This Week in SaaS: PluralSight Goes to Zero, Salesforce and Mongo Hit Hard, The Next IPO Candidates and How Do We Solve the Problem of Liquidity in Venture Capital

23:26I bet box in a year will be a much better product than it ever has been The problem with all these products and I've built one is it's very hard to deal with this unstructured data It's very hard to how do you communicate with the document if AI allows me to find the communicate with my 10 million Documents in box. I think box could be a 10 time better product in a year But will that lead to any revenue growth for box versus open AI or Google Cloud? So far, the evidence is no. So far, it says the incumbents are going to do great things with AI. The product's going to be much better, but it's not clear they're going to get any revenue boost from it.

23:58Even the great ones like Aaron talk for an hour, but right now, we're not seeing a boost. It is worrisome and there is an experiment budget and it is a substitution budget. And I think it's going to take us another 24 to 36 months to figure it out. But the only one thing I will say, you've got to do it. If you're competing with box, you've got to at least have as good AI as box. It is table stakes now. So even if as frustrating it is that your engineers have to drop everything and build these cool products and deal with hallucinations and deal with the cogs and all the issues and all the integration, if you resist this, you are going to get steamrolled because the customers expect it.

24:30They're looking for it. How they pay for it is a different question, but I see too many founders still hiding or running from AI or mocking it or making fun of it. And I think it's a path to destruction. Do you know what I think we will have an AI budget line I seem created for all CFOs? Because right now we don't actually have. No, you don't think we will have. Do you know any CFOs that are creating an AI budget? And where did they get the money? Where did Dad or Mom give them the money? They're substituting. We mentioned box. When I had Aaron on the show, and live in the show, I was like checking his market cap.

24:59And he's like, Bill in there on, and it was 3 .9 billion market cap. I said, dude, this is so depressing. I was brought up on like the 6 to 8, at least, and you're like 3 .9x. And my next stop was UI Puff, which is $6 .9 billion in market cap, which is 4 .2x revenue, basically. My question to you is like, I use Concerned as I am by the compression that we're seeing in market caps to revenues. I'm concerned. I'm not concerned about the boxes in the UI path. I'm concerned that we've only had two SaaS -ish IPOs since 2021, only two. Since HashiCorp was the last one of the bubble of December 2021, right?

25:38It just got up for IBM. It's only a two, it's only a clavio and rubric. Both essentially were at 500 million growing, much more, going 50 % for rubric and 70 % for clavio. They're both trading it like 6x. I don't mind a box and drop box and a few others trade at modest multiples because the growth isn't there. The fact that a clavio or rubric isn't trading at 20x, 15x to 20x, I don't mean to be a Debbie Downerk, but for the math to pencil out, this is the truth in venture and founders should understand this at some level. I think for the math to pencil out and mention we do need to rebound and this is forget about the unicorn rounds in the craze We just we do need some we do need a 30 to 40 percent multiple Reflation or we just can't make any money on any round north of a hundred million can't make any money And this I agree you said you're not concerned about you.

26:23I bought you I bought the growing 31 percent lost Cool, yes, 20 to some I think year on yet. Yeah, yeah I just meant the drama with Daniel coming back in the market here I think that will that that'll pass right the the the the the market a little panic when we had to see you turn over and say, how did you read that? Because for me, I was like, great companies that most often run by the founders themselves. That should have been a confidence surge in some respects. But it was in like seven months. Listen, I think that the Salesforce crash was merited based on the projections, not on the myths, based on the projections.

26:53I think the Mongo crash was merited based on them saying, hey, we're only gonna grow on the teens. Like, Mongo was always supposed to be high -flyer, but there is some overreaction here, right? There is some over -overreaction. But listen, I don't know about UI Path. I think it's definitely positive. I think the vast majority of SaaS companies that our public are still run by their founders eventually people get tired people They can't do it. I mean you can't do it for a hundred years This is this is kind of hard, but yeah, it should it should be positive But I think it will be positive maybe in a quarter, right?

27:18Okay, super homely And you mentioned founders get tired to change Hub swat's found is a less involved now. Obviously they've got Yamone's CEO and then there's a room of 33 But they'll end all a Google acquisition. Yes, you think that goes through Initially, I thought this was a creation of social media. When I read the first article about it, which was like self -reached for untold, it didn't even attribute to anybody. It said, because listen, I worked briefly, I was briefly a VP of Adobe, and I saw how M &A worked, and there's targets, okay? And actually, I love to see you. And like a swipe called going into a debut.

27:51Well, my ideas were pretty different for the targets. We could talk about that, but a couple of years ago, business insider published a leak from Salesforce where they had all their M &A targets. And it was very interesting. And at the bottom they had receptivity. I remember box, it was not uninterested in selling. So they had all the potential like the top 20 targets. It was one of the, I mean, business insiders up and down, but this was one of the good ones where they leaked it and talked through it. So the fact that Google Cloud would be looking at HubSpot is meaningless to me. Of course they should.

28:16Of course they should be looking at every leader and saying, OK, listen, in some ways, UI Path is a good match for like the enterprise push of Google Cloud, but maybe that type of automation is not where they will. They want to be. If they want to go SMB, if they want to combine with G Suite, It's a good fit, right? Because they have this a great footprint. So when I first thought I thought this was stupid, it was like, yeah, it's on someone's slide, and so are 40 other companies. But maybe it's possible. The only reason I say this, and listen, if I knew anything, of course I would not say anything, I feel like people are a little quiet at HubSpot.

