Inside Intercom’s AI Turnaround, Why Software Companies Must Train Their Own Models | Eoghan McCabe, Co-founder and CEO

24:06Turner Novak:Well, yeah, you're not like a GPT wrapper, you're like a GPT Optimus Prime or whatever. Like it's like multiple all woven together. Something like that. Yeah. But there's many other types of models and they're not just, you know, ELL, LLM. There's a lot going on there, including some of our own LLM technology or machine learning technology. So you've experimented with some of our own models? Yeah. So we're working on that. And by the time this is out, we will most likely have announced that we have made significant advances with our own models. They'll be the world's first CX models, proprietary CX models that do the type of work they do, train on proprietary CX data.

24:49and we're quite confident that they're not only going to increase the performance of VIN yet again, help us continue to beat our competitors in those bake-offs, but also allow us to own the full stack. When you own the full stack, it allows you to be a lot more nimble. Like Apple own the hardware, the operating system, the iMessage app, the iMessage protocol. they even own like the custom emoji things as bad as they are they own this whole thing and it just allows them to be a lot more fluid they even own the chips that these things run on yeah and so when you're when you're not held back by third-party vendors you can move faster and get ahead of the game so we're excited about being able to do that too because that's kind of in the current, I don't know, like meta around everything AI is that all the values accruing

25:48Turner Novak:to like certain layers. So if you don't have something in that layer, you miss out on capturing a lot of the value. Well, I think that if you rely on the generic models, you are subscribing to eventually becoming generic. And so I think that unless you have your own innovation and your own technology, you can't get beyond that. And like you said, indeed, the value will go to layers in the stack where the innovation is, and we'll get to a point where it's not the base level models anymore. So do you think, so I guess first off, any software company, you need to reimagine yourself for AI. Do you also need to start training your own models then, most likely?

26:31I don't know. There's so many different types of software companies, and there's software companies that serve older esoteric industries that probably aren't in a rush for AI. And then there's industries or areas where the AI is just not that obviously valuable right now. Like for customer service, everyone saw that coming. But I will say that if you buy the idea that AI will eventually eat all white-collar work, which it seems to be good at, then it's going to disrupt most software because most software is built for adding efficiency to white-collar work. Most business software.

27:23Turner Novak:But when somebody hears all the model companies, like I look at OpenAI, and if you take the current narrative, is they're spending billions and tens of billions of dollars to train and run these things? Isn't it super expensive, or is it not as expensive as people would think? Certain types of AI work is not as expensive as you might think. but some of it is and it has required that we've had to, you know, allocate significant parts of our balance sheet to it. But it's not the tens or hundreds or billions that get thrown around, at least for the type of work that we're doing. Yeah, I guess part of that too is if you just, if you kind of go under the surface a little bit, it's like Azure is not at Microsoft's not actually giving open AI$10 billion.

28:11Turner Novak:It's giving them credits to run chat GPT, which is like, you know people pounding that all day every day it's like one of the most frequent kind of use cases and it's just cloud cost or cloud spend essentially at the end of the day exactly yeah i think that's and that's where a lot of the magic and innovation is happening in uh ai at the moment it's at runtime so did you when you kind of decided okay we need to just rip everything out and start over like what was the process it's like how did you how did you figure out how to approach this and what to do? Well, I have the great benefit of being an outsider because I was chairman of the board, but I wasn't in an operating capacity.

28:50So, you know, as an outsider, you can make all of these broad statements that on the ground are not true in 10 different ways, but at a high level can be powerful and quite meaningful. And the things I saw from the outside were that we needed a lot of clarity in our strategy. We needed a lot of focus in our company and strength and resilience in our culture. We needed to be a lot more customer oriented in our commercialization strategies, not force everyone to talk to sales. Our pricing was super complex. And so I came in with a lot of those ideas written down. I had a form of a manifesto and a 10-point plan that I acted on.

29:45I haven't had that clarity since. Once you're in the trenches, then it's all gone. So I'll never be as effective and as strategic a CEO as I was before I was CEO again. It's just a tricky thing. That's why breaks are so important for leaders. You know, even one day away for me, I find that like, damn, I get so much clarity that I didn't have when I was just smashing my head against the wall. You see that a lot with young leaders. I made that mistake too. They're just grinding seven days a week, every week of the year. And it's actually quite difficult to have clarity on what the most important work to do is if you're doing it.

30:26Anyway, so that was part of it. And then the other part was, you know, I went in deciding that I was going to very much bet on myself in a way that I hadn't in the past. Like, obviously, I had in a very practical way when I co-founder of the company. But, you know, it's easier when you're younger to question yourself when there are smart people around you coming up with, like I said, those 10 reasons. Any given decision might be bad. So sometimes I'd hesitate on decisions. Sometimes I'd scale down decisions.

31:00Turner Novak:This was back in the 2018, 2017 version. Intercom started in 2011. So I had a big, long run before I left. And I did what I see so many CEOs do, which is just try and satisfy multiple stakeholders and play it a little more safe. And I just decided to never do that again. And, you know, I now make rash decisions and, you know, go with the first idea that came to mind. And I've learned that most of those decisions are really good decisions. You know, probably a bunch of them are not, or probably they could be optimized if I like sweat over them for two more weeks. Maybe they couldn't, maybe they'd get worse.

31:40But now I'm just making mostly fast and loose decisions. The hard decisions I'll procrastinate on. And then when it's like overdue, then I'll make the fast and loose decision.

31:50Turner Novak:You just should have done it two weeks. Exactly. Yeah. But, you know, I really have found that, that, that, um, you know, there's a lot to be said for founder intuition because the intuition contains so much, you know, tacit, practical, uh, undefined, undescribed understanding and knowledge that goes a long way. And so when I'm talking to young founders now, and I was speaking to one yesterday and she was trying to land on a name for a company, she gave me a list of 10 names. She said, you know, what do you think? What do you think of these names? Such and such a name is my favorite. But a number of people have said it kind of has negative connotations.

32:29I'm like, if it's your favorite, it's your favorite. Choose your favorite.

32:35Turner Novak:She's like, oh, yeah, you're right. She needed that like a little bit of push. Just like, go with your good. You know, fuck the midwits. They'll always have all these reasons your strong ideas are wrong, you know, And you'll never have worse regrets as a founder than if you make mistakes and the mistakes are someone else's idea, not your own. When you like went against your intuition. Time and time again, great artists and creatives and interesting people, they got the right idea, but they don't fucking lean into it. So that's one of the big things I learned anyway, was to bet on my intuition.

33:13Yeah.

33:14Turner Novak:I feel like I've kind of run into similar things, actually. where it's like you didn't fully execute on or didn't fully lean all the way into the thing that you thought was right. Or like you took someone else's advice on something that maybe they don't know what they're talking about or they're more removed from it. Yeah, or like they're very smart such that they are absolutely not wrong with their criticism, but they don't have the broader insight that you have that tells you that the criticism doesn't dictate the power of the insight. Like you as the founder are the insight holder. You're the one that has to keep that flame alive.

33:54That's not their flame. And so actually having these conversations can be very helpful. They can help generate ideas for how you can improve your flame. I'm like stretching the analogy now, But allowing them to smother that flame that you were excited about, it tends to be a bad idea in my experience anyway.

34:19Turner Novak:And you were initially, I know you just mentioned, like a little skeptical about AI just when it first kind of hit. Was there a kind of evolution? Was it talking to the team? It was like, oh, maybe there's something here. Or did you still push back a little bit after that? I just have learned to be skeptical of all hype. And even still today, there's a lot of AI talk that is kind of propelled by groupthink and FOMO. Like a lot of people talking about the power of AI. Like you'll see these, right? You see these posts on social that says, holy shit, I just started 10 companies and made$50 trillion over the weekend.

35:03The vibe coded now. Yeah, by asking ChatGPT this one fucking thing. Yeah.

35:08Turner Novak:Like... The power of AI. Yeah, you're like, the power of AI. Read this 15-part thread. And then sign up for my course. Exactly. And it's like, no. Yeah. And obviously, mine was like silly and facetious, but they're like half-believe... They're a significant... They're sufficiently believable that everyone else is like, oh, shit, everyone else is doing cool things with AI. And if I am not also... Yeah, you're going to get left behind. I'm going to get left behind. I'm going to look like a loser. Yeah. So I better say some cool stuff about AI. So there's a lot of that. And as transformative as AI is, and I'm certain it's more transformative.

35:45I believe it's more transformative than the internet. Our current understanding of it, I'm also quite certain, is quite infantile. And is bolstered by a lot of hype. And so that's all. I just felt the hype. And I'm like, wait a sec.

