How Plaid Turned a Failed $5.3B Deal with Visa into Momentum | Zach Perret (Plaid)

24:34Yeah, I will let this go because I don't want to take the whole time on this, but it is very fascinating. But how agonizing was it before you made the call? Like, did you feel agonized? I don't know how else to ask that question. No, I mean, I think it's just a set of logical decisions. It's like a process that you go through. And for me, I think we try to, I certainly try to avoid emotion. in my decision making. Like emotion gives good signals. It gives good facts. It gives good inputs. But making decisions emotionally never gets you to a good point. Like who do you call in those moments? Like who are you like, all right, geez, like let me go through my Rolodex here of like people that have gone through this.

25:14I mean, the hard part is you can't really call that many people because it's a very confidential thing. And, you know, a lot of the business mentors or friends or folks that I would normally talk to, they work in the industry. So I can't really tell them anything. Definitely have, you know, a set of coaches and folks that I know and can talk to, you know, close friends, but for the most part, it's, it's an independent decision-making process. Yeah. So that all, the breakup happens, you rally the troops, get everybody going again. Is the business still like this is, is it at that point still going up into the right?

25:50Yeah. I mean, look, we had, we had an amazing growth trajectory from call it mid 2020 up until mid 2022. Then basically it was the Zerp era. So low interest rates, people stuck at home, people using FinTech like crazy. And then our customers growing incredibly well, a lot of new startups launching, lots of funding coming into the space. So like overall business is growing super well for that two year period, so mid 2020 to mid 2022. The second half of 2022, interest rates obviously came down and basically all of our customers didn't quite know how to handle a higher interest rate environment. So our interest rates went up.

26:30And our customers didn't quite know how to handle a higher interest rate environment. And so we saw a slower growth, still growing through that period, actually. So I feel really proud of the resiliency of that business, of our business, going through a really low to a moderately high interest rate environment quickly and still growing through it. But our customers had to retool. So our lenders that were used to making ZERP style loans now had to make higher interest loans. A lot of the investing companies that we worked with, they had to build products that were much more focused on savings and giving consumers the ability to buy treasuries and things like that, as opposed to just purely buying stocks because stocks weren't growing as well.

27:10So a lot of retooling that happened in our customer base, and that probably lasted about six months. And then back into 2023, we returned to normal growth, but on a much higher base. The cool part of all this is when we exit the transaction in 2021, we raised a big round of financing. At like double the visa price. More than double, yeah, exactly. Like$13 million? Yeah, so big step up in valuation, but most importantly, a lot of capital. So we took a lot of capital on the balance sheet. And we have, for the lifetime of Plaid, had this vision that first we're going to build, I call it data plumbing.

27:44My comps team hates it when I call it data plumbing, But the ability to link your bank account to an app, kind of a crucial thing. If you want to use anything in fintech, you need to link your bank account to an app. In doing so, we had a lot of users connect their accounts. We had a lot of data that was flowing through our system. But we always had this vision that some of the fundamental problems of financial services could be better solved by having a lot of this data in one place and then building great analytics on top of it. So fundamental problems in financial services, things like credit scoring.

28:12Nobody understands their credit score. it's not always responsive to the things that you think it should be responsive to. If you get a new job, your income goes way up, you're a better credit risk, but your credit score doesn't necessarily reflect that. So like credit scoring is a big problem. Second is fraud. Fraud is growing at a crazy rate right now. So financial fraud is growing at something like 20 to 25 % a year. We thought there was a huge opportunity to try to solve that. And then there's payments. How do we help people actually use their bank account to pay for things like they do in Europe and more broadly?

28:39And then there's this big basket of other challenges that are inherently broken in the financial system. Plaid V1 was focused on giving everyone access. So how do we help you link your bank account to an app that you want to use? That way you can do banking on the internet. You can have access to that loan you might want to apply it to. Plaid V2 is all about analytics and solving these underlying problems in financial services that have been persistent for decades. So fraud, credit scoring, so on and so forth. So we were able to take all this capital that we raised in 2021 and then deploy it into building out a pretty massive data platform so that we can start to build analytics-oriented products on top of it so that by the end of 2022 and into 2023 and then kind of mid-2024, we can start to launch these really awesome data analytics products.

