Marketing to Machines: Truth, Trust & AI Shopping

It is a how to balance marketing to a human versus marketing to a machine. And machines objectively just care more about truth and humans are easily persuaded and fickle.

All right, welcome to another episode of the venture capital podcast. Super excited. Today we have as our guests Brian Rothenberg and Kimberly Schenck. Is that right? Did I pronounce it right?

Yes.

And today's conversation is going to be a really good one because Kimberly and Brian have known each other for a long time and Brian is an investor in Kimberly's company. And so we're going to talk a little bit about, like, what does the dynamic look like where you have a relationship over a long time period and eventually become more, maybe more tighter knit through an actual investment relationship. But before we dive into that, I'd love to do a quick introduction. So today, like I said, we're joined by Brian Rothenberg. He is a partner at Defy VC, a $700 million early stage venture firm. Brian co founded and sold Skill slate to TaskRabbit and later helped scale Eventbrite as its first VP of growth and GM, taking the company to 300 million in revenue. And through its IPO, we're also joined by Kimberly and the CEO and founder of Novi, which powers verified product data and AI commerce. Kimberly graduated with a master's degree in data science from MIT and went on to serve as a data scientist and captain in the US Air Force before becoming a serial entrepreneur. She led data and product orgs at Eventbrite and Domino Data Labs. Thank you both for joining us.

Thanks for having us.

Yeah.

So I think it would be great maybe to kick off and hear your story. And I don't know who wants to share which side of that, but how you both met and what brought you to where you are today as partners. Cool.

You want to kick off, Kimberly?

Sure. So our story, I think it's pretty interesting. We did meet at Eventbrite and as you mentioned in the intro, Brian was working on the growth team, I was working on the data team. And so we had the very unique opportunity to, I guess, have exposure to each other's operating style at Eventbrite and worked very closely on really tough problems through the ups and downs, through all the struggles, but in a really close capacity, actually. And what was interesting about that is I was going through a moment where I was about to found a company before Novi a few years later. And Brian had been dabbling in some investing and I had reached out to ask some advice. And so that was another moment in time where we were Starting to build this relationship around, hey, what does it look like to be a founder and got advice from his early career in founding companies and ultimately then when I came up with the idea for Novi reached out and it seemed like a very perfect opportunity for us to actually work together again. So yeah, that's the journey.

Anything to add, Brian?

Yeah, I was going to chime in. I think I joined Eventbrite a little bit before Kimberly but it was like such a breath of fresh air to have her join. She just brought such an incredible analytical mindset and you know, professionalism to the data science org at the company and I think startup journeys and we were kind of working together more in the scale up phase of Eventbrite but they get glorified and like there were a lot of hard times. I can recall a specific time where our growth rate really plateaued and there was just such immense pressure to get the growth back up and how are we ever going to get public or how are we ever going to get sold and just being, I remember being rooms whiteboarding with Kim really like trying to segment our audiences or figure out how are we going to return this. And, and I think some of those high pressure cooker, pressure cooker moments forge the relationships. Like do you either go to each other's throats or do you like come together and bond? Like no, we're just going to figure this kind of stuff out and that has laid a really good foundation for our relationship as board member and partner to Kimberly. Hopefully.

I love it. I'm curious, so when you think about founders that you back Brian, everybody always talks about, you know, the jockey versus the horse, the team versus the market or the product. How has, how do you think about that and particularly your relationship with Kimberly and how that's evolved. Does that make sense? Like how do, how do you think about that question of like jockey versus versus horse?

We index more to five. We always say we're in the people business first and foremost and so we lean more towards the jockey. Like is this the person that we believe in? Many of the companies we've invested in have either been through people we've worked with before, like Kimberly, people we backed before. Oftentimes founders come for their second or third startup and, or come in through trusted referral sources. So that's, that's paramount. Obviously there has to be something to the market, the idea, evidence of people want this, et cetera. But at the, at the stage where Kimberiel and I came together, keep me honest here, Kimberly. But it was really kind of a NASA idea. You had seen some kernels for how this could be a thing born a little bit out of your prior company. And I recall we were kind of like even spitballing and whiteboarding and kind of honing the approach together. So that is purely a person that on Kimberly is as an amazing operator, an amazing entrepreneur, and I can go into more detail later and make her blush a little bit, but just such a tenacious, incredible person that she is.

I love it. I love it. I'm curious, Kimberly, I'm going to flip the. The question on you. How has knowing Brian for a long time been helpful in. In terms of having him as an investor? And also, like, why. Why did you choose him? Right? I mean, clearly, like, you are a very successful individual. You probably had other options where you could have raised money from.

And.

And so love to kind of get the other side of that question is, like, on the founder side, why. Why pick Brian? And how has that relationship really impacted your relationship?

