The Science of Scaling & AI - Mark Roberge

24:16um i think they're they're outside of what's happening right now they're the long-term play is no matter what we are going to have some serious growing pains and society that you knew back in the early 2000s it doesn't exist anymore just like society that i grew up with in the late 80s early 90s that's gone too you know that nostalgia is nice but that's not where we're going we've invented planes we know how to fly no one's taken a boat made out of wood across the ocean anymore. We're in a different world. So I agree with all of that. I want to get back to what you are known for. So you can put the jacket back on and we can talk about the logos and all that to, to stay, to play fair.

24:54There are things that you're really well known for and that you're really well read on. What are the things that you, that drives you is what I'm curious about. What is the passionate thing that you're like, God, I wish more people do this about, about economics, about, about scaling, about these are the questions that when you've got those couple students at Harvard and they come over to you and they want to ask you questions. And you're like, these are the questions that I love the most. I wish I could talk about this more because this is what they're missing. This is what isn't in the books.

25:21When we talk about scaling and we talk about AI and we talk about the economics of it all. What are the ones you're like, God, guys, forget everything I teach publicly. These are the conversation. I wish you guys knew this.

25:33Mark Roberge:Yeah. Okay. So let's get back to like today and let's get back to like, you will change something in your business after this podcast, like within the hour. Okay. So, um, it's really about the scaling, like, and, and, and turning scaling of revenue from this, like, lick your finger, put it in the air, do it how open AI or Google did it, um, to actually a science. And this is, you know, this work has been something I've been working on for 10 years. I never intend to honestly write a book. I literally just like go out when people ask me to do speeches, just like you, Charles, I speak about what I'm seeing.

26:17Mark Roberge:And I do that. I probably create a new speech twice or two or three times a year and usually launch it in like a big venue like South By or Sastra or whatever. This particular work dated back to a speech at Sastra in 2019. And again, I've done, I did 20 speeches, 20 big new speeches before, 20 big new speeches after. This one happened to just go massively viral. And people asked me to keep writing it, keep speaking about it. And eventually like Stanford's like, can you write this up? Right. And it really was a reflection on like having been in the boardroom for so many of these companies, watching some go IPO and many go bankrupt.

26:55Mark Roberge:What was the common theme? And the most common theme was the strategic decision on when they decided to scale revenue, which in a B2B context means ad salespeople and a B2C context means five extra marketing budget, and how fast they decided to do it. And it's actually been absurd how haphazard it is. It's crazy how many classes we have in college on how to account for and accrue your revenue and next to zero classes on how to scale it with the same rigorous frameworks. And that's really what this journey has been about is to bring those frameworks so that people can calculate using their own data when they should scale and how fast.

27:42Mark Roberge:Okay, so let's extract that back to a couple principles. Oftentimes when I start this out with an audience and class, whatever, I'll just be like, all right, well, when are you ready to scale? And a common answer is when you have product market fit, which I like. product market fit i will credit eric reese with the lean startup at the beginning of the century and it really evolved us as entrepreneurs from building products haphazardly in a lab to co-building products hand in hand with customers in an agile way beautiful beautiful change to product development and now out of that came this word product market fit which is cool but when i asked 50 people to define product market fit i get 50 different answers which does not do well for a rigorous framework we're trying to make a critical decision around right so and in fact most of those answers are either when i have 100 customers when i have 500 000 in revenue or when i have a thousand inbound leads all of which i think are wrong you can define however you want.

28:52Mark Roberge:But my follow-up question to each of those answers is like, what if you have those things, but half the customers churn and don't like your product? Do you have product market fit? Well, no. But the founder will say, I'll just adapt the product to their needs. And I'll be like, okay, well, how will you know when you got it? It's like when they don't churn. And I'm like, Exactly. Product market fit is not about selling people, getting revenue, closing customers. It's about the customers realizing the value you promised. And that is best quantified by retention. whether you're a software company and they come up on an annual renewal and renew or you're a sweatshirt company and they buy the fall edition and then they buy the winter edition that's when you know you have product market fit and so like we can unpack that more you know the book goes into like how do you create a leading indicator around that and like codify the whole thing just like you would an income statement or cash flow but that's really the first goal of that decision is a more rigorous definition of product market fit rooted in customer value creation and retention.

