More mountain: Marcus Ryu on finding the joy in hard work

0:01As a VC, I'd say the one thing that's been surprising to me is just how professionalized venture capital has become. Now I find myself sometimes in a scrum of 12 other firms hoping to get an audience with a 26-year-old Stanford CS dropout. That's okay. That's the way the world evolves. So it's become much more competitive. There's a lot of capital chasing every idea. Even if those companies turn out good, you know, turn out really well, what will the returns be like? And I'd say it's a source of, you know, it's an open question. Welcome to the SaaS Revolution Show, a podcast by SaaS.com. Here, we interview SaaS founders from around the world who've been there and done that.

0:39They share the ins and outs of how they built their businesses, their operations, their path for securing investment, and more. Our mission with the podcast is to help you, the founder, learn how to scale your SaaS, maintain your well-being, and navigate the complexities of this ever-changing industry. I'm your host, Alex Dima, and together we'll explore the good, the bad, and the ugly in the journey to SaaS success. Welcome. We're doing a live episode of the SaaS Revolution show here at SaaStock USA in Austin. I'm Alex Sumer, CEO, founder of SaaStock. Delighted to be joined today by Marcus Ruh, who's partner at Battery Ventures, also was the founder and CEO of Guidewire.

1:20Welcome, Marcus. Thanks for coming here. Pleased to be here. Good to have you. Really great to have you, actually. I think, if I mentioned this earlier, but the reason you're here, I don't know if you know, maybe you do, David Politis from BetterCloud. Oh, sorry. Yeah, yeah. You don't know him. No, I'm sorry. Okay. Anyway, he said to me, I was speaking to him, he shared me this YouTube video, and he said, you've got to watch this. This is one of the best talks I've ever seen. And I watched it, and I felt the same way. And then I think I shared it with some of my team. And then on that basis, I was like, we've got to get David, who's on my team, got to get Marcus to come and speak and deliver that talk.

1:59I'm flattered to hear it. Thank you. Very inspirational. And that was about your time. guidewire and I want to dovetail a little bit between you being a CEO founder but also now you're in the the VC seat as well so a few questions around that but generally I always like to start outside of being a CEO and a founder you know in the past life and now being a VC who is Marcus Rue? Well I'm a husband and father of course but I you know before joining the entrepreneurial ranks, I thought I was going to be a professional philosopher. So I had a very academic background. I was a good student. I never gave a thought to the business world until it kind of came abruptly at the end of graduate school.

2:41So to this day, I'm probably over-intellectual for someone trying to make his way in the business world. And at times it felt like a liability, but in some ways it had some advantages. So that's interesting because a lot of entrepreneurs, including myself, always felt like maybe from an early age that they wanted to build something, they wanted to be an entrepreneur, but you didn't feel that way. You thought you were going to be an academic. So how did you get into building, becoming an entrepreneur, and then obviously building a very exceptionally large business? Well, when I say intellectual, I don't mean intelligent.

3:14I just mean someone who wanted to live a contemplative life and thought that the most important work to do was to think and to write. I think I had a bit of a crisis in graduate school where it was twofold. On the one hand, I realized the people who are really great at this, they had a kind of monastic devotion to being professors. And I love to think, I love to read, but I didn't know if I wanted to be a monk. And then the other crisis was the sense that, you know, what are the real agents of history? What really makes a difference in this world? What moves the world? And you'd like to think as a philosopher, it's ideas, but generally not.

3:49And indeed, it's mostly entrepreneurs that were on the vanguard of advancing and taking the risks that make the world what it is today. And I had a kind of crisis in my early mid-20s when I said, I've been running a race and doing it pretty well, but I've been running the wrong race. And it was an abrupt change at that point. I had the benefit of being educated and having that moment at a time of fantastic global peace and prosperity in the late 90s. And the dot-com boom at that time was a magical moment where it felt like all you needed was an idea and the superpower of the internet would make anything possible.

4:28Of course, that was overstated, but it afforded me, who didn't really have any credentials other than a good education, the chance to be around extraordinary people who had raised amazing amounts of capital and to see what the entrepreneurial opportunity was at a very early point in life and then take some improbable risks. So you took a risk, you built Guidewire, you were the CEO for 19 years? Not quite, there were six of us. It's very important to mention that it was not a solo journey. I had co-founders and these guys are my brothers, we're very close. In fact, we were just together for a reunion and we get together quite frequently.

