convinced us to say, okay, let's go in on this Amplitude thing. And then we made the mistake of just going back to building for a while, 'cause we're like, oh, we kind of need to be a little more fully featured. We should have instead asked for money, and then we would've realized out of that first group of like 30 people, there's probably one that actually wanted to pay us, that actually was willing to pay us money. But, you know, I think, you know, those are the mistakes of being naive. Ended up, so Jeffrey joined us a little bit after that. He was a friend of a friend and he was like this legendary Stanford coder that was like twice as good as Curtis and like had done all Stanford, he was on Stanford ACM team and done all these coding competitions. We got along really well. So yeah, he joined us and then we launched the company at the start of 2014. I realized at that time I needed to switch over from building product to just doing sales. I was very lucky to meet this sales guy coach at the time, former sales leader named Mitch Morando, who taught me the basics on all sales. I'd meet with him once a week and he'd give me all sorts of advice on how to drive it. And then I'd just be out there talking to customers and trying to sell them. And then our revenue took off from, you know, $0 and we closed our first $12,000 a year deal, then a $24K deal, then $36K deal, then a $48K deal. Then we got to a $60K deal and then we did a, $120K deal, and it was just like, duh, duh, duh, duh, duh, duh, duh. You're like, holy smokes. Like, I can't believe all these people wanna pay me money for software I built.

This is insane. Before we get into the lessons of like sales and, and all of that, um, I, I, you'll probably hate me bringing this up, but, uh, originally Jeffrey wasn't a technical co-founder and you made a decision. Uh, I mean, he was there essentially from the start, right? He, I think Soda Light still was the, it was the same LLC, right? Technically. And so, you rolled forward and then it was you and Curtis, but Jeffrey was there from the start. And so I've never seen anyone do this, but you— I've seen people retroactively make someone a co-founder because he was there so early. But you were also— you felt that, that he should be compensated from an equity ownership as a co-founder from, from that point. Right. And so you actually came to the board, I remember saying, hey, I'm going to give some of my ownership and Curtis as well. Right.

To that.

So what went into— I've never seen anything like that. And you probably hate that I'm asking asking this question, but, uh, what, what went into the inputs into that? And, uh, I mean, it was a very, um, generous decision from a financial standpoint, right? But I know an important one that you felt very passionately about.

Yeah, I mean, wow. Yeah, I've never been asked that. Wow.

Uh, this is the inside—

this is what you get when an investor— you get the, you get the inside view. Um, you know, Jeffrey was So we hired him as like VP of engineering or something like that at the start because we were blown away by him. It was clear he was like exceptional as a talent. And he acted as an owner from day one in terms of the success of the company, doing whatever needed to be done, building whatever needed to be built, making things happen with customers, building the team, like just going all in on the company. And that's just who he was. The surprising thing, which was funny, was that he had actually done a bunch failed companies. He was part of Klinkel, if anyone remembers that way back. That was an OG blowup back in like 2000. Yeah, he was part of all these startup disasters, but he was so wired for that building, and he just knew exactly what to do, and he supercharged what we had been doing on the development side. I remember, so I had always this thing where Curtis was twice as good of an engineer as me, and then I'd ask Curtis like, hey, how good is Jeffrey compared to you and Jeffrey. Curtis is like, oh, Jeffrey's like twice as good as I am. Not just that, but also combine that with the leadership perspective of the company. Like, hey, I want us to be successful. What do we need to do that? Where do we need to go? And so, you know, what we realized after a few years of working with him, he was effectively, you know, a co-founder in all but name. And we wanted to, you know, we thought, I thought back to it and we just, you know, we wanted to, Curtis and I realized that like, hey, he is a co-founder of Amplitude too. He had been there from the start. He had acted with that level of ownership. You know, he had had that level of impact on the trajectory of the company. It would not be Amplitude without him. And so, you know, we thought, hey, what would be the— if we were to go back in time and redo the whole equity set, you know, we had obviously been generous when he came on, but it was still in the context of an employee, not a founder. What would the equity look like? And we realized that actually a huge portion of my shares and Curtis's shares would actually be his shares. And so we ended up deciding, I think what commonly happens with a lot of companies at that point is like, the company's actually worth something. You got millions of dollars at stake. Everyone, talk to lawyers like, oh, you gotta protect yourself and make sure this money stays safe and get a prenup and all this other shit. And it's like, He— but like that, Curtis and I never did it to like maximize our financial outcomes. For me, it was all about having the most impact on the world. For Curtis, it was all about the journey of learning how to build a business. And, you know, regardless of that, this was the right thing to do for Jeffrey. And so we ended up constructing a grant where we took a portion of our existing equity and gave it to him, as well as, you know, made him a co-founder. Officially and everything else. And so, and that was, you know, and that was totally, totally the right thing to do. You know, I wish we had done it earlier in a lot of respects. And, you know, so to this day, you know, that's how we work is like all three of us are still here at the company. We're thinking about how do we shape it into its long-term trajectory in the right way. And, you know, that's had a massive impact.

