Transitioning from CEO to VC | Phil Libin

So you stepped out of Evernote and became a VC. So you've got yourself on the other side of the table this time. And I think this part of the conversation would benefit a lot of the entrepreneurs here. First of all, what were some of the motivations of you being on the other side? And why did you join General Catalyst and becoming a VC?

Well, I realized that I wasn't the best CEO that Evernote could get at the stage of the company that we were at. So I'd always kind of thought, well, we want to be a 100-year startup, which means I have to find my successor. I have to find the next CEO. I didn't really think when. I would always think that, but I was never sure in my head. Am I talking about 20 years? Am I talking about 6 months? I didn't know.

So, you were thinking about it, but you didn't know when?

But probably by year 6 or 7 or 8, it got to the point where, like, I was actively aware that, like, I just wasn't as good as the best CEO could have been in that situation. I thought that I was, like, pretty good at the early stages, at, like, solving the early challenges, the early puzzles. But the things that you have to do at a 500-person company are so radically different than at a 50-person company, or a 5-person company. And I'm like, I don't like the 500-person company job. Like, it started to feel like a job. And I thought, well, we're fortunate enough that, like, we can attract someone great. Like, the company deserves someone who does love that job, who's really good at it. And, you know, if we weren't successful, then maybe I'd have to stick around with it because, like, we're not gonna be able to find anyone better. But, you know, I thought, hey, we never know if we can find someone great. So I said, okay, I'm gonna— I wanna step back. I wanted to become the chairman, focus on the product, do other stuff, but find a CEO. And that was a super tough process. I kind of knew that once I started it, it was very likely that I would lose control of it because, you know, new CEO is a new CEO. But it was definitely— it was emotionally very difficult, but intellectually, it was definitely the right thing to do. So we found a great CEO, Chris, Excuse me. Chris O'Neill, who came on. My plan was to stay involved, but I kind of knew there's like a 50% chance that I would be able to stay involved and a 50% chance that it'd just be too weird. And within about a year, it was just obvious that it was too weird. Like, me hanging around was just like, it was awkward for me, it was awkward for Chris. I was like, okay, the team needs to just feel full ownership of this. So I stepped aside completely, which is weird. Like, every time I drive by the building, it feels weird. But it was good. The company's doing great. And then I decided to be a VC. I didn't actually want to be a VC. I wanted to join General Catalyst. I really liked the team at General Catalyst. And the thing that General Catalyst does is they hatch companies. So I didn't just want to invest. I wanted to help make, from a pretty early stage, several things. And I would, every time I would see a friend that I hadn't seen in a while that would ask me like, hey, why did you go to the dark side? I would always like, I would always give some answer and I would give a slightly different answer each time because I was auditioning the answers in my head. I was like, sooner or later I'm gonna hear myself saying something that's gonna sound like the truth and then I'm gonna know that it's the truth. I mean, I was always saying the same thing, but it was always like a little bit differently. And then finally after like a year, I met a guy that, you know, I hadn't seen in about a year and he's like, Phil, great to see you. How you doing? Why'd you join the dark side? And I heard myself give an answer where I was like, yeah, that's the one, that's the truth. I said, I want to— and I could only say this 'cause he was also a fellow CEO and entrepreneur, so this is only an answer that I would say to a person like that or to you guys. I said, well, I decided I wanted to organize my life so that I would never have to hear anyone else tell me that I had to focus. Like, I tell other motherfuckers to focus, and I do whatever I want. And he was like, yeah, I totally get that, man. Because the experience of being in a company is focus. Like, you have to. Like, that's what your board is going to tell you all the time. It's like, you're doing too much stuff. You've got to focus down. And they're right, and you do. But I'm like, I wanted to do 5 things and not 1 thing. And so I thought that being at General Catalyst let me do that, and that was a great experience, but then I realized actually, well, it's kind of foolish. General Catalyst is a top-tier fund, and the job of a partner at a top-tier fund is to write big checks. And so, as a side project, I was going to be able to do all this hatching stuff, but that was never going to be the main job, and I really wanted that to be the main job. So I kind of had a little 20-minute crisis of conscience about it, and then decided, okay, Let's actually make that the main job and do it adjacent to a VC fund, not part of a VC fund. So, we kind of started AllTurtles inside of General Catalyst, but then within a few months we decided, okay, it's got to be its own thing, so we put it outside.

What are some of the companies or products now with AllTurtles, or back when you were within General Catalyst, that you feel most proud of investing in? Wow.

I mean, I don't know that, like, I don't know that I'm proud of investing in something. That's like, you know, I'm proud in what a lot of founders have built, and like, I feel happy or like lucky to have had the chance to invest in them. And then I'm proud of some things that I think I've helped build. Probably the company, like one of the companies that I love the most, I was an angel investor in them, and then, but they're also a big VC portfolio company is Gusto. It used to be called ZenPayroll, then changed to Gusto a couple years ago, and it's great. And I remember when Josh first contacted me about an angel investment in Gusto, I kind of thought, well, okay, I looked at it and I said, this guy is going to make payroll software. I'm like, the hell? Like, there's this young kid and he's making payroll software? So, you know, I agreed to meet with him, and I thought that I was going to spend 20 minutes lecturing this guy about how he should, like, only work on things that he really cares about. And I'm like, why is he bothering making payroll software? Like, how is that really interesting? And so I, like, walked into this meeting, kind of like, you know, tell this young entrepreneur that he should— you know, he's a talented guy, he shouldn't waste his time working on boring stuff. And I left, like, an hour later, I left, like, not only thinking did he make me understand that payroll software was amazingly important and influential, and it was going to change the world, because it was so broken right now, and fixing it is just this tremendous thing to do for the world. He totally sold me on it. In fact, an hour later, I had felt like I had wasted my life, because I'd never worked on payroll software. I can't believe I've never tried to solve this problem. He was so amazingly good at just distilling exactly how the world was going to be different because Gusto would be successful in it, and made me want to live in that world. And I was like, yeah, all in, definitely. And that's been my key. That's what I expect from every pitch at this point. What I most want is I most want an entrepreneur to be able to articulate how is the world going to be different if your company succeeds? succeeds like better than you possibly thought it would. Like, I don't really— I don't— you don't need to spend time explaining to me like, you know, what plan B is or what the world looks like if you fail. Like, that's all easy. What does the world look like if you succeed more than you possibly think you can? And why do I want to live in that world versus the current one? And that answer can't be like, well, you'll have more money because you would've invested in me. Like, no, I mean like, how is the world fundamentally different in a noticeable way because your company has succeeded in it? And almost no one can do that. Like, it's extremely rare that I meet a founder that can articulate what the world looks like once their company is super successful and why that's obviously better than the current world. 99% can't do that. So, like, I think if you do that, like, you're already in the top 1%. Now, you need to be much better than the top 1% to get a VC investment, but it's a good start.

Right.