Well, I mean, I think this is. This is why a lot of founders go out and meet with investors well before they're about to raise money. They're trying to figure out can they build an authentic relationship. And always, I mean, I struggled personally trying to do that, because you don't ever really see the real person like Ryan was mentioning. Like, yeah, you have these conversations. They're somewhat guarded. You can only meet so many times in a month or in a couple of months before you're about to raise. And so I think some of it is you can build trust with somebody and know how they show up. Like what Brian was mentioning, how a person performs under immense pressure or in a very sticky situation. And if that data over time shows you, wow, this is how this person consistently shows up, then you're like, okay, well, I know when we're in that situation together because it's obviously going to happen. I know how he's going to show up. So I think that's part of it. And I mean, sometimes, yeah, there were moments I was like, oh, man, okay, this can be a new relationship. Like, can he see me in this new role and be able to adapt to these new kinds of interactions? But I think it was more around. I knew him, I had worked with him in multiple capacities. I trusted him. And, yeah, I could talk to a lot of other investors because I did. And there was always that last question around, like, okay, we're all on our best behavior right now, but this journey is about to get tough, and who do I want to have in my corner when things get tough. So.

Yep. Oh, I love that. I'm curious, what's the biggest challenge of working with somebody or investing in somebody that you've known for a long time? Brian, any thoughts on that?

I think there are two challenges. One is I've had to say no to a lot more former colleagues than I've said yes to. So that's just a part of the job. As an investor there are far fewer yeses than no's. So that's kind of like that outward looking challenge inwardly. I think healthy investor entrepreneur relationships require in my opinion some amount of conflict or disagreement. Right. Like you just see things differently. I viewed a little bit as my role to, you know, help entrepreneurs both see around the corner but also call out if I see an opportunity to improve or an area where, you know, it looks like there's potentially a blind spot. And so when you go from being like friend and colleague purely to now this new dynamic, it's just an evolution. And I think I've worked hard to both be supportive but also be direct in communication where I think there's an opportunity to improve. And that has been a natural evolution. I think. I hope Kimberly would echo that. It feels in a good place now, but it's just a changing relationship and I, I, I would imagine, um, it might not go so smoothly. I think it has for us. But it's definitely been an evolution.

Totally.

I'm curious, did you have any, you know, areas of conflict prior to investing where you know like I think about my aunt was always like before you get married you should go on a like you know, a week long trip and see how you handle stress. Right. And I think that's valuable advice in any relationship is like how, how can you navigate challenging situations together?

I can think of one. I'll throw one out there to start it was back at Eventbrite and I think it was during the pressure cooker time where the growth had slowed. And Kimberly, I don't know if you'll remember this but you, your team had done this analysis on there was a viral loop in Eventbrite's product where people would start out as an attendee on the platform like with ticket buyer, get exposed to the platform and after a certain number of touches and interactions with the platform then become an event organizer. And so it created this, this viral loop and product. And I recall my team was spending a lot of time like figuring out how do we dial up that loop and get more people to convert. And Kimberly's team had done an Analysis and I remember came to the conclusion, well, those users who do go through that flow tend to be a lot less valuable on average. And so hey, we should we be spending a few as much time as we are there. And you know, it was a little bit at odds. Right. Like I'm advocating for, hey, we should really do this. And Kim really's like, I don't know, here's the data. And ultimately I think we got to a better place in terms of, you know, how much effort are we putting in. I still believe there was a lot of Halo value in still doing that. But yeah, we disagreed. I remember talking through it and like it was okay. We had an open disagreement, we talked through it and it was fine in the end.

Is that how you remember it, Kimberly?

Exactly.

Yeah.

That was going to be my, my example too.

Okay.

Yeah. Because I mean, also too, it was a, it was a very strategic high vis topic. Right. You know, it was at the exact level. It wasn't just this like, oh, this cool little side project that maybe we'll go talk about. I mean it was something the entire company was talking about. So it was one of those things though where I appreciated directness but also willingness to like, examine other pieces of information, come to, you know, where are we going to disagree and commit or like, how are we going to go forward kind of situation. So. Yeah, exactly. Which is also the example of like, all right, we've gone through that before. I think we can effectively do this in the future.

Yep. We're not always going to agree, but we, we have a framework that works for us. Yeah, I love it. So switching gears a little bit, I would love to learn more about Novi. Can you share a little bit about like how you came up with the idea? It sounds like what's kind of cool about this is some of this you did with Brian, some whiteboarding. Right. We'd love to hear kind of like what that founder journey was like. How'd you come up with the idea? What is it that Novi does and, and what are you building?

