$682M Public CEO: "The Magic of 80% Gross Margin" | with CEO @ Yext, Michael Walrath

0:00Michael Walrath: Michael Walrath is the CEO and chair of Yext, a public software company doing nearly$450 million in revenue. Amongst Michael's other past successes, he bootstrapped Right Media and sold it in a reported$850 million outcome. The magic is that we have an 80 % gross margin business with 31 % EBITDA margins. If you're feeling frustrated by the world of fast-growing but highly unprofitable VC-backed companies, Mike is here to tell you that there's a better path, even if it's not as glamorous at first glance. The employees who are joining XYZ Hot Startup today at$5 billion or$10 billion valuation, they don't really, I think, fully understand the contract that it's a lottery ticket.

0:36Michael Walrath: In today's episode, Mike also gets into how he tackled a serious churn problem, why he stopped paying most of his people in stock, and why you shouldn't be so afraid to cut your weakest sellers. If I cut the bottom 50%, I'm going to lose 20 % of my bookings. It's not even close to true, it's the opposite. Lots to learn in this episode from a strong operator who's not afraid to take some less conventional positions. Welcome. to Topline. Hey, everybody. Welcome to another episode of Topline. We're back in person. I'm joined by my co-host, AJ Bruno, the CEO of Quotapath, Asad Saman, the CEO of Sales Talent Agency, and we've got Mike Walrath back on the show, the CEO and chairman, I believe, as well, of Yext.

1:17Chair. Chair. It's non-gendered. Chairperson. Chairperson. Chairperson. You are the chair. Just when you took it over.

1:23Michael Walrath: I like to keep him guessing. I reached out to you again because you've been one of my favorite follows on X. Well, thank you because I think you're like, you know, You're like a large percentage of followers. I'm a large percentage of your Venkian. I figured being caustic you'd get a lot of followers, but apparently not. Sam just takes your tweets and puts them right to LinkedIn. They go viral every time. But talk a little bit. I feel like you've been on a mission. and maybe the mission is an argument for physics, for gravity, for saying, hey, the old rules of business still apply. Talk to us about like, what, what are you trying to articulate out into the market that you think is disconnected from reality?

2:10Michael Walrath: Yeah. Um, in all seriousness, like, you know, I haven't, like, I had a Twitter, I had like a Twitter account in, you know, 2000, whatever, you know, and I never, I used it. And then I was like, ah, this is a terrible, And that may happen again. I expect it to happen again. But I just, you know, in the last six months or so, obviously, you know, you guys have sort of seen the shift a little bit. I think I just kind of came to the end of my rope when it came to like saying what was on my mind and trying to counter maybe a little bit of the noise in the market. And at least provide another point of view.

2:46Michael Walrath: So it feels, this market reminds me a lot of when I started my career in the late 90s and it's hypey and we're doing crazy things that don't necessarily make sense, but they make sense in the short run. And so, you know, I think what I'm trying to do is just add a voice, hopefully directed mostly at founders, that there are other ways to think about these problems. That the sort of VC and, you know, I have a lot of friends who are VCs and, you know, we just stay away from this topic. Do you really stay away from it? I mean, I think it's an interesting conversation, right? I just don't think they will tell you the truth.

3:18They'll just be very positive on everything. I just think we're all playing different games. Their game is a markup game, and they just don't have to be the last person holding the bag. That's right, yeah. And your game as running a public company is I have to build a long-term durable business, and we're just playing different games, right?

3:38Michael Walrath: Yeah, actually, it's a good point. I think people are like, why are you beating up on the VCs? And I'm actually not. Like they're doing exactly the right thing, you know, generally speaking, like this is a hype cycle, right? Like they had, they, if you're a venture capitalist, you really don't have a choice not to participate. This is when all returns are made in venture capital is at the peak of hype cycles. Yeah. Yeah. And the losses will just not matter. Right. And so, so, you know, the problem that, you know, the thing that I think I resist the most is the idea that the vast majority of input that most founders are getting is that.

4:10Michael Walrath: Right. And it's a completely different math problem for a founder. You don't have portfolio dynamics. You don't have 10 bets. You have one, right? And you all have one. Awesome will say, but you can sell secondaries along the way, so it's fine. Sure. Yeah, and by the way, I would, right? If you can get those, you know, but the problem is, is that these deals, these billion dollar deals and multi-billion dollar deals, like, you know, 1 % of founders are getting those deals, right? There's a whole world of people who are building businesses who aren't, you know, they can't raise primary capital, let alone sell secondary.

