20VC: Notion's Founder on "Founder Mode": When it Works & When it Doesn't | Why The Way Startups Fundraise & Construct Boards is Broken | Raising at a $10BN Valuation in Peak Bubble Times and How Notion Has More Money Than Ever Before with Akshay Kothari

0:00Founder mode is really good if you have a founder who's right a lot. If they're not, God bless that company. There's more cash in notions bank today than the history of its race. So it's like in some ways, like with produced cash, we haven't spent any of it. I think the thing I would say about Sequoia, I think it is probably the best brand. Similar to how we demand excellence from our from our employees, I think they demand excellence from their companies. Welcome back to 20 VC with me, Harry Stebrings. And since we have the man who makes the show at Notion run smoothly in the hot seat, Axe Cthari.

0:34Axe is the co -founder at Notion, and he is run almost every function in the company. From sales, to marketing, to finance, he's even led their fundraising efforts, raising over $340 million from Sequoia Index and Co2, with the latest round pricing them at $10 billion. Before Notion, Axe was VP of Product at LinkedIn for five years, and he joined LinkedIn when his previous company Pulse was acquired by them in 2013. But before we dive in today, all of you listening use tons of software every day. Sometimes it fills us with rage. You can't figure something out. The chatbot in the bottom right is useless.

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3:46You have now arrived at your destination. Actually, I am so excited for this, dude. We did this four years ago in COVID when no one was getting out. And now you're in London, man, this is so special. Thank you for being here. Thank you for hosting. And so good to see you in person. Now, I spoke to Ivan before the show. I spoke to many people before the show. Basically, he's taught the shit out of me. And what I heard was actually that you have had so many different hats across the notion journey from CMO to CFO to ahead of inside sales, CHRO, head of IAR, CPO. I mean, Christ, I hope you're accumulating different salaries for this.

4:22But how did you learn new disciplines so quickly on the job? I didn't really think of my job as those titles. Like, my job was COO. So my primary job was to like help scale the business and the company and let my co -founders Ivan and Simon stay focused on the product. And so that meant whatever the company needed, I would jump in and try to figure it out. How did I do it? This is actually kind of interesting. So my background is product, right? And Ivan told me to join and take care of everything except product. And so I essentially put myself on all these new functions and just try to learn on the job.

5:01So one thing I realized was even though I had never really done any of these things before, actually like force principles thinking and like systems design that you learn in product development actually like applies a lot to these functions too. Can we take one apply systems design in a way that you did just so we can understand that in a more contextual manner? Yeah, so let's say the first job I had at Notion was actually like there are three people who reported to me were support, customer support, right? Now, typically, as the number of tickets or as the number of requests go up, the first thing that people typically do is they just add more people.

5:37They sort of divide the tickets by productivity and then come up with some number of people. The product manager in me was like, well, we could build a better system, right? And so we could build better tools so that each support person can do more every day. But also once you have enough of these customer tickets, then the next role you want to hire would be something called a product ops. Product ops would take all this feedback and synthesize it and share it with the engineers. So one thing Ivan and I did in the early years, we created this canonical database of about 200 types of requests that would come, which would map to like features.

6:16And we trained our support team to tag every request that come in with one of those 200 tags. You have to do that, right? That was part of the job. Every morning at 6am, we wrote a script which would take all these tags from Intercom and write it against these database tags in Notion. And so essentially what every engineer at Notion had was a real time view of what people were talking about yesterday or the last week or the last month. And so if you could see like, oh wow, people are talking about the Android app or the last month that is really going up, they can go in and start solving that problem.

6:54And we use this tag across the tools we had. So for example, if you were working on Android, you could essentially put that tag in Intercom and you can basically see all the customer support tickets that have come. So you could essentially, in many ways, you don't even have to hire a researcher. If you put all these things together, we didn't have to hire as many support people. We did not have to hire a product ops person. And we also did not have research early days. In fact, all of these were given to the engineer directly to be able to tap into that feedback and actually solve that problem.

7:27This is a strange question, but everyone is going mad over founder mode and the difference between managed mode and founder mode. When you listen to the way that you're talking, it really is quite a change from traditional all structures and all designs and it's really driven by a very product driven founder mindset. Do you think in the future and with founder mode, we will see completely redesigned orgs and the traditional functions be very changed? Everybody is starting a question, things that we've been taught about this specific org structure and the fact that you know, Jensen has like 40 direct reports and doesn't do one -on -one.