29:25And so we feel fortunate that, you know, we had this opportunity to raise a bunch of capital, take our operating margin from being positive to now very negative and then back to positive again by investing in this kind of like replatforming, almost like a product strategy pivot. I would call it more of a product strategy upgrade for the business. It's amazing. I mean, the roller coaster is like, I mean, it's like there'll be books about this company one day. Like raises at 13. Everyone, I remember the headlines at the time. These guys are geniuses. You know, like look at overnight success. Exactly.

29:59Exactly. Right. All the headlines were, couldn't have been more positive. Right. And then we were going on to raise. And I mean, this is, it was like one of the hotter rounds that year. By the way, Platt has always had a hard time raising. It's always been a hard business to explain to people. But then all of a sudden, we were the one that everyone wanted to talk to. And so we got a great multiple on it. But all the VCs, they would come in, they were like, oh, I read the DOJ thing. Now I really understand your business. And I'm like, all right, if that's how you think about our business, then this will be a good conversation.

30:28That's like their internal partner memo. It's the DOJ thing. And then, crazy enough, you need to finance the business again. Take a down round, which is ironically an up round from the Visa price. but it was like 6 billion, right? Just like emotionally, people are just probably like, what is going on? Yeah. Yeah. I mean, as I said, we raised, like we were the bell of the ball. We raised - It was like a ZERP price. ZERP price, but like a very high ZERP price, like relative to all the other ZERP prices, it was a very good ZERP price that we were able to get. And we appreciate it. They put capital on the balance sheet and we were able to like really invest these new businesses.

31:07all of the metrics inside the business look way way way better than when we raised at that that period um but the underlying reality is market multiples have changed massively i mean you look at public companies they've they've gone down hugely since that period of time um private companies as well and so we ended up landing in what we think is a very rational valuation on top of a much much better business um but the market multiples have changed um and so that's why that's why obviously we had the step down in price. The interesting thing is, you know, we actually didn't need capital. I wouldn't have gone to raise capital, except that we had RSUs expiring, which means we need to flip the RSUs into shares so that our employees could retain that value.

31:47We ended up, you know, not adding much capital to the balance sheet at all in that transaction. And this is a way to get everybody a little bit more aligned on a current day valuation. Yeah, it does help to have a kind of a more recent mark to market so that when we're making an offer to a new executive, they can look and say, yeah, this is the price that was just paid by investors. And I understand that price. Yeah, exactly. You had mentioned that it was hard for people to grok plaid in the early days. Did you actually have a hard time fundraising? So in the early stages, we had a lot of trouble financing the business.

32:23The general view by VCs at the time was that not a lot of interesting products are going to be built in financial services because one, it's too regulated. And then two, the banks are going to build everything. Obviously, you know, we look at the Chime IPO that just happened. We look at like a lot of the huge public companies that are out there. There's a lot of space in fintech. We didn't even have the name fintech at the time. That started in like 2016, 2017. but the first time we went out to raise capital, we put together a round and it totally fell apart. So we ended up raising$60 ,000. That was the first round that we ever did.

33:00Then we did like a very small, I think we raised$250 ,000. Then we were finally able to raise a seed round. And at the seed round, it was interesting because we'd pitched all these investors like two or three times and they said no to us two or three times. And then one of the new investors that we hadn't happened to pitch before ended up leading that round, which is great. didn't have the negative history, I guess. And then at the Series A, it was still tough, but we ended up getting maybe two term sheets at the Series A. Series B was a lot easier because we had metrics. And then the Series C, that's actually when the KP Growth Fund invested.

33:33Right. When you did the 60K round and it fell apart, what do you mean it fell apart? Like, people just got cold feet? Sort of. So we went out to raise half a million bucks. I think it's like 500k on a on a four million dollar post or something like that. And we've talked to a bunch of angel investors like the funds weren't really interested because we were too early. We were also living in New York at the time. And so like the New York funds were really, really looking for like a lot more traction than we had. We didn't know all the West Coast funds yet. But we put together this group of angels led by these two guys that were like pretty prolific angel investors, one in LA and one in New York.

34:19And then we ran out and got a bunch of other like little smaller checks put together. So the 500K round, like a week before we were supposed to close, I think we'd actually signed the docs at this point, like a week before we were supposed to close, the lead investor in LA calls and he says, hey, look, I can't do it. Like, I just don't, I don't believe in the space. Like I don't believe in kind of financial services and this platform idea. So when he left and the other New York I left and then everybody else left. And we felt it was irresponsible not to call everyone and tell them what was happening.