4:41And on top of that, so 1 % of founders, it's even less of employees, which is what we're talking about.

4:47Michael Walrath: Yeah. Well, and I think you make a great, that's the underappreciated point about the biggest downside. And if you look at these downside deals, the biggest downside here is not to the early stage investors or to the founders. It's to the employees whose equity was issued at these, you know, at 409A valuations discounted off these crazy numbers. So when we look at the air tables and the muses of the world, like the founders got paid, the early stage investors got paid, the late stage investors got all their money back. The employees got nothing. The employees got nothing. Right. And the employees who are joining XYZ Hot Startup today at 5 billion or 10 billion valuation, like they don't really, I think, fully understand the contract that like, you know, that it's a lottery ticket.

5:30Michael Walrath: And in a lot of cases, you know, their compensation statement shows the opportunity, but they're not really getting paid for it. Do you think that from an employee perspective, if you're still working at Airtable right now? Yeah. Then that's a little bit on you. Like, why are you working there? This company went a hell of a long time ago. Everyone that's still there being like, fingers crossed, hopefully this works out. That's a really bad decision. And so, of course, it's not going to work out for them. They should have at this point been able to look at... No one has more insider information than an employee, right?

6:09And so when you think about careers, careers are like picking stocks, but you have inside information. And at some point, you have to take that information into account and be like, it's the hottest job market in history, and I'm sitting at Airtable.

6:23Michael Walrath: Yeah, but, yes, but, right? So I think that if you're sitting at Airtable today and you're counting on, you know, the company being worth 25 or 50 billion dollars so that your option package, you know, is going to be meaningful, then like, yes, you're probably not really understanding the situation that you're in. And I'm sure there are lots of people working at our table who have realized that, hey, that's not how I'm going to get paid. And I'm happy in my job and I'm well paid. And I like the people I work with and lots of other reasons why people stay in jobs that aren't because I think I'm cashing this lottery ticket.

6:57Michael Walrath: I do think there's a, you know, this is like a bit of a non sequitur, but like any good politician, I'm going to answer the question that you didn't answer. We're here for it. I think there's this really fascinating thing going on right now because when the private market gets this overheated and then, you know, we've talked at length about, you know, how, you know, out of favor the public software market is. We're starting to see this really interesting discussion in prospects and candidates who are beginning to understand that, like, I may have a 10x opportunity at the undervalued software company that I don't have at the overvalued private software company.

7:33Michael Walrath: How's your stock right now? How's it performed this year? This year, I'm sure it's down on the year, but it's doubled since the last time we talked, I think. That's what I was going to ask, yeah. So I'll come on again when it doubles again. Is it too late? I definitely can tell the temperament. You were in the, we talked about the DGAF, right? Yes, yes. Sure, but you're not wearing it today. No, I left it, unfortunately I left it in Florida. Are you sure it's down for the year? Isn't it that you guys have all of this great restaurant data and consumer data and the agents need that data to make recommendations so you'll follow along on muse and instinct and all of these other i appreciate that you're asking the ceo are you sure it's down i'm just saying i'm getting bullish on yex for exact partially for what i just said partially because i agree with mike that at some point cash flow generation and good businesses will matter again yeah and and you know i think good data and and how you you know bring value for your customers matters a ton.

8:29Michael Walrath: Our situation's strange because we had the take private thing going on. So the stock was sort of unnaturally elevated until it wasn't. And so, you know, when you look at it on a, let me say it this way, since I took over four years ago, we're basically flat, right? That sounds horrible, right? But it's actually like top decile performance, I think. I think, yeah, I'm going to take flat at this point. As it turns out, actually, you know. So we're not real, you know, happy about that. But I do think the most important thing is the business is incredibly healthy and getting healthier. And the market's turning around a little bit to software as well, right?

9:08Like since we lost boat, I think when we lost boat was when SaaS companies were getting beaten up in the public markets a lot. Since then, most of these SaaS companies are quite up and they've been right-sized and the market's starting to look at them a little bit differently.

9:22Michael Walrath: so the market has changed its view yeah i mean we you know actually revenue i think overall revenue has stabilized and revenue growth rates are beginning to at least start to tick back up ours has significantly improved in the enterprise piece and every you know everyone has a different set of sort of complicating dynamics um it's this feels to me and i and i may wind up sounding really stupid about this but like you know and this shows how old i am this reminds me a lot of like the middle of 2004. Interesting. So in, in 1999, when I, yeah. So, so like we, I started working at double click in 1999.

