How to Operate and Scale a Business the Right Way

0:00Podcast Nation, before I get you into today's podcast, big announcement. as you probably heard at this point because I had John from Stan on the show. I'm an investor advisor to an incredible startup called Stan, Stan.store. I'm sending you right now to garyvee.com, garyvee.com slash Stan. Go check this out. We've done a Gary V. Stan store challenge which actually has a weekly call with me. This is built for everyone who's been affected, honestly, by my overall content. The tech stack, all these features and the minimal costs per month that Stand Store has built is really the tool that was needed for this world that I envisioned when I wrote Crush It, when I wrote Crushing It and this overall thing I'm thinking a lot about lately which is the individual empire, right?

0:48This creator entrepreneur slash entrepreneur creator economy that I think is gonna eat up the oxygen very honestly, the thing that so many of you want in your life and the reason so many of you are not there yet is you've got the strategy for me, you've got the ambition within yourself but you don't have the tools for you to fully maximize it and I believe you can find that at Stan store Stan dot store but specifically I want you to sign up for it through my challenge because I want to get access with you and plus there's a bunch of cool things so if you want to go see those cool things go to GaryVee.com slash Stan S-T-A-N now to the podcast this is the Gary Vee audio experience Vayner Nation how are you?

1:31another exciting episode of the Gary Vee Audio Experience. Decided that we've done a lot of motivation. We're doing a lot of innovation, but I want to get into operation. I want to get into the depths. I was really excited when the opportunity came to have this guest on the show because I think bringing leaders who actually did it, are actually doing it, are building, for me, building a business that from afar I admire in its longevity. It's not a fly by night. It's not a quote unquote unicorn, even though this is probably a unicorn in the way it's defined. But like, you know, like it's not, it's a unicorn, aka a startup that's a big company, not a rhinoceros with a unicorn, with painting its horn and making pretend it's a unicorn, aka a lot of the startups that are grossly overvalued and then disappear off the face of the earth because they were over leveraged and weren't actually building an actual business.

2:27And I want to tap into some of the minds of the people that are doing it because so many of you are on your journey of doing it. And so that's why I asked Henry to be on the show. Henry, welcome. Please tell everybody your full name, what you do, what the company is, and a little bit about the company. And I think we should get into a meat and potatoes episode here of the audio experience. Thank you for being on, brother. Yeah, thanks, Gary. Thanks for having me. Yeah, my name is Henry Ward. I'm the co-founder CEO at Carta. We're about 10 years old. We have three lines of business. We're about$350 million in revenue.

3:01About 60 % of that comes out of our core cap table business, which is where we serve startups and manage their cap tables. Another 30 % comes out of our fund administration business, where we manage the back office of venture funds and do their financial accounting and reporting to their investors, their LPs. And then we have a newer business, which is about 10 % of the business now. It's a couple of years old, and it's our private equity business, where we're basically managing the cap tables and fund administration for private equity companies and funds. How did it start? You know, we saw this cap table problem.

3:38It was sort of interesting. People in 2013, 14, when we launched, were physically mailing paper stock certificates. Like if you see the old movies with the railroads. Brother, look at this. You've got four in your room, yeah. Facebook, Twitter, and Tumblr. Beautiful, beautiful. All pre-Carta. Yeah, all 2006, 2007. Nice, nice. Really nice to know what the valuations of those companies was back then. Totally, totally. And they're beautiful. They're embroidered. They look exactly like the stock certificates when they invested in the railroads. And we're still doing that in 2013. And we said, hey, can we do something like what PayPal did for cash?

4:25Can we dematerialize these stocks through DeBegas? Instead of mailing a check or mailing cash, could we send equity through email the way PayPal sent money through email? Can we do that through the cloud? And that was the original idea. Could we push all this stuff in the cloud? And then once you did that, once you dematerialized equity and put it in the cloud, suddenly the option value on that exploded. You know, there's so many things we could do. We could do cap table management. We could do option management. We could do portfolio management. We could do liquidity. We could do fund administration.