And, you know, it was, it was, it was, yeah, it was the right thing to do. It was amazing. I remember the board, The investors, when you proposed it, everyone was like, huh, interesting. And we're like trying to think through the negative implications. We're like, we've never been asked that before.

This is an interesting thing. The joke that I'd always have with Curtis and Jeffrey about it when we told the board is like, you know, in the financial world, people are so used to stabbing each other in the back to pick up a few more pennies off the ground. It'd be like unheard of. But like, But for us, it was again, never about like, you know, squeezing every single dollar out of Amplitude's equity. It was all about how do you maximize the long-term value of this thing in the right way.

I remember having a conversation where we were like, our instincts are there's some negative thing that has to occur from an incentive standpoint here. That's just our instinct, but we can't think of what the actual— it's like we couldn't come up with anything. So we're like, hey, if you want to do it, God bless.

There.

Now, you went on a VC journey as well, right? So you went through YC, and I think at one point— now, you didn't say this to me, but I know you said this— there was something about, "I fucking hate VCs," or something that had been put into you. What was that mindset, and how did— I mean, obviously we're sitting here today— how did that evolve over time and potentially change?

I love venture capitalists. I've been so lucky to be able to do what I You're married to one, so. I'm married to one as well. I'm so, I'm like now, you know, in, in, in, so embedded in, in the tribe that it's like, yeah, it's like, I love, I think I early on, I mean, raising our seed round for Amplitude was brutal. Rightfully so. I didn't know what the fuck I was doing. Like, we didn't have any traction at the time.

There was a competitor that was, you know, saying the same words and I don't know, 20x the size.

Yeah, yeah, there were tons of, there were tons of, you know, Localytics, There was Mixpanel, there was Appsalar, there was like, I can go down the whole list of them. We didn't have any real traction. We had some insights about the market, this whole digital product and the journey and getting deep on that, and these insights that we talked about with Peloton and Calm. But it was basically, hey, me and Curtis are great MIT programmers, and we won Battlecode twice. All of that. Like, it, it, um, and so I ended up trying to raise a seed round for Amplitude without any real traction, and it was— that was the first really, really hard moment in the startup journey because, um, yeah, you, you know, this is like when you're really meeting, getting real feedback. You're like, man, your thing sucks. Like, no. And we're trying to put together a million dollars in the, in, in the seed round and trying to do it $50,000 from all these angels at a time, which if you ever tried to, you know, get to $1 million, $50,000 at a time, it is a fucking really long process. And you talk to all these angels and they say no, and then eventually every 2 weeks you get one guy that would say yes. You'd be like, yay, we're now up to like $200,000 in total investment. Like, oh, it's only $800,000 more to go. It was just— that was rough. That was rough. And so I was really frustrated. I can't remember. Like, I was really frustrated at at the time about that. And I'm like, and I was trying to figure out why. And so I was like, I fucking hate VC, da da da da da da. You know, and then I got to work with you, Logan, and I got to work with some incredible venture capitalists like Eric at Neeridge and Pat and others. And it was like, okay, like, you know, this really changed everything.

