Jake Knapp & John Zeratsky: From Google Ventures to Character VC (and Making Better Bets Faster)

22:18John Zeratsky:I think that element of it is really the draw, the hook, the thing that works so well. It's such a nice alignment of incentives. John pointed out to me when first sort of introducing the idea of, hey, what if we start a venture fund with Eli? That this is the highest leverage way to use what we're good at. It's really the way to do it with the people to whom it matters most, folks who are at the very beginning starting something new. They can benefit the most from what we're uniquely, weirdly good at. And it's also the way for us to potentially be the most rewarded for that work. And it's not the same.

23:07John Zeratsky:It's a hustle still, but it's not the hustle of trying to line up consulting clients. And it has a different feeling. And that's not to say that, to malign that work, the work of consulting and coaching and advising people who are larger companies. But, boy, it does feel better. Because once you get past the, okay, what are the structures of the deal? And let's sign the term sheet and everything. Once you just get underway with the founders, it's such a nice feeling. We are all in this together. And it gets back to like, I think one of the sort of themes of my life is I really like building things.

23:46John Zeratsky:I really like to make things. And John will roll his eyes because I always talk about this. But I started off making video games on like a Mac Plus, you know, in middle school and high school. And a lot of for me, it just goes back to that. It's like, you know, just being one person making the thing from, you know, zero to everything. like pixel by pixel artwork, writing the code, you know, testing, bug testing it myself, watching my friends use it, try to get it, you know, get it to, to spread around the school, you know, it's like this tiny market. And like that still feels really good. If I'm making something, it still feels really good.

24:21John Zeratsky:And I think I periodically got into situations in my life where I was less felt like I was making something and more like I was, you know, kind of doing this job for somebody else. And that, you know, that eventually happened to me at Microsoft. And I wanted to leave it. When I came to Google, I felt like I have a lot more autonomy. It feels like this is a really special moment. You know, we're building new products and, and there are very few designers. So the role in the product is really strong. And then, and that kind of shifted and going to Google ventures, I think in the early days, we were still trying to establish the brand of Google ventures.

24:56John Zeratsky:We were still trying to build credibility with founders. And we were also trying to establish this design sprint thing and figure out how it should work and then get the story out about it. And that felt like making a thing. And then that kind of slowed and stopped. And that's around the time I left, around the time John left. I think when we felt like, okay, now we're just sort of sitting back. And the fun thing about character has been having that sense of building something in the fund itself and trying to figure out how to make it work. But also over and over again, this sense of with the founders, even if it's for moments at a time that you're fully in with them on building the thing and, and figuring out that, how do we make it?

25:35John Zeratsky:How do we make it work? How do we make something people love? That's, that's so much fun. And it's, it's weird that in what can be this very, just, you know, like cutthroat almost business of like, you know, the way venture capital can be, that you can also have this just sort of purity of alignment. That's so joyful.

25:53Jake Knapp:I mean, it's great hearing you say that. I mean, again, it's very much my own personal experience as well. Like I think one of the reasons I got into VC was also because it's a place where you can have a huge amount of impact. You know, I work, I do a lot of coaching with design leaders and they often work at much larger companies where the founder has no connection with design and sees design not as a kind of important strategic sort of, you know, lever. Whereas I get to work with young founders who, you know, really, really from the start start to build a way of thinking and a way of understanding the world into the company culture and so that they never have to kind of hire someone like me to come in later to help coach them and their design team because it's already kind of baked in and so I think the leverage you can have is great I think also if you're a designer working on a hundred person design team you can feel like a very small part of a big machine whereas I think the kind of stuff that we do is really zero to one it's really formative you are there at the stage that the idea is being formed, you know, you're helping find the route to product market fit, because, you know, we're both in relatively early stage funds.

27:01Jake Knapp:And so that is really, really exciting. And it's where I think as a designer, thinker, a product person, a maker, you can have the biggest impact. And so I love that you referenced that.

27:12John Zeratsky:There's another, Andy, there's another layer of making things on top of this that I wanted to just touch on, because I think it's, it's, it's sort of unique in the world of VC and for folks listening who maybe come from a design background and are interested in VC, there's actually a big opportunity to make things inside of your firm and inside of your strategy, the way that you operate as a VC investor. And I think it's an area that's neglected by a lot of VCs. The default mode of being a VC investor is you have a network, you go to events, maybe you post on LinkedIn or Twitter and you do deals and then you make introductions.