30:06So if you've got one, and just to get the people out there, let's say you've got a product that's you're driving in thousands of new subscriptions every month, whatever, and you're crushing it. And your turn rate on that is 90 days. And you're like, Hey, I'm known for this. When you're having these conversations with board of directors and you're having this conversation with founders and owners, what are the first steps you do? Cause I want to make this reduce and I want to make this scientific because again, this is, it's proven. This is what works. You do this, you do this, you do this. Churn rate's huge in most of the industries for almost everything.

30:38It's huge. There's only, there's very few people who have cracked that code and the people who have cracked that code are seeing some crumbles in that foundation as well, because the market changes and what people want changes. So there's always this adaptivity to it. When someone's in this, like, Hey, I'm doing a great job getting people in the door. The top of my funnel is full. We're converting or closing them. And then we're spitting out for whatever reason, even if they have phenomenal service, even if they're doing A, B, C, D, E, how do you reset there? Where you're like, oh crap, I'm losing people.

31:06We have spent all this. The LTV on these individuals is just, it's collapsing. What are some of the things that you've seen that could be kind of, again, back to rigorous, because I love that word, that you can go through and mark that out?

31:16Mark Roberge:The first one is instrument it so we understand. The second one is like diagnose and fix. Okay. So the instrumentation is critical here because oftentimes this measurement of retention is a lagging indicator. You just said it, Charles, I've got these subscriptions coming in and 90 days later, 180 days later, they're not renewing. So you can't make a bunch of fixes and then sit around for 90 days and wait to see what happens. So that's the first step is we have to bring that measurement back to a leading indicator. And I call that the lead indicator of retention. Okay. And as a rigorous framing, I suggest that you define it as P percent of customers do E event every T time.

32:08Mark Roberge:Okay. So now I've honed this in on the decision of three variables, P, E, and T. Okay. Now, let me just like try to bring that to life to conceptualize a bit. For Slack, it was 80 % of customers send 2000 team messages every month. That's beautiful, right? So like imagine Stuart, the founder of Slack being like, you know, there's five engineers in the room. They're about to put the first version of the product out. And he's like, our first goal is to get to a million in revenue. Like you can see how the organization would react, hire a bunch of salespeople, try to increase ACVs, whatever. Or our first Northstar metric is to get 80 % of our users to send 2 ,000 team messages every month.

32:54Mark Roberge:Totally different set of actions. Really close Microsoft on post-sale activity, user happiness, like what bugs are preventing that from happening? Right, so that's the first step, all right? So like for HubSpot, it was 80 % of customers use five or more features in the platform every month, okay? So like we can talk about how you make the decisions on those, but point number one is take that long-term metric of retention and bring it back to something that you can measure one month after a customer signs up so we know if we're fixing it. The second part is now you can diagnose why that's not happening.

33:32Mark Roberge:And so you have a couple options there. Let's just say half the people are churning. Half the people aren't hitting that lead indicator of retention. Well, that means half of them are. so oftentimes you can like look at them from a persona or segment perspective and you can be like oh my gosh everybody who has more than 50 employees is hitting it and everybody under 50 employees is not well great let's now only acquire people with more than 50 employees right so like that's a very simple example but like that's just really a refinement of what we call the ICP or ideal customer profile. So sometimes you can do it in that way.

34:16Mark Roberge:As long as that ICP, that segment that's doing well, if that's big enough for you to scale through your growth aspirations for the next three years, you're good because you'll be able to scale and hit those goals for three years. And that will also give you time to open up the other segments where it's not working, to run experiments, to tweak, to adapt so you can increase that TAM and grow even further. Okay. So that's one. Other ones are just like, you know, sometimes there's product gaps. You got to do that. Sometimes there's onboarding opportunities. The biggest one where the most common one where people look last is how it's being sold.

34:59Mark Roberge:If you're selling, because like part of it's like what we already talked about, which like, who are you selling to? and part of it is like, how do you sell it? Are you lying about what it takes to set it up? Are you lying about the extreme value they will get? Are you including IT or whoever's needed to set it up in the pre-sale conversation? Like I don't have to do any of these to get the contract, which is the problem. When we set the goal as the contract, I skip these hard steps that will ultimately prevent the user from seeing the value, right? So that would be it is number one, you've got to extract the long-term retention goal back to a lead indicator retention that can measure it in the first week or month of a customer's experience with you.