28:47When you see the executives go a little quiet, yeah, that's my tell, right? Not like, so you know, that's the only reason why. The genuine question of light from a regulatory standpoint. Yeah, could it go through? 33 billion not passes the bar of meaningful to regulators. You know, we're gonna ask you about Clarebit, which is a quite 450 -inch suite. You thought about that. Respectfully, it's too small for regulators to give a shit. Really, I think bluntly. But 33 billion, oh, they can. I think it depends on the argument. I don't think Figma deserved the antitrust ding that it got. I think if Adobe Bot can, but that'd be a much bigger issue.

29:18I think Ken was an existential threat to the whole creative cloud. Whole creative cloud. Figma is adjacent. If antitrust looks at Google and says, is hey Google is arguably the number one marketing platform on planet earth and HubSpot is a marketing company. I'd block it. If you slow it down and said listen, this is a CRM with support, with all these other pieces and it does some email automation, you're like this is fine, this should be. So I do think it's risky because a lot of folks do think that HubSpot is primarily a marketing company which is no longer really the majority of the revenue.

29:48So I think it is a crapshoot. So I don't know, I don't know that they would agree to it. It'll be interesting to see. I need trust is a bummer too. It's like P. Like, it's a bummer for SAS that it's hard to get acquired because it just creates a cloud across M &A and the P steps a cloud. These are like double clouds. They all double clouds. Yeah. It's said to me before about kind of a figma on Adobe being seen as a competitive. Yes. And you said, actually, Canva is more competitive. Yes. You said it's the whole creative cloud. Why do you think that is? The majority of Adobe's revenue is still from designers designing assets in creative cloud.

30:21And that is exactly what Canva does. it's not prototyping products, which is what Figma is great at. Adobe had, I forget what it's called, is it XD or something? Adobe had a trivial product doing like 50 million in revenue. Out of what, 5 billion? Or maybe Adobe's more bigger today. Creative Cloud is the bulk of it. It's still the majority. It's either the majority of the plurality of the revenue, and it's exactly what Canva did, and Canva snuck up on Adobe, I think, right? Every company uses Canva, even if your designers are using Creative Cloud. So it's much bigger deal. I think, I do think the regulators got this one wrong and this is why the Google Hub Spot thing might be worse and maybe it's how they were lobbied or manipulated because I don't think it's competitive.

30:56Nor would I think they would have done the deal if they genuinely believed it was competitive. They wanted to expand to their surface area. Scott wanted to, Scott Belskie, he's great, you've had him, right? They wanted to expand their surface area. They didn't want to take out a competitor. That would be trying to buy Canva, be taking out a competitor. They wanted to expand what Adobe did. Can you just help me out on the question of liquidity? Yes. I mentioned of Z pleurocyte and what I think that could do to P and that willingness to buy. We mentioned that regulators and that withdrawal or that kind of intrusion meaning less M &A lack of IPOs with rubric and hash Equipped being the last ones as he said.

31:27How do we solve the problem of liquidity? How do you explain that to LPs who ask? It's tough. There's been essentially no liquidity Since 2021 two IPOs you can't even get liquid on Figma the big stuff's blocked So that's the easy way to cash right is just someone right you at check the day a big deal close if I can't get liquid on billion dollar plus deals and the multiples for the best companies are at 6x. And even worse, it's hard to say because one of these IPOs hasn't happened in years. But folks that are close about Marisa, look, for sure you can IPO at 200 million in ARR, but there's no liquidity.

31:58If you can't distribute your stock, if you can't sell your stock, it doesn't matter much for venture. Do you think you can IPO at 200 in ARR? Yeah, for sure. Yeah, maybe you'll IPO at a billion market cap and that was HubSpot IPO at 800 million, in box IPO to 800 million, Shopify IPO to 700 million. The world will not end if you IPO, but if there's no liquidity, employees can sell their shares and you can do a little bit of M &A, but how much M &A can you do at a billion? You 8 % of your market cap, it's 80 million. What can you buy in today's world, right? So what's the point? If your VCs can't get out and you can't buy anything, then employee liquidity is critical, but maybe that's all it really does.

32:35There's random things that happen. We haven't had liquidity in Venture since 2021. It's getting to be a while, and you either have to decide there's ups and downs and in a liquid asset class, and this is part of the deal, or you should maybe panic. And this is why I tell almost every individual do not invest in venture funds. Dumb for individuals. If you're managing an endowment thinking about centuries, you can have a sort of, you can have a nuanced approach on liquidity, but even there they have liquidity crunches because they have capital calls and they have to reinvest money. And even folks that didn't think liquidity was important in endowments end up having liquidity crunches too, right?

33:06But as an individual, You really want to lock up your 100 grand for 16 years for a 2x return. I say put it down to that The final one that got slam was Mongo. Yeah, Mongo sinking 23 % is not the same story as Salesforce Is there anything different? It is it is literally taking a company that even when things started to get harder in 2022 into 23 Still hit its number still crushed. It still was a high fire still had the multiple still had everything right people love Mongo They run their companies on it It's very interesting in terms of, you know, having a long tail and being very enterprise great CEO I like everything competitive position despite a lot of competitors stronger than ever But then saying hey growth is plummeted to the teens.