5:01It just, it took off. We created an entire ecosystem once you got things out of paper. How quickly did you know, this is a great question for the audience. How quickly did you know we got something here? You know, we were in beta. I think we kind of launched a free version of this product maybe in July of 2013. I'm sorry to interrupt. I remember it vividly. I was so pumped it existed. That's awesome. The concept that I was able to just forward it to somebody and be like, take care of this. And like the thing I needed to be done when I was making an investment was done. It was massive for me. Someone like me that cares about time over everything.

5:41Like it was huge. I remember those early days. Like I was like, I remember thinking like this just changed my life. Totally. Totally. Well, thank you for being an early user. It was, it was, um, you know, it was a tough start. Like a lot of these companies where you're doing something completely new, you know, nobody had bought cap table software before 2014. Uh, it just didn't exist. You know, there, there's companies where you're building something that already exists. Like, like MongoDB is like my favorite example, right? People had databases. MongoDB was like, I'm building a better database.

6:10And you didn't have to convince people to buy a database. You just had to convince people to buy a better database. And CapTables was different. Nobody ever in the history of the world had ever bought a CapTable software product before. And so you had to convince people to buy something that they never bought before. And they never thought they needed. And so it was hard to get going. It's hard to convince people to do something they've never done. And we launched kind of an early beta in July 2013 that barely worked. And then we started charging in January of 2014. That's when we're like, OK.

6:43And we earned our first$120 on January 7th from a friend and company startup in Austin, Texas. And it was amazing. It was incredible. The first time you build something as an entrepreneur that somebody pays you for is a magical moment. Really? You know what? That's a great call out. I genuinely remember like the first Gillette deal with for VaynerMedia. AJ was still in college. I vividly remember kind of the first things I sold at my dad's liquor store when I was 15. Kenwood, 1992, 1990 Chardonnay. Like literally I can sit here and tell you Kenwood, 1990 Chardonnay from Sonoma Valley is like ingrained in my heart.

7:29this goes a little bit to why I want this episode Henry I view you from afar and we're getting to know each other a little bit here as a real like an actual entrepreneur and what I mean by that is it's in when you like love the game not the thing that has become which is like it's so cool like quote unquote everyone is you know like I love playing sports but I'm not a professional athlete when you love the game like you can like I don't think a lot of people can actually talk about the first thing they sold the modern entrepreneur right They can remember when they raised the capital. They can remember this, that, and the other thing.

8:05But the actual first client, especially if they're five, seven years in, in this new era. But I can remember the first wine I sold for my dad, the first client VaynerMedia had, all of it, vividly. Totally, totally. It's amazing. I remember we made$800 in January of 2014, and it was the most amazing$800 we made. This year, we'll put$100 million of bookings on the board. right? But, and, and the thing is, is even, you know, uh, 2000 employees, um, you know, 350 million in revenue going to 450. Uh, I spent, you know, uh, half my day. I talked to four customers yesterday that were unhappy and that's what you do.

8:43That's no different than we are a seed founder. Like you're just, if you love the game, you love talking to customers. I have problems. Look right now back to your point. Three, am I right about this? 345 PM today, client issue. I have 2 ,000 employees. How many employees you got? About 2 ,000 also. Yeah. There you go. Right? It's amazing. Keep going. Yeah, no. And, you know, so, you know, at January, we made 800 bucks. We're like, okay, well, at least somebody will pay us for this. So that was amazing. So that was, I guess, milestone one. Somebody paid us for something we built, which is a super huge high.

9:24And then I would say that the second one was August of that year. And we moved our, you know, back then you still called, you know, to order something, you know. And so we had a phone system and it was one of these things you called in and you pressed, you know, one to talk to sales, two to talk to, you know, support. And we changed our phone system and broke something so that when you clicked one and it went to sales, it hung up on you. You know, the classic startup story, like we had no idea what we're doing. And so it just hung up on you if you tried to talk to a salesperson. And we sold more in August than we did any month prior.

10:02And we didn't even know until halfway through the month, somebody went in through support and was like, hey, guys, I'm trying to give you money to buy your software and I can't get to anybody. You know, what is going on over there? And I was like, oh, we have something. People are beating down the doors to get this product. And I would say the third one was we finally had so many sales orders, we couldn't onboard them fast enough. And this was in January of 2014, a year later, or sorry, December of 2014. And we're going into Christmas. And I told the sales team, all five or six of them at the time, I said, you have to stop selling.