35:47Mark Roberge:And number two, using that, you need to diagnose the situation and make some changes to the ICP, the onboarding, the product, or the sales process. So what I like about this is it's very rigorous and we changed our goal from the beginning. we changed the target and then moved it back into and that will and that'll obviously affect the target in the long run it's kind of like the the conversation of we have right now where trains are trying to become more like planes and that's it's a wrong thing to do people who want to get there fast are willing to deal with discomfort and not have tables people want to be on a train want to have that first class experience they don't want to be corralled they don't want to do that so when you see the amtraks and you see that the trains across the company or across the country trying to be more like planes i'm like you're gonna lose you're more expensive you're slower you're never going to make it let's redesign this and because the first class experience i get a table and i get to sit i have a lay down chair and i get food and this is amazing and i have this very nice person bring me amazing food and if i'm on swiss air i get move and pick ice cream which makes me very happy and doing all of that but if i'm on a train and i'm on amtrak you're trying to make it more like a plane stop it stop it boston to new york Amtrak, Amtrak, make the Wi-Fi work in Canada.

36:57Please, please. A decent student. Come on, that's the whole differentiation. I will take your stupid train if you don't make it like a plane. If I wanted to be on a plane, it's not that complicated. So understanding what your clients really want, that changes retention. Have fun, Amtrak. You could use all of this in your next board meeting. We'll just yell at you even more. Stop trying to be planes. So where are some companies that you see this mistake all the time where they're trying to be planes? Again, for that example, where you see AI or software companies or the people who are the biggest mistake for any of these industries is like, God, you guys just stop doing this and have some tangible action.

37:37Mark Roberge:Oh, it's a really good question, especially now, because we are in this Clay Christensen's innovator's dilemma moment where we're on the brink of a massive technology shift, which Clay's work has shown that the new startups actually win most of the time relative to the incumbents because of what he calls an innovator's dilemma. And so, you know, we can probably conceptualize this best by looking back 20 years to the rise of the internet and what the innovators' dilemmas were then. Now, keep in mind in the B2B software layer where I spend most of my time, the number one CRM in 1998 was Siebel. The number one HR platform was PeopleSoft.

38:28Mark Roberge:And the number one IT software platform was BMC. If you look at the market share capture in the last 20 years in those categories, their capture is abysmal compared to Salesforce and HubSpot in the CRM stage, compared to Workday in the HR days stage, and compared to ServiceNow in the IT management stage. All cloud-first startups, right? Why is that? What were the innovators' dilemmas? these can often be technology shifts, business model shifts, distribution shifts, whatever. All three of those were drivers. First one, pricing. All three of those incumbents, it was like, here's a floppy disk, give me$4 million.

39:19Mark Roberge:Salesforce was like, here's a login, pay me 500 bucks a month. They couldn't copy it. It would have killed their stock price. Everyone would have left. In innovators dilemma number two, the entire sales team was like good looking outside sales reps. Salesforce and Workday were distributed through MQLs passed to an inside rep. It was too politically disruptive to do that. Okay. Number three, they had to rebuild the floppy disk product to a cloud product. Like McKinsey was literally in there being like, it's going to cost you a billion dollars to rebuild this. We just interviewed 500 CTOs in 1998.

40:07Mark Roberge:None of them said they would ever put their data in the cloud. No one's going to buy this thing. Innovator's dilemma, the rest is history. So the question now is, what are the innovators' dilemmas that today's no-name AI-native startups that are happening at Caltech and MIT and Harvard today will take over the category? 100%. And I can talk about what some of those are, but to your point, Charles, if you are listening to customers exactly on what they want, you will be iterative and fall into the incumbent's world. Absolutely. customers are terrible yeah customers are terrible visionaries that is your job yes listen to customers that's the near-term value like show them the vision evangelize it whatever but to your point like you you have to be close to customers but you can't let them dictate your vision and business strategy completely you have to be a visionary especially in this moment so here's the question i have on this one because i run into this all the time where people come in, they're like, hey, can you help me scale?

41:12There is conversations where I'm like, yes, but not you. In other words, you're so big over here and you're doing this, that if I make these changes, I won't make it out of your boardroom alive. Your staff will lynch me. It's just, it's just, it's not going to happen. Make these scaling changes that you need to do. An example of this is Citrix. That the conversation in that world, I was like, guys, it's, it's, it's over. Give the best parachute you can to your staff. Do the best thing you can to them. It's over. You're too big of a ship to turn on a dime. There's a lot of people who, when they look at the science of scaling and they were like, okay, I've read the book and I'm going to do this and it's going to be amazing.