Yeah, so the idea is out of a personal problem that I never thought I would have. So that's kind of the really crazy part of this journey. But I have always been passionate about health and wellness and in 2017 I ended up getting pregnant and just became hyper obsessed with like, what is it that I'm consuming, putting into my house, like, what are the products that I'm purchasing and how are they being made? That was kind of a trigger point to say, wow, it's really Hard to purchase and shop with trusted products and a trusted experience. And so the first phase of asking Brian for advice, I ended up co founding a company before Novi that was an online E tailor to help consumers shop in a more trusted way and find trusted products. And through that experience, learned firsthand how hard it is to get access to verified product information to be able to put together that kind of shopping experience. And so started to build, like, the underlying infrastructure and technology to solve that. And that turned into me having lots of conversations with brands and retailers out in the ecosystem. Like, how do you do this? Like, oh, my gosh, we don't. This is horrible. We should, you know, we'd love to figure that out. And we saw, hmm, should we continue trying to build a platform to help consumers shop, yet another place for them to shop, or should we try to build the infrastructure that enables them to do that across every channel that they shop? And we thought that was the more scalable version. And so that was the first really, like, hey, Brian, we think this is something we don't really have a product. We have some people that say it's interesting. And, oh, by the way, we're like building it as an infrastructure over in this company. Like, how would you spin this out or pivot or like, what should we do to get to this new company idea? So we, you know, I got a lot of advice from him on that we thought through. It ended up being a spin out, which is a very interesting experience to go through it because I had no idea what that was at the time. And so, yeah, we spun out the company. And then I think, because he was along that journey and saw how cool it was. And as we started to whiteboard the possibilities and what it could be, a couple months later, I think ended up writing our first check.

Yeah, I remember you came down to our Woodside office. We had lunch as a team. We spent some time in the office whiteboarding. And another part of the story that's probably relevant is that lunch was with my partner Neil, who was a series A investor in the Honest Company. So saw firsthand how to create a brand focused on this problem with Jessica Alba and Brian Lee and others who are the founders. But it was kind of that insight into, oh, yeah, this is a real problem. Big businesses can be built here. And this spanned the whole industry. So that was a big aha for us. And one other thing I wanted to comment on Kimberly's story is Kimberly's former, well, co founder, Jali Bishrat. She's a longtime friend of both of ours, but also one of my mentors. I actually reported to her eventbrite for a period of time. I recall we talked for your prior company, that was the inception for Novi and it wasn't a good fit for our firm. So I had to say no, you know, I'm sorry, I don't think this is a good fit. And then later we came back and it worked in this capacity. So it's kind of this interesting winding journey and also speaks probably to the relationship where hey, no hard feelings on the first one not working, let's do it this time.

No, I think that's great. I'm curious just because I think this is a meaningful challenge and venture. How did you say no to somebody who knew really well that you used to report to in such a way that maintained the relationship.

Well, I'll ask for Kimberly's take but as I recall the conversation we spent a lot of time talking together. I think I was talking maybe a little bit more with Jolly at the time, but the original incarnation of business was a little bit more as a CPG type product and just felt a little bit outside of our typical purview. We have done a little bit there but we tend to invest in software and AI type businesses. And so it was really about. I think my, my response was I will write you a personal angel and check. I would do it all day. It just doesn't fit within the fund's purview. But I hope we have another chance to work together. And I think hopefully they understood. It sounds like everyone did, but yeah, just again, honesty, like really it was the honest answer and everyone seemed okay with that. No, I think that's great.

Do you have something to add? Sorry, Kimberly.

No, no, I was just gonna say yeah, that's exactly how it's just. Yeah, be direct, be honest. And if you had that prior relationship, you're like, okay, cool.

I think there is a certain amount of like art to doing it well. Right. Because a lot of people, a lot of VCs in particular don't do it well. But you know, you never know when that next, that next opportunity is going to arise. And so you always want to have relation, good relationships with great people.

Yeah, sort of. One other thing maybe that's relevant there. Even though there was like a no in that moment, we talked all the time. Even though I wasn't on the cap table, wasn't an investor, I was in close touch with Kimberly and with Jolly. Like, you know, they have a question about something going on with an investor or they're raising their next round. I was making intros to other investors for them. So it's like continue to invest even though there's nothing formally at stake there. I mean I do that with other founders that I know less well than Kimberly. You gotta put a lot of good out there to help. They haven't come back.

Yeah. Which is one of the things I love about the venture community is that when it works well, everybody kind of wants to help lift everybody. Right. It's, I know like a lot of VCs kind of get bashed for telling entrepreneurs that their babies are ugly by telling them no. But at the same time like I think most VCs are optimists at heart and they want to see founders win even if they can't make it fit within their current fund structure or strategy. Um, so anyways, so I'm, I'm curious going back to Novi, why do some products win in AI shopping while others are disappearing and not been successful?