33:45It's not a growth stock anymore That was just like a shock to the system and you know Dev said is discretionary spend is being is still being managed very very carefully I'm sure that's the reason but everyone sort of thought we were bouncing off some bottom and if you look at a lot of charts It's like, John and Bell's charts are great. And you can track a lot of folks. And it does look like in the aggregate, we bounced off some bottoms in first half of 2023. And the aggregate all cloud outsass. But we're not seeing that. Mongo's saying, hey, it's getting worse. Salesforce is saying it's basically getting worse.

34:15Yomani got on the last call a couple weeks ago and said, yeah, we saw little bounce at the end of the year. And HubSpot had a great quarter, but it's not any easier. She said it's not one look easier right now. So HubSpot not any easier. MongoWorse, SalesforceWorse, WorkdayWorse. What happens to Twilio? Twilio obviously Jeff Lawson now no longer see crazy, but people love the product Brilliant idea push out one of the greatest founders of our generation just just push great idea But people love the product people still use the product. Yeah, it has great community But the market caps in the fucking floor.

34:45Yeah, it is not Loved by Wall Street Twilio is you know, it is it's the stripe of communications, right? It has more competitors. It's the stripe of communications It is egregious that it is whatever it is, a five or six million dollar market cap company. It does, but if we want to take a very short -term view, the margins are lower. The margins have always been low. Two, it hasn't been able to make segment make any money, which it's paid billions of dollars for. So it has like two existential issues. It's got like a big product line that it doesn't want to divest that's not profitable in a world where they need to be have 30 % margins.

35:19In the old days, when you bought when they bought segment and send grid and all these others, is just breaking even was fine. But now you have to be so profitable, it's an anchor. So they've got a bunch of existential issues. And maybe Jeff just is like, if you think you're so smart and you can solve these problems. But honestly, those are the, I think the micro answer is what I generally try to be positive or realistic. But man, it sucks because 99 .9 % of us will never build a Tuleo. Tuleo isn't just a good business, it's an iconic platform and brand, right? It is trusted. I think it's good to kind of hide in series A land with five years of runway.

35:54This is the place to be today. Hide from all of this stuff, right? And to not have to deal with some of the market issues, is the best place not to be actually like you'll call selling for two and a half billion to private equity versus your gongs with the pressure now with your repricing being put on you? That is a whole place to be. I mean, I can't speak to Gong in particular, but I think all of these folks, they're going to have to rebuild their entire management teams if they haven't already. You just, it's too much for the team. Folks that I I know that work at a lot of these unicorns that have done well.

36:24They've left or leaving and it's not because they don't believe, but it's just too much, it's too much change. It's too hard. You need new blood and you need fresh blood, right? You go in notion at 10. What do you think they're doing? 80 million in revenue? 150? What like notion is worth over 30 billion? I guess you have to believe it's bigger and better than HubSpot. I mean, it's not a perfect comp. You'd have to believe it's bigger, because if HubSpot's trading at 30, right? So you've got to believe it's going to be better than, you know, because even 30 is only three X. I want at least a shot at more.

36:53Is it gonna be better than data dog? I guess at last year and sort of, but notion just has a little tiny bit of what at last year does. Because what's at last year and worth we could look at up 40 billion, 50 billion? Yeah, 45 billion. So you're betting that notion's gonna be bigger than at last year and it's newer. It's still cooler. I honestly don't, when I look at, even across my own portfolio, I wonder at some of the growth bets being made. I don't fully, I'm happy for them. I'm supportive, but I think they actively see count secondaries in those rounds. I think that there's no point in even as a seed investor selling before a billion.

37:28Done if money, the impact on your fund is not enough. It took me a little while to figure this out, but even though I'm a little slow, it's just that's my new rule. It's just even if it's there, and even if you could make 10 X on your investment or 15 X, you know what? When you start your career adventure like, oh, 15 X, that sounds, and it does sound great when you go to raise your own fund. Later on, it doesn't matter or what how any individual investment does, you gotta find fund returners. You gotta find fund returners. And this is where the disalignment between founders and VC's always has been a still an issue.

37:56Like you gotta, if the investment's struggling, you'll take a dollar. You're right, I'll take, I'm so excited. I got a million dollars back on my $2 million check if it was gonna be zero. But the tough one for venture, I think, is when the investment's doing reasonably well. Would you take liquidity at 500 million if you invested at five million? It sounds like a hundred X, but it's really 50X with dilution. It sounds great, but let's say you're diluted to 5%. So you're gonna sell your entire position? People talk about selling a little piece. It's difficult selling top positions. Just like feasibly.

38:27It's difficult. Yeah, so okay, so great. So let's say you have a $25 million position in a $100 million fund. First of all, the entire thing's only a quarter of your fund. What if you sell 10%, you get $2 million back? We have a co -investment. We'll leave it nameless that just did around it. 300 and something million and one of the early investors, seed investors sold a little bit in this round and like they made like 50 acts the but only got like two million What's the what's the fun? Yeah, fun. Yeah, well, that's it's not naming any name. It's a great company great thing They're both in but I'm like I get it that it and sometimes that's a good proof point for your LPs You know, but it doesn't make any difference right?