41:50You're like, yeah, that's adorable. That would work if you're a pigeon, not if you're a triceratops. It's just new. How do you deal with that in that environment? People come in and say, hey, I'd love to be able to do this. I've read your book. I understand what you're saying this all makes sense but i'm a cruise ship trying to do a 180 in a puddle

42:09Mark Roberge:what what do you do great great context because like it's a good and and just to give people the context here during the time between hubspot and um stage two i spent five years as a senior advisor at bcg doing about a different engagement every quarter with companies that were doing north of 10 billion in revenue global, helping them with this situation. And I've also like, you know, done a lot of tangential work around it, speeches, et cetera. And so this particular work, the science of scaling is not just for brand new startup, build new product today. It is also the way that a 10 billion dollar company will bring a new product to market or take their existing product to a new market.

42:52Mark Roberge:Either way, you follow the same steps. Okay. Now, the implementation strategy is kind of what Charles is digging into here, which is it's not advisable to completely blow up the org and just try to push this into the core org. Sometimes you have to do it if you're just dead in six months and you have to like, you know, the street just needs a big answer quick. But that's like hopefully a Hail Mary you never have to deal with. what instead you should be doing is running small experiments separate from the core or as separate as possible and this is right out of clay's work and also a guy named michael tushman and the ambidextrous organization if you want to check out his work um where you're running experiments to almost essentially disrupt yourself okay so like the problem like we talk about citrix for a second the problem with a lot of these large incumbents is when they're thinking about how to redefine themselves in the AI era, they do what I call an inside out strategy, which is like, okay, what do we have as leverageable assets that we can bring to the AI opportunity?

43:57Mark Roberge:That's what causes you to get disrupted. Because the right answer is you have to like remove everything we have and just say, okay, what if we were starting a company from scratch, clean slate? What would we build, knowing what we know about the problem, the way this problem will be solved in a very AI mature era. That's the answer. Now it's like, how do we go through the difficult work of having this to get over there as fast as possible? And usually what that entails is let's take, you know, 20 engineers and, you know, 10 go-to-market people, support sales, marketing, whatever, and like open up an office as far away from headquarters as possible.

44:42Mark Roberge:Yeah. Maybe we even acquire a small startup to do this. Yeah. And like, let's give them some sandbox. Maybe like we're struggling in the Southeast. Let's take the Southeast away from the core business and give it to this little group and see if they can create the vision that we just did. Brand new product, new distribution, new pricing model, whatever, and see what they can do. The board's not going to be all up. The board's going to be psyched about that. It's like 0.01 % of your spend and 0.01 % of your revenue. It doesn't matter. But then let's be clear in the principles of the science of scaling.

45:17Mark Roberge:We just talked through a couple of them, the milestones they have to achieve. And hopefully they succeed. And then we can give them the Northeast. And then the Northwest. And then the Southwest. And then we can give them Asia. You know what I mean? That's a little aggressive. But you get the point. You're essentially cannibalizing yourself systematically. and you're giving that team a shot to go after the right answer as opposed to being, you know, distracted by the competencies of the current legacy org. Right. You're having this self-canibalization before the market does it to you. It's the idea of, hey, you might be the best hockey players in the world and you show up to the rink, but if that rink is now a pool, all of those hockey players are done.

46:00It's over. So you have to be able to pivot and do it beforehand? Because, you know, again, using citrus as an example, sorry, y 'all, y 'all got eaten alive and you're incumbent, you couldn't turn that 180. So having these smaller ways to do this and pivot around is super huge in order to do that. Have you seen any ways when you have that innovation? Because this is what people are going to turn around going, well, shit, I've done it like this for 20 years. And we just started this conversation with the fact that the world that you grew up in does not exist anymore. It's gone. Do you have ways when you've sat down with these people who have done it this way and they're going to have to innovate, which is tough for people, but sorry, it's now a swimming pool.

46:37It's not an ice rink anymore. Deal with it. What are some specific scientific or back to our term of this, this podcast, uh, rigorous ways? Because when I think about this, most businesses, it reminds me of the movie that's probably going to be too old for this reference, but there was a movie called the last starfighter and they were sitting there spinning out. And at the very end, it's like, we're about to smash into this planet. it what do we do and this thing smashes in front of his eye it's like we die most people are in the humor most of these people are like that's where you're going you don't have this how do you innovate how do you teach your squad that okay we've got to innovate through this is it through acquisition or what are the ways that you normally do it yeah any of them can occur

47:15Mark Roberge:um i think in this ai world when i'm talking to incumbents um i do prefer acquisition because to your point, I do think that one of the biggest innovators dilemmas for this cloud to AI shift is not necessarily going to be in the product offering or the pricing model. Those will play a part, but they're going to be how the actual company runs, right? Like kind of the stuff we were talking about in the beginning with phase one, two, three, and four, getting to that GM model, if that actually comes to life, your current staffing is not set up around that. Correct. And so if we have a significant evolution, rapid evolution, and it's happening in how a company is structured and runs, and that changes the optimal hiring profile and skill set of an engineer and a seller, it's going to be a lot easier for a brand new company to have that answer and run in that way and pass those advantages on to the customer than it is for Citrix to retrain everyone or reorg the company around it.