36:02Turner Novak:Let's see what this can really do. So you mentioned something that was interesting. You said that you think that AI is going to potentially be more transformative than the internet. Why do you say that? Just because it's flagging itself right now as like a really big deal, bigger than cloud and mobile, I think, you know, has the potential to do actual work. That's a new type of thing. It's a new type of technology. and always at the start of these new big deals by default we underestimate their potential because we can't imagine the ways in which they'll get used and and be deployed so i used to say at the start of intercom and and i still think it's true to today and this is in 2011 that we still haven't seen the degree to which the internet is going to transform the world and that's probably still true.

37:02Now, you can ask yourself, what is the internet? ChatGPT leans on the internet. Is it a product of the internet? The AI itself is arguably quite different and separate from internet technology. But we probably, no, I'm certain that we haven't seen the full effects of the internet on humanity. And so just kind of pattern matching, I just think that this is clearly a big deal. It's bigger than other trends. It's different in that it does work that humans used to do. It doesn't just make them more efficient or connect them like the internet did. And it's only getting started. And so we're lightly, highly, lightly underestimating it.

37:46That's all.

37:47Turner Novak:And it seems like the biggest kind of like the takeaway is this. This is the first time that the internet or software does work for you. Like it's never really been the case before. Software, yeah. I mean, it has a little bit before, right? You can have, we used to have software that would manage certain types of automation. Like early machine learning type stuff, maybe. Yeah. So it was doing little bits of work, but clearly there's a chasm that's just been crossed. And again, that's going to change even in a few years when people start to figure out how to apply agents and let them be more agentic and define their work.

38:24I don't mean like really, really exotic ways. I just mean when you're going to have agents in the workplace that understand more abstract briefs and can figure out how to solve problems themselves and then get to work with it. That's a fundamentally new thing. The automation we've had in the past has kind of been, it's been very deterministic. Even if you use machine learning to kind of make it a little bit more efficient, it's been quite deterministic. So arguably it's been doing a little bit of its work, but not, it could be 100 ,000x the amount of work that software used to do. like you know yeah it's like it's at least 100x could be it's probably a thousand x i mean it's just so much more work not only is it going to do all the work that humans used to do it's going to do work that humans couldn't do didn't have time for or it was not economical to spend money to have humans do there's going to be so much more work done in the world so much more as power gets cheaper, as computing gets more effective, as AI and agents gets more powerful, we're going to just deploy these things to problems we haven't even thought of yet.

39:37And they'll deploy themselves to problems that we certainly haven't thought of yet. The agents will start deploying other agents. Well, maybe, but again, that sounds more like the matrix. But I just mean, like, we'll have abstract agents in business and other places that will know how to get to work.

40:01Turner Novak:So you mentioned something super interesting right there about the way software is going to change the pricing specifically. You mentioned, I think that was kind of a big thing that you guys kind of, you mentioned earlier that you messed that up back in kind of the maybe couple of years ago. And then your co-founder, Daz, when I told him that we were talking, he's like, oh, you need to talk about how you figured out this new sort of outcome-based pricing, like this AI-native pricing model. I think you were the first one to do outcome-based? Yeah, we were the first. Yeah, we were the first, yeah.

40:30So was it hard to do that? And again, part of the story is that we messed our pricing up so badly in the past that we developed these very principled rules for how pricing needed to work at Intercom going forward and created the new fin pricing in that image. So historically, Intercom had very complex pricing because we did so many different things. We sold to sales, support, and marketing. So we tried to serve many use cases. Then it was very sales forward. So it was kind of aggressive and we'd twist people's arms. And it was kind of unpredictable because it had all these metrics that reacted to usage.

41:14And so we developed these principles that included stuff like transparency, predictability, et cetera. But one of the core principles is a clean map from value to price. And so we try and always practice value-based pricing. And the ultimate in value-based pricing for a thing that does customer service is to charge for the service itself. And the unit of service versus the resolution, when it resolves a customer issue to the liking of the customer, then we will charge you 99 cent and never before. So if Finn tries and fails, no charge. If Finn tries and actually learns a lot from the customer, but can't finish the job and then passes it to the customer service rep, and then the customer service rep has all that information to get it started, get him or her started, I shouldn't call it humans.

42:03It's weird now. It's mixing agents and humans. We still charge you nothing. So yeah, we were just crazy principled about it. Originally it cost us$1.21 per resolution, but we were losing money. We just had the conviction that we would, that surely we'd be able to make this cheaper and we made it dramatically cheaper. And so we have a very healthy margin now, but yeah, we just believed in the power of 99 cents. It just felt very fair. And, you know, Now, by the way, we pay$26 at Intercom. When we do customer service, we pay$26 for every human resolution. So some people will do 15. Some people will get it as low as five.

42:49But a lot of those people who think it's very cheap, they don't look at the fully loaded costs of benefits and office space and all the things. But if you can answer a resolution instantly for$0.99 versus$26, dollars you know we knew that would be a smash hit but everyone has now done it so basically everyone's doing resolution-based pricing one way or another and it's like that across not just

43:13Turner Novak:customer service but like a lot of different categories in ai it seems to be like you pay for the work that the ai delivers well it's a little different than paying for the outcome so paying for the work is the ai did a bunch of shit it's terrible and you have to pay for it yeah of course we're saying they i did a bunch of shit you only pay if your customer is happy with the work we did it's a very high bar it's a very high bar yeah what we like about that is that it's hard for the customer to argue with the only the only friction you have there is that it's a new metric anytime you introduce a new metric you introduce friction because they have to learn seats you don't have to explain anymore but c 'est la vie this is part of the fun of playing in a new category so then how did you do the customer education around that like did you roll it out it was super simple and everyone got it or was there people got it quickly okay really quickly um yep it was it was remarkably effective um but i was going to say that the reason we like it is that the second reason we like it apart from the fact that there's a little friction when we explain this to customers and it feels good they were charging for value is that we then are incentivized to increase our resolution rates and so if we can make our system more effective at doing work for them, we earn more too.

44:44So it's kind of got a built in perpetual incentive and reward system where we continue to get paid for that. If we just charge for work done, then we're working all day, just doing bullshit. Yeah. Just getting stuff out there. Why not? So we like that model. Some people have tried to charge for work. I think it's okay, but But I think the braver, harder thing is to charge for real value and outcomes.

45:14Turner Novak:And one thing you mentioned was you're charging 99 cents. It used to cost you$1.21. So you're losing money. That seems to be kind of the current narrative around AI products is like, oh, they all have negative gross margins. They're all losing money. This is a huge bubble. But I saw you reply to someone on Twitter that was commenting on this. And you're like, we actually have comparable margins to traditional software. Yeah, best in class. So what's the disconnect there? You know, we were always in the chat business. We had a messenger early on and we started to build bots early on. And this is, Finn is a third generation of agent or bot.

45:59I say that to explain the reason that we had an AI group from the start. And we now have an AI group that's over 50 people. We have a research group within that. These are real AI scientists, researchers, and engineers. Crazy team, all co-located in Dublin at the moment, where we relocate people to Dublin. Amazing fucking team. And the same reason that we're able to earn a strong margin on 99 cents. And by the way, people like, I shouldn't say their name because I'd have to double check it, but some of our competitors are charging two and three and$4. So we're also the cheapest. But the same reason that we're able to charge a healthy margin, even with such a cheap resolution, is the same reason that we beat all our competitors in trade-offs.

46:49And that reason is that we've got real AI, real AI teams, real AI technology, real AI scientists and researchers. And I think that that's where frontier AI application companies are going to go. And that's a really interesting challenge because if you haven't noticed, there's a really serious war for talent. But if you want to be a real AI company, you need real AI talent. I think if you're making AI applications, again, in long tail, unsexy, unobvious, esoteric areas, I don't want to pick on anyone, but imagine if you're doing some sort of plumbing management system.

47:30Turner Novak:There's maybe less competition. There's less competition and you can probably use the generic models for a much longer period of time. But customer service or customer agents is arguably the most obvious application of AI. Customer agents are going to do all the customer interaction in the near future. They're going to do trillions of dollars of salaries. It's potentially the most obvious area. Then there's going to be a lot of competition. And then the frontier companies like Intercom and Fin are going to need to do relay. It's a long-winded answer, but that's the actual truth. So is it that you train your own models that you get low cost?

48:15Well, we're doing that, but we also just use the models in a far more sophisticated way. it's not hard to take sonnet or gpt and wrap it in some really light vibe coded software and have it answer some questions from customers it's extremely hard to do that at an average resolution rate in the 60s which is the best in the industry and beat all our competitors and not hallucinate. It's extremely hard. And it's just like a lot of very complicated tuning and configuration of this multifaceted system. It's just fucking hard.