5:05I became CEO about six, seven years in and then all the way for another 13, 14 years after that. But I think, and also correct me if my facts are wrong, but at the time when you maybe moved into chairman role, was it doing around a billion in ARR? I think we were around 800 million or so in ARR at that time. I rounded it up. Yeah. And now the company is around 1.1, 1.2 billion. Okay. So it's a pretty sizable company and that's a huge achievement. Perhaps what is, well, it can be spoken about, but like, so we can focus on 1 billion ARR or 800 million. But during that time, I mean, I think in your talk, you talk about something like the near-death moments, right?

5:47Yes. And I think these are really important for founders to hear about. And perhaps also when you speak to founders, why some of their favorite books are The Hard Thing About the Hard Things or Shoe Dog, right? Where it's actually you see these companies like Nike and you think, oh, it's an amazing, huge company. But how many near-death moments did they nearly have? And are you happy just to share a little bit about some of your experiences there? Indeed. Because it's not all up and to the right. No, indeed. I mean, sometimes I see the journey of if you just look at the company's trajectory over its revenue, it looks like this monotonic, smooth path.

6:18And I didn't experience it that way at all. It was arduous and there were many moments of crisis and several moments, indeed, where I thought it's game over. I mean, starting from the very beginning, you know, we had the advantage of very talented people who are willing to work hard on a not glamorous problem. But capital was gone. It was used to say it's a nuclear winter out here and we had many, many meetings of just rejection after rejection. And, you know, there was nothing in my my life up to that point that prepared me for that amount of rejection. And it was continuous. It was from investors.

6:50It was from customers. It was from potential employees and it was years of it. And it was very touch and go whether we would even, you know, raise the initial few million that we needed to, you know, to start the company at all. When we did raise, it was on very poor terms. But at least we were off to the races. you know our the sales of our product were very very difficult because we were selling a huge transactional core system and there's no way to sell a part of it you either had to make the whole decision and if you were a buyer of ours you were essentially betting your career on a very improbable and risky proposition right and so it was very very difficult to get those initial sales much it's always hard but for us it felt almost impossible and there were days where i felt you know, I'd have an easier chance of jumping to the moon than actually getting a customer to buy something from us.

7:38Just getting a meeting just felt like a Herculean task. And then even after we had our first few customers, implementing them was so difficult, you know, that we encountered a kind of complexity, a kind of depth of, you know, horizons beyond horizons of issues that we had not even thought about in order to make our software work. And it was only just through brute will and failure not being an option that we made our first customer successful and then built from there. There's another story that I've told, and I'll keep it very brief, but about eight years in, things were going reasonably well.

8:16We had a few dozen customers. We didn't think about an IPO, but we said, okay, we're not going to vanish from the earth, and then we were sued by our largest competitor. We were completely blindsided by it. And the details are complicated and not that interesting. But essentially, our largest competitor, which was Accenture, at the time$40 billion massive global consultancy, launched an intellectual property lawsuit against us that we were completely surprised by. And it very nearly killed the company. And tell me a little bit about more Mountain and what that means. Because I've actually stolen that to be one of our values this year as we updated those.

8:56Thank you. I'm flattered. Tell me about it. So one thing we realized is that, you know, when you don't have glamorous things to sell, then you have to find a way not to apologize for your weaknesses, but you have to make them your assets. And so the fact that the work is hard, that's, as we like to say in Silicon Valley, that's a feature, not a bug. You are joining this company to do something difficult, something substantial, something arduous, and something that will deliver a kind of satisfaction on its achievement that you cannot get if you're doing a trivial problem. So that's the difficulty.

9:26And one way that we had to kind of make that a metaphor was to say, when you see a mountain, you think, I've got to go around this somehow. It's an obstacle. And so what if you just embrace it as your destiny, and you're going to just tunnel through it, and you're going to take the hardest route, but you are going to go right into the rock face. And when you do that, you don't know how much mountain you'll find. And so you cannot be focused on the destination. You have to be focused on the next task, but you can't say, well, I'm just going to endure this because eventually there will be a good result.