48:30Mark Roberge:So I think the org design and skill capabilities internally is the biggest innovator's dilemma. And because of that, I do think you have to solve this through acquisition to acquire that talent nucleus from the beginning, keep them separate, let them run at the right answer and systematically cannibalize yourself and the other transition to that is being very aggressive on your corp dev um team and your venture arm um you know like probably triple your budget there you know triple the staffing that increases the amount of ears and eyes you have on the ground of what innovations are happening in your in your category it allows you to make investments, make acquisitions, um, to basically codify this.

49:21Mark Roberge:So that that's kind of my move with the big companies right now. So one of the things that people are talking about what's in their orgs is personnel and leadership that because the entire ballgames change. And just to stay with the example, it's no longer an ice rink, it's not a swimming pool leadership and how we interact on human behavior is going to evolve as well. The way that we interacted, we led back in the early 90s is very different how we do it now. I'm very blessed to be around some individuals who are operators and they talk about how their leadership had to change from when they were downrange in Vietnam versus when they were in Iraq versus what we have now.

49:54Those things are changing. We're implementing one of the notorious ones that it's this concept of extreme ownership and using decentralized command. And it's worked very well for a very long time. AI is disrupting that as well. What are you seeing from the human behavior side and from the leadership side, when you're building these org charts, which are now completely different and we're no longer siloed except HR, you go stay over there, HR, um, these other silos that are connecting and they're doing this, how are you seeing leadership styles change as well? Then how do you leverage that in scaling?

50:25Mark Roberge:Yeah. I mean, I think there's like, um, one, you're, you're reversing the specialization movement. Um, so we can look at that both in the R and D org and the GTM org. um in 1992 in the r &d org there was one role and it was engineer you know like computer programmer whatever and now it's product manager front-end engineer back-end engineer designer data analyst data scientist like it was it was the right thing for that time but we're starting to see trends where like pms are being asked to do more of the deployment right because of the the advancements of like in simplification of product development um so so that has a pretty big implication on the org as well as the leadership is you know leaders are really um you know hiring more like uh founder types athletes as opposed to specialists right and you see the same thing in um uh in the go-to-market arena like we had one role in 1992 and it was salesperson.

51:36Mark Roberge:Here's a phone book. Here's a territory, book some meetings, sell some customers and renew them. Right. And like fast forward 25 years, we have SDRs and AEs and AMs and CSMs and SEs, like super specialized. I think we're going back. I think we're going because of AI, like that specialization has some disadvantages starting with a terrible buyer experience who gets passed from one person to the next. Right. So like we're going back because the advantages don't offset the disadvantages in a post-AIA era. And that has a massive implication on the leadership structure, that you don't have these siloed departments that need to be aligned.

52:16You instead are measuring almost like many business owners.

52:21Mark Roberge:You're managing many business owners, which has an implication on your hiring model, your ramp model, how you hold them accountable. I think the concept of going back, you know, we started with this idea that, hey, we went through nomadic and then non-nomadic and then back again. this going back, you know, circling back to that. And that brings me to, you know, because you are connected to Hobbit, there's this idea that we have right now that college is garbage and no one should do it. And it's a dead institute. And it's just, the time has passed and it's not something valuable anymore. And most of the people I meet who are young, they're like, I'm never going to college.

52:53Why would I waste that money? That's just stupid.

52:55Mark Roberge:Sure. That's where I was going. Yeah. Where are you in that ballgame where it's like, should we do this? there's a lot of like it's just so freaking expensive yeah um and i have some colleagues steeg for example is doing some great work on this at harvard um where i do think like i hate to say it but some of these like lower tiered colleges are just as expensive and just don't have the career promise that it's going to make sense. So like that, that it's just very, I'd rather see you do other stuff than do that. Now, like, you know, I'll stand behind today's, you know, Harvard, MIT, Stanford, like that, especially if you're coming out of like, you know, not much, like it is such a transformational experience.