39:03It's if it was your own money you might sell these shares You know you put 50 grand in and then someone you know five years later offers you three million But I need to take that I was laughing with us see see after this morning because we've got a company where we did the first round for when it was a Sass Company pivoted to a foundation model and now it's worth three billion wow You can't get the fucking liquidity on it Jason so like we own two percent of it Yeah, it's like 60 million dollars in a 30 million dollar fund shit. It's two ice of fund. That is great It means nothing. I can't get any liquidity on it.

39:36Yeah, it is. What surprises me is numbers still matter to LPs. And what I mean by that is like TVPI numbers still carry a lot of weight. I thought everyone knew that the TVPI numbers like that is actually relatively meaningless. And it's a shift towards DPI if you've been in the game long enough. But no TVPI still is a big focus. A lot of people aren't challenged me on this, but they're wrong. They're wrong. So many LPs are judged on TVPI, the paper markups. If you're judged as a manager at an LP on your paper markups, of course you're going to care. You can mock it and you can be, ah, mule and the cool of the DPI, all the stuff.

40:17It's true. But how are you judged? If you're only judged as an LP as cash distributions, then great. Hopefully in 23 years you get a promotion because even if 20 VC does really well, you've got 20 managers and so altogether it's going to take you 20 years to make enough money on this to prove yourself. Should it be discounted? Do we account for TV? I don't think we account for it properly. That's my criticism of TVPI. But you've got to use a KPI. We have to use a KPI. We don't account for it properly. I think markups are corrupt behavior. Should we have mark to market? Not to get down the venture road versus this we can say.

40:54Should we force people like crossover fun suit? have to revalue their investments every quarter, maybe just a little bit. Maybe that would be better. Are you very reflective of your book? Right. Do you mount down your book very proactively? At the end of 1231, I took a big red marker and I went overboard. I cut everything that needed to be cut. In fact, I just had a liquidity. I mean, I'm extremely my liquidity event. It's three times what I marked it down to in December. It ain't much, but it is three times I marked the investment down. How did LPs respond to the rub pattern to the portfolio?

41:25So yeah, they didn't care. They didn't care. My sense is that that was unusual last year. My sense is people were still holding on to valuations, but I'm like, listen, I'm gonna cut everything back to the bone so it's only upside. I don't want anything to only go up. There's only, there's only upside. So I think people are still holding on structured rounds, inside rounds that continuing to keep prices high. That's why it is, TVPI is corrupting for this, because if you didn't value companies like this, no one would do endless extensions on unicorn rounds to prop up valuation. That's bad. That's bad.

42:00Should you have no markups at all? I actually think that's not the dumbest idea, but it's too exhausting for LPs. It's too exhausting. It's like retool who was super hot and then continued but lose the heat over time. And it's, what happens there? On this we can say, one of the more discouraged, okay, so the multiples are discouraging. The lack of any hype, only two IPOs since 2021 is discouraging. And we're going to get some positives. Can't if it's growing 40 % of 2 .3 billion in monstrously profitable? And it'll be a great, there's going to be some great IPOs coming, which we can talk about.

42:31One of the most discouraging things I saw was Tomas Tungas did something a couple weeks ago. I put it up on Sastry, you can search for him. And that the number of 50 million plus software exits in the US, that can be tracked. And some aren't tracked for a variety of reasons. It's averaged about 57 or so for a decade. And it's stuck at 57. So the problem is we have so many retools now. Now, if you think about it for a minute, if the number of 50 million plus exits is constant for a decade, the SaaS all sorts of explodes, exploded, what, 20x, 30x? It has to mean it's harder to get acquired. Does, forget about, hard Scott, redo you know, in Figma, it has to be harder if it's still only 57 deals and how many deals are VCs doing like M &A?

43:11And so this I think quietly was the most discouraging thing I saw, which is getting acquired as hard as F. We all think like, hey, we'll get, But let's just get the company to 5 million or 10 million and someone will buy it and HubSpot will buy it or it's 57? 57? I think it needs to be 570 for venture math to pencil out. It's worrisome. It's worrisome. When does SaaS companies microbrands get to a stage where you start to see reduction in cax because of microbrands? You've said before, when you get 10 million an hour, I think it's 10 million an hour, you get a microbrand maybe in a vertical. Maybe early, maybe a couple million, maybe a couple million.

43:48When do you start? But they say I really think to this quote of yours often when I'm investing because I'm looking at can't asking when does the micro brand Can't production happen but I actually find it happens by a couple million revenue You often will get half of your deals from not just inbound deals But folks that heard about you folks that in your little niche in your in your little niche But other folks just like your customers they start talking about you they go to events They meet up they they have their own little communities they talk about you So you get like you start approaching 50 % of your leads are free and they're inbound and they're great And so if you did nothing else your CAC would go to zero and frankly that's what I accidentally did as a founder That's why I went profitable 5 million in revenue is I just I went to a zero cost marketing model But the problem with that is right when that happens is when we start to raise money and invest in sales and marketing It works like that's that propels us up the curve to scale But we don't really get a net CAC benefit because we layer in more paid along with the free One good thing we learned in SAS is until the Salesforce decline, we learned that generally high NRR lasts forever.