27:59John Zeratsky:There's this kind of circle around the standard things that a lot of VCs do. And we have found that it is both highly rewarding and fun and really effective to think beyond those defaults and to create things like Character Labs, which is our accelerator program, or the Foundation Sprint, which is a new sprint method we created at Character, just like we created the design sprint at Google and Google Ventures. And to really think about what are the products that we can create as investors, because we're selling something to, we're offering something to the market, which is money. We'll invest cash in your business in exchange for your equity.

28:41John Zeratsky:But if everybody's offering the same product, how do you differentiate the product that we're offering as an investor? And so I think that that's a way of looking at VC that is underappreciated, that has become really, really important to us. And it's another way to kind of scratch that itch of like, it's just so fun and so rewarding to make stuff. And it doesn't have to be products, but it can actually be sort of these systems and these processes that really help us be successful as a business.

29:17Jake Knapp:One of the things I love about being a sort of a former designer in VC, I don't really do much actual design work anymore, but I come from that background, is that you're also helping companies design businesses. So it's not just designing interfaces or products, it's designing the whole kind of way that a company operates. But you're doing that with character and within character, you're spinning out, like you say, these kind of, they might be considered service offerings or they might be considered sort of products or businesses. And that is really, really fun using your platform as a tool to kind of grow other things internally.

29:47Jake Knapp:I've always been quite fascinated with the world of the venture studio, which is kind of almost the taking the idea to its kind of like ultimate conclusion, which is rather than finding people to give money to, we will kind of birth lots of startups, you know, within the company, like we will maybe come up with the idea, we will maybe find a CEO to kind of drive it forward. And, you know, I think it's still a market hasn't quite got traction yet. There were a few companies that did it really well, but a lot of them are kind of, you know, not quite in, you know, getting that level of success at the moment.

30:21Jake Knapp:But I'd love to see more people enter that space and really use their own creativity, their own creative capital to, you know, generate, you know, dozens of interesting ideas. But one thing I wanted to sort of move on to really quickly is just whenever a VC fund starts, most of them have this thing called a thesis. It's their kind of their philosophy, their idea, the thing that kind of differentiates them in the market. Like did character have a thesis? And if so, what was it? And what is it?

30:51John Zeratsky:Basically, no. We did not have a thesis. Well, let me back up. Normally, when people say our thesis as an investor is our investment thesis, what they're describing is the kind of company that they want to invest in because of a set of beliefs or predictions about how the world works today or how it will work in the future. The best in the business at thesis-driven investing is Union Square Ventures. And if you look back, if you go on the Wayback Machine, actually, they may even have this on their website as archives, but if you go on the Wayback Machine and you go to usv.com from, I don't know, let's say 2009 or something.

31:34John Zeratsky:They have a thesis about, you know, paraphrasing, essentially democratized media, social media, networked media. And it's spelling out, you know, we see all these trends from things like Flickr and Twitter and blogs and podcasts that the world is going to continue to look this way and expand in this way. And we want to invest in companies that fit into that thesis, that theme. And we didn't have anything like that. You know, I think that as we have grown and continued to invest, we have developed some very lightweight versions of that, which we can talk about if you want. But there's a different kind of thesis, which is really about investment strategy.

32:16John Zeratsky:So it's not what do we invest in, but how do we invest? How do we leverage our advantages, the things that we're uniquely good at, to find great opportunities, to make good decisions, to earn the ability to invest in those companies when we decide that we want to. And that's something that we were very, very deliberate about, and we still are. And it's really at the core of how we operate. And it's essentially about this idea, this assumption that when you're building a startup, the most important thing is to build a product that solves a real problem for customers and figure out how to put that into the world and talk about it in a way that really clicks, that really resonates.

32:58John Zeratsky:It sounds so obvious, but when you look on Twitter, you read VC blogs, most of the things people are talking about are not that. They're mostly talking about other stuff. They're talking about technology. They're talking about partnerships and pricing models and growth rates and hiring. And all those things are really important, but none of them matter unless you get that first thing right, unless you make the right product for the right customers and you know how to talk about it in the right way. And so we believed, and we still believe, that if we can help startup founders with that specifically, not only can we give them an unfair advantage, but they're going to be attracted to us.

33:41John Zeratsky:They're going to want to work with us because we have created these sprint methods that are used by the world's most successful startups. We have more experience with these than anybody else. And we're able to really clear our calendars and spend time with founders to help them solve those existential problems, answer those existential questions that they have as they're building a new company.