I'm editing that part out, by the way. Pat, Eric, it's just gonna be you. Cut that out. Hard cut.

Yeah, yeah, yeah.

Cut that out.

I got to work with—

Just Logan part.

Like the only VC. You know, Logan, Logan's a really special VC. If you want to be the best SaaS company of all time, my recommendation is you got to take this.

Yeah, no, no, no, no investment that I— or nothing I paid Spenser to say that. But you did have a great board.

Yeah, I fucking made you money.

Yeah, you did. You did 100%. You got me. It got me a job, right? But you did have a great composition of folks around. Very lucky. Very lucky. And there was a lot of different skill you had Eric, you had Niraj, you had Pat, and there was just a bunch of different people that helped in different ways. What do you look for in a board member now? Like, what are the criteria that you've found most helpful from those folks?

It changed. So it's changed. Now that we're public, it changes to more governance stuff, which is not as useful in my opinion. But from the early stage folks, I think the key is, There's 3 big things. The first is, do you have deep trust and alignment to what you're trying to do with the business together with this person? Because ultimately, the job of the board is to decide whether you're the right CEO. That's the only thing they can do. They can't do anything else, really. The board can change the CEO. That's it. They can give you advice and all this other stuff, but you're, as a management team, you're just running the thing. That's the first one. The second one, Is, are they gonna work hard and be active for your business? So many investors, very, very passive. And then, you know, that's like 95% of investors. It's like, I remember hearing from one of my friends who's also a VC, was like complaining about, oh, you know, this company I just invested in, they wanna talk to me once a month. And it's like, what? Like, what are you talking about, dude? Like, that's the point of the thing of this model of funding. And then the last one is like, are they conscious of what they know and what they don't know? Particularly for ex-operators, this is, more difficult because they forget they're not the ones running the company anymore. And so they, their job is to provide the advice, but you know, you gotta set the direction.

Particularly if they've been as successful as ex-operators, right? Because there's one path and journey that they saw and it worked out. And who knows if that was actually the right north star that, or just circumstances around them, right?

Yeah. And this is what makes the transition from operator, like this is what, you know, if you look at the Andreessen Horowitz model, like I gotta give a lot of credit to Mark and Ben for developing it. And it's also not all the operators have been able to make that transition successfully because it's hard. It's really, really hard, you know, to not be the one that gets to make the impact and drive and make the final call at the end of the day.

Versus me, my entire career has been no one listening to me, right? I just give advice and I'm like, Spenser, you take it or not.

One of the things that always impressed me, Logan, was just how deep you were on SaaS models. And like seeing around the corner on sales capacity and all this other stuff.

And so I just see this. I feel like people have caught up to some of those things that I feel like all the— well, now it's like, you know, you can read this on blogs, the lines, product size, all that stuff is totally, totally— I've been commoditized into a podcast host, I guess. But one of the other interesting things I think is you've— I've seen you through the journey have different levels of success in hiring, right? And I think maybe You said founding CEOs suck at hiring or something.

We're very bad at building organizations.

What do you think that is? What have you learned over the course of mistakes you've made and success you've had? And what advice would you give about that for other CEOs?

Yeah, so there's— let me take a step back. There's two models for venture scale companies in terms of CEOs. One is to go with the founder CEO and one is to go with the hired in CEO. And they have very, very sharp set of trade-offs. And it used to be very in vogue that you'd almost always replace the CEO. I mean, that's what happened at Google. That's what happened to Apple.