48:56Turner Novak:So if I have like a vibe-coded customer support... I say vibe-coded now to be facetious. Our competitors are not vibe-coded actually. But if I were to go say, I'm just going to try to compute with Intercom and vibe-code this thing. You could make a cool demo. And will it probably be that in reality, on the back end, I'm just running tons of cycles and it cost me$8 versus you had it fine-tuned. Potentially that, but it's just going to be, again, another technical term, dog shit. Like in the market, it's going to fail hard. This is one of the big things that software companies need to wrap their heads around in the pivot to AI.

49:32You can't validate it empirically. Whereas you used to be able to sign into the new app and click around and say, that works, it looks great. You can't do that with AI. You need to actually run scientific studies to see how it performs with real data and in our case, real customers. And part of our secret also is that we have billions of data points from our tens of thousands of customers from the help this that we also sell to do rapid high volume testing.

50:05Turner Novak:It would probably be because you're not just getting software, you're basically getting an employee that's doing work. So if you hire an employee, you're not just going to like to show up and you say, oh, look good, you're hired. You want to see a proof of work. You're going to check references. Well, it's not even one employee. It's a team of employees. So you're going to like really extensive. It's almost like if you're going to acquire a company of a thousand people, you're going to want to know deeply entire team. Yeah. You want to see like resolution rates, time to response, but also like the feel of the answers.

50:36Like, okay, such and such an agent actually had an acceptable resolution rate, but it's super verbose. And it takes customers a long time to read the questions and they find it really robotic and it has impacted the CSAT score. So there's a lot of art to it too. But chiefly, because I'm kind of messing my argument up now by saying that there's art when I was trying to say the science, chiefly it's about running through the tests to see how all these different tweaks impact the outcome. We've now run well over 300, we're probably approaching 400 different A-B tests run to very high levels of statistical significance to see how all these different changes of the fin system perform in the real world so somebody has lower or negative margins that's probably because they haven't maybe that's part of it too but i think that like like so i don't know this But the narrative publicly, I believe, is that a lot of these coding co-pilots or coding platforms, AI coding technologies, have negative gross margins.

51:53That's what people are saying. I don't know if that's true or not.

51:58And that's a little bit more of a raw exposure to the generic models. At least that's what it appears. And I don't know. You're a lot more close. You're closer to the action. And I feel like your ability to charge a margin above what you get from Cloud Code or just Cloud itself is going to be a little limited. I'd have to really look at these businesses and see the numbers better to give a better answer. That's a guess here. But there's a lot of companies out there that it's kind of insidious, actually. they've got negative gross margins and so much of their software is kind of like a tire-kicking software sorry so much of their revenue is kind of like a tire-kicking revenue and that people are signing up to try these new tools because they're really exciting and cool and they've got a lot of dead revenue whereas companies and products like finn where we only charge for usage and sorry, not usage, value and outcomes, it's not possible for us to have dead revenue.

53:08We can only get revenue when we actually deliver value in the world. If we stop delivering it, then our revenue goes down. And so there's kind of two categories of AI companies now. There's those that have this kind of apparently negative gross margin revenue and a lot of dead revenue and then there's those that are doing real work in the real world and that's an example of what i'm getting at when i'm talking about the fact that our understanding of ai today is still very naive like in just a year we're gonna be like oh wow that was silly of us and like whoa that company we thought was really hot it's not that hot actually yeah or the one we thought was

53:49Turner Novak:dead and screwed is 10 times hotter now yeah that also because i think one one window of that argument is, let's say you pay a really good engineer 300 grand a year all in. Sure. And then Cursor's 20 bucks a month. Sure. Do you really think that Cursor's not going to be able to charge instead of 20, 100 or 1 ,000? Like if it's actually as good as it's supposed to be and somebody's paying 1 ,000 times more, can you just increase the price? But the question is, how much is it better relative to its competitor and how much are they willing to charge? That's fair. And it's going to be tricky unless one is vastly superior for them to be able to maintain a significant margin above costs.

54:31Turner Novak:I think the other thing that they were doing was it's like a fixed subscription price, but then they had variable costs. So if somebody uses it, the cost is out of control. So it was just like the wrong pricing model initially. I'm not sure how to think of it. Honestly, I don't know. I haven't studied it very carefully. But like my example where I said that we know that we pay our service reps, our humans,$26 per resolution, but we sell fin for 99 cents per resolution. We do that because we know that the argument, the following argument won't work. Hey, you pay 26, we'll charge you half, 13 bucks.

55:06We just know it doesn't work because we know that people know that AI is a lot cheaper. and if we're charging 13 books and the other guys are charging two books i don't know they're going to start to look attractive and you know so i yeah the margin game is going to like what i think is going to happen is that there'll be a lot of players in all the categories it's going to be hyper competitive and then one will get an edge and then if they manage to continue to play their cards right, that edge will compound. And other players will then end up in certain sweet spots or certain areas. Some will be acquired.

55:49There'll be consolidation. But there's not going to be 10 coding platforms. There might be two really big ones. But this will naturally get figured out. But only when there are a much smaller amount will they be able to charge a margin. And if they really do have negative gross margins right now, that's the bet that all their investors are making. That these guys seem to be out and ahead of everyone else. Once they kind of have that dominance and superiority in the market, they'll be able to catch up. It's an interesting game. And it's a game that used to be played in the consumer world when people lost margin to customer acquisition.

56:29And a lot of it didn't work out. Some of it did. Some of it did.

56:33Turner Novak:Massive, massive, massive success too. Like Instacart and those types of companies. Uber, Uber Eats. I think they all have these dynamics. So if you can, and I named all the winners. So if you can end up as the winner, then it worked out. It was good. It's kind of like, you know, let's just say you're one of those ones like, oh man, our gross margins are negative. We better slow down. We better pair it back. Somebody else is just going to charge past you. If they have the right, you know, investors set on board, employees, the right product, like they're going to smoke you. So you kind of have to sort of play the game to the extent that it's out there.

57:08Turner Novak:Well, part of the game is like a game of chicken. Like, who's going to not continue this very crazy game and continue to raise increasingly large amounts of money, dilute themselves, set expectations in the hope that they become a winner? So eventually people will drop out or be forced to drop out because they can't raise. That's how winners emerge also. So they just can't continue to finance their losses. So is that a strategic thing that you've kind of thought about and how you position in the market? For some reason, it's different. And we've been making a positive growth and a strong positive growth margin on Fin almost from the start.

57:52Only at the start, we were making a loss. And so that hasn't been a dynamic for us. And we have not been cash constrained. And I don't know if I had a little longer to think about it, I'd probably do a better answer. Better job at answering, but it doesn't seem to be a dynamic.

58:12Turner Novak:I feel like in a sense, you're in a pretty interesting position where you have like the scaled customer base already. I think that could be a really big part of it. Because you didn't have to go and say, oh, we need to spend a hundred million on essentially customer acquisition to scale up really quick. So that's certainly a big part of the dynamic. And then you also had an existing AI team. Like, what was it? Oh, we got to go hire 50 AI researchers. No, we have 50 people on our AI team already. We have a customer base, distribution, AI team, and a lot of cash in the bank. We cash flow positive.

58:43So all of those things are helpful.

58:45Turner Novak:But a shrinking business. So it's like, okay, we need to... Well, yeah, a business with a declining growth rate. We had not yet started to shrink. Oh, you didn't? Okay. No. But the growth, the net new RR was decreasing. We pulled up before revenue started to decline. We had slowing growth rates, but we never hit that bottom, thankfully. Okay. Yeah. That's, so it seems like you almost had like the perfect setup of doing a life altering or like company altering strategic, even though it kind of seemed like a terrible situation you were in. You actually had an interesting setup. Of course. this because you had the sort of the team, you have the distribution, you probably had, I'm assuming a lot of your investors were like, oh, we like AI is sure.

59:35Can we get some of that AI dollars? Of course. Yeah. Like the following two things are true. And I mean, that's strongly so much so that I resent anyone that claims that that's not the case. It's true that this opportunity was handed to us on a planner. it's just unarguably true customer service you know we were in the right space and there's just such an opportunity there and we just went through all the advantages it's also true that it took A willingness to be kind of fucking crazy to bet the farm on this new fancy thing. I mean, we were the first to have a billboard with AI on it. We were the first to, you know, I said we're going to spend a hundred million of our own balance sheet.

1:00:29We're the first to say that they were going to spend their own real money on AI. We're the first to just have a late stage company to say that we're going to pivot to AI. So, and we weren't the only company in trouble. So it still required bravery and craziness. But yes, the opportunity was also presented to us. It was ours to screw up for sure. Yeah.