34:01Jake Knapp:and I guess that's sort of what I was sort of getting to really like I think you're right I mean I suspect there are types or classes of business or founder that you like to invest in and so I think there probably is a kind of a thesis around what makes for a good fit between a company and character but I also get the sense that you are positioning yourself in the market as offering a belief, a set of skills, a problem solving mechanism. And people are coming to you because they value that. They probably know your brand. They know your backstory. I imagine I might be wrong, but I imagine you're maybe doing more follow on checks and lead checks.

34:42Jake Knapp:Like you might be leading less rounds. So the way you get into those deals, you know, just for the audience, like someone that's leading around is tending to put a lot more money in and they're kind of the sort of the anchor investor. But in order to kind of come into that round, you need to be adding value, probably more than just the cash. And I imagine when people look at you, look at your positioning, look at your offering, you're offering so much more than the cash that you can deliver. Like you say, you're helping them figure out some of the real sort of fundamental stuff. And so I guess one of the things I was wondering is like, do you consider yourself as like a design VC?

35:16Jake Knapp:Like there are the designer funds, there are other companies that really lean into that. Like, do you see that? Are you almost distancing yourself from that kind of sort of design label?

35:26John Zeratsky:I want to let Jake take that question, but I also want to clarify one thing just in case anybody hears this or watches this, you know, and they're interested. We do lead rounds. So we lead and co-lead seed rounds and pre-seed rounds. But most of our investing happens through Character Labs, which is an accelerator program where we are often the first investors into a company. So one thing that's really unique about our approach is that we don't source from other investors and we don't source from other accelerators. So the model that you're describing, which is sort of the value add participating check model, is where somebody says, hey, I have this really unique thing that I do.

36:08John Zeratsky:I'm going to go develop relationships with 50 different VCs. And then I'm going to basically ask them to pull me into deals and I'm going to fight my way in. I'm going to win my way into that opportunity. And that's not how we operate. I mean, not to say that we never, ever source, you know, opportunities from other VCs. But you're creating your own deal flow from the sounds of it. Yeah. So in almost all cases, we have a direct relationship with the founder, either because of the books or like you said, the brand, or because it's somebody that we worked with maybe 10 years ago at Google Ventures, or it's somebody that we actually kind of went out into the world and we found.

36:47John Zeratsky:We do a lot of outbound sourcing and oftentimes our books act as a calling card for those. But just in case somebody's listening and they're like, hey, I want to raise money. I want to work with character. We absolutely lead rounds and we would absolutely love to be your first investor. You don't have to have your round lined up before you come and talk to us.

37:07Jake Knapp:Brilliant. Well, that's amazing to know. Thanks for the clarification. That's really helpful. We did sort of touch on design and I don't know whether you still see yourself as a kind of a design VC. I guess it might not be a helpful framing, but I'm kind of wondering like um it feels like design has gone from being a differentiator to you know just kind of part of the scenery like and i'm just kind of wondering like do you feel that design has become sort of mainstream and accepted in startups are you still having to kind of um convince petition advocate for some of the things that designers might sort of take for granted you know and in

37:51John Zeratsky:In my career, I know that the need to convince people that design is important is real. And I've seen shades of it. But I have been so lucky and charmed in every situation I've been in. It turns out that design has just intrinsically been valued in the place where I landed. And that started when I was in college. I started working for Oakley, the sunglasses company. And, you know, their style may not be what every designer thinks of as like the, you know, exactly what they picture when they dream of a design job. But that is a company that really valued design, the way things looked. And so my very first time like working for somebody else doing this kind of work, the CEO, you know, the head of product, they cared about design.

38:47John Zeratsky:that, you know, and the guy, actually this is like sort of random anecdote, but the, um, the, the guy who he would later become the CEO and he was their, their head of design at the time, uh, would, would come next to my desk and I was making animated gifts, you know, banner ads for Yahoo. Cause this is really like at the time when Google, I don't even know if Google had come out yet. Like it would, you know, Yahoo was the dominant way you looked at the internet. And so they were advertising on these pages on Yahoo where you'd have directories of, you know, you click down to, you know, apparel.

39:18John Zeratsky:Sunglasses page in the directory. Yeah. Sunglasses page. And they're advertising with a banner ad there. And so I, I had learned how to make animated gifts, you know, in high school and I'm making animated gifts for this job. And anyway, this guy would come sit next to my desk and put his arm up next to my head, like crouched down and he'd say, all right, let's see what you got. And I would flip through the different, you know, if I come up with like 10 different ideas and he would, he would say, if the hair on my arm stands up, then we'll use it. So, you know, that's not the way everybody evaluates design, but he cared, you know, they cared, they really, they cared about it.