Yeah, this is a really interesting topic because we've been studying it very deeply lately. But there's really three things that we've seen. I'm sure as users of ChatGPT or AI platforms you're experiencing this personally, but the first thing is just the general, I'd say like exposure of AEO versus SEO really, but it's how consumers are behaving. So when you think about a consumer behaving on Google, right, they're typing in a short amount of words. I think the average like as of a couple of weeks ago was like 4.6 words per search. And then of course when you behave with these more query answer surfaces, it's like 23 words. Right. And so what that really means though is you are asking things that are more hyper personalized about you. You're just asking for a deeper set. So it's like, I mean we, we actually have faced this with a couple brands but it's like help me find a whiskey that's locally sourced with a, you know, bottle not made from plastic, under $35, like you can type that whole entire thing in. And so what ends up happening is how do you make sure you show up in that kind of hyper personalized query that covers so much surface, more surface area than a typical short query in, in like a Google context. Right. And so it's challenging because you of course like companies have started by just tackling that at the brand level. So how does my company show up in shopping? It's even harder because it's how do I make sure all of my different products show up in the right places based on the query. And so now it becomes this like just really hard optimization problem. And so the first thing is just, okay, so it's consumer behavior. But the second thing, which I think is really interesting, and everyone has seen the stats, like ChatGPT heavily relies on Reddit as a source. Why is that? It's because that's considered whether you agree or not, a trusted source. And it's trusted because they police their community. They allow, you know, consumers authentically endorse companies. Right. So again, that's great as a signal for like brand level surface or you surfacing as a brand level in an answer. But, um, when we started to dive in deeper to help make sure your individual products surface, what we found is the same exact thing. Like you needed trusted signals. And so the issue is brands don't have enough metadata out there that covers them to be able to show up in these crazy, different, deeper, hyper personalized queries. And they don't have enough trust signals that give them authority on the Internet. And so that's kind of the area that we've been tackling now is like, how do you help brands do that in this new era?

Yeah. Super complex problem. Especially like to your point, just how many different products that a lot of these brands have to show up for?

Thousands of SKUs. Yeah. And like the answers right now are very short. Sometimes it's only three. Three products that show up. So you're not in this long scrolling list. It's. If you don't show up, you. You like totally miss out. You're invisible completely.

Yeah, yeah. I think about like, I just was doing some research and on like how to build and do a better job building an audience for our various content channels and so forth and did the same search and was like, all right, I want to become an expert in this area. And what are like the five books? Right. Or what are the books? And it gave me like five and I went and bought like all five. But I'm sure there's like 50 more books.

Yeah, right.

Yep, yep, exactly. Yeah. And that's a challenge. If that author said, oh, I actually answered that question perfectly.

Yep.

Yeah.

Do you think SEO is dead?

So I, A lot of people talk about how everything is dying on Google, but then a lot of people talk about how the pie is just getting larger. I do think what's very interesting is it's not the exclusive way to make you show up. And so I think there's going to Be this dynamic where you have to decide as a company how you're going to allocate your investment. And so if I exclusively invest in SEO, that's not the only way to make sure I show up in a ranking in some search capacity. And so I do think we're going to see like lower ad dollars being sent to Google. Especially we saw in the news ChatGPT is thinking about ads, so it's just going to be a budget allocation situation. But also, I mean we talked to, I can't remember which, how much search traffic it's up to like 20 or 30% at this point. Even just with Target seeing Most of like 20% of their searches are now coming through a source like ChatGPT. And so it is. Even if you want to make the argument that the pie is getting bigger, they are going to have to start allocating dollars and resources towards how they show up in LLMs.

Yeah, it has blown my mind over the last year, the number of people I know that have completely replaced Google as their like default search engine with either ChatGPT or Claude or Perplexity. Like they're just like not even going to Google at all.

Yeah, yeah.

I mean parents are in their 70s and they're exclusive Perplexity users. And I'm like, mind blown. They're not even super techie, but, but it's wow.

The other thing that I think is interesting about it is I would never pay for Google and I am currently a subscriber to an embarrassing number of AI platforms. Now part of that is definitely my job and part of that is also like my ADD and curiosity. But I think that's like this other like interesting element of it that people are driving enough value out of these, these platforms to actually pay for this search functionality. And granted they're, they're getting a lot more out of it than just search. But yeah, I think that's interesting.