That's what happened—

Cisco back in the day. Cisco, like every single, that used to be the model. Now it's more in fashion to go with it. But honestly, founder CEOs get too much credit in my opinion. A lot of the times, The bar is high and like, you know, you're not special just 'cause you're a founder. So the good with going a founder CEO is because they were the ones who were attuned to the market and from the early days, so much so that they were the ones who successfully had the conviction to develop a new piece of a new product and a new technology to go after that market. They have deeper, insight into where the market is going. That's not to say they're always right. They get it wrong plenty of times, but because they can see one or two more chess moves into that web of possibilities of how the market plays out, they end up— that edge is worth so much money. You know, if you can see a little bit further than anyone else as to how a market or a product plays out, that is worth so— you know, as, as you know, in finance, like, that's worth incredible amounts. And so that's the edge founder sees. CEOs have. The downside and what they don't have is experience operating an organization at scale, being an executive, building an executive team, operating an organization, setting that thing. That is such a learning process, and it is brutal. I mean, if you look at— there's so many stories from the early days of Google. Even after they hired Eric Schmidt, he'd always have to argue with Larry and Sergey. He'd be like, "Why do we have to have an ERP system? Can't we just do this in a bunch of spreadsheets?" You know, like, it doesn't make any sense. Why do we have to have managers? Yeah, you know, it's like you got to teach all these basics and how to— it turns out there's a reason every single organization ever has done it this way. I mean, I even— even though I was conscious of this process, I still had to go through the same learnings. So one of the hardest ones— now, most the great founder CEOs always embrace that and learn that, and, you know, that's what I aspire to do as well, is you learn from the the best about how do you lead and how do you manage and how do you build an organization. The part that is really freaking hard is when you have to change the people on the team, that is the hardest thing you can ever do because there are people who are a fit for a certain size and a certain stage and a certain scale, and they can do great things for the company. But then at a certain point, and you're going to think, man, this is great, we're going to work together forever and we're all going to be best friends. We're going to take this thing to infinity and fulfill all of our dreams. Then what happens is there becomes a disconnect between that person's fit and skill set and where the company needs to go. That is so hard to reconcile because you have so much loyalty to that person from where they brought you and how much they've done for the company. That is the number one downfall of founder CEOs. I was talking with another public company CEO who has mentored lots of great founder CEOs, and he said that was the number one reason why founder CEOs burn out after about a decade. If you look at most cases, by the time you get to 10 years later, even on very successful companies, the founder CEO will leave. I've seen it happen again and again and again in the SaaS world. I was like, man, how do I have more longevity than that? I want to continue to compound this thing for as long as I can. And he said that was the number one thing. One of the other things on that, so I remember watching this interview from Larry Ellison. And as you probably know, Larry's not a particularly sentimental guy, very ruthless. He was asked what was the hardest thing he had to do. And he said changing out his team when he got to $100 million in revenue, because he had so much loyalty to all those people for where they had gotten Oracle, but he knew he knew that he needed a different set of people as they went to the next stage. And so that's the hardest by far. And I've suffered from that mistake so many times, and it remains the hardest part of the journey.

It's particularly hard when it's not yet broken, but it's going to break.

It's going to break, yes. Can you see— Foreseeing that is your job. That's your job as a CEO, to foresee where that's gonna go and then get in front of it and make, the changes and the improvements the org you need to make, but it's so hard to—

How are you actually conscious of that though? How do you try to see around? Like, it's an interesting insight, and maybe the answer is, hey, when you first have instinct around the change needs to be made, just do it, right? And like, your gut's going to be the right one, even if it's sentimental and painful to do so. But are there any things like going back in time that you would have done differently now that you know this?

For sure, I would've gotten through some of those changes in Amplitude's organization earlier. No question in my mind. I like, I'm always like, feel like I'm a year late on a bunch of those. You know, part of that though is like, you even know that's gonna happen and that still happens anyway. And so I think a few things. One, I think this is where great coaches and advisors and mentors can be a huge help. So talking to CEOs who are a little bit ahead of you or talking to, you know, getting advice from great board members who have perspective on this can help. Sometimes you can get that feedback from other folks on the team where they'll be concerned or they'll see things. I mean, and the toughest part is you can't be open about it as a CEO. You know, I'm very used to being open and transparent. I want to talk about all the problems, but that decision of who's the right person for the team rests with you and only you. The other thing which I was bad at, so this is the one tactical thing I would definitely suggest. I wish I had advised my previous self, or would've listened to my previous self, had my previous self listen to me on this, which was go out and constantly meet people external to the company, because a lot of the times the solutions to the problems that you're having are actually not within the knowledge of the people at the company. And so constantly getting knowledge, like from how do you build a sales organization? What does a great marketing strategy look like? Is how do you attract great engineering talent from people outside of the organization? And then that will help you calibrate. And that's frankly one of my biggest weaknesses as I'm very internally focused. Like how do I get the most out of the team that we have and make them, set them up for success? And so that would be the one tactical thing that I would change. And then maybe I would've come to some of these, gotten in front of where the organization needs to go earlier. But, you know, sometimes that just is what it is.