39:54John Zeratsky:And then I went to go work at Microsoft and at Microsoft, I was working on the Encarta team. And I kind of, I was not a huge, like Microsoft enthusiast. I've always been an Apple guy, but I saw this job posting for this job, working on the Encarta encyclopedia. And I was like, well, that, that's actually quite cool. I want to go work on that. And in Carta, you know, they, they had this history of having a real design led process. There's this guy named Bill Flora who went on to do the windows Metro design. He's had this sort of Swiss design approach. All the designers there had a graphic design background.

40:28John Zeratsky:They customized every menu. Everything was a sort of flat Swiss design. And so again, like I land on this team that's been doing this, building this product for a decade and they're super design oriented. So they're just respecting, you know, at Oakley I was respected for design. At Microsoft I'm just sort of instantly respected for design. We go to Google and there are very few designers at the company and there was a lot of respect for designers and you were kind of immediately like a peer of the product managers. You know, there'd be hundreds of engineers and the engineers were like, great, you know how to do design amazing, like whatever you say, and almost too much though, like whatever you say goes.

41:04John Zeratsky:And then when we came to Google Ventures, It was in this era when the iPhone was really taking off and that was changing people's expectations for design everywhere. And founders knew that it mattered. They knew they had to do it and they were so grateful to get our help. And in fact, when I named the design sprint, the design sprint, I mean, I knew it was really about defining the product. The seed of it had come from product definition. But design, I knew was like a hook that actually would get people to try this weird idea of clearing your calendar. And the name stuck, but the same is true to this day that we find when we work with founders, they want design, they know it matters.

41:44And they also probably know that we're not in the purest sense of maybe what everybody would say is like a designer.

41:51John Zeratsky:We're not full stack thinking about, you know, the visual design and the intricacies of system design systems and all these things at all times. We're not like super, super hardcore figma guys or anything. We know a lot of designers, but we're not the folks who are going to connect you with necessarily your first design hire. We might, but we're not like the designer fund folks who really are amazing at all of that. We're not like maybe the traditional design role that folks think of. We're more kind of product folks. And it just happens that our tool for doing the product work, we've called it design for a long time.

42:30John Zeratsky:It has some design elements, but we're almost more like these process dorks. You know, we're going to come in and really think about what's the efficient process we can do together to lead you through decision making. And it happens to be with this angle of design, and we happen to have this product design background. But, yeah, it's – I always – often, you know, when people ask that question, I have to be honest. Like, I've just been really lucky. People always wanted it. And I think for both, maybe, I don't know, I won't speak for John, but like, I think John maybe had some kind of a similar experience before we started working together of, of, um, situations where design was valued and our work was valued beyond just sort of putting on the finish layer.

43:12John Zeratsky:And I think it has led to a sense when we come to work with people, come to have a conversation with folks that we're not actually trying to justify or convince them of anything about design. Like we kind of don't, I don't care. I'm not a precious design. Like I don't care. Like if you don't care about design, it doesn't really matter. What matters is, uh, you know, we're investors. We're on the same page with you. We want the same things. We have the same motivations and incentives. So how do we make your product great? And if it looks terrible, like, but it's great and people love it. I mean, that was what I was building at Google when we first started stuff that looked pretty bad, but like was really effective and really helpful and useful.

43:48John Zeratsky:That's awesome. I'm thrilled to have something that's unbeautiful and, you know, un-designery, but it solves the problem. People love it. They want it. They want to tell their friends about it. So yeah, anyway, that's kind of how I think about it. Hopefully that kind of sense of, you know, these guys are helpful. They help us solve the problems that keep us up at night is the way we want folks to see us and what we want to deliver for them.

44:17Jake Knapp:I mean, I guess, you know, what you said sort of resonates. I mean, I do, you know, part of the time I do VC work, part of the time I do coaching design leaders and design teams. And I do see a lot of designers that have a feeling that the rest of the organization doesn't care. But then when I talk to the CEOs, when I talk to the engineering leads, when I talk to the product managers, they do, but there's often a kind of a translation layer that kind of something in the middle is kind of breaking down. And I think, you know, a lot of designers and design teams are fixated on the output. And I think you're clearly fixated on the outcome.