34:48So we called each of the investors and we said, hey, look, here's what's happened. The lead investors decided to step out of the deal. We still love to have your capital, but we don't have the full round. Now, it actually logically makes sense for a lot of those investors to walk away at that point because investing 50K into a business that has no other investments, that's not necessarily a good risk. But there were these three guys who each kind of independently said, no, don't worry about it. Just take the investment. Like, let's see where it goes. So two that did a 25K investment, one that did a 10K investment.

35:20And so there was 60K invested in the company. And they kept us alive for 12 months. So talk about being really frugal. We were living in New York. Who's my co-founder? Who was living on a friend's couch. And I, who like moved in with my very recent girlfriend, not my wife, but my very recent girlfriend in order to like not have to pay rent. and we like somehow kept this company alive, us and then an intern for enough time to get to like a larger seed round. But the funny story about this is that there are three guys, all three of them are named Justin. And so we would like have this internal joke of, you know, hey, we're making this big decision.

35:58Like how would the Justins think about that? How would the Justins like think about how we're using their capital? But weirdly, because we had so little capital, it really built this like this culture of frugality, this culture of like figure out how to go through things. I mean, obviously the idea for this podcast is grit. Like whenever people ask me for startup advice, I have very little that I can say because I think that, you know, for the most part, like each startup journey is unique and like, I don't have generalized advice. The only good thing that I have to say is like, don't die. And like, if we could survive for a year on$60 ,000 living in New York and like building the business, like that was a pretty good lesson that all we had to do was decide not to die and we'd keep going.

36:34And so my take is for most founders, the answer is just decide you're not gonna die. Like that's the first step to building a great company. And then when it's very obvious that you're going to die, if you've decided that it's not going to die, you'll push through it and it'll be just fine. And the Justins now are... Oh, we dropped the price on that round, by the way. So I think they invested like 60K on two and a half. So it's you, your co-founder. Are you hands-on keyboard? Like were you coding at the time? Yeah, we both were. You were both coding. You have an intern doing a bunch of stuff for you, whatever that is.

37:01No, he was an engineer too. He was an engineer too, also coding. Yes. And how long did the three of you, the rat pack, like make it, make it through until you hired somebody. I think it was like a year that New York, a year. Well, I think it's probably six months in New York. And then we moved the business to San Francisco. Um, so basically in this year, we, um, raised a little more money than we, um, uh, were able to get, uh, kind of commitments to a seed round. Um, and so we moved, we decided to move the business from New York to San Francisco. This was in 2013, 2014. There just weren't a lot of engineers in New York that we could hire.

37:39New York just didn't have the engineering community it does now. So we moved it to San Francisco, mostly because we knew more people out there. We thought we could actually hire people well. There's this one moment actually where we'd gotten the seed round. It was like Spark Capital and GV and NEA had invested in our seed round. The money had just hit the bank. We rented an office. It was like a 15-person office because we thought we needed to hire people. we move in the next day our intern goes back to college like he and he had taken like a semester off he had like a summer he just like stayed with us for a really long time he actually ended up coming back full-time but he had to go back for one semester in order to graduate because his parents really wanted him to graduate and so we go from three people to two people but we just put you know like two million dollars in the bank and we're like sitting this empty office looking at each other saying like what how do we build a business now we have money like what do we do that.

38:26Oh my God. But you know, we figured it out. We recruited some people. You know, your wife now is a real one. If she was willing to put up with your shit for those, those early days. Exactly. Yes. Yes. What during that year of New York fundraise moved to San Francisco, what else are you really doing? Like, is it all product work? Like, are you just writing code and trying to get this thing, get a V.1 off the ground? Yeah, so we were very focused on building the platform. I was by far the worst engineer of the group. So I got assigned, like, Zach, you go build our website, you build the front end, like you can write the API docs, like all of the stuff that was not like particularly complex coding.

39:11And then, you know, me having had basically no sales experience, I just decided, all right, the best way to contribute is to go talk to customers. And so that was me just like for probably like a year chasing every fintech meetup, every, you know, people in finance want to build stuff, calling everyone that I knew, talking to like I remember, I think I called YNAB, you need a budget. It was a budgeting tool at the time. I think I called them like, I think I probably said them like 20 emails before they finally responded and said, hey, please leave us alone. But also like, OK, interesting idea what you're working on.