9:56because then you'll be lying to yourself or you'll be telling yourself a story you can't substantiate. So what's your only choice? You have to find a joy in the tunneling. And of course, this is not an original idea. Most famously, Albert Camus in The Myth of Sisyphus said, you know, the seemingly pointless task of pushing this huge boulder up a mountain, and it's agony, it's excruciating, and when it gets to the top, it just rolls down again. What's the point of that? And the point has to be the doing of it. The point has to be the struggle and the exertion and the expression and the instantiation of your will to make something happen that would not happen without you trying.

10:33And if you can't find joy in that, well, you're probably going to be an unhappy person because that's most of life. And in a startup is that, but just times 100. Yeah. Well, I love that. And obviously, thanks for sharing that. And we borrowed it. Thank you. We're using it. You're free to use it. No copyright. I would switch into the VC side of things now. And obviously, we're in this age, an exciting age of AI. And do you think, maybe on the first side of things, is AI in some way saving the VC industry a little bit after maybe a couple of very slow years? Now, there's a lot more, I think, interest and activity in VC.

11:09What are your thoughts around that? Well, the jury is out, surely. I mean, an astronomical amount of CapEx has gone into the belief that AI will usher in an era of labor replacement such as has not happened since the Industrial Revolution. Will this happen or not is a very open question. And everyone has an opinion. I have my own, which in a nutshell is there's a certain class of tasks of which there's no doubt. It's self-evident that there's radical acceleration and automation possible. The question is, how far does that horizon extend? And I'm probably a little bit on the pessimistic side. I think that the kind of deeper tasks of judgment, I personally, and I've talked to a lot of companies, from the foundation level to the application level, have not yet displaced a lot of the higher level human tasks.

12:02In fact, not even come close. That doesn't mean there isn't value there. There's enormous value. But if I were to take a bet, and this is a complete speculation, it's not scientific whatsoever, I would say that the impact could be something like mobile. Mobile has changed our lives. We all have a supercomputer in our pocket, but it has not ushered in a new era, a golden age of human prosperity and productivity. It's just been another significant technology in our human progress. And I think it's more likely to be of kind of that order of magnitude rather than some of the more explosive or extreme claims that you'll hear.

12:39And so you invest in Series A and above, right? That's right. Battery is a multi-stage investor. The party line is everything from seed to buyout. I focus almost entirely on the venture side. So seed to Series, realistically Series C, A, B and C. Do you only do AI deals now or AI first? Not at all. I mean, AI is an instrument. You know, I built a software company or built alongside others a software company where AI was a fantasy. And yet now AI is very relevant to the company that I led for many years. And so AI, it's a layer of enablement and instrumentation that will make a huge difference to companies of all sorts.

13:22But still, you have to deliver a core value proposition. And that's generally where the focus is. And we think perhaps also like AI is lowering the barrier to entry to enable people to build, you know, at the application layer. And with that, probably more and more SaaS companies or, you know, AI first SaaS companies are going to be born. But do you feel you're looking at like data to say that perhaps like more companies are going to be bootstrapped than ever before? And there's going to be a smaller pool of companies that VCs will look at to invest in. What are your thoughts around that? Well, you've asked multiple questions.

13:57I mean, first with respect to AI lowering the threshold or the barrier to entry, it certainly has lowered the barrier alongside many other enabling technologies like the cloud and, you know, cloud services that you can get on AWS and, you know, with a credit card that make, you know, that when we built Guidewire, you know, we had to think we had a serious decision to make. What application server shall we use? What object relational mapping layer should we use? And no entrepreneur thinks about these questions. They're already abstracted away and you just get them as a service. Right. And so in that sense, it's made things easier.

14:30But that doesn't necessarily mean it's become easier to build a viable company. I think it's a completely different question. And the world is much more crowded. There's a lot of venture capital, a lot of risk capital in general, and many, many new entrants. And so if it's lowered the barriers for you, then it's lowered them for the next guy and, you know, the next founding team. And, you know, getting attention, getting the mind share, getting sales is not clear as any easier, right? And therefore, I don't think the journey is any less punishing. The second part of your question is, where is the venture industry focusing overall?

15:06The venture industry at its heart is about picking winners in markets. You accept that there is a higher mortality rate than you would ever accept as a public market investor. And the question is, has it become top heavier than ever? You know, it sort of seems that way. But we're in an anomalous time where, you know, the IPO market has become weirdly quiet, even at the same time that equity values have grown, tariffs notwithstanding. And it's hard to tell. Like, are we going to enter a kind of winner-take-all future or winner-take-most future? Or will it be a little bit more balanced? And I can tell you from the front lines, as it were, I cannot tell.