1:00:51Turner Novak:And both can be true at the same time. So something interesting that you mentioned a couple minutes ago, a little earlier, was you're not really thinking about this as just specifically customer service. It's kind of a broader opportunity than that. Can you expand on that? Yeah, I mean, you know, we think that everything in a business that doesn't involve making a product or delivering a service is going to be done by agents. You know, whether it's deep in a company doing accounting or whether it's on the front line with customers helping them, you know, buy your product. You know, they'll still be for some quite some period of time humans in all these departments.

1:01:36but there's going to be agents doing a broad spectrum of non-strategic work, the stuff that doesn't define and make the company different.

1:01:51And I don't think you're going to have multiple, say, customer-facing agents. I don't think it makes any sense to have an agent that chats with your customer on your website to help answer questions about the product. And then another agent that helps it get onboarded and use the product more successfully. And then another agent that answers questions when it gets stuck. And then another agent that upsells the customer. It doesn't make any sense. And certainly in the real world, the customers don't see a distinction. When you are in a boutique store and you have a question about a product, you'll ask the person behind the desk.

1:02:31If you bought a product and it was broken, you'll go back and ask the person behind the desk. If you, as that business, want to upsell a customer on a more valuable item, it's going to be the person behind the desk. So the customer doesn't have any distinction. And so I just think making a bunch of different agents is going to be wildly, crazily, ridiculously complex. And as such, people will want one to rule them all. And we're calling that thing a customer agent. And the goal is to deliver concierge experience to every single customer. White glove service for anyone who shows any level of interest in your business throughout the customer lifecycle.

1:03:18Just like agents are better than humans at service, they're going to be better than humans at all of these things. Yeah, there won't be a single customer that won't get the attention they deserve. If you really wanted to treat them with the dignity and respect you felt that they had, given that they're paying your bills and potentially making you rich, you certainly wouldn't make them wait multiple days for an answer. You'd be on it. Every single whimsical question they had, you'd be there for them. And in the future, customer agents won't just, like I said, solve problems, but they're going to be experts, consultants.

1:04:01Think of the clothes, the use case of buying clothing online. If you imagine the agent as being a really, an AI agent, as being a really effective version of the thing that the humans do today.

1:04:16Turner Novak:Hey, do you deliver to this place? Can you change the delivery address or I need to do a return? You're thinking of it all wrong. Customer agents are going to be the very best stylist in the world, right? They're going to be experts in their field. Like, hey, I know that you chose those pants and those shoes. And you told me earlier that you're shopping for this wedding you're going to this summer in Italy. They could totally work. People usually buy these other shoes with that suit. And I actually wanted to show you this photo of this one celebrity that wore this suit to this, sorry, this suit to this show.

1:04:56And they wore these shoes. And I think it looks awesome. And it's up to you. But if you want, if you upload your, send me a photo, let's see what it looked like on you. Like, I think it looks pretty dashing. So anyway, I don't want to do a hard sell or anything, but if we wrap this up now, I'll give you 5 % off this package too. I guarantee people are going to be like, you know what sold you see how people talk to our agent finn all day long they're thanking it they're making little jokes finn is making jokes back people love it and so if it can give you that experience i think people are going to love it too so that's that's clearly the future of all different types of businesses is customer agents doing all the things incredibly well that don't

1:05:44Turner Novak:differentiate you from your competitors well you could even say with that like the the customer or the customer agent could say, people just really want this like new suede suit. Like everyone is asking for the suede suit. We don't have one. Maybe we should make a suede suit. So on the back end, so you're talking about like an operations agent, which obviously makes sense too. Yeah. So customer agent is all the customer facing stuff. Then you've got the operations agent, which is on the inside. So you think that will be separate? TBD. I think people will have their own operational agents. And that's, I think that there's going to be companies that make kind of like glue agents or like everything agents.

1:06:25There's a cool company called Lindy that's doing these types of things. There's probably many more. And then there's going to be specific agents that we want probably for legal stuff, accounting, customer stuff. And then TBD, who's going to do the internal operations? And you could imagine that internal customer operations be done internally. and we're working on certain versions of that where it'll work with your team, ask questions of the humans when it doesn't actually have answers and build up its repertoire of knowledge. So I think there'll be some overlap, but TBD, what the operations agent looks like and who will build that.

1:07:01Turner Novak:So how do you think the way that companies are designed and run is going to change? Just how we see this kind of agent, almost like an agent for each department, like as that kind of evolves over the next decade-ish or so? Like, is it going to be, you know, it's a single person and they have 20 different agents that just represent every single different function of a company? Like, is that the extreme or? Like, I don't know. I think that it's not just going to be like a manager and all these IC agents, I don't think, because there'll be an amount of the work that the agents just can't do, that humans will still want to do.

1:07:40Turner Novak:Like always, even in 10 years. I think there'll even be like a preference in many instances where they'll want to actually differentiate themselves from the shitty companies that only use agents and say, oh, we messed up. Like we get on a quick call and they like apologize. And like, it's going to be a really interesting experience. We'll get to a point where you're like, it's like a peek behind the curtain. And it's like, it's like, you'll tell your buddy, like the craziest thing happened to me today. I was like on this store, blah, blah, blah, blah, blah. And something fucking crazy happened.

1:08:18And like, I didn't, I don't know where I ended up talking to a person. And he's like based in San Francisco. And he was just like this guy in a flannel shirt. And apparently he runs the thing. It'll be like archaic and quaint. You talk to humans, but it'll make sense. It'll be remarkable. But that's in the outer reaches of this future world. For the next 10 years, the agents won't even be able to do a lot of the human stuff. There's a long way to go to cover 100 % of all demand for service. And so my point is that it won't just be managers and IC agents. It'll be a mix between managers and IC humans with the agents.

1:08:56And maybe what it'll look like is you have like an IC type manager who can do some of the human work and then has peers who work alongside it and also work for him or her, them, and also do their work.

1:09:11Turner Novak:Interesting. But this is just one of the examples of smart assets like me can get on podcasts and say how they believe the future is going to look. It's all bullshit. We haven't a clue. And you're probably going to be biased towards people using Finn versus not. Well, of course they are. I mean, that for sure. But like, fin aside, my idea about how humans and agents are going to work together. That's just fucking bullshit that I almost, I mean, almost just made up now. Like, I can imagine it, but I don't think we have a clue. None of us have a clue. Should be very skeptical of people who are like very, very confident about what the future is going to look like.

1:09:45Turner Novak:Yeah. So one thing that I have noticed is that you have not really said intercom much. You specifically, when you created the AI native version of the product, you called it FAN. Right. was there like a certain significance around that decision? Yeah, very much so.

1:10:04Like historically brand prestige

1:10:12meant something important. Even Apple, for example, apart from maybe recent years, it could be a bad example, have historically and still consistently make good products. And their reputation for being hardware people, at the very least, is relevant today because people are still building hardware. We want new hardware. So Apple's brand and reputation as a company that makes great hardware over the last 20 to 30 years is relevant today.

1:10:47in when a new technology or trend emerges not only can that brand maybe not translate but it can be a kind of a a ball and chain and a counterweight something that works against you and we all have without saying it out loud realized that AI is kind of like a new person, or sorry, a young person, a new company's game. Like we kind of imagine that all the new hot AI is going to come from new hot companies. And you look at them, it's like a bunch of kids working 365 days a year on negative gross margin companies, just kind of joking about that one. And that's our image for like what that looks like.

1:11:37And so if you have like a prestige brand from a previous generation, that looks very differently from what your expectations are for what good looks like in this new world, yeah, it can work against you. And that's our perception with a brand like Zendesk, Salesforce, or maybe even Intercom, where they're previous generation companies and no one expects that they're going to be the leaders in AI. Yeah. Like if you heard that Cisco are making the most interesting coding, AI coding platform, you would say, I, I, I'm going to need to see some, I want to see that. I would say there's zero chance.

1:12:21Turner Novak:It's probably not true. I would say, right. Well, it's like, like with, this is actually a bad example of your point because IBM made Watson, this new thing. True. But Watson wasn't that great, actually. I mean, it was new, but it wasn't the modern AI. That's fair. Right? So, but, you know, it can happen, but it's pretty rare. And so for us, we're proud of who we are. We're Intercom. We're unique in that we have the best help desk and the best agent for our part of the market. And that's why we're wedding a lot of customers from people like Zendesk, because people want something that works together.