8:05So I think it's actually kind of good that we're reopening What does this lead to? And I think every leader has to sort of question what is sort of the best way to run their company. What things do you think we should question that we aren't questioning today? If you go back to notion and sort of why we did some of these things, I think a lot of it came from Ivan really prioritizing keeping a very small team. And that part was not done just because we thought we would be profitable because of that. But I think we did it because it really meant that we can stay a lot more nimble by doing that, right?

8:38How did you prevent the creep? There's quite a few people that start very nimble and they're really aligned to how you built the company and then with 100 million round or with that big mouth, you know what we can hire that extra, we can hire that, we can start that new division, we can go into enterprise early, we can do X. How did you prevent the creep with the increased branding cash? The best power founder has is like the V2 power and Ivan used that a lot when I was in the early days, like, you know, I remember, I don't know how many sales people were interviewed for the first six months. And Ivan was like, well, this person is quite good, but not great.

9:16So let's keep looking. And I think for up to about 500 people, we're about 700 people today, but up to 500 people, the last interview was always with Ivan or myself. So we met literally everyone before. And because we did that, I think it already sort of forced a certain rigor inside the company. But also in general we were okay with enduring the pain like a lot of times you feel like this person needed to be hired yesterday And and we would be okay waiting a few weeks few months until we found the best person for that job You said they're back on enduring the pain that kind of goes in stock contrast to what we're told Which is the speed of execution is the most important thing in relatively early stage companies the willingness to wait Goes against that how do you think about that and the importance of speed?

10:01I think we took a slightly different approach where we did try to keep the team lean and we felt like it might feel like short -term It's slowing us down, but in the long term keeping the team small allowed us to move a lot faster today All of notion with all the different surfaces we have under 20 product managers and we have about 12 designers 12 designers sort of design the entire surface of notion including calendar and it really allows us to move faster Like, it's not a committee of design or committee of product managers where someone's only responsible for a small part of the problem. And so because we have a lean team, we can actually take a little bit longer because we're not trying to hire a lot more people.

10:43We're trying to hire maybe a couple of people every year, and it also forces a certain prioritization that makes you a lot more effective. Instead of just taking the fundraising money that you took, adding a lot of people, saying yes to all the projects, I think that is actually comes at a cost. The cost is that your bandwidth is now split among so many different projects. And so I think you may feel like you're going faster by hiding more people and saying yes to more projects, but in effect, it is actually going slower. So we've actually chosen the path where we're doing fewer things and doing them better.

11:18I love the statement you said, which is the power of the veto. What did you and Ivan veto that was a benefit of hindsight maybe would have been better to do in the moment. Initially we we didn't have our values codified and so a lot of the initial final round interviews was a little bit around our intuition where we felt like whether this person is going to be actually a good fit for the company. After about I think when we were 50 people, we actually like did the excess of codifying the values and we have four values. We are owners Here's the mission, we are peace setters, we are truth seekers, and we are kind and direct.

11:56My team would be watching this going, whoo, there's a red rag. I think values are a very, very challenge when you can't take the other side. So kind and direct, I want someone nasty and indiret. No one would ask for that. Is it a good value because you could not take the alternative side? So like as an example, we look for obsessed people. Not like a passionate. it. That's no, no. You need to be completely obsessed. How do you think about that and what makes a really good value in that case? To answer your question, we wouldn't take someone who's nasty and direct, but no one would. There's a few nuances to this.

12:32If you take that example of kind and direct, the and direct part has an extra signal there. It's not like being nice to each other. We want people to be direct, which means that we are inviting people to be able to debate internally. I suppose I've been again before and he said listen, he's basically hired every single leader at notion at this point Harry. So you have to ask him about that. When you think back over your lessons on hiring, what are your single biggest lessons on what it takes to really get the best people into notion? Initially, you sort of have to get a feel for the shape of what you're trying to do in this function.

13:06And I think, so in many cases, we didn't go to hiding the leader first. A lot of these functions, maybe I started doing the job myself, sort of shaping it to sort of what we wanted to do in notion. A lot of these functions we also hired the ICs first, like individual contributors who can start to like do the work. When you look back, what have been some of the biggest mistakes you've made and what are some big lessons from those? I think the people who do well at notion are builders and we sort of expect even the execs and leaders to be builders. I think when we hired people who are VPs or CXOs at big tech firms, they have a machinery around how their work happens.