What about empowering and delegating the team now? So I know you've, I forget if this is still the case, but you've never actually seen an office before you've moved into this.

Is that actually true or by Mr.

Myth?

It's true, it's true. Yeah, yeah, I didn't actually visit our last few offices before seeing them. I kind of delegate it. One of these things, I don't know, I think in retrospect our current office needs some work, but I probably should have gotten, we didn't have the right group of people on that thing at the time. But a lot of founders, particularly founder CEOs, they get too much success, too much credit, and too much blame for success and failure of their thing. And so that feeds their egos. And so they get interested in playing the role and acting the part of CEO versus actually being it. What is actually being it? Well, building the org and shipping product and closing customers, that's the thing. Shipping product and closing customers. Those are the things that will move you forward as a technology company. Whereas all this other stuff like talking to reporters or go visiting and making a cool office space for you, it's like, whatever. That just does not impact company trajectory. And so part of one of my things on that was that, hey, I'm not going to spend time going to visit office spaces. You know, I'm going to get a bunch of people who are reasonable at it and like go figure it out. You know, and we'll, we'll, we'll get— now definitely you can make mistakes on that as a result, but like again, is that, is that going to be the thing that moves the business forward?

I think philosophically one of the things that I saw, or that I was most impressed with just observing your, your journey as an outsider, is you were so, um, you're very, uh, technical by nature, right? And you were, uh, came in as a developer originally, but then you were also so fascinated by sales and treating it like it was— there were systems to be learned in the same way that you have an architecture that you're building the product around, like you have an architecture that you're building the sales around. Right. And so, and I also think in the early days, talking to people on the sales team, you also built a culture of sales being a first-class citizen, which is often not the case with technical founders, right? It's like, why do they get paid so much? Why do we give them incentive comp when we don't give engineers incentive comp? And all these different things. But I think you came from a principle of like, hey, this is a solved problem. Let me study the art and the science of this solved problem and figure it out. What were some of the less intuitive things of learning sales, and how did you approach it with such a, I don't know, beginner's mindset, and actually that there was so much to learn about the methodology?