1:12:56You can't really get that with the standalone guys. but we we really need people to know that the fin thing's a new thing and so we want it to kind of like win on its own and you look at our billboards for example don't say intercom on them like we're spending tens of millions of dollars on advertising that has no intercom on it we send all the traffic to fin.ai only on the bottom of the page does it say an intercom product we're not trying to hide the fact that we're intercom we're just trying to let people see it anew for what it is because it is new. I mean, the AI group was like six or seven people when we started working on Fin.

1:13:32They're 50 now. We were spending a couple million dollars in AI. Back then, we're spending 100 million plus over the next year or two. There's so much that's new here, and we've made a dramatic pivot, and we need to package that in a way which people understand. It's probably kind of common sense, but it's a kind of a wild thing to do when you have a respected brand, but it is actually working. And now we have a great channel on intercom.com where we sell a ton of software that way, but now we have a new channel, fin.ai. We sell a ton of software that way. We'll see. It's complicated.

1:14:14Turner Novak:You mentioned you're spending tens of millions on billboards. Do Billboard work? I think they work when you're trying to establish a new leader of a new category in people's minds. Just brand recognition. You can brute force it. I think you can. It doesn't mean that they'll develop preference for it. But I think there's an insidious way of that positive exposure to a brand influences people's perception of the company. If you've heard it many times, you're kind of like, I've heard that somewhere. That's an interesting company. I think I need to check them out. And yeah, we're fighting the inertia of the star that is the hot white star that is the intercom.

1:15:12And therefore, it makes sense to spend a lot. Now, I think those$10 million are billboards and they're also digital advertising, et cetera. So it might not all be, I should know how much you're spending on all the various things, but I have smart people that do that. But I do believe it works to some degree.

1:15:29Turner Novak:And you said something really interesting in the past. You mentioned when you came back to Intercom that you just didn't like the brand at the time. Well, I didn't like the brand expression. Yeah, so what was going on? I just thought it was very robotic and corporate and shit. We always were brave and different, creative, and we see ourselves as that kind of company. And so when the brand shows up differently, it's going to make everyone feel uncomfortable it's like you having to go to a party dressed and i don't know you i actually don't know you want to finish that sentence but dress like a fucking dork that's what it felt like yeah yeah maybe slightly different topic but you um talking about some of the ai stuff just sort of if you look at like the two kind of like ceo archetypes there's the manager ceo and there's the founder ceo you probably fall more in the founder CEO bucket.

1:16:25Turner Novak:How do you think about those two archetypes as we kind of go into the next couple of years? Well, I just think that I know that AI is so fucking competitive and the people working on it are young and very hardworking kids in their twenties.

1:16:47and we worked super hard back in the day maybe they're working harder i don't know if that's true but you like there's no timeout time timeouts in in this game like you just gotta push aggressively every day of the week and work at a cadence that is quite unfamiliar in the late stage software days. In the late stage software days, every year or two, you check in in your strategy, you do a quarterly exec meeting, you'd review the goals for that quarter and set the KPIs after having reviewed the goals from the last quarter. Maybe once a year, you'd have the innovation and strategy team present to you.

1:17:39Some new innovations. They tell you what's coming.

1:17:42Turner Novak:Yeah. The R &D team would say, here's what we've been working on for the last year. That's good to hear from. Yeah. And you'd be like, cool. I like that. Oh, cool. Cloud. Okay, great. Let's make sure we have something for our cloud strategy. I'm really like being ridiculous. Yeah. People are like, oh, maybe we need an NFT strategy. Or whatever. I mean, yeah. Maybe. Unfortunately, many people have an NFT strategy. Unfortunately. Yeah. And there was this slow cadence. And it maybe, and I say maybe, and really, I mean, didn't fit the professional CEO who was part of an large organization. And they were really good at that cadence, structure, order, harmony.

1:18:26But in the AI world, it's like, imagine you set your new strategy and your goals for the quarter. It can be day three on the new quarter. Someone releases a new model. And your competitor releases a new product. And the other competitor just announced a new financing. And the product you all were really hyped about kind of didn't work. You need another quarter. And you realize that your old brand that everyone loved is kind of fucking holding you back. You need a new brand. And you can't get the fin.ai domain. And it's really the only one. You're going to have to talk to the fucking guy who owns it.

1:19:09And he wants a lot to be paid for it. Did this actually happen? This actually happened. Wow. And it's like this constantly dynamic, wild thing. And yeah, professional CEOs, I just think, anyone who wants to work in that cadence is just going to be left in the dust. And so I just think that this time demands the founder MO, which is flying by the seat of their pants and, you know, rolling their sleeves up and getting

1:19:38Turner Novak:involved and making quick and fast decisions and not being afraid to make a mess. Yeah. When you, when you think about that, an annual product plan, let's say we're sitting there, you know, August of 2024, I think Bolt launched in October of 2024, lovable somewhat recently after that then you had v0 from versell you had replet launch yeah we had like windsurf and cursor you know all these companies basically break the record of course fastest ar growth of course you know what's what's the joke accounting rules aside did you see the one video that went viral it's like oh that's actually when you replied to yeah it's like you know gross margins aside yeah extreme growth so you professional ceo like you check back in october of 2021 plan doesn't work yeah and so part of what you also need is employees who are willing to work in that chaos and you know i've always got feedback that like oh we're making too many changes and you know is that the hardest part of working for you is that you're always no, we can get the hardest part of work for me in a second, but I always got that feedback and I actually took it as a negative and was quite insecure about it because I'm not a hyper-organized person.

1:20:56I'm not the professional CEO operator. I'm the person that hires that person. But now I know it's a feature, not a bug, actually. In the AI game, you have to change. We would be fucking dead if we didn't rip up all of our rules and all of our plans and all of our strategy. and ICP and everything else multiple times in the last couple of years. Because there's been quite a few startups

1:21:21Turner Novak:that have emerged trying to do customer service, right? Yeah, yeah, yeah. You have to stay adaptive, yeah. Speaking of that, actually, if you were a startup right now, if you had to start over, like if you're like, you're not allowed to do intercom. Yeah. You're not like, you have to, no customer service allowed. What kind of opportunities do you think are out there for startups right now? Like, is there like a framework that you have? No, I like, Like starting anew is so difficult, particularly now that things are moving so quickly because you need to start something long before it's valuable or cool, like well before the category takes off.

1:22:00So, so much of the early stage thing is a crapshoot because of that, you know, which you probably know. Yeah. So for me, when I think about starting new businesses, it's always just needs I see in the world that I will be really excited to fill. And I do think that that works in technology today, including in AI. If you stay close to fields of personal interest, and of course you can try and build stuff in fields that are not interesting to you, but I hate that approach personally. I hate that throw shit at the wall approach and see what sticks. It's just really, really hard to build for people you don't understand or care about.

1:22:44But if you can stay close to domains that are interesting to you and that you care about, really get to know them. And also be the person in that field that knows the most about modern technology and applications of AI. I think that there's opportunities to build cool new stuff. But so many of these AI companies are like really abstract also. How so? they're building like platforms for AI companies that do a certain type of niche. Do you know what I'm saying?

1:23:16Turner Novak:I mean, I've definitely seen some of those. But then you look at the revenue and their customer base, it's like, oh, it's kind of real. Like, and I believe it's real for what it's worth. Now, maybe it's actually not. I'm not going to name the company. Maybe it's like the optimist in you. No, I'm not an optimist, actually. I totally am skeptical on the AI thing. I'm not an optimist. I think at least half these companies are going to flame out. That's how it works, particularly when everyone's FOMOing into a space. Maybe two-thirds are going to flame out. That's kind of okay also. Everyone should go into it all eyes wide open.

1:23:49But yeah, I do think that there are those abstract opportunities. If AI is going to be as big as AI seems to be, then building tools and platforms for AI is probably a thing. These second-order things that I never would have thought of, But you have to be a certain type of nerdy individual to get excited about that too. But when you get far enough away from early stage, all your early stage ideas kind of wither and die. You need to be a desperate founder to smell the ideas quite often. Yeah.

1:24:23Turner Novak:And I feel like when you're just thinking about competitions, there's probably less incumbent competition in helping AI native companies. but there's probably a startup competition in the, you know, how do you do evals better? Sure. Or, you know, I think there's this one, I don't know if this even worked. It was like employee reviews for AI agents or something like that. Yeah. You can get pretty esoteric. But maybe it does work. Yeah. Yeah, maybe it does. Yeah, maybe it does. One question that I know I wanted to ask you about was you are originally from Dublin, Ireland. Right. Obviously also based here in SF.