44:49It lasts to a billion, two billion, ten billion. But we also learned that CAC never comes down. And actually the public SAS companies have the highest CACs of all. We said about positivity. Yes. Because we want to be more positive in this week in SAS always. We'll just have people jump in the bridge. Yes. When we think about like the IPOs that come, who are the nice contenders? Who do we think is going on next? Canva, Figma. These will be great IPOs. Stripe will be a great IPO. Stripe will be a great public company. Canva will be a great public company. Plad will probably be a great public company.

45:19Like a lot of these names that we know, they're not going to IPO at 100 million or 200 million IPO. Canva is going to IPO at 3 billion in revenue. So these are great ones and the markets will love them. What's that? What does that IPO have? Canva? They have secondary at 26 billion out of this year. So let's say that, I mean, what's the highest possible multiple in the market would be 15, right? So that could be 45 billion. So that sort of ties to the secondary hoping to double their money in an IPO, right? There's just would be no precedent in today's world for it to be higher than 15. And again, it sucks that Clavio is at 6x because I don't know that I mean, Canva is bigger.

45:57I don't know that it's better than Clavio. So 6x or 8x would be like a bummer, right? Then you'd have like a 15 to 20 million dollar market cap. But from the founders and the early investors, it is what it is, right? It is what it is. But it could be flat, right? Frankly, for a growth investor, if the seconder was at 20, there was around at 40, right? It was around at 40, and then the secondary reported me that he was 26. But maybe that's okay, Harry, because maybe, if you invest in a great name, and you'll only end up making one X on some of them, maybe it's not the end of the world. You hope to get three X on a lot.

46:29You hope one per fund in this growth stage is like a 10 Xer, and if some of them are 1 X, but you're pretty confident, maybe it's not the end of the world. So canva agreed, I'll take a bat with you. I think Stripe will still be private in four years time. Well, look, I didn't think the Colossus ever wanted to get a problem like with it. If you and I were running a startup together at their size and we personally didn't need to create a lot of liquidity for ourselves and we could literally create structured secondary every six months, why wouldn't you stay in that in the world of being a builder?

47:02Because you look at Salesforce. The problem with public companies here, here's the problem for the weak and sassy. And again, I do want to be positive. Here's the real problem. I think we've made a terrible pact with the devil in publics' ass companies, a terrible pact, which is the markets hold that everyone they had to get efficient. But there's no money for R &D. There's no money for R &D. How can you, if Salesforce is going to get to 40%, it's coming up on 40 % margin. Where is the money for engineers? Where's the money for sales? Sales has got us down. Engineering headcount is dead. I don't know if it's down.

47:27Sales, like, where is the money? And so I would stay private as long as I could so I keep investing in the product and then when I finally had to find, I've got to be profitable. But no one cares if you're profitable six years before your IPO. They care if you're there when you IPO. Palantir around that playbook, their metrics were atrocious before the IPO. They weren't even sass. They had like 20 % gross margins for your profits. Then magically their margins were in the 70s. The year before the IPO and they've done pretty well. Is there anything else positives that we should discuss in this weekend sass?

47:57There's more good news out there than bad. multiples are down. That's not fun. Canva, 40 % at 2 .3 billion in revenue. Toast, 32 % growth at 1 .3 billion. Samsaar, 39 % at 1 .1 billion. A Monday. No, okay. Now, this is a super interesting one. You know who Monday doesn't really sell to? Tech. They sell to non -tech. Salesforce, single -digit growth. Monday, 34 % at 900 million in revenue. 34 %. But as you go through this, Canva sells to Enconceuma. Yeah. How is sales to Enconceuma being restaurant owners? Yeah. Monday sells to SMBs, small creatives. Yeah, Sam, Sam, sorry, is selling to the end economy, not consumers businesses, but the end economy, right?

48:37ZSKG 32 % at 2 .2 billion, right? Security remains on fire. And then, Clavio, we talked about 42 % at 800 million. So we can look at all the, you know, the Mongols and the work days and the socials they looked at. But I found six, six leaders that are all growing at nuts. So now they're not 2021 nuts or rates. So you basically have a couple of choices. as you can hibernate, you can blame, you can say, well, it's me, or you can say, listen, maybe I'm not selling to restaurants or to end designer, but what can I find in here? Where are the gems? I remember Henry Schuck from ZoomInfo like a year and a half ago, said the thing it was, it was early, but he was obviously seeing everything early.

49:11It's like, the good news is our non -tech customers are growing 20 something percent. The bad news is our tech customers are growing like 6%. Now it's worse. Now I think it's, they're negative, right? Cause the NRS fall into like 85 % at ZoomInfo. Would you be a buyer or a short one at ZoomInfo? Generally speaking, when you have great founders that are committed on a buyer, so I would buy. Those negative things, but like Henry's a great founder who's done this from scratch, basically bootstrapped all the way here, totally committed to the space. We'll never quit. Now, there's Apollo, there's others, but you're going to ultimately outlast the ones that quit.

49:44Can I ask, actually, one, we mentioned kind of the hyper -growing companies that are now non -growing stocks. be at your box, be at your drop box, it's be at your sales forces, which one that has transitioned from growth to stable for to 6 % grower, do you think will reflate in the next few years? And what do you think will be the next one that is a hypergrower will go into a slow growth stock? I think the Zoom infos and the bills that have gone through a patch with incredible founders that have been, have a multi -decade commitment, will crush it. I don't know how some of the Zoom's will do it.