15:48I see examples of hyper-specialization that are making things very successful. And I also see large companies taking on issues with a level of generality that might work. And there is a tension between these in almost every market that I look at. Two final questions for you, Marcus. So one with your entrepreneur hat on, one with the VC hat on. So what is, I guess, in your opinion, in your experience, the hardest thing about being a CEO, being an entrepreneur? Well, the hardest thing about being a CEO is, many people have said this, but you know, it's a combination of the loneliness and the relentless context switching.

16:24You know, you're constantly having to switch between constituencies who have, not only do they have different interests and different goals, sometimes they're directly oppositional. You have employees that say, how does this lead to my professional development and how can I get paid more? And you have investors saying, how can you be more efficient and how can you do more with fewer people? and you have to switch between both of these, be sincere in both contexts, and that can be very taxing. And there's a kind of core loneliness to that that comes from being the only one with advantage to see that and switching contexts all the time.

17:00As a VC, I'd say the one thing that's been surprising to me is just how professionalized venture capital has become. And when I, I recall the days of, you know, seeking venture capital. And it was, you know, we would high five if we got a meeting with someone who might know a VC who might take a meeting with us. And that was an achievement. And now I find myself sometimes in a scrum of, you know, 12 other firms hoping to get an audience with a 26-year-old Stanford CS dropout. And that's okay. That's the way the world evolves. So it's become much more competitive. There's a lot of capital chasing every idea.

17:34And it's an open question. even if those companies turn out really well, what will the returns be like? And I'd say it's a source of, it's an open question. It's kind of leads, maybe you answered it a little bit, but the next question was going to be, what is the hardest thing about picking a winner as a VC, right? There's going to be a lot of mortality rate. How do you really pick the winners? It's hard to know, obviously. It's the most precious and valuable skill in the world, if I had an easy answer to that. I'll just tell you, my firm, Battery, and the reason I joined is it does very fundamental work.

18:07It says no matter what you can think in the abstract, the market is always right. You must ask. You must get as close as you can to the end market, and you must ask as many questions relentlessly, just tirelessly. You must try to understand what does that end market really think. And it's a great danger to just try to invest in an ivory tower and think, how do I feel about it, right? And sometimes I have to resist my own tendency to abstract that away instead of just getting to the coalface and asking what are people really saying? What do they really think about the use of this product and its potential, right?

18:40So that's one thing that my firm does, I think, very, very well, and that I strive to do well. Then there's this slight difference for me as an investor, maybe than some other of the peers that I've seen, is I pay a lot of attention to the strategic coherence. You heard me talk about that earlier, but how lucidly, precisely, consistently can the leadership, especially the CEO, articulate the diagnosis of the market and a plan of attack. And it's remarkable. Sometimes you have very talented, very charismatic CEOs who are not good at that, who actually become a kind of word salad when they actually get to the specifics of their strategy.

19:16And that I pay a lot of attention to. And then finally, there's underwriting the leadership team because so much of the journey is unpredictable. There was no reason that my co-founders and I looked especially like we had no assets. So there was a bet on our human potential. And I look for things that I think were important to us, which is a kind of a kind of restlessness, a kind of insecurity, if you will, and eagerness or requirements to just to prove something. you know founders who have had too comfortable a life generally aren't ready for the kind of suffering and the setbacks and the frustration and once in a while along the way i was often asked you know are you most are you really motivated by this fantastic thing and the opportunity and the economic results and i would say no not at all that's not the motivator the motivator is terror of failure that was infinitely more powerful and it's true of most of the founders that I talk to.

20:08Awesome. Well, Marcus, thank you so much for coming to SAS.USA, speaking here, joining us on the SAS Revolution Show. Really appreciate it. Marcus Rue, partner at Battery Ventures. Thank you so much.

20:21Thanks for tuning in to this week's episode of the SAS Revolution Show. I hope you enjoyed it. And if you learned something from it, check out sasdoc.com forward slash events to find all the upcoming SAS.Conferences around the world. Want exclusive SaaS content and actionable insights to grow your SaaS? Join our community of over 36 ,000 SaaS founders at sasstock.com.