That's, I think that's an advantage for sure on the consumer side, but also is what kind of exacerbates the issue for companies and especially in shopping because we typically think of SEO as I need to bid on keywords and every search is an independent, mutually exclusive activity. LLM like query and answer is about of course the query you put in at the time, but the past context because you as a consumer have engaged in multiple questions and it learns about you and so you might not even put some of that context into that exact query, but it's going to know something about you to help give you the best recommendation and that's just like a mind blowing thing to have to tackle as a brand brand, which is like it might not even be the query they put in, it might be all the stuff that they've talked about in the past.

Yep, yep. What are your thoughts on how ads will impact this? Is it good, bad, neutral?

Yeah. So actually what I think is interesting and having had a couple of conversations with folks in the space, I do think, and I personally am also aligned with this, that all these LLMs still put trust as their number one like priority. And what I mean by trust is the answer is trustworthy. Yes, they still hallucinate, but that's why we spend billions of dollars on surge AI so we can train these models to have better answers. So getting to a great quality, high trustworthy answer is still the top priority. Inserting ads on top of that is the number one thing that would erode trust. So I do think what will be interesting is how those are blended and since they've started with that, that core value, I guess of trust, I do think they're going to look for ways to make sure that you can buy advertising but that you are still the right answer. Because at the end of the day like what's the point if we're going to all query stuff and get just like shitty answers that don't make any sense because they were just like paid for?

Yeah. I'm curious Brian, what are your thoughts?

I think it'll play out much like I was at Yahoo. It was my first job and I saw the search wars play out of like Yahoo searching Google and Google's emphasis on quality. Score to Kimberly's point on trust was I think one of the core reasons they won, their ads were just more relevant in addition to the better search results below that. So I think it'll play out pretty similarly. These companies, the open eyes of the world have shown they're not afraid to burn capital to keep growing and get market share. So I don't see them rushing in to overly monetize on an ads basis. They'll tweak it and work to get it right and really prioritize the user experience over monetization. Be my pet.

Yeah, I wonder if there's like an interesting opportunity around just making it easy to get the recommendation and purchase right through the LLM like chat and maybe that's the way in which they capture revenue rather than just like force forcing ads down our throats.

Right, exactly. I mean I obviously don't know the details but they have talked about that partnership, especially the ChatGPT side, the partnership with Shopify to make that a seamless transaction experience. So I do, if I were a betting person, believe that's a viable direction.

And how does that impact brands, do you think? And how. How they should think about it.

So again, it is the hottest topic right now is how do I influence the models to make sure I show up? Especially if you now think about brands have all these surfaces, is what we call them, or channels to distribute products. So I can sell in Target, I can sell in Walmart, I can sell, you know, I can sell in a lot of different places to get discovered and drive conversion. But now if I'm gonna see most consumers, you know, shopping through Perplexity or chatgpt, I'm not going to any of those channels. And so that's a very concerning thing for a brand to make sure that they show up and the real estate to show up is so much tighter. It's like three to five selections. So I think that's the, the biggest. It's very new. Nobody's really solved this. We're starting to see the underlying mechanisms of what, how an LLM thinks about it and what things you can tease out and try to impact. But I. Yeah, that. That's the core question.

Yeah. Do you think it negatively impacts small brands who can't, you know, can't play at that level?

Actually, we've seen quite the opposite, which is very interesting. So this goes back to having trust signals. And one of the real things that we've seen, we've seen this consistently in other research too, is that having data in multiple places across the Internet is a compounding effect. And so you, you show up in multiple ways where third parties have endorsed your product in some way, or you have a trust signal in some way. And you can do that pretty instantly now as a small brand and show up and you can rise to the top over much larger brands. Because if you think about it, much larger brands today have trust with humans because they're like a massive brand. And that's just like an implied psychological trust. But if you don't have any of that as a larger brand, and actually everywhere across the Internet, it's just like, you know your product description, what you say, and nobody's really talking about you. They're not choosing you. So. So it is actually interesting. You can have a pretty large advantage as a small brand pretty quickly, but.

I would imagine there's also an advantage of you can really kind of own a niche. Yes, they're like they're dialed to your point. Right. These searches are like highly personalized. And if you're like, okay, I'm going to check off these boxes, it's a small market but I'm going to own that market. You know, maybe you show up for every single one of those.

Exactly. That's exactly right.

Yeah.

I'm curious, what do you think are the big blind spots that these brands have today? What are they missing that they should be paying attention to?

I think. Well, the first one we just talked about, which is the blind spot of you need to have your data consistently everywhere you shop and data distribution is a very hard problem. Lots of people are trying to solve this. So it's not about optimizing your product description page in one channel. You really got to think about it, like how is it showing up everywhere? A lot of stuff we talked about is like having third party endorsement. It's just because it needs to be something that's not just you making a claim. Like you can't go out and say I have the best product ever. Like you need a multiple people or certifications or retailers even endorsing you saying this is a great product and how you do that, it's does take work and it makes, it makes it more important that you actually build good products that people like. I think there's no like silver bullet, like oh, I can just buy my way into this. So I think those are like two of the, the pieces that we're talking about all the time.