50:19They got dealt the worst COVID card. It seemed that they had the best, one to four billion a one year, but they got dealt the tough hand, right? That's a tough one. I'm gonna say that folks that are going through a patch, like those ZoomInfo or Bill, they're gonna pull out. Folks that maybe like Dropbox have decided to lean into this world. The tough thing is we've learned that we've learned you've got a sequence these next acts like HubSpot did. And if you don't, it's so hard to do it later. It's so it's not impossible, but it is it is so hard. Okay, so I want to do a tweet of the week You said one large accidental mistake founders can make in fundraising is to ask for too much money Yes What did you mean by this and how does that impact the advice that you give to founders listening too many founders are still giving you terrible advice from 2021 Run a process give people one hour to decide I literally got an email.

51:09I was here Harry the email was pretty good Okay, from this founder, I think they're at 100K ARR and they're doubling. They're growing, but like this is not a rocket ship yesterday. And in bold, it's like the deals moving really fast. I don't know who told you to write this or where you found this on the internet, but no. This is not the right way to approach it is, listen, we have something that's early. Let me tell you why it's going to be great, right? So so much the advice is bad. People are still asking for too much money. They're asking for too much money. And I was pulling this up for first -ass year up, but you know, Gong series A was 7 million, series A was 7 million.

51:43That wasn't that long, that was 2017. That used to be a series A. Now it's a seed round. And so you see these numbers in the media and you hear about them, but be very careful that that's appropriate for you because you can just rule yourself out from investors. It's just such an unforced error. There's things I've found as a thing. What do you mean you can rule yourself out from investors? If the fun size isn't big enough to meet your ask, most good investors will quietly opt out because there's too many deals. Okay, the biggest check I can write, you can tell me what yours is next. The biggest check I can write is $4 million.

52:16Okay, I've written quite a few $4 million checks. I could write a little more, but when I write a $4 million check, Harry, it has to work. We use this seven, eight percent of your fund. Yeah, it's a lot. So it has to work. Otherwise, it's like, plural sight. Like I'm dead of that thing. I can survive it, of course, but it really sucks when I write a $4 million check. So when you ask for 10, not only do I not out of money, but me, I can get Harry to do the deal with me, right? But I have to believe it will absolutely crush it to do a 10 because then I got to bring Harry and to do four and then we'll find our friends to do two so we can do it.

52:46But if you're just taking getting going, what do you get? Forty or fifty of these emails a week, it's just easier to not respond or to be kind, right? Now, that same company, Syllometric says, we're, I want to raise like four to five million or even they do something dumb like two to five. It's okay even if it doesn't make sense, then I'll take the meeting if the rest looks good. But I'm not I'm not if it they're asking for 10 or 20 or crazy things. It's just not once in a while I'll do the meeting when it's so amazing right when it literally leaps but but you have to check every single box It's easier to just say listen this founder doesn't get it like I'm just the wrong match for that Right, I'm a popular.

53:20I didn't like big ranges two to five what you do with two is completely different Well, I said it intentionally like that wasn't a great answer But I'll still engage now if it's a third time founder and they're asking for two to five I'm skeptical if it's the first time they've raised any capital they don't know, you got to cut people a little bit of slack, right? Four to five is better, four to six is a good answer, right? How many fond of meetings do you take a week? Try to do two. I try to interact for real with every single good email, like for real. That's good. But I try to do as much as I can.

53:47How much do you get a week? Two good ones, really good ones a week. And if you're lucky, if you get an insane one a month. So why not do all some really unfulfilled questions? Not sure of us. And you can tell anything, how much does sausage do in revenue? Those will be our first crappy year, but like 25 million? Why is it a crappy yet? This the first year where we just had so many unicorns asterisks that imploded. So we probably lost 60 sponsors 70, 80. Wow. Now, there's not that they're bankrupt, but lost them. And so that's a flat year for revenue? No, it'll be down. Do you think that is also because events are less exciting than they were?

54:20Like events in Sass used to be the thing. Now content is the thing. I don't listen. It's a... If I'm pushing you, let you... No, no, no, no. It's a nuanced question. Let me answer it at a tactical level for revenue. It's mixed because on the one hand, every report ever had recently field is still 40 % of all marketing spend, field marketing. So the budgets are still there, but some people don't even want to deploy them. Okay, so that's one issue, right? And then yeah, there's a whole issue where we thought that when we came out of lockdown that people would want to be together more. And I think what I've learned from the event thing is it cuts two ways.

54:56On the one hand, it is great. We're hearing your office, your team is here, but almost everyone's at least running some kind of hybrid team. Okay, no, almost everybody. And so we've had to learn about this, but a lot of people just don't want to get out of the house. They don't want to get out of the house. And so events on the one hand, they're very exciting for folks, but I think a lot of folks just literally don't want to leave the home. I mean, we've got it. It's funny. I'll tell you a little, it's as tiny, but if you're, this is an itch topic. Amelia, who runs a lot of Sassar, was saying she'd gotten the most cancellations this year ever for a very specific reason.

55:28People want to refunds. We just, anyone complains we give them a refund. Like, we don't have, we have a tiny team. We're not gonna argue. We won't, we won't. You give me a refund. People actually, they wanted to buy a ticket, but they just, not only do they want the list, which they don't do, they didn't want to come. They wanted the benefits. They didn't want to come. So all this stuff cuts both ways, and I think that we all kind of thought the world would pengellum back in certain ways. I'll say I don't know the answer. And this is me being really, I'm fat telling this into a show as well. But I'm like, I get the event strategy, helps the investing strategy 10 years ago.