53:46Mark Roberge:I think it's worth it, even though it's expensive. And you'd be shocked, like the actual real cost to people, the amount of grants and scholarship that is given, um, is extraordinary. And that's not really talked about as much. Um, so just like, so we have the facts there, but yeah, I mean, if we zoom out and in the same way that during this discussion, we've blown up and reinvented, you know, government economy and sales teams, let's go at it with education as well while we're at it. Yeah, dude, seriously, you're 18 and you go through four years of school and that's it. And then you're done. And in school, you're learning how to be like CEO of a company as a 21 year old.

54:26Mark Roberge:That's stupid. Like literally, and you come up with these stupid, like you're, you, you, you like, you studied like 17th century Eastern Europe history and spent$400 ,000. it's crazy. It makes no sense. I mean, this needs to be you graduate high school, you go to one year of school to prepare you for the next eight years of your life, basically an individual contributor. Then you go back to school for a year to prepare for the next eight years of your life, which is basically managing people. Then you go back to school for a year to prepare for the next eight years of your life, which is basically running companies.

55:01Mark Roberge:Then you go back to school for one more year to for the next eight years, which is the final quartile of your career, which might be boards, investor. like chairmen's, like philanthropic, whatever. Like it needs to be reinvented. I agree. I think it goes back to the reinventing. I don't know if it's the one every eight years things, but, you know, my undergrad is at FAU, which is this tiny little college, which FAU does not stand for Florida Atlantic University. It stands for find another university. And it was garbage when I was there. And sorry. So that when I lectured at Yale and I saw the difference, I was like, this is a completely different experience.

55:38It's the difference between, hey, here's Taco Bell versus here's, you know, the Four Seasons. I was like, oh my God, this is not the same. Why are they now being charged the same? So I agree. So thank you for letting me ask that. The next one I want to ask is, you know, there's a list of books because I believe books have been the best things I've ever invested in other than my health. You've mentioned a bunch of people. For some of them who will never get into the Ales and never get into the Hogwarts and won't be able to sit with you. if they're going, Jesus, I clearly, I, this is a different way of thinking that operates differently and that's producing results differently and innovating differently.

56:11Are there certain books that obviously other than your own that you need to, that you say, listen, go read these now. This is the core stuff. It'll, you'll get the same. It's a goodwill hunting idea. You know, I got the same education for a library, you know, card. What are the ones that you're like, please go read these as fast as you can?

56:29Mark Roberge:Yeah. Yeah, I know that answer cold for I need to learn how to sell. Like I'm a founder. I need to learn how to sell. I would like to perhaps. There's always going to be selling in my career. And my go-to is a 120-year-old book, Dale Carnegie's How to Win Friends and Influence People is phenomenal. I love Neil Rackham's Spin Selling. And I love the work of Sandler. which has been codified in a book. And I love the work recently of Jocko at Winning by Design. I think his most recent one is Revenue Architecture. So if you're deep in the go-to-market front, that's what I like. As a founder, we teach the principles of lean startup with Eric Reese at Harvard.

57:20Mark Roberge:So I think that's an important rooting. Everyone loves Ben Horowitz's book, The Hard things about, or I forget the name of it. And I think that's good. I think, um, uh, I just like, I am trying to think of other influential ones for me. Like I'm a pretty spiritual person too. And like, I'm a deacon at my Christian church, but I also aggressively read, um, you know, Islam and, uh, Judah, Jewish, works of Jewish, uh, Buddhism, Hindu. I love Hindu. Um, and so if you go down that route, I love, um, autobiography of a yogi. Uh, he's pretty, uh, predictive of what's going to happen in this AI era actually, which I think is a cool work.

58:05Mark Roberge:Um, it's actually the reason I was turned on to it was I was reading the biography of Steve Jobs and there was one book he read every year of the last 20 years of his life. And it was the autobiography yogi. So that's how he stumbled across it. Um, but I think just to like zoom out of your question, Charles. Um, I think, uh, it's, it's just in terms of like, if I can zoom that out to be, how do you educate yourself? Um, it's just that that is dramatically changing. I just think like, first off, carve out 5 % of your week for personal learning. Like a lot of people just get caught up in it. Make sure you schedule that and you can just like start.