10:41You're not allowed to sell. I'm going to put you on a draw for three months and all of you are going to be onboarding managers and we're going to close the doors because our customers are furious because they bought, but we can't deliver because we're selling too much. And that was, that was the moment. Yeah. Do you think that that is an incredible common mistake of successful, like obviously a lot of people end up figuring it out. I actually think the story you just told, if you even have the talent and the product market fit to get to that problem, you 7.5 out of 10 times know what to do in that moment to get to the next place.

11:20Sometimes technology is not there. You might remember Friendster because you're a tech dude. Friendster being down all the time really eliminated it from having the opportunity of becoming MySpace or Facebook. Right? I mean, Twitter got lucky a little bit because there was no unique competitor. There was Pounce, if you remember, that popped for a while. But I mean, Twitter was a real problem in 2006, 70. It just wasn't up. Then there's the other thing, like under-delivering on what you sold. Big issue for me in a client service business because I'm completely human-based. You have a smart business.

11:54I have a stupid business if I wasn't building something bigger on top of it. and so you know i think i think for us it's very hard when you're scaling people as you can imagine with technology uh or product it's a lot quote unquote easier when you get your supply chain or your tech team down but you find that to be a common problem and then more importantly for the people that are in it right now that problem like you've over promised and under delivered do you recommend they take your track which is a drastic tip to act or do you feel like they should do things that have worked for me in the past which was more of a okay, fuck it.

12:27I'm just going to hold my breath and fly the plane, keep flying the plane, but fix it while I'm flying the plane and make sure that doesn't get out of whack. Both. What's your thoughts on that? Yeah. Well, so we did this, uh, uh, you know, we don't really have marketing back then. So our, our version of marketing was me, uh, and I, and, and my assistant and, or chief of staff, I think. And I asked my chief of staff, I said, Hey, go talk to 50 customers and interview them and ask them how they heard about Carta, why they decided to buy Carta and what that sales cycle was like. And all of them kind of heard a little bit different.

13:02Somebody came in from a friend, an investor, Google search, whatever it was. But the one thing that was 100 % consistent, 50 of 50 customers asked somebody else who was a Carta user what they had heard of Carta to decide whether to buy. And so we knew that the most important thing we could get right is that when that phone call happened, the person who did have experience with Carta would say a good thing. That was like the number one thing. Nothing else mattered. And so I said, it doesn't matter as we have to make sure that the reference checks go well. And if people aren't happy, it kills everything.

13:39And I'm willing to take a three month closing the doors on sales to make sure that's always true. And it was a tough decision, right? To tell the board, hey, I'm not going to sell for three months. That's a tough, tough conversation to have. Let's segue back to me wanting it to be a meat and potatoes table. Talk to me about the pros and cons, not just from your perspective, because you have yours. And obviously, there's been a lot of success. Congratulations. So I have a funny feeling. People are feeling pretty decent on the board, at least at this point. But tell the kids or the OGs, I'll tell you who's a big listener to this, Henry, that I think we can inspire.

14:17A 47-year-old, very successful corporate player who she or he feels they're ready. They're ready. And because they've been successful for 25 years in that environment, are going to actually have like a real board and real investors, right? Talk me through your perspective, but more importantly, I was going to say equally, but I'll actually say more important because and through the eyes of many of the founders you've been around over the last 15 years, the watchouts and the ways to best use a board. Let's do that. Yeah. So I have two tips on this that have worked well for me. So one is, you know, the boards are always hungry for information.

14:54They want to know what's going on, you know, etc. And one of my favorite lines from the Ben Horowitz book is, you know, apply pressure, either feel pressure or apply pressure. And I think, you know, he's really talking about executive teams. When the exec teams are like hounding the CEO and the CEO is like, oh my God, I don't know what to do. You know, everyone's on me. I feel so much pressure. He's like, turn the tables, apply pressure or feel it. I think that's true with the board. And so I used to tell the board, you know, hey, I want to put you to work. And we had what's called an adopt a business unit program where I'd have the board, each board member would like pick a business unit.