So the first thing is that you have to recognize its importance to the business. It's like if you build great product and you sell great product, the business will be successful. A lot else can go wrong in how you market or do finance or whatever, but if you build great product and sell great product, the whole thing will go. And that's true since the beginning of B2B companies. I knew as a developer how I can build a great product, but I had no appreciation for how to sell great product. And so, like I said earlier, I'd seen so many great product people and great engineers not end up having success because they didn't have an appreciation for the sales. And I'm like, okay, whatever I do, I want to make sure I avoid that. So that was the first order of things, is just recognizing the importance of it. Then learning it was a trial by fire. I First, so many mistakes. I think I thought sales was you go to a customer, you do a demo, you ask for money, that's the thing. It could not be further from how you approach it. It's all about finding the right opportunities and understanding them, and then from there you can show how what you do matches someone's needs. Another big thing I think a lot of engineers who may have that instinct get wrong is that they think they're gonna learn it the same way they do engineering, which is by reading, you know, a book. What's a great book? I see this post on like Hacker News or Facebook all the time. Hey, I'm trying to learn sales. What's a great book? My thing is like, wrong way to look at it. The way to learn how to be great at sales is to go out and do it and then get someone to coach you as you go through that process. That's how great salespeople That's the fastest path. You're gonna learn that 10 times faster than trying to read it out of the book or flail around yourself. And so that's, you know, that, and that's how companies work. That's the point of a sales manager is to coach the people on, you know, how do you drive success in your profession? And so that was hugely impactful for me. The other thing, you know, let's see what else happened. I remember that Mitch, the sales coach that I hired, he would always ask me after a customer call, hey, what's the pain? I'd be like, well, they want some dashboards because they're trying to do these SQL queries and they want to get an automated way to do it. He's like, that's not a business pain, Spenser. What's the pain? And then he would always ask me this after every single call. And so after a while it got beat into me that I should always be figuring out and getting deep on a customer pain before you're pitching anything about Amplitude or what we do or anything like that. So that really got drilled into me. The other thing is it's less about thinking deeply and going deep on a problem, it's more about being responsive to what the world is telling you. So anyway, I learned all this as I went through the first year after Amplitude. Launched in 2014. And then the thing that I made sure to impress upon every single new person at Amplitude was that sales is as all of those learnings, that sales was as critical, actually frankly even more important to the success of a company than great engineering. And I remember there was an early engineer employee who was like, well, they're getting comp months, commission, it's bullshit and blah, blah, blah, blah, blah. And I'm like, I don't care We're doing this thing, we're gonna hire salespeople, and this is the right way to do it. I'm not gonna try to reinvent the wheel. They're gonna be in commission plans, they're gonna make lots of money, and that's gonna make Amplitude really valuable, and we're gonna go on the thing. And that ethos has stuck with Amplitude all the way through. Now, if you come to Amplitude as a salesperson, engineers will celebrate your closed deals. We have this here, I'm gonna show you this right now, Logan. We have the Slack channel. Called Win Reports that literally has closed deals. And then, like, people will comment on the threads who are engineers being like, oh, hey, congrats, you know, on this deal. Like, yeah, this is from our head of our product. You know, it's just like, it's like, and it's engineers actually chiming in. Yeah, it's engineers who like got the features. It's not just sales or marketing folks or folks on go-to-market. And so And so it's always been a culture with an amplitude where it's like, and that was actually, in retrospect, that was actually kind of important for analytics where it's not so much about building the beautiful feature, but it's about outshipping and building more features and more utility than anyone else. And so that close interlock between sales and engineering where you have engineers celebrate closed deals, yeah, they want the company to be successful. That is what makes them successful. I remember Jeffrey told me at Sumo Logic, I shouldn't call them out, but Sumo Logic, the engineers were just on a different floor. He literally never talked to any of the salespeople in the year that he worked there. And at Amplitude, we've been very, very deliberate about having the opposite culture. So, you know, I am—

Sumo Logic just got taken private, by the way. So I don't think anyone that worked there when Jeffrey was there is still there now.

Okay. Yeah, different company. I think we're in the clear. Different company. So, and so like the, like we'll have big deal celebrations at all hands where we celebrate closing. Um, you know, like we closed Fandom in Q4 and that was a huge deal. And we like had a bunch of the engineers and product people carry the salespeople on that deal in on a throne in front of the company. And then I crowned them, um, and, uh, you know, knighted them and gave them a bunch of cool titles to celebrate the fact that they closed this amazing deal. So that's always been part of the culture at Amplitude. And I think it's always been the culture of great B2B companies.

You know, it's one of the things that I've never heard engineers checking Salesforce to see where deals are progressing and all of that until I heard that at Amplitude that they cared to that level, that they were actually watching the deals like actually in Salesforce. Well, one of the last ones I want to hit you with is I know another topic that you actually did want to reinvent the wheel on was exercise windows. And I— it's something that you were very passionate about., and I think this was, I think we were investors at the time. Yeah, you were investors.

And so maybe, maybe we, I think we did it before you guys invested. Okay. So you guys had to put up with it once you came on. I see.

Yeah.

Okay. I think you had to approve it. Yeah. It was so funny. Niraj, every single board meeting, Niraj would be like, hey, this is like really nonstandard. Can you guys look into this? And I'd have to like go through my same fucking spiel about why this was the right thing to do.

All of that. Explain exercise windows and explain how it's been set up. To some extent, we might need to start with equity compensation. Yeah, absolutely.