1:25:02Turner Novak:You probably were one of the first scaled and successful kind of distributed teams. Is that so something you guys lean into a lot? So we're like semi-distributed in that we have multiple offices, but we try to not hire remote. It's just kind of a painful fact of our existence. Like it was an advantage insofar as it gave us access to talent markets that we wouldn't have if we were just in San Francisco. And we have benefited and continue to benefit quite a bit from being in Ireland and London and being one of the more interesting companies to build actual technology in, in those places. But being far away from the humans that you're collaborating with and kind of spending most of your life with and on such a deeply emotional and profound adventure with sucks.

1:25:51It's horrible. I don't recommend it to anyone. And a lot of people sleepwalk into it because, you know, they're kind of like, oh, my founder, my co-founder doesn't want to like move for whatever reason. Or, you know, we can't find a designer here or whatever it is. I'm not saying you have to be an SF at all, even though there are great benefits to being here. But they take the easy path of building a distributed team and then just make it ever harder to undistribute themselves, so much so that they never become undistributed. And I just think it sucks. I just know that in-person is better. You know, the days I crave were the days where we were in the same office, or I was back in Dublin.

1:26:38you're going in in the morning you're meeting your co-founder or someone for a coffee you kind of can have um ad hoc meetings i don't know it's just more fluid and fun like i spend the majority of my day looking at a little digital square in front of me and like for my one beautiful human life on this earth under the sun i choose to fucking stare at this little digital square i don't know it doesn't i don't know it doesn't seem like the best way to spend your days probably not i don't know if brian johnson would approve he he probably hates this idea but i'm not even talking about it from a wellness perspective i'm just talking about like just richness of life experienced.

1:27:36Turner Novak:Yeah. So I do it out of necessity, but I just think it's, I know it's just so much more fun to meet people in person, but we all have various trade-offs to make. It's okay if you make the conscious trade-off. I'm just telling people don't make it unconsciously. Yeah. It sounds like if there's multiple distributed team with multiple offices and it's like the people that are in different cities because of the necessities of whatever. That's not as bad as like the remote thing because I do have people in SF I meet in person. There's a lot of people that meet in person in Dublin and in London. And we try to keep teams together, certainly in the same time zone.

1:28:12The time zone makes it even worse.

1:28:13Turner Novak:Oh, yeah. Way worse because Dublin's eight hours ahead. And so I'm just starting my day. I'm barely waking up. They're at the end of the day. They want to go home. Yeah. It's like terrible mismatch. How do you think the media has changed over recent years? I know you've, I mean, we're on a podcast, I'm an influencer, I guess, at the end of the day.

1:28:36Turner Novak:It depends on who you're talking to. It's like, sometimes it's like an embarrassing thing. Some people are really excited for it. Yeah. For me, it's like, I kind of accidentally became one. So it's like, you got to lean into it. But have you kind of seen that evolve over time as a founder and how you kind of play that for your company? More and more people have evangelized the idea of founders going direct. And it's a trend that's real. You've even got people like Mark Zuckerberg going on a range of different podcasts, speaking in long form in a very raw way. And I think that that's only great for people like Mark.

1:29:12I think without that, he was substantially less human to the world. And so for founders and having this opportunity to go on different people's podcasts, have these long form conversations, publish their own podcasts or videos, even just their own writing on Substack or even on Twitter or X. Like all these things are outstanding. I will begrudgingly admit that there is some, at the very least psychological stamp of approval or value stamp that conventional media still delivers. and when you're covered by the Wall Street Journal, I don't know, I guess it's got a certain sheen to it still.

1:29:58Turner Novak:Yeah, people kind of lean forward. I think so. Now, if you think carefully about it, is there a good reason for that? Probably in part, no. But in part, yes, because to actually get covered by the Wall Street Journal, you need to be comprehensible and interesting to the mainstream. And that is a kind of signifier that there's something that's broadly more interesting here than the nerdy podcast. But yeah, I just tell all founders to just tell their story early and often. Don't be afraid to repeat themselves. The new cohort are all vibes founders, at least the best of them. They're really good at media.

1:30:44Turner Novak:Did they grow up on the internet? Like, is that why? Part of it, right? Well, they grew up with TikTok and they grew up with Instagram. And the best of them learned how to promote themselves, or at the very least, saw how people who were good at promoting themselves did it. It's hard, actually, for a lot of founders. I'm not that type of person. I don't want to do that. Like, I don't want to create a bunch of fucking videos of myself. It's not interesting to me. Yeah. Very painful. But there's people who like doing it and they're good at it, and they get a lot of benefits now. Yeah. And yeah. So I, I, I think the game is now a hype game.

1:31:18It's now a, it's now a cell phone media game. It's a direct game. And the more you can tell your story early and often the better. And, and, and I think the last thing I would say is the more vulnerable you can be, the better. Really?

1:31:32Turner Novak:Why is that a big deal? Well, just because with the vibe marketing comes the bullshit and there's a lot of overly slick content and kind of dry podcast interviews that are very difficult to listen to in my opinion. That's true. If someone's listening this far into this one, you got to give them credit. What are you saying? This is dry? Is that what you're saying? if you can be vulnerable and authentic in yourself, I just think it's a lot more interesting and relatable. And it's hard, you know, everyone on the internet is trying to take quick and cheap shots. It's hard to take shots of people who are just fully being themselves and not trying to sell too hard.

1:32:17So the prototypical future successful founder, and I do think that this is like a strong signifier for someone worth investing in is someone who is able to tell their story confidently, knows who they are, they're authentic, they're willing to make mistakes, admit when they're wrong, and is not afraid to be on camera and just produces content and communicates. Those guys go so far, so far. Some of them go too far. And there's some companies I can think of, which I won't name that maybe they're all hype. We don't know yet. But I'm almost certain that the future successful founders will learn how to do this well.

1:32:57Turner Novak:Well, it's that whole of like distributions, all the matters. That's not entirely true, but to the point of... It makes a big difference if indeed software is getting cheaper to develop. Yeah. Right? What's left then? Yeah. And to your point of maybe someone went too far, we don't know if they actually have a product and if it actually works, but we know that we should care. Like there's two different sides of that problem. It's like you made a great product, nobody knows about it. Sure. And there's the other side, like you have no product, but everyone knows about your product. Two different problems.

1:33:33Turner Novak:Maybe one of them is easier or harder to solve for or get around. But well, I think you need to do all the things. And we've got a lot better at building software. Like when I started building software, things like Ruby on Rails just came out and it was profoundly. You didn't have cursor. Like you had to actually write the code. Forget cursor. We didn't have, I don't know what version of Rails we're on now that make it even easier. Like these frameworks only just came out that allowed you to save a lot of time developing basic CRUD apps. Now software is commodified. And yes, now we have Cursor and everything else, which are going to add great efficiencies.

1:34:13But distribution is not commodified at all. It's monetized. So you can pay your way in. And if you are a new founder with not a lot of money, you're finding the incumbents like me with the hundreds of millions of dollars, the tens of millions of dollars, dumping it on billboards allegedly. So what have you got left? You've got your own vibe and je ne sais quoi and magic to give to the world. And so maybe this take proves wrong, but I really think that the new hot founders are going to be ones that can sell themselves well. Yeah.

1:34:52Turner Novak:Well, and I think one thing too, is when you think about, um, you, like, if you think about from yourself and you just think of like, do, do, how do I feel about constantly putting myself out? Like I'm tweeting 20 times a day. I'm making a bunch of TikTok videos, make like 10 or 20 a day, you know, all that you're doing and you just assume every single person out there seeing and consuming all. And they just think, oh man, Turner's just tweeting all day. trying to make TikToks all day. But the average person is going to see maybe one or two or three of those. And they might see 10 or 20, maybe 50 % of what you put out.

1:35:24Turner Novak:No one will actually see all of it. So it's kind of like putting shots on goal. So, and a lot of times, you don't really know what's going to hit when you're making content. Like I will tweet something that I thought was pretty clever and like, oh, this is going to be a banger. And it just kind of flops. And then sometimes I'll have one where there's like a typo and it was like, it took me two seconds to make, but it gets a million views. so yeah shit i almost didn't tweet that one yeah yeah so it's it's kind of one of those like sort of the same thing of like high shipping velocity on product it's just with content it's just you just put it out there you do it 10 times a day and the ninth one and the 10th one is the one that really hits yeah and that's the reason people know about you but if you chop those off and you only did eight or you only did one a day or you did one a week or one a month like imagine if you did 10 a day you need the hundredth time is the one that is totally true 10 days and you got you hit versus if you were doing one a month or one a week and it'd take you a hundred it would literally take you a hundred years it's true unfortunately i'm doing like the one a week strategy it's because i'm not one of these young founders that is like social native where i like have all these ideas for pithy tweets and i'm really excited for the world to like like yeah i don't i'm not that guy unfortunately so this is some of the advantages that the new kids do have yeah some people can work and tweet like amjad from replit apparently can work and tweet.