15:27So I'd have Matt, you know, work on cap tables and I have Mike work with the liquidity team and they'd meet with the team once or twice a month. And it was great because one, they helped me, they helped scale me in terms of the strategy and sort of influencing the organization. I could run a flatter organization that way. And two, when the board meetings came up, they all had firsthand data. It wasn't just me trying to explain everything. Like everybody kind of had data. So when they're like, Henry, what's going on with the liquidity business? I'd be like, Mike, what's going on with liquidity business?

15:57And so it really brought them in. The second thing I would say is the goal that, you know, the number one rule on boards is don't surprise them. Like, that's just it. Like, as long as you never surprise the board, you'll be okay. And so that is the classic mistake that very entrepreneurial, someone like me, who would be like, I'll figure it like, never had a board before. Like, I really don't have board life, because I knew that this would be a huge mistake of mine. And ironically, I'm on boards, and I help the Gary in that situation. I see the CO is doing the mistake I would make. And I make it safe for her or him be like, Hey, I know what you're doing.

16:40It's okay. Cause I don't want to be a hypocrite. I do this shit all the time. You're being over optimistic and you don't want to scare us. So you're trying to do something, but let me give you the preview. We're going to see you in 90 days and you're going to, you're going to be on the other side of this. So you're going to have to admit to the problem and everyone at this table besides me, cause I'm ridiculous, but the rest of the people here are much more straight and they're going to be pissed. So why don't you just tell us that shit's fucked up now and let us help you for the next 40 minutes instead of saying it's all good because to your point, and this was, I'm glad you went there because I really want to give you the, I'm on the podcast all the time.

17:14I can put out content to these people all the time. I want them to hear different voices. This, let me hold it in and maybe I'll make it work by the time I see them in 90 days. When you see them in 90 days and it's double bad, AKA, you didn't say shit 90 days ago. and now you're saying it's an 11 out of 10 issue, whereas 90 days ago you were saying it's all fine, aka it's a zero or a one or two out of 10, you're in deep shit because you've lost trust of the board and that's when the seeds start to sprout of are you the right person to run this company and if you have a board that has say in you being, aka you didn't structure in a way where you can actually get ousted, you better be real careful, aka forget about over promise under deliver, under, under, under promise to your board and over deliver.

17:59Yes. A hundred percent. And totally with you, Gary, I'll live and raise you one, which is like, even if it's like, you know, you're, you're previewing Brad news, whenever anything, you know, it's like, I think is going to be a little controversial or, you know, people will have different opinions on or anything. I do, I do what I call the rounds, which is like, I text, I call all the board members one-on-one and I say, Hey, you know, I want to give you a heads up at the board meeting, I'm going to bring up, you know, such and such. And I wanted to get your, you know, I want to preview this with you before, you know, it's a group setting.

18:31So you can tell me what you think, you know, blah, blah, blah. And, and it makes them feel special. It makes them feel connected. You know, they can tell you things that they may not want to say in front of seven other board members, you know, et cetera. And it's incredible amount of work, like, you know, to call seven people, eight people and have the same conversation, you know, to do that. But it's that work that instills the trust so that by the time the actual board meetings happen, everybody already knows what's going on. It's been, it's been quote unquote sold before you even had the meeting.

19:03Totally. And, and I like when my board members zone out in board meetings and like they're bored and they're like, we've seen this. Like I, I actually, people, my exec teams always like come out of these board meetings and go, I don't, they, Henry, were they interested do they you know do they care and you're like that that i'm like oh my god i'm managing the board so well when they're like enough we get it already like like that means i've overdone it i've over communicated everything there's no surprises like yeah when the board is literally bored uh like i've done my job well by the way get your board board is like a book on Nail it to the floor.

19:41It's definitely a real blog post. Henry, what's the biggest mistake you made in 13, 14, 15, 16 as a leader that you're better at? I talk a lot about me being better at candor. I used to struggle with delivering bad news because I have a disease. It's called I love my employees. And I mean it. I love people. You're getting to know me a little bit here. Like I'm just them who I am. Like I really like people and I screw up and I've gotten way better. And especially the last three years, I wrote a book that touched on it aggressively. I talk about it in my content more. Candor was my kryptonite. If I asked you, 2013, 14, 15, Henry, versus 2022, three, going into 2024, Henry, what's been the biggest gap you've closed as a leader?