13:47Because notion is so small and so lean, those people had a tough time at notion because that machinery didn't exist. But also when we did have a crisis or moment of solution that needed to be found, I think the typically sort of went to needing another head count or sort of blaming on the systems or so forth, right, which actually didn't work so well. What was the hardest team to hire and the hardest function to build out? The fun I would change a lot if I could or the one that I probably regret not doing the right way is probably sales. I was optimistic. I thought, you know, I think we could do sales a different way.

14:32And I thought our salespeople could be more consultative. They don't have to worry about COTA. They just have to make sure the customer is being successful and the product will grow and expand. And what I learned the hard way is that we try to reinvent the wheel on something that has been done in a specific way does work really, really well that we shouldn't have. But I think the thing that I misunderstood was she saw the best salespeople they joined because there is a COTA because they can hit a number because they can outperform that number. And so actually not having that and not having the attribution really hurt us setting the first year or two.

15:10How did you see it, how inability to hire people, the people did not have direction? What was it that was the, oh, this is how it is? Well, the way we looked at it was just the percentage of business that is driven by sales or sales assisted wasn't growing as much as we would have hoped. But you know, there's actually an interesting piece here around sales at product -led growth companies, right? Which is that, in many ways, product sells itself at these companies and you think you can do sales a slightly different way because you have all these leads, right? And that actually is also a blessing and a curse.

15:46Yes, it's a blessing because you have all these leads, but it's also a curse because I think your broader team starts to depend on it. It's like, oh, the product is not really signing up the right lead. This is why I'm not able to close sales, right? which if you didn't have the product, or if you didn't have anybody signing up on your website, you would still be doing going out and trying to find the lead. And so you'd be sort of complaining about that part bit less. And if you want to build enterprise at some point, you've got to build outbound. And you've got to build an enterprise function.

16:14And you cannot continuously rely on product inbound. Exactly. As nice as that would be for anyone. Exactly. Where was that moment when you realized that? Probably like three years in, so that there would have been like three years ago. We've obviously now moved very much into like, you know, we have an incredible new sales leader Proveysh who comes from like an enterprise sales background and I think he's brought certain amount of energy and DNA that like I didn't have, right? That's the other thing. It's like you need someone who can really rally the troops and operate a slightly different weight other than like a systems builder product thinker.

16:51It doesn't work. I can't stand on the stage of sales kickoff and like rally the troops as much as Provish can and I think if you're like a sales account executive You'd you need you want to see that you want to see that you want to see that you're crushing your quotas And you know, you know, you're really you're really building for that and so so if I had to do I used to back to your question If I had to do it one function all over again, I would do sales and what the way I would do it is to not try to like Overthink it just do it the way it is run like a proper sales machine I think we would have saved three years in that journey.

17:24So that part is painful. Slightly weird one and going off on a tangent, but I heard it before this and I was like, it's just a really thoughtful statement. And it was the hardest things in life are not iron or gold, but unmade decisions. What unmade decision does notion have that is heavy? You can take a moment to think about it. I think one of the challenges for notion has always been the fact that it's a horizontal product, right? And so I think the question people ask is like, oh, is it for consumers or is it for large enterprises and the answer is always being yes. And I still very much believe in that sort of horizontal mess.

18:02But one of the things I'm starting to realize is like instead of defending the answer or trying to pick, we're much more forthright with our employees about the kind of company we are. How so? I think the best way I've seen more recently is Parker at Rippling sort of calls it a compound company, which is that it is this like big mission that we're building many different products and they're all connected through the data layer. I think in many ways, notion is a compound company as well. The building blocks that we're building really do serve consumers all the way to large enterprises. The reason the flywheel works is that we actually did the study recently and we found that you know something like 46 % of our business, it can be attributed back to someone using notion in their personal life.

18:50Everybody I spoke to who was using it at a large company with, you know, wall -to -wall usage, they all started because their spouse is using it for their home project, or they're using it for, with their kids on something, or their knees told them about it, or I saw my uncle having their portfolio on it and so on and so forth, right? So we know that this part is very important for us. Like it's almost like a part of distribution that happens naturally because it's a consumery product, but it doesn't pay the bills. The bills are, the business is growing on the B2B site. Which person do you think is at the most profound impact maybe on you and your leadership, maybe on notion as a company, when I ask, it's a good question.