1:36:42He's built a great product. The business is on fire. The guys out there in social media promoting it nonstop apparently. It all works. Kudos to him.

1:36:52Turner Novak:Well, and one thing to think of too is like, you might think, oh, he's just tweeting all day, or he's just always doing is just typing all day. But you're probably spending a lot of time in Slack. You're spending a lot of time in email. So you're just kind of shifting some of that to being a place that's one on many. So it's like, you can send an incredible message, It's super insightful on Slack or an email to one person. Sure. Or if you put it on the internet, a hundred thousand people will see it and you almost get more credit for it in a way. So, you know, there's downsides to putting the wrong thing out there on the internet, but there's also like unbounded upside.

1:37:22Turner Novak:Yeah. You have to not overthink it. Yeah. You have to be willing to be wrong. Yeah. Yeah. Talking about putting things out on the internet, I kind of wanted to just to kind of wrap this up. Yeah. I went to your personal website. Yeah. Yeah. Your website's incredible. It looks like it was made in 2003, maybe. Well, it's, It's designed to look like it was made in 1996. Okay. Because they were the glory days for me when I first got online. Okay. Geocities and all that good stuff. Okay. I was going to say Geocities. Yeah. I had a Geocities website back in high school that I had. It had the little, the sidebar ads thing.

1:37:56Turner Novak:You know what I'm talking about? I think you could pay for a premium to get rid of it. Of course. But I was 12. So I didn't have that. That was a beautiful thing. Yeah. You said one of the things on your website, you said you took out a loan for$2.2 ,000 for your first flight to San Francisco? Yeah, yeah, yeah. Really? So what's the story with that? I mean, just thought I didn't have a lot of money. That's the end of the story. You were just hell bent on, I'm going to get to San Francisco. Yeah, yeah. I had one friend out here who told me earlier that year, like, dude, it's crazy out here. Kind of like the whole internet's being built out here.

1:38:36And there's like so many VCs and you kind of have to be here. And yeah, the word was kind of getting out about San Francisco. San Francisco wasn't the center of Silicon Valley in 2011. That was just like a conversation. People were saying, oh, it's starting to move to San Francisco.

1:38:56Turner Novak:From like South Bay-ish. Yeah, exactly. South Bay, Palo Alto, and Cupertino, and Menlo Park, and Mountain View. That was where Silicon Valley was. And so I moved here just as people were saying, Ooh, San Francisco is going to be the new Silicon Valley. And yeah, I came here to be part of that. Had to be part of that. Yeah. And other things, somewhere related on the website, it said you, it took you quite a while to raise the very first round for income. I think I saw that the pitch deck is on the website, which I'll throw a link in the description for people to see, but I think you were trying to raise 600 grand.

1:39:30I was trying to raise a million dollars and I like just burned through every single investor intro I got. I just got notes everywhere. You see the thing, this is where I really sound like an old man, but like back then there weren't seed firms. Like there was maybe three or four or five.

1:39:59Turner Novak:So was this 2011? 2011. Like there weren't really seed firms. Like there were VCs and I think kind of the way you did it was that you raised like friends and family round and then you went to the institutional people and then maybe you raised a series A and the friends and family round was maybe your seed kind of. Like there weren't many people who are writing big seed checks. i see all these people all these fucking kids um i'm just kind of trying to joke here trying to lighten the situation given how old i sound um announcing their seven eight nine ten million dollar seed rounds there was one just announced today that i invested in and that was unheard of seven fucking million dollars for a seed round like if someone told you that in 2011 it would be actually funny it'll be like it'll be a funny joke so you would have thought they were like literally like it would be a joke because it didn't happen yeah it didn't happen and yeah so anyway i went to all the various angels i could get intros to got a bunch of no's then i got a couple yeses i got 5k checks 10k checks i think i got a 50 or 100k check from biz stone who was the founder of Twitter, one of the Twitter founders.

1:41:25So he was one of the big ones. And like, I met him, we took a walk around the mission for probably 25 minutes. He shook my hand and said, yeah, I really like it. Yeah. Okay, cool. I mean, kind of like 50, 100 K like, but really, I really got the impression that like, and I like biz a lot. This is only a compliment to biz. He ended up making like a bunch of just killer investments. But I'm like, God damn it, that guy really hasn't

1:41:50Turner Novak:done his due diligence at all yeah like how what he doesn't know investing exactly but i mean it really worked out for him but yeah um yeah long story short manny manny painful depressing months came back to ireland cap in hand like a fucking loser to my co-founders i had managed to scrape together 500k much of which just came together in the last minute then biz knew these japanese guys digital garage and introduced me to them and i had a meeting with them during the day in dublin it must be really late in japan it was a skype call it was 26 year old me there was like 12 guys in suits okay the the the the loss in translation factor was very real did they know english yeah they did okay but like i'm pretty sure that they barely knew what i was saying i barely knew what they were saying yeah but i it was something like i don't know how it went but they were kind of like i'm not you know they said something like very good uh we'd like to invest five hundred thousand dollars sorry i have five hundred thousand dollars and i was like okay and you know that went on to be a great fucking investment for them also i mean a killer investment back then of course seed rounds were we raised at a six million dollar valuation so it's like maybe some dilution they're probably sitting around 100x at least right there's some dilution i don't know if it's 100x but uh it was a good investment let me put it that way so kudos to those guys and and i got to like meet them over the years we'd meet a person.

1:43:35They're just the most polite, lovely gentleman ever. So our round was just really random. I didn't deserve that million dollars, but it came together. And so I can't overstate my resentment for the kids who are raising$10 million at a$100 million valuation in a week. So why is that happening now? I think we're more aware of the potential of these investment vehicles. Like, you know, 15 years later, we now see the plethora of unicorns and deca-corns. It's the first time. Is this how we say deca-corn?

1:44:15Turner Novak:Deca-corn. Terrible phrase, but I'm embarrassed even that I said that phrase. It's like the most. I'm shifting in my face. I realize I've never said it before. Yeah. You've never said it a lot before? I've never said that word before. it um there was barely billion dollar private companies back then yeah like it wasn't a thing the reason it was called unicorn was that it kind of didn't exist yeah and now there's like little ai companies that are like worth a billion dollars three months after launch i mean that literally happens now and so we weren't aware of and awake to the potential still of software the internet, technology, cloud.

1:44:55And that's why now when people see AI come around, they're like, holy shit, we're not going to make that same mistake again. Because these things are so much bigger than we realize. And just like, you know, SaaS was bigger than we thought before. I say it again, that AI is probably way bigger than we could possibly imagine. And so as ludicrous as these rounds are, even though some will flame out and people will lose their money, some are going to make phenomenal fortunes. Because just like unicorns were so rare then, and now we have companies worth tens of billions, maybe in 10 years, it's not going to be rare for companies to be worth hundreds of billions when they're private.

1:45:36It might not be the thing that only five companies can achieve. Maybe there'll be 50. And so then it makes sense to lean in aggressively. but now back in 2011. Yeah.

1:45:50Turner Novak:Well, an interesting thing though, when you think about the people investing that capital and how do you monetize it, like you charge fees and you get the profits or the carries. So in public markets, there's fee compression. So if you're running a public market fund, you probably can only charge about 1 % of your capital. But if you run a venture capital fund, private markets, you can charge 2%. People charge 2.5 % or 3 % a year. Right. So there's incentives for the capital to kind of be there. If people know the returns are there, you, you know, you, you can, you, you miss out on with public, you get paid your carry quarterly, sometimes annually with private markets, you need to actually exit.

1:46:33Turner Novak:Yeah. So you don't get the carry quite as much, but the incentives are that moves the incentives even more towards raising AUM. Sure. And getting that management fee. So it's like you've got, if the companies are doing well and they're growing into the correct profile, You'll have investors who will kind of step up and raise the capital to kind of solve for that and keep them private. So I think the incentives are aligned, whether you could say it's good or bad. Like the incentives are set up to where that's probably going to happen. And there'll be just a lot more money chasing this current capital.

1:47:03Yeah, for sure.

1:47:04Turner Novak:Yeah. And just going into, once again, many esoteric, unfamiliar, unsexy categories. the capital is going to trickle down in many areas and directions yeah so it's going to be interesting to see maybe vc firms will grow maybe it turns out that the close to infinite vc funds will actually not be enough maybe i feel like that's a pretty hot date i feel like most people say there's too many vcs that's what i would say yeah well it's just really hard to differentiate now yeah what do you have you decide like when you meet an investor yeah i guess you're a little different now from where you're at, but maybe if you can reflect on it and think about it, I mean, I guess at any spectrum, like, how do you think about it?