39:45So it was really just like chasing and trying to find customers. They're now a customer, by the way. And what we found is when we'd moved to California, there was this like budding group of people that were thinking about building new products in SF. And then we had this previous network in New York. So the biggest one from the previous network was Venmo. So kind of a friend of a friend introduced us to the head of engineering at Venmo. He said that he wanted to buy the product. That was like one of the big inspirations for actually building the product in the way that we did. It then took a year to go through not Venmo, but Venmo had been acquired by Braintree, which had been acquired by PayPal, which had been acquired by eBay.

40:21eBay's procurement process. It took a year to go through eBay's procurement process so that Venmo could use the product. I've learned a lot about how not to run bad procurement processes. So that took a long time. And then on the West Coast, we met the Robinhood guys when I think there were five people. And they were saying, hey, we need to do this kind of account onboarding. Can you build it? Like, yeah, that's what we're building for Venmo. Let's create the same thing for you. So yeah, my time was doing a bad job of engineering and then talking to customers. And did Venmo commit and then you decided, let's go build this business?

40:53No. Or were you kind of jamming with them on what you thought you wanted to build? Yeah, so prior to Plaid, we built this consumer app, this bad consumer app. And then Venmo kind of came to us and said, hey, can we license the backend to that? And we said, yeah, maybe. And so we were going back and forth with them on how this backend would work. We kind of knew what we wanted to build. And they said, well, maybe we'd be interested. And then I went and found other customers that were our first customers. And then kind of following that, Venmo saw that a couple of people were starting to use it.

41:18And they said, yeah, we'll commit to actually buying this product. The back end? The back end, yeah. Okay. And then it took basically a year for them to actually turn it on. But yeah, throughout that year, it was great, actually. We built the integration with them. They gave us a bunch of feedback on it. So in some weird sense, you know, we did have them as a... Like a design partner. A design partner. Yeah, exactly. But we couldn't actually call them a customer because we hadn't signed it. At what point did you decide, I'm not going to die? Like, this company is not going to run out of money.

41:46Like, was there something that catalyzed this, like, wall in your brain that you were never going to move backwards from? Like, okay, now Venmo is going to work with us. We have to deliver it. Or now the interns on our team, like, we have to go do it. Like, at what point were you like, no way is this thing going to collapse? It took a long time. Like, I think to be totally honest, I think that I still have a like a lot of fire in like the belly because I think that like Plaid, we need to be operating as if we still could die. And we need to be pushing at the proper pace in order to go have a big impact on this industry.

42:25If we're stagnant, you know, bad things will happen to us. So we need to be pushing really quickly. And I think that was partially solidified through kind of a series of things that happened to us. So initially the round falls apart. Okay, we're going to die. Fast forward a little bit, going into our series A,

42:47we had two term sheets. We accepted one term sheet, but then we got sued by a company that, it was a competitor, we got sued for patent infringement, but it was a company that that fund had previously invested in. We thought they had no relation to them. They may have had no relation, but somehow the word got to that company that they should sue us. for patent infringement. So we got sued for patent infringement. That first term sheet disappeared. And then we had to go scramble and find the second term sheet and get them to still invest. And that was NEA, who I still to this day say they saved the company by investing at that point.

43:21So that was another instance where we were going to die. Then, you know, fast forward, there's like another instance where we're going to die before our Series B. Then we get the Series B. And like probably like around the time we raised the Series C, we were like it was valued at like two and a half billion at that point. That was when I started to say like, okay, maybe the company's not going to die, but we still need to act like it might. We still need to have this thought in the back of our mind of like, if we are not moving at sufficient pace, if we're not sufficiently scrappy and thoughtful and hardworking, we're going to stagnate and then the business is going to die.

43:52So I don't think that that feeling has fully gone away. This might be a silly question, but is the only existential threat in your mind running out of money? no of course not i mean businesses die for many reasons um but i think the the existential thought of running out of money in the earliest phase was very clear to us certainly you know there's this um there's this book and i can't speak for the whole book because i read a long time ago and i don't remember all the details but i remember the title um the book the title of the book is called pleased but not satisfied um and i think that's how i'd probably describe my management philosophy is that i'm pretty pleased with what we've accomplished like i'm pretty pleased with the business that we've built so far.