Hewlett-Packard and all that. I give a lot of credit to Hewlett-Packard for creating, making it a standard in Silicon Valley to give equity ownership in companies. That's very, very uncommon. You look across industries generally. But the fact with especially early-stage technology startups, it's about let's have— let everyone have it. And they did it not because they thought it was the right business thing, but because that's who they were and what they believed in. They want everyone to have an upside in the company's success. And now, especially with early-stage technology companies where the risk is huge, having that, hey, if we get to this shared dream together, we can all be a part of it, you know, that, that's a really special thing. So, um, let's talk about options and exercise windows. So traditionally, instead of granting shares outright or RSUs, restricted stock units, outright, early-stage companies will grant options. And the reason is, is because options, when you grant them, they're not taxable by the IRS because you're granting them at what's considered like the strike price of an— I get this whole thing. But an option is the right to buy the share at a certain price, and the price that you give is also the current price of the company. So, you're giving an instrument to someone that has zero intrinsic value at the time it's granted. So, it's not a taxable event.

Which is an important thing, by the way, because a lot of these options go to zero. So, you don't want people taking on these tax liabilities, right?

Totally, totally. Taxes on something that doesn't end up right. Because if the equity in a company, you know, if it goes bankrupt or, or doesn't work out, or, you know, doesn't have enough money to pay back, um, the common shares, then, then, you know, you're going to have to pay taxes on something that has no value. And so it's really important to be able to grant equity in a way that is not taxable for the very early stages of the company. And so that's why options exist. Okay, now we're at options. Okay, so options is the right to buy a share of a company at a certain price. And typically the idea is you grant them when the company is not worth much and the company appreciates a ton. And so the right to buy has a lot of intrinsic value. That's that delta between when you got it and what the company is worth now. And that, that's what gives everyone some massive upside in the company. Okay. Why is that all an issue? Because of the construct of an option. So there's two types of options, what's called incentive stock options and non-— or non-incentive stock, like NSOs. NSOs and ISOs. Yeah, NSOs and ISOs. So, ISOs have a bunch of benefits, and you typically want to grant ISOs to employees because they have a bunch of tax benefits in terms of how you exercise and use them. Whereas, if you're giving options to someone who's not working at the company, typically those are going to be NSOs. Here is the rub. Because ISOs have a bunch of tax benefits, the IRS wants to restrict them to people who are only currently working at a company. And so what ends up happening is employees get this grant of ISOs when they first join a company. The problem is that if they ever leave that company or get fired, what will happen is they're actually not allowed to continue holding on to those options because their ISOs pass 90 days after they leave the company.. And so they have two choices. They can either exercise the options, so pay a whole bunch of money to buy the stock at the price that was said, which is often tens or hundreds of thousands of dollars, which especially as, you know, an early employee at a lot of these companies, people are just not going to have this cash. And has this huge risk where, you know, you're spending hundreds of thousands of dollars, something that might be worth zero. Or they can let them expire after those 90 days, in which case all the equity that you vested and built up will be worthless.

Yeah. It goes— and it goes back. It's not only that it's worthless, but it goes back to the company, right?

It goes back to the company. Yeah, it goes back to the company, so the employee no longer has it. Now, when I saw this, I was like, what? Like, why is it structured like this? And so, you know, I got explained the tax reasons, and then a bunch of investors also said, well, it's actually a great way for the company to reclaim equity. And I'm like, this makes zero sense to me. If you gave someone cash compensation and they earned that cash compensation and they left the company, you wouldn't decide to claw that. People would fucking riot. Like, you would get in trouble with all sorts of parts of the government. Like, there's no way that would ever happen. But because, you know, equity is this ephemeral thing that people don't really understand, companies end up pulling a fast one on early employees.

And so I thought that was super fucked.