58:46Mark Roberge:I, I don't actually usually start with a book. I usually start with a question and problem. and five, ten years ago I used to go out in social media and read the blog articles about it and sometimes that led to a book. These days I start in an LLM and triple down in. I like perplexity because I think the advice is sourced well so I can click through to the actual sources and check their validity and that sometimes leads to a reading of a book. But it's really that mechanism that I think is powerful. We have zoomed out your question to how to stay educated. I also think starting with the question versus the book is a huge pivot that most people don't do.

59:24It's like, okay, what is the question I'm trying to answer? Like, yeah, sure. I could read everything about anatomy, but if I'm just trying to figure out how to fix a sinus infection, why would you start with the actual thing and then kind of pull up?

59:34Mark Roberge:And you see, even if like, what's your point? Like, I want to be a great founder. How do I learn about being a good founder? Like, just prompt that and start reading. That might lead to a book, but it probably, it might lead to like 12 articles that may actually in, in aggregate be more valuable to your development. So. So we've, we've gone through the process of how to educate yourself, where the world's changing. The idea that, you know, everything's about to change and that how to scale. The last one I want to go into is funding, right? A lot of people get into like, how do we fund? How do we, how do we go into that when we're standing in front of VCs or we're running into certain capital companies?

1:00:08I know you're connected to this. When people run into that, what are the things that you wish people would know, especially as, because you see this over at stage four, you know, what are the things that you're running into and that you're like, guys, this is a different ballgame when you come into this world, when you try to come into this and we're doing acquisitions or funding or where you're going down with this. What are some things you wish people would know more about before they approach you over at stage four?

1:00:30Mark Roberge:The biggest thing is like in the same way that you only focus your efforts and sales on qualified accounts and don't waste time on unqualified accounts. It's the same thing you have to do with funding sources, both from the category as well as the individual firm. You would be shocked how often I have to talk entrepreneurs out of taking venture capital because they will make way more money faster if they don't. Yes. Like just more wealth is created outside of venture capital backslash. Let's just get that straight. Bootstrapped, family businesses, private equity backed. So like you, just because VC says no, doesn't mean it's a bad idea and you shouldn't do it and you won't make a ton of money.

1:01:19Mark Roberge:Okay. Like let's just like conceptualize this for a second. We built HubSpot. Halligan was our co-founder CEO. I think he owned 5 % of the company when we went public. We went public at a billion dollars. It took nine years. That's a$50 million payday. Great. Okay. I've talked to an entrepreneur last week that is building a feature within the go-to-market stack. I forget what it did. I think it helped you uncover the intent of a buyer. Okay. I'm like, dude, this is cool. Don't raise venture capital. If you raise venture capital, our asset class invests in companies that have the potential to exit at north of a billion dollars.

1:01:57Mark Roberge:If you raise venture capital, they're going to force you to 100x your product footprint to match HubSpot and Salesforce, which is going to be tremendous risk and take 10 years. Your chances of pulling that off are low. And if you pull it off, you're going to be so diluted. Let's say you pull it off and you exit a billion, just like howling it did and made the 50 million dollar payday he made a lot more with the journey after believe me but but great great payday and you what you should do is just build the product you're telling me about go from 1 million to 3 million to 10 million over the next three years sell it to salesforce or hubspot for 120 million and you own 90 of the company right and you made $100 million in three years.

1:02:41Correct. Versus maybe, yeah, it's a different ballgame.

1:02:45Mark Roberge:Yeah. So it's like, and yeah, you can pull together our friends and family, you know, a million dollar round to get you going, pay yourself a little, get some engineers, whatever. So the first point is like, it's all in the mindset of like qualifying your investor. That's the asset class. What type of capital is right for my opportunity? let's say you are good for a venture let's say you are i talked to a buddy yesterday he's building out like a like you know i think it's like a financing marketplace type thing okay that's a venture-backed deal that could exit multi-billion dollars um you have to find the vcs that invest at that stage in that um that type of company like people i get notes all the time like hey hey, Mark, I'm building a pharmaceutical lab in Japan.

1:03:39Mark Roberge:That's really cool. That's probably going to be like, if that pulls off, that's not what we do. Right. We have a huge endowment that gave us like hundreds of millions of dollars. The reason we got the money was because we said that we invest in B2B software companies all over the world, everything from pre-seed, just starting to build the product, up to Series A. we deploy$4 million for between 8 % and 15 % ownership. If I was like, oh, hey, we just invested$2 million for 1 % of a company, they don't even care what the company is. They'd be like, what are you doing? If I invest in a pharmaceutical lab in Japan from the most brilliant pharmaceutical person, they'd be like, dude, what are you doing?