44:34I'm pleased with the things that we're shipping. And there's a lot of things to celebrate, but I'm absolutely not satisfied because I think the opportunity ahead of us is so great. And I think the threats to the business in the longer term can be very real if we're not continuing to move at the pace that we need to move. And so, you know, I'm deeply motivated by the mission. I think the impact that we can have on the world is like quite substantial. And I think we've only scratched the surface of that. So, you know, in a lot of senses, I'm very pleased with where we are, but it's certainly not satisfied.

45:02And this like dissatisfaction, is that how you are with everything or is that specifically to Plaid? I think if you ask my wife, she might tell you that it's kind of the same where, you know, we like I run a lot, like I do marathons and so forth. And like, yeah, I'm happy with the times that I'm getting, but I'm absolutely not satisfied with the times that I'm getting. I think, yeah, I need, it's probably better for me to like learn to turn this off a little bit in personal and social situations, but you know, it's built in. I did my first triathlon, maybe my last, but I did the escape from Alcatraz here.

45:36And I had this weird feeling before, like leading up to it, like the swim was the thing that I was just dreading. Like I do not want to swim from Alcatraz to shore. And I kept telling myself like, once it's over, you're just going to be really happy, really proud. Like it's going to be over and you're going to feel great. And then after it was done, I did not feel like that. Like I felt like, man, I probably could have gone faster. I was waiting too long between the swim and the bike. Like, why did I take so long on the run? Am I going to have to do this again to get like, you know? And I was like, what the hell?

46:11Like, there's just no winning. What's the saying? The reward for good work is more work. Right. It's like a cake eating contest and the reward is more cake. Yeah, exactly. Exactly. can you talk about the PNC bank stuff? No. Okay. All right, fine. Okay. Sorry. Maybe offline, because I do want to know about it. I have a few things that I do want to ask you that hopefully you can talk about. The first is, you said you built a shitty app before you built Plaid. We built a bunch of them. What does that mean? So the initial idea for Plaid is we wanted to build something that helps consumers live a better financial life.

46:56This was 2012, like late 2012, early 2013, living in New York. And around that time, it was the tail end of the Occupy Wall Street protests. It was a period, and setting aside the politics of all of that, it was pretty clear that consumers were frustrated with financial services. It was a period after the 2008 financial crisis where people were mad at their banks. and we being kind of like naive entrepreneurs said, all right, well, we want to build a tool to help people feel better about their finances. Like we want to build a tool so people feel more protected by the financial system. The first thing that we tried to build was a budgeting tool.

47:37We had seen Mint and when at the time, I think it wasn't on mobile devices. So we were like, all right, let's build a mobile version of Mint or let's build a more accessible version of Mint. And we had a bunch of signups. People were excited about the product. And then we had a bunch of people first turn off the notifications when we started telling them that they spent too much money on coffee and then delete the app and never come back. So V1 of the first idea we had was terrible. We then pivoted and said, all right, well, what other tools can we build to help consumers better understand their money?

48:08We built one that was about helping people find cheaper places to spend. So, hey, you're in this grocery store. There's a grocery store down the street that's cheaper. We would tell people that. and then they would respond by saying, yeah, I know it's cheaper. It's kind of crappy. I don't want to go to that grocery store. So again, another one that failed, had a lot of users and then didn't go anywhere. And this is you and your same co-founder? My co-founder, yeah. And then eventually this intern that we brought up. I call him the intern. His name is Michael. He's a really wonderful engineer. I guess I should give him a real shout out.

48:36He's not an intern anymore. No, he joined Flat. He was full-time with us for a long time. He's like a stud engineer.

48:45So that was another one. And we built a tool to help you make recommendations on like, hey, you spent in these places, you might like to spend in those places. We built a tool that put a play button over your entire financial life. So you hit play and it was like this magnifying glass on a map that would move around and zoom in every time you spent money in a place. So you could hit play on your vacation and you would see all the places you spent money in your vacation. It was kind of cool. That's actually kind of cool. Yeah, there's like a bunch of these things that got real traction and then immediately no more traction and couldn't monetize in any way.