20:25Yeah, well, I have two thoughts. One on the candor side. I've always had a problem with the kind of the candor, radical candor thing. I remember talking to Kim about it. And I love Kim. I think she's fantastic. But I always said, you know, the problem I have with the book is it's a one size fits all. Like radical candor kind of works with no matter who you're talking to. You know, whether you're talking to a shy, you know, 23 year old first job employee or like your 25 year veteran CFO that you've worked with for six years. Right. Like it's it's the same. And and everything I know about people is know your audience, like how you talk to them.

21:01Yeah. Yeah. Matters. That's what's tough. To your point, Kim's awesome. By the way, I call it kind candor at VaynerMedia because I think radical people feel like, oh, let me give you the purest form of it, which I actually think seeps into people's real struggle with candor, which is they don't deliver it with enough empathy, compassion, sympathy, and context. Totally. I would even go, so here's the, I do this all the time in my management training, right? You go, okay, so the manager's working with their employee and the employee's not doing great in the manager's view. And the manager says, okay, so I'm going to deliver the feedback.

21:38And they basically say, employee, I don't think you're doing great. And I always ask, the most important thing to figure out is it doesn't matter yet what you think. What matters is what the employee thinks, right? If the employee agrees with you and is like, I don't think I'm doing great either. That's a very different conversation than if the employee's like, I don't know what you're talking about. I'm crushing it. And so the first thing to say after you say, hey, I don't think you're doing great is what do you think? Right. And if they're like, I don't think I'm doing great either. You're like, amazing.

22:10So let's talk about how I can help. Right. That becomes a collaborative discussion of fixing it. If the employee is like, I'm crushing it. I don't know what you're talking about. That's a very different conversation. Right. And then the second, you know, if you go down the decision tree, the second thing managers always do is, I say, okay, what do you say if they say, manager, you're wrong, I'm crushing it, I don't know what you're talking about. The manager will always, what they do is they double down. They're like, no, no, here, here's all the reasons why you're not doing good, right? And I'm always like, that's the losing battle.

22:41Never do that, right? And my advice is always to say to the employee, I say, oh, amazing. I'm so glad you think you're doing well. Why do you think I don't think you're doing well. And, and right. So, so you lead with curiosity because that's the thing to figure out, right? It's not, it's not the, the question to solve is not if the employee is doing well or not. The question to solve is why, why are you seeing the same thing differently? That's the question to solve. You know, it's, I love you for that because we do something here where I train my leaders to say, Hey Henry, in my subjective opinion from my purview, which is all I can really rely on and the data that I've gathered from others, I believe you're not crushing it instead of like, this is definitive fact.

23:31And that really triggers people because we know this, a lot of managers are wrong. A lot of times you're right. A lot of times you're wrong. By the way, I've watched managers for years give feedback to people only because they wanted to keep them down because they knew that person was better than them. Totally. 100%. Idiosyncratic manager bias, I think is one of the worst diseases in an organization. I couldn't agree more, brother. Real quick, just almost like we interrupt for this commercial break. I really do love your product. And so one more time, who who's listening here should really discover Carta and why and what does it do and where should they go?

24:10Oh, thanks for letting me do that. I've done this podcast a long time. I never do this, but I wanted to do this for two reasons. I wanted a steak and potatoes meeting, which we're doing. And honestly, I really think I'm about to help a lot of people who listen to this show. So I'm being a little selfish and I'm thrilled that it's good for you. Yeah, thank you. So, you know, we serve two types of customers. So one is if you're an entrepreneur running a company, whether it's, you know, a two person startup, whether it's an LLC, you know, small business in the Midwest, like we have products for you.

24:47Basically, we want to help you manage your shareholders, your stakeholders, your employees. So we'll help you on understanding the capital structure of your business. That's what we do for entrepreneurs. And then on the other side, if you're a venture fund manager or a private equity fund manager, we'll help you manage your fund. And like Gary, you're a customer of ours for your venture fund. And we help people like you. I have this kind of view of the world, which is America as a country, we're great at producing accountants and lawyers and doctors. We're really good at that. But we're really bad at producing entrepreneurs.