1:04:29Mark Roberge:That's not what you told us you were going to do. So, so when you're, when you're, even if you are venture backed, make sure that you are not the first deal that that firm has invested in at that stage in that category. Now, I love all that. There's so many radical technical things that you're giving people very rigorous, very proven. There are going to be people who want to just spend time with you and track you down and connect with you and read everything out of your brain. That just, it is what it is. I'm one of them. So if we want to track you down, because again, it's a little different.

1:05:02I have access to you differently. If people want to track you down and they want to connect with you and they want to learn more, how do they find you?

1:05:09Mark Roberge:Yeah. I'm most active on LinkedIn. Just go there. I've been there for a long time and I am playing around with Instagram and TikTok more. So it's probably easier to get my attention there. I'm just trying to make sure that, you know, the young talented techies in college. I don't know where they are. I'm trying to like to stay relevant there. So I do some fun videos there that I think are educational as well. But any of those work, I do my best to keep up with those things. And I post there frequently. And if I could, Charles, just before we wrap, you know, I just want to mention two things. One, we just scratched the surface on the work of science of scaling.

1:05:48Mark Roberge:I think that the audience got a good view on some of the ways I view the world. What we talked about with the lead indicator attention, essentially, that's chapter two of 27 chapters, just so you know. These are all in the rigorousness of answering when should we scale and how fast. So if you do want to check out the book, that'd be great. And as I mentioned, all the proceeds are donated to mental health for two reasons. The first reason we discussed, which is it's just crazy how much energy is being put into building AI, but not understanding the societal impact. I think all of us in tech need to do a better job of diversifying our time and energy with also the societal impact.

1:06:29Mark Roberge:And this is my little thing for now, is the donating decision of the book and the work around that. And I'll do more as time unfolds. And the second reason is because mental health has been a big part of my life. It's crazy that when we interview a candidate who is a cancer survivor, we elevate our perception of that person. But if we find out that the candidate had a massive struggle with mental health five years ago, we may have concerns about hiring them because the stigma still exists, even though both are genetic and out of their control and curable and all that kind of stuff. and so I have been a caretaker directly to loved ones.

1:07:16Mark Roberge:I've also been a patient and I'm lucky to have the credentials that society values on my resume so I can be transparent about that situation where many have to suffer in silence and so that's the other reason you know why I am donating the proceeds and I appreciate all the support from the community and Charles thank you for the platform for me to be able to say that on. Yeah, absolutely. I think people don't understand that therapy is the gift you give to yourself. And there is a difference between depression and depletion. So one of the things that I had to work through with that and all my stuff was sitting down and being told, Hey, you're not depressed right now.

1:07:54You're just depleted. You're just, you're just, you're spent. You're in adrenal fatigue. You've been running from something. It's just, so there is that ball game. So if, for those of you who are listening and, you know, I've been coaching and doing this for 20 something years, there's not a single one of my clients that has ever come to me when they're like, Hey, I want to make a hundred million dollars that we don't immediately end up at some sort of mental health conversation because the people who are getting that, that 50 to a hundred million dollar ball game, most of them, again, they don't have bad days.

1:08:22They want to have days where they don't want to have any more days and having that conversation and sitting down with them and, you know, really embracing that. And yeah, we've been there before we get it. And you know, if you're out there, I'm not a therapist in any way, shape or form, but make that call. It's important. Track down the person, have the conversation, start going that ball game. Uh, it's much more common than, you know, and therapy is absolutely the gift that you give yourself. And I would recommend it to everybody other than the book. Uh, you know, go track down this book because I need to go track it down and read your book now.

1:08:54Cause I was like, God dang it. So Mark, I appreciate it more than I could possibly tell you. This is a conversation that I could go for probably another five or six days. And I'm sure the audience is going to want me to bring you back and have more conversations. Thank you so much for jumping on and sharing your time. I appreciate it more than I can tell you.

1:09:11Mark Roberge:Thanks, Charles. Appreciate it. Thanks for tuning into the podcast. Mark talked about companies that were the best in the world at what they did, like the best hockey team on the ice. But then the ice turned into a pool. All that skill stopped mattering. Back in 1998, Siebel led the way in CRM, PeopleSoft led HR, and BMC led IT software. None of them saw what was coming. Salesforce, Workday, and ServiceNow took over because they built something different from day one instead of trying to protect what they already had. That's the real risk with AI right now. It's not about keeping up. It's about knowing when the game itself changes.

1:09:52See you in the next one.