49:16And so basically the unifying backend to all this is what ended up becoming Plaid, which is how do we get data from the banks? How do we make the data into kind of a format that can actually be useful? And that was around the time that our friend Peyton from Venmo came and said, Hey, can we license the backend? That might be interesting. Did you and your co-founder decide together, like, all right, come hell or high water, we're just going to try winter stuff until we make something work? Because the alternative of going back to Bain and doing consulting is just untenable? Well, we both quit. So we both had no job.

49:48You know, I think I don't know how great co-founder relationships are forged, but ours was uniquely great. Like co-founder is as determined as I am, like as focused as I am. He's a much better engineer than me. I'm probably a better salesperson than him. But like it was a thing where like we were in the same boat. Like neither of us had family money to fall back on. Neither of us had any backup job offers. we kind of knew that if we didn't make this thing successful, then we had to go interview at Google and try to get a job. And neither of us wanted to do that, like vehemently. And so we were just in this same boat.

50:25Like we had no money. We had to make this thing successful. And it was fun. You know, you look back at the early years of starting a company and, you know, the most fun is often those moments that are actually also the toughest. You know, you're in the office. I remember I had this period of time where, and we pushed each other really hard. We pushed ourselves really hard. We pushed each other really hard. And it's a period of time where I would take photos of New York at 2 a.m. every day because I would be walking home and the city would be totally empty and I thought it was so beautiful. And I'd send them to my co-founder.

50:56He'd send me one back. And this was just the zeitgeist that we built into the culture of this two-person, then three-person startup. But there is a great bond that's formed by going through hardship. And I think we were fortunate to go through that hardship together. And now, despite the fact that he's left the business, he's off to new things. We're still really, really close friends. And so I got so lucky in that co-founder relationship. I think it is much lonelier to have no co-founder, certainly. But people step up. And we've had execs that have become really, really close, that have taken on a really important part of the business, both structurally, but also emotionally.

51:32They're people that I can talk to. So it's been great to see that evolution. I read a quote. everything you read online is obviously true but tell me if this is true or not that this was you describing after the deal collapsed that you said there was a month or two where I actually just don't remember what happened because I slept so little the 2am comment reminded me of that yeah is that true yeah yeah this has happened a couple times but there's a particularly long one. Basically, like the first quarter of 2021, I don't remember very well. But I have photos of what I've done. Like, you know, my wife will remind me what's happened.

52:16But like, I don't have any real memories in that period of time. And it was largely because I was sleeping so little because I was just like, it was like, that was, again, max emotional management, working with a team, talking to people saying, hey, look, I understand you're not going to get the cash to buy that house. We will do a secondary as soon as we can. And by the way, here's why you should be so excited. And just on repeat, talking to everyone, trying to make sure that everybody gets the message. And the great, the great outcome is that like the vast majority of the team stayed, um, uh, the best for the team, you know, got excited about the future.

52:46Um, but man, that was the hardest period I think I've ever worked. Like you would come home and you would lay in bed awake or like, there was no coming home. I like we were in COVID. So like I was in my office, um, and I I would be like on these Zooms all night. Then I would like finish kind of like well after dinner talking to people. Then I would do actual work. And then I would fall asleep at like 2 a.m. and then be back up at 7. And so it's just like. And you were just so delirious. Yeah. From this schedule. You don't remember. Well, I mean, delirious or not. I don't know how I was acting.

53:17Like someone else could tell me how I was acting in that period of time. But it is now just a blank spot in my memory. That's insane. And it's happened before besides that period too. Yeah. Yeah, we have a tendency to push with a lot of hours sometimes. Damn. Do you... I don't think that's healthy, by the way. I don't think that other entrepreneurs should do that. No, I don't think you're glorifying it. This is not fun. And is it because you just feel the need? What is your rationale in that moment? Look, I don't think I realized it at the time. You're just in overdrive. Yeah, exactly. So, I mean, and I would say that most entrepreneurs are like this.

53:58If a big challenge presents itself and it's a challenge that needs to be solved, like they'll go all out to solve it. In this case, it was just it was very clear what I needed to do. And I was in large part the only one that could do a lot of these things in those periods of time. And so the answer is just do it. and you know had I realized that it was would have impacted my memory or like that that that loss of sleep for that period of time maybe you'd have longer term health effects I probably wouldn't have done it or maybe would have been a little bit more thoughtful about how I structured my time yeah but you know the problem in front of you yeah I just don't I mean like maybe you would have done something differently but also like isn't this the like double-edged sword of a fire that burns in your belly like that fire sometimes gets really hot you know like it doesn't you don't get to really decide and choose.