55:59But I never helped. I disagree with you that. When you look at the founders, having a community help, there was no need to do an event. Then why do it? It is the hardest form. Like content is so big. Very hard. You can write a Reddit in your own home with a coffee and we can chat on a podcast or my own homes. Why do all this shit? I mean, I was walking around the city with mom today. And I said to a god, I got a way better deal than Jason. This events business is hard. Two reasons. One, it does make a difference in a lot of people's lives, and you only have so many orbits around the planet. Maybe it's hard or the time ROI is tough.

56:33If you really can do something that other people can't do, now people can't, very few people can do an event for 15 ,000 people in the US area. Totally. It's a, and you know, the classic sawmultman who was here saying, you know, his classic thing is say, do the things that are easy for you that are hard for other people. This is something that's hard for us, but much harder for other people. So one is we're good at it, two, it's impactful. And the third one, this I learned from Aaron Levy, I asked him, I don't do very many podcasts but I do a few, right? And when I, the last few ones I've asked people why you still do it, it's my opener.

57:04I asked Jennifer to hot, I asked Aaron Levy. He said a bunch of things about AI in the future on this thing, but it's like, it's a jigsaw puzzle. Box is doing a billion -ish a year, a little bit more, right? 200 million goes to cogs, to servers, and support. And he's got 800 million to play with each year. And for him, he's like, this is what's interesting to me. I mean, the technology is interesting, but it's a jick, like, it's, it's in, what I mean is it's engaging. So putting together a jigsaw puzzle, you have a jigsaw puzzle at 20 VC, you're putting this together all the time. So we don't always choose our jigsaw puzzles and maybe in a, in a certain world, we would choose the easiest jigsaw puzzle.

57:34That's the simplest one, but I think sometimes our jigsaw puzzles pick us. And what I do know is that I've never been depressed, but the closest I've been is the two times I sold my companies. So I would be reluctant to give up a jigsaw puzzle that we're good at. And what happens to Saster in 2025? You're saying a 25 minute interview, you're going from Lestia. What was Lestia's study? Yeah, almost 30. What happens in 2025? Is that reflate? You know, if you'd asked me in 2021, I would have not for myself, but for other people, I would have been using a bullish number just for the two troops. Here's the exact path to 100 million.

58:07I don't know the answers today. I don't know all the answers. All the stuff we talked about today. What's the motion on an events business like Saster? Basically, you need to get above 20 to make money. But once you're above 20, then you get, start to get very high margins, but it's very high. So when you look at the public companies in this space, they do have like 30 to 40 % operating margins. You have to get above a $20 million or not to do it as a business, right? Not that we started as a business, but you do have to stay above that, right? So you do 30 or 40, then it could be very lucrative.

58:39If you want to take cash out of the business, you could make a lot of money. The question everyone asked me is financially speaking, are you a media company or are you a fund? And always push back incredibly fast and say I'm a fund. Leverage media to find great entrepreneurs and win the right to invest in them. Is that the same one? I think of Saster as a community first. I do think that that's powerful, but it's a little bit different than media. If the only goal is to invest, then you don't want to put one more ounce of energy into marketing, Then you need to do to close the next Figma. You don't want to do one more 20 VC podcast.

59:16You don't want to do one more thing. There's not an infinite supply of Figma's, right? So if you view all of this as marketing for a fund, that's great, right? And certainly folks are much more aware of marketing for funds than they used to be. But you could argue that for me, I weigh crossed a lot. It's way too much time and energy just to try to make a couple of investments. How much time do you spend on the events business versus on all community building versus investing? I mean, this is a lot of detail. It used to be before 2020, it was actually more time because the team was terrible. Oh my God, every week terrible things would just happen.

59:50Like we almost died and like, we had one head of events who forgot to reserve the venue of the convention center. She forgot to reserve it. Do you know how stressful that is? We can always redo the pod. How did you find out? Like a lot of mediocre people, she hit it until the very end, until three months before. And then she said, I'm sorry. never she never told anybody. Every year I had multiple issues like that Harry almost literally almost killed me right. So actually used to take more time than it takes now. I had that experience for you at that. What's that? What was the biggest like near that experience that year of Mamba?

1:00:24We did lose $10 million in March 2020. We were the first major event shut down by COVID. RSA got done and then San Jose shut us down when there was one case off the coast. So we lost did lose $10 million. That was not the most stressful but it was pretty It was pretty stressful. The woman forgetting to book the convention center was pretty bad. I've not become a baddnessy over time. I'm much worse. Why you us and then we'll do a great far. I care much more. I care like 20 times more about my team than I used to. But I can't bullshit anymore. I can't tell people it's great. Great job. I'm too transparent.

1:00:56I'm no bullshit. I used to be a pretty good team rallyer, right? Now I'm like, you want to work with me? Great. If you don't, the door is right there and I'll pay you 60 days, but like I'm not gonna convince you to work with me anymore. So there's a set of that kind of tools That I just don't have the patience for right team rally or is that important skill so so important when things were hearted Echo sign I had I had this huge thing on the wall It was our journey from one to 10 million error and I had this little animated guy And I would just move it every week at our team meeting 1 .6 2 .1 It was pretty funny.