19:29I would say in many ways, like notions kind of unique in that the company became cash repositive pretty early on. You know, we did not have to spend a lot of money, or spend a lot of time on sort of fundraising. So there's very little external pressure on notion. What is being a cash flow positive mean you have done that you wouldn't have done if you weren't cash flow positive? What is it enabled you? It's a huge, like once you get there it's actually a huge time safe. So I think I'll talk a little bit about notions, very nuanced, but we got there pretty early. I think we got there like five years ago.

20:02What it did was it meant that suddenly you feel in control of your destiny. You don't have to think about you don't you don't have an end date. You don't feel like you're going to run out of money in X months or X years, why years away. And what that means is you can choose to raise money if you have a good need for it, but you don't have to. All the time spent there could be spent back into building a better product and selling to customers. If you think the way that companies are built today is wrong. I dare raise 5 million on 25 after leaving Stripe. Higher people get to a million in an error, you're an angel ambassador to, get a million in error or have Excel index, never on fire, if you get a 10 million in error, do you think we are building companies wrong?

20:48People should have a deep understanding for what long term valuation metrics look like, right? What do you mean by that? I mean, you just look at historically what is the revenue multiple or PE multiple of SaaS companies. So like, you can raise on hope today, but in the very long run, unless you're trying to just get acquired, you will be valued at a multiple of your revenue or a multiple of your cash flows that you're generating. And they tend to be an average of like, you know, what, five to ten X on the revenue multiple side. And the way that you can increase your multiple is by three things, right?

21:24I think in my view, one is you can increase it by having a faster growth rate, but you can increase it by having a better cash flow margin. and you can increase it by operating in an industry or in a space where the terminal growth rate can still be pretty high. So I think as long as you have a deep understanding of those things, I think as long as you have a good understanding of what you're going to use the money for, you can build towards that. Great. I think if you're hoping that we're going to be back to 100 times revenue, 100 times ARR, valuation, I think that's a bit challenging. It's funny, I had the fans of UIPath, Clavio, a service Titan, and none of them could raise.

22:04And it meant that they all were forced to stay very close to customers for the first few years. They didn't hire customer service teams, they didn't even hire product people because they had to do it all themselves. All three said the company would not be the success it is if they had raised the money. I think it's some of it, like I also have to credit Ivan here because in the early days I think, you know, this lot of investors did knock on our doors a lot. A lot. A lot. And I think did some crazy things to get attention from you guys. Correct. Correct. And so literally every quarter, Ivan and I would discuss, is like, should we do it?

22:35Just out of interest. What was that internal discussion and fascinated? I think primarily Ivan was very focused on, is money the constraining factor right now? Is like, if we had more money in the bank, would we, would be spending on hiding faster? Take me to the time when money was a really constraining factor and you decided to raise it. We raised a 50 million, a two billion at the start of COVID, like pretty much like a couple of weeks into COVID in 2020, only 24. 50 million at two billion. I mean, that's a weird raise in the way it is brilliant raise, but in the race it is minimal dilution actually, but a lot of money.

23:0950 million buys a lot. A lot. The traditional notion is, well, VCs wouldn't like that because they can't get the ownership that they need. How do you think about that raise the structure of it? I'm just fascinated. Well, actually came about really fast And it actually goes back to being cash repositive and not needing it. I think you sort of are able to do, you're able to break the rules because there's more demand than supply. But you know, the reason we raised that round was also, I think it was an interesting one where we didn't have a need for $50 million, but we raised it because we saw that the talent was flocking to safety.

23:45where all the people we wanted to hire needed some signal to say like oh this company is stable and I'm willing to work there. And so in March or April 2020, again we didn't have the cash needs but we needed in index and co -to stamp that I'm putting $50 million in this company that is growing and that actually really helped us recruit and like break that. How do you not let that alter your mindset towards focus? You got 50 million now, actually. You can build that new team. You can build that new product. You can do that a lot higher. How do you retain discipline when 50 million drops? Frankly, I don't know.

24:24I think this might sound weird, but I think we just like not wired that way. Like in some ways, like, which makes it very rare. Yeah, in some ways, like, there's more cash in notions bank today than the history of its race. So it's like in some ways, like with produced cash, we haven't spent any of it. And some people might look at it and be like, like, hey, you're not really utilizing the cash that isn't hand. Are you being aggressive enough? Yeah, so that's a question people ask. One of the things I learned, this was actually one of my favorite tools of duty inside Notion was when I was running finance for a year.