54:46Like, yeah, you know, it's, it's the entrepreneur thing. I mean, I think, I think a lot of entrepreneurs probably can empathize. Yeah. Um, there's another quote that I read. Um, it said, I, uh, I'm too busy to recruit. It's kind of like saying I'm too hungry to eat. I love that. Can you describe it? Yeah. I say that to my team a lot. So, um, you know, there, there are times when, uh, you're pushing really hard, you have huge goals and, um, then you also need to be recruiting because you have goals that will manifest maybe the next quarter or the quarter after that. And people will say like, hey, I'm going to cut back on the amount of recruiting that I'm doing in order to solve this challenge.

55:24And from time to time, that's the right answer, but it's pretty rare that that is the actual right answer. And so the conversation I have with the team is like basically that, like, hey, saying that you're too busy to recruit is like saying you're too hungry to eat. You may be busy right now, but if you don't eat, you're going to die. And so you may be busy right now, but if you're not recruiting, if you're not building the capacity of the organization over time, then obviously you're not going to be able to achieve the next goals and the next goals after that. That was particularly important in a period of hypergrowth.

55:55Now I talk to the team about that, but I also talk to them about building leverage. So right now we're going through this big AI transition in our business. Every job, I believe, will be AI enabled or it will not exist in 12 months. And I've been saying this to the team, the horizon was a little longer, but I've been saying this to the team for about a year. And so, you know, the rationale of, oh, I don't have time to go learn the AI tools is exactly the same thing. Like you don't have the time to build the leverage that you need to be very successful at your job in the longterm. Well, that logic doesn't really check out.

56:25So we built all these tools and processes internally, but it's also a bit of an ethos just saying like, build yourself the leverage that you need in order to be successful in the longterm. When you were going through hyper growth, how much time were you spending on recruiting? Probably 40%. Okay. Maybe 50 % in some periods. More from time to time, but... That's a lot. 40, 50 probably. That's a lot. Yeah. That's a pretty consistent answer that I hear. And I think it doesn't really settle in how much that is unless you really think about half of your working day is recruiting. That's a lot. it is um but you have to find a way to love it like i love recruiting that was one of the most fun things that i get to do and i started out hating recruiting um and the reason i hated it is like i felt like i was selling myself i felt like um you know if a person didn't want to come work for us then like that was on them um i i felt nervous to ask questions i felt nervous to be direct with people give direct feedback in these interviews um i felt nervous to like push people hard because like you know i didn't i felt like i didn't deserve their time at that point Now it's fully flipped for me.

57:32I get to talk to the most interesting people in the world. I get to ask them hard questions. I get to have a great conversation with them. I think that most people, or certainly hope that most people that I'm interviewing, walk away thinking like, oh, that was a really interesting conversation, come offer or no offer. I'm really happy that I had that conversation. And it's become a game, right? So recruiting becomes a game. You get to effectively draft your ideal fantasy roster, except there's no limit to your roster size. So you can find as many great people as you want to. and you get to put them on your fantasy team.

58:01And then this fantasy team gets to go out and tackle challenges and become friends and all this stuff. Another great aspect of recruiting that, you know, I didn't quite realize until a little further in my founder journey, but like as a founder, you get to build the environment around you. Like you get to choose who you spend your days with. You get to recruit people that you're going to learn from and be inspired by. And, you know, in almost no other job do you get to have that level of world building where you can create this wonderful environment for yourself and of course for everyone else, but you get to choose who's in that environment.

58:36And that for me has been super rewarding. Like I'm really close friends with a lot of the people that we've hired over the years. And it's a unique thing that I get to do. That's a very like profound way of describing it. Like it's your world that you just get to design. You're like Pokemon going and catching them all.

58:57When you talk about getting leverage from AI as a person on your team or whatever, how do you think about that as a CEO? Like, how do you think about what are you doing today that's different from what you were doing two years ago, taking advantage of some of these tech? I talked to Chad GPT far too much. It's become my friend. I've built custom GPTs to do all sorts of different things. I built my own exec coach. Are you serious? Yeah. What did you feed? I went and pulled a bunch of snippets from a bunch of books that I was inspired by. I pulled stuff from autobiographies. I pulled a bunch of podcast transcripts and so forth.