1:01:28We'd move it up and I rally or 3 .182 million error I cheer him and you just rally it was such a great vehicle because it felt like it took fucking forever to go from one to ten They are but today no way I could not do that so I think about it a lot and The odd thing about her is just I actually struggle with this all the time because I care so much more about people now That I used to so much more like we had such a great sales team, you know sandblown zero at brex Jameson who just left his SVV sales at gong so many folks like most of the folks I never talked to him But I kept moving the thing up the thing and bringing lunch in.

1:02:01That's what I did. Now I care so much more about every single person. And I think it might be a negative. Right, we're going to do a quick find, my friend. Otherwise, it's still a cool day. You brought it up. No, no, I love this. What's the best first founder meeting you've ever had? I will say the best founder meeting I probably had was with Parker Conrad in the beginning of Zenefits. I introduced him to Sam Belon and that's how I got going. What didn't you invest? You know, I told him I would and then he went and took the money from Andreessen. Would you have done it with them at 35? Yeah, I told them I told them I would give them I would do whatever you wanted if you took a entry sentence Okay, but I'll tell you why because that was the first founder I met it was very early on I'd barely started investing where You could just see the future through the founder and those the meetings then I then you should never do anyone where you can't see the future through the founders You're the founder of a sauce company to stay.

1:02:48Yeah, you can choose any bull member who would you choose? I think I'd pick Toby from Shopify because I think you'd and frigging kick my ass. We have too many founder friendly, Yahoo, great job, Harry's on boards. I'm just so sick of it. Toby just seems like he just doesn't suffer fools. And maybe you don't want to work, not maybe not everyone would want to work for that. I would work for him. I mean, I've never met him, right? But that's who you want on your board. One of the first signs that I found is quite quizzing. Too many excuses for mediocre VPs. Too many excuses. Harry, my VPS sales, Jim, man, I know we only closed 8%.

1:03:21They'll ask a couple quarters, but Jim's doing a fine job. When a founder has acquiesced, it's hard. It is hard to rebuild the management team, right? Especially when think growth or slow. But when you've decided that's fine, when you've acquiesced to having a mediocre management team, it's over. How are you ever going to regrow with a mediocre management team? So when you start covering for a mediocre management, I'm not saying fire them, that's a more nuanced topic. But if behind the closed doors of a board meeting, you're covering for mediocre VPs. I give up on the fact. like I almost instantly give up on the founders.

1:03:53Final one, you need to have another bat. What do you find to see as the bat? But I really blew the IPO one. I really thought I was right. One was a whiffer. I really, but I believed in it. I really thought there are so many folks at 200 million. I know, because you took a three, I slivered Johnny. Yeah, I really thought I was gonna win, I really thought I was gonna win that one. But listen, you met my mother this morning, so I said, yes, you for paying five Christmas presents. You're welcome, I'm good for it. What's the next bat? This is a tough weekend sass to make at the bullish bat, But the best bet is because we're all making it is, you know, what will multiples be at the end of next year?

1:04:25If we're going to a fourth year of Cremie multiples, well then we'll adapt, but that would be a bummer, right? But I got to quantify it perfectly. So we need to be in an 8x world. We need the median or average SaaS public company to be at 8x. Obviously some can drag it down, but the good ones will drag it up, right? So we're in a 6x world today 5 .8, 6 .0 whatever version you use. I think we need to be an 8x world for all this to be worth it. Let's do that as the bet. Average 8x, end of 25. I think I'm gonna only bet you 20 grand on this one because I'm not sure. I was confident of the IPOs. I was confident it would be an IPO a week in the second half of this year.

1:05:03This is my worst bet ever. Just gotta lose left and right. There are reasons to believe that. The worst one. This one I just need, I want to believe. I need it to be true. I say you're gonna take the over on that. Yeah, I'll do 20 grand that at 12 .31 at the end of 2025 we're back to an 8x world. Great, I'll take the on the phone. Okay, well done. Okay, good. Jason, thank you so much for doing. Okay. This has been so much fun. I'm what a joy to do it in Boston. Yeah, it's great. It's great to be at the worldwide headquarters for 20 VC. What is about 100 ,000 square feet that we're at here? Yeah, something about that.

1:05:35Yeah, the 50 analysts above look tired. You make them all work on Saturday. For here on Saturday, I don't know whether you're watching or listening. But there is an army, it looks like we're at 0 .72 or some hedge fund up above. There's literally, and there's no, right down here it's nice, but up above there's no AC. And so there's like a hundred analysts scouring, scouring crunch base for deals. We didn't scouring them for days. Yeah, yeah. You know what I mean? It's, it's, it's what you kill, right? There's no salary. It's deal by deal, a half percent carry if you find a good deal. And that's the way that you've under it up there.

1:06:04And I've got more nasty. Dude, you're a stun. I have to say, I just love hanging out with Jason. and here's one of my oldest friends, they are always fantastic discussions. I want to hear what you think of this new style of show, so let us know on Twitter or LinkedIn. You can also watch the full episode we recorded live in the studio. You can watch that on YouTube by searching for 20VC. Again, I would love to hear your thoughts. What can we do to make it better? But before we leave you today, we're all trying to grow our businesses here. So let's be real for a second. We all know that your website shouldn't be this static asset.

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