1:47:49Turner Novak:Like, do you look at like, what value will you provide to me? Is it like, do I trust you? Like, would I want to get a beer with you? Like, how do you gauge it? I have sharp hot takes on this. I'm glad you asked. Okay. I think that value add is fucking bullshit. I do think that some, if they're, particularly if they're operators, can maybe help. But I think it's really the job of the founder to run their damn business. And if they set up a situation where either they think or the investor thinks that the investor should be contributing anything, something's going wrong. But for the most part, most investors are not going to be able to help the founders.

1:48:30I mean, it's just a fundamentally different discipline. I do think that they can help them thinking about future financings and about corporate matters, valuations, exits, and they can make appropriate introductions to other investors and bankers and strategic buyers, et cetera. So all of that makes sense. I think that's really cool. But I'm really allergic to the big firms that have apparently these suites of services. I think that that's bullshit. So that's kind of one side of it. The investors, And so I'm repelled from investors that say, how can we be helpful? I'm like, come on, buddy. Like, you can't.

1:49:13Sorry. You typically can't. Not with me, not with the brand new founder. You can't. You're probably a great investor, but that's a different discipline. So I'm repelled from those types of people. I'm attracted to investors who have the confidence to communicate directly and openly and actually know what they bring to the table and are willing to disclose their own interests so when you get investors who are like i just want to be involved in like you know great founders and you're fucking amazing and like oh i really actually love your company and you are particularly incredible and i just oh the timing isn't right or something something i just didn't say anything that was the most generic line of words I've ever heard.

1:50:00But that is 80 to 90 % of investors still. I reconnected with a bunch of investors because we haven't raised since late 2017. So I've been not exposed to investors for eight years. And I'm like, huh, maybe they've changed. And I got the same lines from a brand new cohort of investors.

1:50:21Turner Novak:But a couple investors would say things like, or will say things like, you know, that opportunity is interesting on the face of it. We like that company, but, you know, our return profile, you know, is, you know, three to five X. And at this stage, we don't know if we can achieve that. Or just by the nature of this business, which is an arguably great business, it's not going to make as much sense as me allocating this capital to a slightly earlier stage company that's growing at this different rate. And they'll kind of like show their cards a little bit and have a grownup conversation. Because then if it's authentic and real, if the founder wants to feel hurt, then it's kind of on them.

1:51:10Whereas if the investor is fucking bullshitting them, which the founder will always feel, at least subconsciously, that's when I think the relationships go awry. And so the investors, while they think they're helping themselves from hiding their true motivations or hesitations about the business themselves. Yeah, or keeping optionality of like, oh, I convinced my team to invest now. I think that they're actually damaging the reputation with the best founders who will smell bullshit a mile away. So again, I've seen just time and time again, the best investors, the top 1 % or 2%, they're more than confident to say, hey, this is a little early.

1:51:51We'd like a little bit more proof on this. We'd like this and this, but this I'm a little concerned about. We'd like to get to know you a little bit longer. And it's just a chill thing. Or this is not for us because we only do this other thing. But as soon as you start laying all the, like you're fucking amazing and I do anything to work with you, but for some reason I'm not investing in you, absolute bullshit. That's still 80%, 90 % investors, which is really, really surprising. And it's just because, sorry, It's just because I think a lot of investors don't have experience managing people. When you manage people and you have to give hard feedback, and you have to build rapport with people who want to follow you and work with you, even though you told them things that they didn't want to hear, you quickly learn just that authenticity pays and bullshit doesn't.

1:52:45And I just don't think that they've had that experience. I will admit that it's very easy for me to say that on the founder side of the table, who doesn't have to maintain optionality and doesn't have to maintain their reputation amongst immature founders who are going to badmouth you no matter what you say. So I actually know it's fucking hard. Well, I will say that despite how hard it is, some investors can do it. And I think they're the fucking legends. I've met some of them and I'm just so impressed with them. Like I would, if I was raising money again for this business, another business, I would go straight back to those people because they're real.

1:53:22And I'd love if the world kind of knew more about them. And one of the insidious and shitty parts of just the overall dynamic here is that there's always a new batch of founders that don't have the experience that I have. They don't know it can be a different way. And they'll fall for the bullshit. and they don't have the standing and ability to tell investors to go fuck themselves if they misbehave. So the bad patterns perpetuate.

1:53:51Turner Novak:So should I tell someone to go fuck themselves? Probably, yeah. No, I'm just kidding. Or do you like - Well, unless if there's a reason to, yeah. But what I'm saying is, what are the various reasons you won't invest? Sometimes you just think, you just don't see the opportunity there. Yeah. So this is like giving a data point. It's just like, I like, like, here's literally the conversation I would try to have. And if you had a hundred of these conversations, I guarantee it's going to resonate with all the right people. They're going to come back to you. Yeah. I would say, um, I'm trying this new form of feedback and communication with founders that basically no investors do because they're all trying to maintain option value and it encourages them to bullshit founders.

1:54:41And I really don't want to do that. And I'll admit that I've been there a little bit because sometimes it just doesn't pay to be really real, but I'm not going to do that anymore. And I'm going to try and build a reputation that is based on authenticity. And so here's what I think your business, I think you're very compelling. I think that you really believe in what you're doing. and you're smart, and I've enjoyed my conversations with you. And I really hope that despite what I'm about to say, you'll talk to me again. I think that the way you're currently configuring the business, it's just a little odd for what we've seen before.

1:55:21And that could mean that either I'm super wrong, and it's an incredible opportunity. And I'm really close-minded, and you're going to make a fortune without me. Or maybe if I'm lucky, you'll come back in the next round. Or it could possibly mean that you need to make a little adjustment and you'll figure this out. And I've seen it before with great founders like you who are slightly misconfigured, who go to market in the wrong way, learn and change, have incredible success. And so for me, who can only make a small number of investments, I have this limited size fund. These are the sizes are right.

1:56:02I'm really only going to make one investment every month. I can't get comfortable when I think that that's the wrong thing. And either you're right or I'm right, it doesn't really matter. But that's where I'm at. And I hope that me being real with you will win some trust such that when you're raising again, you'll come back. And maybe it won't. And I guarantee that the best people will be like, okay, I've actually never heard that before. Yeah, that's pretty hard to argue with.

1:56:27Turner Novak:Yeah. Like, thank you. Some people will be like, fuck you, whatever, but they're not the right people at all. The best people will be like, I really like that authenticity. Because if you talk about the other 80, 90%, they don't even get this. It might be the first time someone actually said that to them. I guarantee if you do that, you'll be most times the only person that does that. Guarantee it. Because the types of investors I meet now are way more experienced at a later stage, great firms. So they've learned to do this. The early stage guys haven't even learned that. So I think it's a secret weapon, just radical transparency, directness, authenticity.

1:57:08You could build a whole brand around that, in my opinion. But again, easy for me to say from this side of the table, wish you the best of luck with that.

1:57:16Turner Novak:Yeah. Thank you. I mean, I think at the end of the day, that probably sounds easier than It's hard. Building an AI company from the ground up. Well, no, I think it's all hard. I think it's all hard. Listen, your dollars are the exact same color as everyone else's. But somehow people have to choose your ones. Somehow. And there are now countless idiots with green money. Countless. Yeah. You and I could never list them. ChatGPT could never list them. And so you really got to be careful when you build that reputation. So that conversation is easy to have when a smart ass is talking on a podcast. But in real life, it's difficult.

1:57:55But having said that, I think it's an opportunity.

1:57:57Turner Novak:Interesting. Okay. It's good to reflect on. I do try to give as much feedback as I can. But to your point, it's hard to do it at scale, like in a kind way. Sure. Everyone. Totally. Things definitely do fall through the cracks. Yeah. But that's where the legends are the legends. Yeah. I like that, though. It's good motivation. It's good food for thought. Yeah. Well, it's been a lot of fun. Yeah, really fun. And I hope you had fun. A quick thanks to Ramp for supporting this episode. Head to ramp.com slash the peel for$250 on your first set of cards. If you missed it, make sure to check out last week's episode with Albert Azut from Level Ventures on how to actually generate alpha and venture capital.

1:58:35Turner Novak:Tune in next week for Dan Fader, who runs private market investing for the University of Michigan's Endowment. If you enjoyed this conversation, please like, comment, subscribe, name your next internal AI model afternoon. If you don't want to miss a future episode, subscribe to my newsletter, The Split, linked in the description to get each episode plus a transcript emailed directly to your inbox every week. Thanks again for listening. See you next time.