59:38I fed them into this custom GPT. And I was like, hey, you are an exec coach. I gave it a certain set of parameters that I wanted to coach me on. And then I just talked to it every now and then. It helps me work through problems sometimes. It's not perfect by any stretch, but it gets you a unique view of it. But also at one point, there's this like, this guy that I'd never met, but I love his books, this guy named Josh Waitzkin. And he's like, you know, the exec coach to the most impressive people out there. He'll never be my exec coach, right? Playa's not a big enough business. Like I don't run like a trillion dollar hedge fund or something like that.

1:00:13But I fed a bunch of his stuff into it. And I was like, now you're the Josh Waitzkin exec coach. Like, please coach me. And it was kind of cool. Like, you know, having read his books, it feels like it got somewhat close. So those are some of the more fun things. But philosophically for the organization, it's just, it's making the clear statement, like, hey, everybody is an AI-enabled version of themselves. So to our engineering team, some companies historically had this concept of like an applied AI engineer. And we have the expectation that every engineer is an applied AI engineer. We originally tried the applied AI team, But then we were like, no, no, this needs to be everybody.

1:00:50And so it's just making really clear what the expectation is of everybody. Everybody should be innovating. Everybody should be learning and then setting aside dedicated time to go learn about it. So we do these AI days, both company wide and then as a team. And then we back those up with with hackathons where like we'll do AI day where we'll teach you a bunch of stuff. You have time to go learn. And then a month later, after you played with the tools, we'll do a hackathon where you go deep and build something. And we've massively increased the number of both AI days and the kind of training days and hackathons that we do this year.

1:01:17And I think we'll continue that into next year with the expectation that our workforce is going to be fundamentally different in how they do the work by the end of next year. If you were a betting man three years from now, does that hack count go up, down or flat? Up, probably. It doesn't go up at the pace that it might have in a different era. So, you know, seeing the increased efficiency coming out of our engineering team, we don't need to hire new engineers at the pace that we did before. But we will continue to hire engineers and we will continue to see the efficiency gains improve. So the net output of the organization will be as much, if not much greater than what it would have been had we hired at the pace that we did, call it, a couple years ago.

1:01:54I think a thousand people is quite a lean. It's like a pretty lean organization, given what you all are doing. We try to be fairly lean. Yeah. Do you buy this perspective that all organizations are going to be half the size down in headcount? Not, I can't speak for all organizations and I certainly can't speak for companies outside of Silicon Valley. Because, you know, I don't know how the insides of an accounting firm or a law firm work. And there I do think there will be meaningful job changes. But in our business, like, and in all of the other startups that I know, if you can do more, you're going to do more.

1:02:32and if you can afford to hire more people in order to do more and the leverage that you get out of those people is dramatically larger, you're going to just build more stuff. You're going to create more products. You're going to add more value for your customers. And so I think that the insatiable demand of doing more, building more, creating better products for customers and so forth, that'll continue. And I would expect that startup headcount will continue to grow. I can't speak for big companies, but certainly for us, if I can hire an engineer that's twice as efficient, that sounds great. That's a great deal.

1:03:01I should hire that engineer and then build products that generate far more value for the company. I appreciate you doing this. Thank you. Of course. And I'm sorry again for the delay. That's okay. Are you, speaking of hiring, where are you hiring? What are you hiring for? Any key roles that you want to shout out? I mean, we're hiring for basically everything in New York and San Francisco, especially engineering, go to market in both places. And we just opened a Raleigh office. So if you know any amazing salespeople in Raleigh, we're building a sales office there. Cool. When you hear the word grit, what do you think of?

1:03:39You know, I, this is maybe a weird answer to it, but like, I think of those periods of, you know, the hardest that you push, but also the most fun that you have, you know, impossible challenge in front of you. You know, I, and I think I speak for a lot of founders when I say it, like, that's the moment where you're the most alive. You see something that's that's that's totally impossible to do. And you're like, yeah, I'm gonna go figure out how to do it anyway. Great answer, Zach. Thank you. Thanks for having me. That's it for now. If you liked the episode, please leave us a review or go back into the archives where we've done more than 200 episodes with some fantastic folks.

1:04:15This podcast is a client of Perkins production, and I'm Juven. Thanks for listening.

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