And philosophically, the mindset behind it is, hey, they're not here anymore, they're not adding value anymore. Yeah, but they added value. That's the point of vesting. They added value for the time they're at the company. These grants vest over 4 years, so it's not like you get all that for just joining the company. You have to wait 4 years. But if you wait 4 years, you put in the time and the work, and all of a sudden all the equity you put in the company disappears. It's like, what the fuck? Equity is a huge and a very important part of compensation of these early companies.. And so I thought that was super messed up. And so I ended up talking to a bunch of different lawyers about how can we fix this, because I think this is a really screwed up way. Because I don't think there should be— employees should be forced to exercise or completely give up their options after leaving the company. The first few lawyers told me I was crazy and thought like, you know, they'd never heard of such an idea and, you know, we'd be inviting all sorts of trouble if we did it. But I was lucky enough to find Craig Schmitz at Goodwin Procter, who completely understood what I was trying to do and actually came up with a very reasonable workaround, which is what you do is you automatically convert those ISO options to NSO options. And it required a little bit of new legal paperwork at the time, but was a very sound way to do it and wouldn't get, you know, wouldn't like, yeah, would be, you know, totally within the bounds of of how tax law worked. And so we were actually the first company to grant 10-year exercise windows unconditionally to all employees at Amplitude. 'Cause my belief, hey, even if you're here for only a little bit of Amplitude, if you contributed and invested the equity, that equity is yours. It shouldn't be contingent on you being able to exercise those options, which is particularly adverse to people who don't have cash or early in their career. Or have other issues. And literally, it's like a perfect example of the case of the rich getting richer. And so, and that was a little controversial at the time. I was very lucky, you know, Eric on our— Vishri on our board supported it. You know, Niraj was more mixed, but we managed to keep him on the right side of that. And that was a huge attractor of talent, explaining the whole thing, because people had no— the vast majority of people who join these early-stage startups, they have no idea how this equity worked. And so just by being able to explain that to them and show that we had done this. It was a big deal that they understand their equity was theirs and we weren't going to do something shady to take it away. What's really, really cool about that is that I wrote a whole blog post about this. It's now much more of a standard among companies these days, early-stage companies to do that. We weren't the only ones to innovate on this. There was tons of others like Sam Altman pushed for this and there's a whole bunch of— Quora did this.

Did a version of this for certain employees. But the benefit, then, is not just the window of time— well, it is the window of time that it gives people the opportunity to come up with the money instead of being constrained into this 90-day period. But then also, maybe the company goes public and you can realize— at the point in time, you can convert it and pay taxes and be done with it. Maybe the company gets acquired and at the point in time you can convert.

Yeah, you can wait. You don't have to outlay the cash and you can just hold on to them if you don't have the cash and wait for the shares to actually be worth anything.

So you have 10 years to do it as opposed to 90 days of your leave. So huge, huge, huge deal. It's a fascinating thing. It's very employee-friendly. And one of the things I remember when you were going through was, were you actually going to get the credit for—

because it's so nuanced, right? We're talking about options and then ISOs and then 90 days.

Because a lot of employees don't even understand like shares, right? Totally. Options in general. Now we're in tax code land, but it sounds like you were able to communicate it, and it's been a really nice benefit, not just as a social good for the people that have both been a part, but also as a retention tool.

I'm sure recruiting tool. So many people that have contributed to the success of Amplitude have been able to benefit from it, and so I don't regret for a second, you know, making sure that those people can get value out of their equity. And then, you know, at the same time, like now that it's becoming more of a standard in tech, like that is, that is really cool. Yeah. So, well, uh, I know you have to jet.

I do.

I do have to run. Holy shit. I'm gonna, they're gonna be so mad at me, but I'll tell 'em I was talking with you, Logan.

That makes hopefully that I, I could keep you for another 30 minutes. I could keep you for a while here, but I know you actually need to, need to get out. Awesome. All right. Hey, thanks so much, man.

Spenser, thanks for doing this.

Yeah, of course. Great to see you.

So that'll do it for this 55th episode of The Logan Bartlett Show. Thank you, Spenser Skates, for coming on. Thank you to Sam and Rashad, with Justin out this, uh, this month actually on a band tour. So we are in pinch-hitting mode for audio engineers. So thank you, Sam, for stepping in. And thank you everyone for listening. Always a pleasure to get time together with Spenser. So hopefully you enjoyed that discussion. Look forward to seeing you next week on the 56th episode of the Logan Martland Show.

Have a good weekend, everyone.