Brian, I'm curious. So it's clearly like Kimberly's focused on the shopping side of this, but getting in this, the prompt results, we'll call them of the LLMs is super important for everybody. I'm curious, what are you seeing from other companies not in the shopping space and how they're thinking about that?

Yeah, One interesting insight is some of our companies in our portfolio had historically been pretty reliant, might be too strong, but a lot of their leads came inbound via content marketing. So creating quality blog posts, et cetera. And what we've seen across a few of these companies is inbound leads actually continue to increase. But the proportional share coming from Google referred traffic versus ChatGPT and others, it's obviously shifting. Right. Google is coming down or staying flat and you know, OpenAI and others are increasing in their proportion. But as these companies continue to create and focus on creating high quality content, it seems to lift all boats. Even though you don't see it as much in terms of like referred traffic to the blog that comes in through a lead, it's getting picked up by the AI halo. So I guess one learning is like, don't just shut off content marketing because you think SEO's dead. It's actually feeding the LLMs in a different way.

Yeah, I love that. That's super interesting. Going back to just like the, the, the growing pains of a startup, what were some of the hardest lessons you learned about achieving product market fit at Novi?

Oh my goodness. Some of the hardest. Well, there's a lot of hard ones. I would say that honestly this is something even Andy Radcliffe used to tell us pretty early on is usually the things that you expect to work don't and the thing you didn't expect to work does. And so sometimes that can be hard too if you have a lot of, I don't know, emotional investment or really want to see something come to fruition. And it's just like beating your head against a wall, like not happening. So I think just some of the hard lessons are to be completely, yes, you have a high level vision of where you want to head. Like that's not changing, but to be somewhat unemotionally attached to the, how you're going to get there and be okay with like, well, that didn't work. So I guess we're going to get up and do it again tomorrow and figure out a different way. And I think at the beginning that was a little bit more challenging and now it's like, yeah, well, I'm ready to be surprised. Whatever, like thing is going to work, we're, we're going to go in that direction and listen to the market and the customer.

I love it. Any, any thoughts, Brian, on. On things that you've learned as you've seen companies make it to product market fit? Because I'm sure you see it all.

I think this applies to Novi, but many different companies too. It's like the, one of the infuriating things about that journey is sometimes you don't know if you just haven't tried hard enough and like you're going to pound the wall one more time and break through or if you just have to find a way around the wall. And I, I think sometimes at Novi, I could think of one in particular. I think we came to the right decision to like, all right, we're going to, we're going to go around this wall, we're going to stop banging our heads at it. And I think we're seeing signs that it's really working, but it's just a really hard thing to Know, because sometimes we've seen founders, you know, take 10 more cracks and they break through and it's just very painful. Very hard to know.

Yeah, it's kind of like wandering in the wilderness for a while until you find the thing that starts working right.

Yeah, kind of feels that way.

At least.

I think I've been a founder twice. I actually hated the product market fit search part of it. Like, I'm. I much more preferred that. Like, okay, something's starting to click. How do we scale this thing? And everybody. Everyone's different sometimes. I know they, like, get it to that point it's scaling up and they want nothing to be nothing to do with it anymore. It's like, hand it off and go work on the next PMF problem.

I'm curious, how do you know when a company has hit product market fit? And how did you know, Kimberly, that. That you had kind of achieved at least to some degree of. Of fit?

I know there's like the. Oh, you can see it in the data. And lots of people put together, you see these metrics and. And then there's also a feeling like, oh, it's really starting to be easier to have these conversations. And I'm having the same conversations over and over that are really clicking now with new people, and they're all just adopting and it just starts to become more snowball effect versus like either banging your head into a wall, pulled it, pushing a boulder up a hill, like whatever you want to call it, just that super painful, like, what are we doing? That just starts to go away.

Yep.

But yeah, and then I think other parts of this too are in my mind and the way we've thought about it is there's finding product market fit doesn't mean that you've found a business that's scaling and so you can find product market fit. And it might not be a interesting or big enough market that's going to scale into a massive business. And so that's also the equation of like, okay, we found the fit. Now can we actually scale it into something, something larger? And I think those are two different activities.

And yeah, yeah, it's challenging if you found like a local maximum, but that's not the ultimate maximum. Right. So you gotta be super careful. I'm curious, what are your thoughts, Brian?