44:54Jake Knapp:You are problem solving. You're walking people through a process in order to, you know, and one of the great things from the design sprint world is you have a structured, often a structured way of thinking or approaching problems, which a lot of maybe traditional product people or engineers or whatever don't have. but that structure allows to have really really good conversations and the output is almost kind of irrelevant it's the outcome that's really important so I kind of love that so I see that a lot um I also for my work like you know I work with a lot of founders I very rarely met a founder that doesn't care about this stuff I meet some founders that come from an engineering background that don't get it but they often know that they don't get it and that's why we're having a conversation because they want that kind of help and assistance um so there's definitely something sort of breaking down there.

45:40Jake Knapp:But that's really good to hear. That's really positive to hear. You know, I think I'm seeing a lot more designers get into the VC world because I think they are helping founders kind of navigate some of those early challenges. But I'm also kind of curious, have you come across many founders who come from a design background? Is that a thing or a trend you're seeing? We've got Figma, we've got Linear, we've got YC saying that like we need more design founders. Would you agree? Is this a trend or do you think it's kind of irrelevant?

46:09John Zeratsky:I think if we simplify kind of the typical backgrounds of a startup founder and we say it's an engineer, it's a product person, or it's a designer, let's just assume for now that those are the three sort of standard backgrounds. That's not entirely true, but I think it's pretty close. I think that certainly engineers are the most common. I think that designers have have been gaining on engineers probably. And I think that designers have a really incredible skillset to bring to the job of being a founder. But I don't know if they always have the best temperament to be a founder. There is something that we often see with designer founders where they are, for lack of a better phrase, they're perfectionists.

47:01John Zeratsky:And I say this as somebody who's very detail-oriented and does struggle with perfectionism at times, I think that even though they have, again, a great set of skills that they can use to rapidly understand their customers and generate ideas and make things and ship those, they often get hung up on wanting it to be just right and wanting to optimize the last 10, 20%, which especially in a large organization that is working on optimizing mature products is very important and certainly is a behavior that I think is rewarded. But in a startup, the most important thing to do is to increase the speed of your loop, your learning loop.

47:49John Zeratsky:And that comes by putting things out into the world, by taking action that generates information from the market. And if every time you go through that loop, You're just 20 % slower because you wanted to make it just right. You wanted it to be a piece of design, an output of design, to use your word, Andy, that you feel sort of strong. You feel proud of. You feel like it lives up to the capital D label of design. That compounds in a negative way, right? Every single week, you're 20 % slower. You're learning 20 % less. You're at a big disadvantage compared to an engineer who maybe is less precious about those things and going that much faster.

48:28John Zeratsky:So to answer your question, I wouldn't say that we've seen an incredible surge of designer founders. You know, I really think in our portfolio, there's maybe only only 10 percent. We sort of would identify as designers. And I'm not convinced that designers are necessarily better founders than than sort of other backgrounds based on what we've seen, at least.

48:48Jake Knapp:I mean, I think that trend I've seen as well, I've met and talked to a lot of design founders who have said that they've really had to unlearn a whole bunch of skills and behaviors. It was really hard. You know, you're being paid to, you know, normally in your day job to put something out that's that's considered that every single kind of edge case has been sort of worked on and you sweated the details. And that's almost the culture. That's the kind of the way you're taught at university and you look up to these kind of perfect situations. and that just doesn't work necessarily in the early say startup world.

49:21Jake Knapp:And very quickly, you have to kind of get comfortable putting things out that are, you know, maybe 80 % there rather than 100 % and that took 20 % at the time rather than kind of, you know, you spent all the extra time kind of sweating the details because like you say, it's about cycles of iteration, it's about learning. The other thing I find, and this isn't just with designers, but with product people in general, like we all know this idea of like product market fit. And I tend to find that a lot of product and design people, they want to solve every business problem with the product. They're really drawn to product-led growth.

49:55Jake Knapp:They're really drawn to, you know, like every sales problem, every growth problem ends up being product. And there's a real resistance towards doing some of the things that is really important. Sales, marketing, kind of going and speaking to customers, going and doing outbound, like all of this kind of stuff. and often it takes a bit of a kind of a like a bunch of failed launches and really slow growth to make people realize oh maybe the solution isn't always in the product the product has to be good but maybe I need to stay up and start doing things that are uncomfortable and out of my comfort zone and so the designers that I find that lean into founderdom well are the ones that pivot really quickly and the ones I feel struggle their head is always in product even as the kind of the runway is running out and the growth is not taking off because they think that's where that's their comfort space.

50:48Jake Knapp:That's their happy place.

50:49John Zeratsky:Yeah. And you touched on the biggest danger that startups face, which is running out of time, running out of money and having to step away from what they're doing and go to do something else. And when we talked earlier about alignment, Jake spoke about the upside alignment, this notion of us participating wholeheartedly and helping teams build their companies and sharing in the rewards. But we're also aligned on avoiding the downside because we don't want them to run out of money before they've launched anything or reached product market fit. And they don't want to do it either. And so it's great if a designer founder wants to put in that extra 10 % of polish.

51:29John Zeratsky:And certainly in some cases, I think that that can lead to success if it creates a better positive impression on customers. But I think when it comes at the cost of runway and of speed, that's where it becomes really a fatal flaw in their approach to building a company. I think some of the most successful founders who we've worked with, and we have worked with a lot of founders over the course of our time at Character now, which is, gosh, we're doing Character for what, three, four years? Four, four and a half, almost five. Yeah. And now with labs, you know, we're doing like our current group of labs has how many companies in it?

52:08John Zeratsky:19. 19. So we have 19, you know, founders. We get to see all of them, how they behave, how they operate, how they make these decisions in parallel. You know, and then going back to our time at Google Ventures, I worked with 150 different startups and, you know, including some founders who I won't name drop, but, you know, famous founders who we got to work up close with and founders who maybe aren't so famous, but were also incredibly successful. and we got to see the early days, how they made decisions. I think that founders who are whatever their center of gravity is or their foundation, if their foundation is, as John said, if it's engineering or design or product, to simplify it down to those three things.

52:48John Zeratsky:We've seen founders who are great who's center of gravity sales, but just to simplify it down to those three. Whatever their foundation is, they are intensely curious and have this sort of exploratory approach to the other things. The product person wants to know about engineering. They want to know about sales. They want to know about design. They want to know about being a founder, which is a whole other thing, right? Like just as John said, this notion of being quick and pivoting and sort of trying to understand how you build this bridge from your vision of the future to like the way things can actually work in reality and what's going on with your customers.

53:28John Zeratsky:And so no matter where they start in terms of their background expertise, the best ones, they really want to know about all of it. They want to care about all of it. and they're not too locked into this sort of sense of like, this is what I do and I'll just get other people to do that other stuff when I need it, but I can stay here. They're breaking out of any definition of who they are. They benefit from that deep expertise that they have, but their head is in all of it, including that experience of the startup and the different dynamic of how the startup works. If those folks, they don't always succeed, but when you see people succeed, it's usually going to be that they can do that.

54:13John Zeratsky:And the, you know, whether designers are more or less suited to do that, I don't know. You know, we see folks who do it well. We have founders in our portfolio who design background. They do that thing really well. They have broken out of that silo with, you know, with a lot of energy. And that's kind of, I think, what makes it work.

54:38Jake Knapp:Absolutely. I mean, I love meeting people that just want to understand how the world works. You know, I meet a lot of engineers that kind of they grew up like they got into engineering because they wanted to take the radio part or take the clock apart. Or, you know, like a lot of scientists, physicists, they want to understand how, you know, the world works, how the universe works, how biology works. And it's that curiosity. And I think you're absolutely right. If you want to be a founder, you have to understand all the different parts. You have to understand how product works and finding product market fit.

55:05Jake Knapp:But you still have to understand your go-to-market strategy. You still understand how to build a team and build an effective engine for delivering products. You need to understand how to find customers and all these kind of things. And often, I think you need to step away from the thing you're really good at, because that will probably take care of itself. You need to lean into the uncomfortable things that you're not good at, because there's nobody else going to do it for you in the early days. You need to get good at that really quickly. You know, I find a lot of founders who really like lean away from sales and want to hire a bunch of salespeople to do the sales job for them.

55:36Jake Knapp:And that invariably fails because those salespeople are not as aware of the founding journey. They're not as invested in the success. You know, and so usually I think the founder ends up having to make that first sales playbook. and once that playbook is there once they've figured out how it works then they can bring experienced sales people on to kind of take over and and optimize the machine and grow it but like being that first person to kind of do all those things I think is really important I guess I'm curious so um you've touched on it a little bit you talked a little bit about sprint we all were aware of it you talked about make time wonderful book if you're a founder trying to reclaim some bandwidth and some sanity I think it's an amazing sort of recipe book of ways to kind of figure out how you can calm that kind of you know inner sort of monkey mind and be really resourceful and effective or just like really calm the new book not so new now I guess it's kind of seven or eight months you know uh now I'm presuming is Click and it kind of it starts with this idea I think it's a foundation sprint can you just give me a little bit more of a background of like, what does the book set out to solve?