You know, the one quantitative measure, or one of the quantitative measures that I like is my friend Sean Ellis, who coins growth hacking. He had this survey, the product market fit survey, where he asked initial users, how disappointed would you be if this product disappeared overnight? And the threshold was if 40% said be someone or very disappointed, you've achieved some level of product market fit. He actually did that at Eventbrite when he was an early advisor. And I've seen other companies do it too. And so it's a good heuristic. It doesn't mean it's forever or a hundred percent, but I like it. That's one thought. And then I really do think what Kim really mentioned around, okay, it's one thing to find product market fit, it's another to find product channel fit. And how do you figure out distribution? To your point, Peter, the two are often different skill sets. And I find the strongest companies, the founders typically have the DNA where they can do both and scale onto both. But it's a rare thing and I think who said it. There was a phrase that I love too. I think it was Justin Kahn from Justin TV and Twitch. He said, first time founders obsess over product. Second time founders obsess over distribution. And it's so true too. I just love that.

Yeah, that's such a good quote. My feel on it is that it is a little bit of a feeling just from all. Because every business is a little different, right? They all have different metrics. But it's. If you are solving a pain point that people are desperate to find relief for it, you start to feel like a pull almost, right? Like it definitely gets easy, but also like, people are like, please, please come solve this for me. Right? And it starts to pull a little bit. So that's one of the things that we look for is just like that feeling of like, is this starting to like customers are almost like pulling the solution out of the company for themselves. All right, so I got another question on this line. What do you think is harder? So scaling a company to IPO or a meaningful acquisition or convincing investors to believe in your vision before it's actually real.

Wow, that's a tough one.

I'll let either one of you take that first. But I want to hear from both.

I don't know. Both are so hard in their different ways. As a founder, I heard no 41 times before we got our first yes. We were trying to raise money in the depths of the financial. Great financial Crisis. It was 2009 in New York City. Um, and we ultimately got a. A really good yes. But it was extremely painful. I remember feeling just so dejected with my co founder. Um, so it. It's hard. The struggle is real. Um, that said, I don't know, scaling up a company from product Market fit to IPO it. It's a herculean task too, I think. I guess if you forced me to pick one, I'd say going from zero to one and leaving, you know, often a cushy job to go do this thing, pay yourself nothing. I financed, you know, the first version of our initial product on student loans while I was in grad school. Like that is pretty tough. So I would give the points to the startup founders versus the scalers.

Awesome. Kimberly, what do you think?

Well, let's see, I was at Eventbrite in the scale up phase. I wasn't there all the way through to ipo, but I can comment it on. On it from that perspective. Yeah. Bringing a company to life from nothing is like having something in constant CPR mode. Come on, you can do it.

I love that.

It's exhausting. It's thrilling too. I will say the toil on your ego and like your personal psychological well being is very challenging when you're trying to pitch something that you see as a vision and most people don't get it. But the that to me is actually more attractive than the scale up. At least the part of the scale up that I was in. Largely because if I want to get out of bed every morning and beat my head into a wall, I'm going to do that just to like make a company happen. But you got to work with a lot of other people to get a scale up company to work. And sometimes it's more how do you influence your peers and you know, make sure that you're getting everyone on the same page and you're kind of moving a ship a little bit in order to get through scale up. And I found that to be not my sweet spot necessarily, but so maybe I would. I'd be the opposite answer. Brian.

I like it. So one of the last questions I want to ask as we kind of come to the end of the episode today, which has been a really fun conversation, is how do you build a great relationship with your investor maybe before they invest? And not knowing that not everybody can have the advantage that you both have of working together at a prior company. But what advice would you have for founders that are trying to navigate this dynamic of you want to build a good relationship over the long run with the investor and maybe Kimberly, if you have other investors that you don't haven't known as long. Right. I'd love to kind of hear your perspective on that. And then also Brian, like from the VC side, like what have you seen founders do that's been incredibly effective.

So I do. I have other investors I did not have as long of a relationship with. I think for me, the important thing that I've learned is maybe it's not fully understanding your vision, but believing that there's something very compelling and interesting in your vision and that you are the right person to run after it and like believing in you as a person to do that. The one thing I'm not, I don't think works well, or at least I was. I did not. Was not attracted to in the past, is working with an investor that has a set thesis and then they're on this hunt or search of a founder that they think is going to bring their thesis to life. It's just basically flipped where they have the vision just largely because, like, you could tell they have a large opinion about how this is going to come to life and they want to interject that. And so it's more like, no, no, no, I have this crazy ide. It's not obvious and that's actually the beauty of it. And maybe you shouldn't believe, like, hm, if that did come to life, that's really cool and you're crazy and I think you're awesome and you're going to make it happen. That's like the thing that I've found, like, I work well with and I've seen success in.

I like it.