56:50Jake Knapp:And how does that kind of how did that come about?

56:52John Zeratsky:We started character with this notion that we're going to use design sprints, we know it works, we know people know about it, it's going to become this flywheel for us of both attracting founders and helping us to evaluate founders, because we've been in so many sprints and helping us close deals with founders and helping them succeed, and hopefully spin out to them wanting to tell other people about us. And we started doing that and that worked. That worked actually, I think, almost just as we imagined it. It's almost shocking how usually you have a plan and you have to pivot from that plan. And actually it worked really well.

57:32John Zeratsky:In our course of time at Google Ventures, when we first started at Google Ventures, we were working mostly with pre-seed, seed, some series A companies. Google Ventures was trying to establish its reputation, you know, and for founders in Silicon Valley, even though Google obviously was at that time, like everybody loved Google. But if you were a founder, the notion of having Google in your business was like, maybe people were a little uncertain about that. People are a little uncertain about if Google would commit over the long haul to Google ventures, or would this be sort of a, you know, Google reader situation where we kind of like, you know, shut down a thing that some people love.

58:09John Zeratsky:And so our role as design partners, I mean, honestly, a big part of it, to be frank, was marketing. Like, can we convince founders? Can we tell the story about a special kind of help that we offer? Our colleague, Brayden Coetz, was the first design partner at any venture fund anywhere. And so like, if we can establish that and kind of make that our thing and follow through and deliver on it, that could be part of what makes, you know, GV legit. And anyway, as Google ventures reputation, uh, grew and grew, they were able to get, we were able to invest in later stage companies, write bigger checks, deploy more capital, which if you think of it from the alphabet perspective is what they wanted to do.

58:50John Zeratsky:They wanted to have this really big fund for me personally, like the most fun, the place where I feel like I'm the most helpful. It's much, much earlier. It's those early stage companies. So we got to character capital, we start running sprints. We're getting to do it again now with pre-seed and seed and occasionally series A companies. And this is like, ah, this is great. This is the, this is the sweet spot. But we noticed something that we had not noticed before, you know, before we were doing it at Google ventures was our first time. We're learning so much, trying to figure out so much. I think we had seen a lot more by the time we had started character capital.

59:25John Zeratsky:And we're also in this role now where we're not operating partners, but we're also the GPs. So we're having conversations of a different sort on a different cadence with founders in addition to being in the room with them during design sprints. Anyway, that's a lot of background. The point is when we're having conversations with founders, we notice that sometimes you'd feel like, God, I have to ask this obvious question. I'm almost embarrassed, but like, who's your most important customer guys? And there might be, you know, three co-founders, you know, they're super bright. They've been working with each other.

59:57John Zeratsky:They are obviously focused on the same thing. They obviously have the same sense of what the strategy is, but they have three different answers about who the target customer is, you know, maybe slightly different, maybe actually sometimes sort of, um, shockingly different, or you say, you know, yeah, okay. Um, sorry to ask this guys. I feel like as the investor, I should know, but would you mind telling me like, who are, who's really like the most important competitor for you guys and your customer minds? And how do you differentiate? Like what's the thing that really sets you apart for that customer?

1:00:28John Zeratsky:And, you know, same three, 60-minute debate, no conclusion. And we realized like, oh, God, you know what? This is a problem. People feel like there's a sense of we have the same strategy in mind. But actually, when you zoom into the details, there are key differences or there's a gap. and that gap, and especially when it comes around this promise of what do we solve for customers and what's the way that we do it that's radically different from anything that's come before, that's a problem. And when we thought back on all of the sprints that we'd been in over the years and the ones with the most successful companies, the companies who went on to build these tremendously successful products that customers loved, that grew into big businesses, they all had in common And it's the same element, which is when they came into the design sprints, they had a very clear idea about what their differentiation was.

1:01:25John Zeratsky:They knew what problem they were solving for customers and they had a sense of how to talk about it. It might not have been right. You know, they were open to treating it as like a hypothesis. And as they ran design sprints, they were looking for, okay, is that working? And if it's not working, you'd see in the next design sprint that they shifted the way they approached it. They either tried to sharpen the language. So we're not being clear enough or they sharpen the approach to the design. We're not delivering it quite right. Or sometimes even have that differentiation, isn't it? We need to do this other thing.