I love that. I think for founders to build relationships with investors before they invest, it's. It's a series of touch points where an opinion and a pattern gets formed. And I think the best founders that I've been in touch with before investing have dropped breadcrumbs like they'll say, first of all, they work to get their vision into your mind so that you at least get the basics, as Kim really said. Then it's about showing like, okay, here's where we are today. Here's what I think are the next steps and here's what I'm going to do. Work towards those and they'll circle back, you know, six months later and say, hey, remember, here's what we talked about at this date. Here's how we solve these problems or attack these opportunities or the progress we've made. And here's what I'm going to do the next time. Because it's more about the trajectory and the path of getting there and. Or if not the quantitative metrics, but like proving or disproving this thing should exist and bringing the investor along the journey versus a point in time. This is a sprint four Weeks, I'm running my process, I'm going to pick the highest bid at the end. I don't think those lead to the best relationships or the best long term outcome. So I think it's about maintaining an authentic relationship, keeping people up to date, kind of saying what your hypotheses are working to prove or disprove them and, or if you're a little bit further, what progress are you going to make and have you done it? And then what's the next milestone and show people the path along the way?

Do you think there's, I feel like a lot of founders have this belief and I'm curious if, if you think this is true or not, that they only get like one shot with an investor. You know, like I'm gonna share my, my vision once and if they say no, like then they'll always have a bias against me. And so I, I, I kind of gotta time it just right, you know, so I don't wanna screw it up.

Yeah, I think that there is merit to that concern. I think investors and you know this like when you meet with hundreds of companies per year, if not thousands, you sort of form a fast opinion, one or the other, you know, does this feel like it fits the box or, or is there something really unique or insightful that that's going to stick with me? It's a little bit of a gut feeling in some ways. So on one hand, yeah, first impressions do matter. On the other hand, it's never going to be perfect. Right. And if you really want a good relationship and want to set the relationship up on the right footing, I think it's okay to show things that are not fully baked or not perfect. And so I don't know, I guess I'd probably lean towards prepare but it's never going to be perfect. Ship it just kind of go and it's a little bit like, you know, finding a friend or dating, like you're not going to fit with everyone and so be okay with that. Like you don't have to have everyone like you. You just need to find the right person both ways. And I think your odds are higher if you are your authentic self and showing who you really are versus trying to be some polished thing that is not authentic that investors are probably going to sniff out and it's not going to feel right to you as a founder as well.

And even if things do work out right, like then you're stuck with this fake partnership and that this weird facade, it's not going to set you up for Success. I tell a lot of my students when they're like freaking out about interviews and stuff. I'm like, similar advice, right? Be authentic in the interview because whoever ends up hiring you, you're going to be a lot happier and they're going to be a lot happier if you are authentic throughout the whole interview process. Right?

Yes.

So, um, awesome. Well, as we wrap up any. Any thoughts around kind of the future of AI and E commerce and any like, you know, hot takes that you want to share with our audience?

I mean, honestly, the. I would just boil it down like it is a how to balance marketing to a human versus marketing to a machine. And machines objectively just care more about truth and humans are easily persuaded and fickle. And so I do think it's just like going to be a new wave of like, how to think. But we're going to have to hold both of them side by side as we go forward.

Love it.

I. I'll just add to it. I think data will matter more than ever because the output from the models are only as good as the inputs from the data. And so nailing the problem that Kubernetes Nova you're solving is critically important there. I know my buying behavior has changed. I'm not researching 10 individual products anymore. Like we talked about earlier. I'm in many cases trusting the first one that comes back from the LLM. So these brands are going to have kind of one or two shots and you got to put your best foot forward. And so again, the data and the right signals from the web and beyond are going to be of paramount importance. But. Oh, and then the other thing I'll say is I think a lot of the clunkiness of us having to click through and purchase, that's all going to go away. Like, operator from OpenAI is okay. It's not great yet, but it will be. That's my opinion. Perplexities Comic browser. Like, they're going to automate a lot of tasks. That's all going to go away. You're just going to say, yes, buy it or not. It may be on crypto Rails, it may be other payment Rails, but it's going to be pretty seamless and I'm excited for that.

Yeah, I love it. I love that vision. Awesome. Well, thank you so much, both of you for joining us. I think this has been a really fun conversation. I feel like I've learned a lot and just very grateful for the opportunity to get to know both of you. So thank you.

Thank you.

How can our audience find both of you if they want to, you know, keep track of the content you're creating and so forth.

Well, for us, please go to novyconnect.com or follow us on LinkedIn. Follow me on LinkedIn. We'll be talking a lot about the future as we learn it.

Love it.

And for us, you can find us at DeFi VC on X. DeFi VC is the handle. Or you can follow me on XM Rothenberg and we'd love to connect with you there.

Awesome. And of course, to our audience, please like and subscribe and share this episode with your friends and we'll see you next time. Sam.