1:01:54John Zeratsky:But that was clear for everybody on the team. It wasn't this vague thing. And we realized we need to help folks get there. We need to help them with that pre design sprint. So in other words, pre we're defining the product. Now we're defining the marketing now, but we're defining the sales method. Now, before we do any of that definition and building and forming of the thing and testing of the thing, we got to know what we're about. We need to have this kernel of a strategy that is so clear and simple that we all understand it and we can assess it when we run sprints. So it's, you know, that's the genesis of it.

1:02:32John Zeratsky:The foundation sprint was how do we get people on the same page about customer thereafter, the problem they're solving, who they're up against, and what differentiates them. what makes them special and what's the best approach to take what should we be experimenting on to have the best chance of delivering that differentiation and i have to admit i love it i

1:02:51Jake Knapp:think it's a really good book i've really enjoyed reading it um it resonates so much with a lot of the the problems and challenges i see in fact um literally before this call i was finishing off my talk for web summit in lisbon in a few days time and it's all about that kind of that challenge And so I also, this is a little bit of a personal plug, but my book Over My Shoulder, The Growth Equation, is all about the kind of the first couple of years of the kind of the founder's journey to product market fit. And literally the first or second chapter is exactly this problem. And I think what you've done is you've basically taken that small little nugget.

1:03:29Jake Knapp:You hadn't read the book, I don't think, before, but you've basically blown it up into a whole book, a really good guidebook and the importance of ICP, really, really good definition of who you're serving, really, really good focus on the differentiation and a really good focus on positioning. And these are things that I think most founders get wrong in the early stages, and that bakes problems into the product later on. And so I think if people can read your book, if they can follow that process, if they can have clarity around that, it just means you get the product market fit much quicker. You can get the product market fit in 12 or 18 months rather than two or three years.

1:04:06Jake Knapp:And I think you've just really, really sort of simplified the process. And so I can totally see how that would be massively useful to some of your early investments and massively useful to a whole bunch of founders who are out there and struggling. you know how off to you i think you've done a a brilliant job i know we're kind of at time now i you know we're sort of just slightly over an hour so i don't want to hold up any more of your time i'm sure there are kind of investors you know so you know founders that are desperately wanting to speak to you so but just to literally to finish up i'm just kind of curious like you know you've helped teams move faster focus better you know connect deeper and obviously you know really start their startup journey from a good position.

1:04:49Jake Knapp:What's next for both of you individually and what's next for character?

1:04:52John Zeratsky:Good question. I'm not, I'm, I am not yet tired of what we're doing. So plan to keep on going. I, we, we, we spoke briefly about this notion of building new things and, and optimizing things. And, and we have been internally at character. we've been through a tremendous amount of building new things in the last, well, really the whole time since we started Character, but especially I think the last 18 months where Character Labs has kind of come into its own. We wrote Click and writing a book, I think there's, writing a book like this one is actually two projects in one. You have to write the book, but then you also have to figure out like the systems and the methods and the things that you're trying to tell people about in the book.

1:05:42John Zeratsky:It's not like a journalistic book where you go out and you do reporting and that's the book. We had to, you know, sort of tighten up the foundation sprint. How does it work? What are the steps? And then how do we explain it? What are the stories we use to bring it to life?

1:05:54Jake Knapp:And also because you're self-published, there's go-to-market and there's kind of promotion, you know, you're doing the whole, you know, the book is almost like a mini startup in its own right. And it seems like things are going really well. So I'm sure there's a lot more time invested in the book. But look, thank you, John, Jake. It's been an absolute pleasure. Thank you so much for joining me.

1:06:13John Zeratsky:Yeah, thanks a lot, Andy. Thanks for having us, Andy.

1:06:16Jake Knapp:And look, I just want to say to the audience, that was brilliant. I really, really enjoyed that conversation. Thank you, everyone who kind of listened in. Thank you for tuning into the Design VC. If you enjoyed today's episode, please subscribe, leave a review, do all that malarkey. If people want to follow what you're doing at the moment, like where can they go? Where's the best place to find out

1:06:36John Zeratsky:all about you guys and character character.vc brilliant simple as that well look thank you so

1:06:43Jake Knapp:much I'm Andy Budd see you all next time goodbye thanks Andy thanks Andy

1:07:09And I rêve only one story