9:58Michael Walrath: Um, you know, uh, you talk about like, you're stupid enough to stay when you're stuck, like, you know, I, I, the stock was going up$20 a day. It was like 10 % a day, every day, right. Clockwork. I got my 2000 options and I was like, I'm going to be a millionaire. Right. Um, and then six months later, the stock had gone from like 220 bucks to seven. right and you wake up and you're like I'm not going to be a millionaire right not not off this um and then I you know the whole thing happened right and in 2002 I left double click and I started right media and it was brutal it was like the only reason why that was possible was I had a couple of customers who were basically willing to shift their media buying to us so I bootstrap so we we really bootstrapped the company Jonah and Noah Goodhart put some money in and that was all we had.

10:40Michael Walrath: And so we kind of put our heads down and just said, we're going to survive this moment. It was the sort of the apocalypse of the post-apocalyptic post.com meltdown. And somewhere in middle of 2004, maybe it was late 2004, we just kind of looked up and went like, oh, it's like, it's getting easier, right? Like the budgets that were slashed are not slashed anymore. and customers want to spend more money. It's all digital advertising stuff. I mean, it's almost comical, right? In 2020, second half of 2022 was going to be the recovery, right? Second half of 2023 was going to be the recovery. 24, yeah, we're going to see the recovery, right?

11:19Michael Walrath: So it's like an interminable period of time to go four years from like, you know, everything fell apart at the end of 21 and now we're literally, we're five years removed, right? It doesn't seem like it's been that long. But I think something's shifting and what I feel now is like, you look at like generally corporations are over earning. The, the sort of CFO is satisfied that you've like taken enough cost out. There is this opportunity to be productive. And all of a sudden it just feels like deals are easier to get done. Right now, like this could turn, this could, could absolutely turn out to be a horrible sort of feeling, but my spider sense is that we may just be entering the phase where like, you know, we've sort of optimized everything for, you know, a really hard selling environment and it might just get a little bit easier.

12:04Do you worry that the other part of the economy, meaning like the AI first, the AI native economy is going to cause enough disruption, maybe whether you think it's a bubble or not, but a correction in that part of the world impacts your ability to keep improving your business or are they uncorrelated?

12:23Michael Walrath: I think that's the beauty of being like rational, right? Is that like, we don't require any venture capital. We don't require any huge capex we don't require like you know the company has gone from break even to over 30 percent you know real ebitda not like fake ebitda um that's amazing generating tons of cash um and that cash and starting to grow again a little bit in the enterprise core which is the important part so as we get there one of the most interesting underappreciated things i think from and you know i wouldn't have understood this 20 years ago is when you're actually profitable like really profitable, then any growth becomes hugely accretive.

13:04Michael Walrath: So like, you know, running a business at, you know, I think our EBITDA margins last quarter were 31%. And so - That's fantastic. It's been, I mean, look, it has been, it has not been a simple journey to get there. But, you know, what I think the magic is that we have an 80 % gross margin business with 31 % EBITDA margins, every incremental dollar, I can spend 45 cents of it and not affect my margins in any way. And so, you know, I think this is the underappreciated thing about some of these kind of left for dead software businesses is that we have an unbelievable amount of investment capital just in even very modern growth rates.

13:45Michael Walrath: We don't need, and we can be totally dislocated from our valuation, right? That's a completely different story than if I have to keep raising growth capital. So is your balance sheet just exploding? Well, we've used our balance sheet to buy something like 35 % of every share ever issued. Did you announce those buybacks? Yeah, that's all public information. I'm going to do my very best not to disclose. I'll stop asking sensitive questions. No, no, it's not sensitive. We've chosen, because we have such healthy cash flows, we've chosen, you know, at a time when the market is trading our stock for, I don't know, less than five times EBITDA.

14:27Michael Walrath: Like we believe that our business has more than like three years of life in it. Right. And that's kind of what the market says when they trade you for, I think the last time we got together, we were trading for like, I don't know, two and a half times EBITDA. When you look at 2004 for let's say SaaS companies, right? Mid-cap, public SaaS companies, maybe even the large caps. where do you place this ai side of the market there's this conversation happening that it's 97 98 there's other people who are saying it's 98 99 it's getting close to light it's gonna pop yeah and so there's everybody understands that it's bubbly everybody understands this hype that doesn't necessarily mean the bubble burst right like there can definitely be a world in which this goes on for five six years with many corrections along the way something that it might night burst but it's hard to place it because it's also very different there's real revenue you saw that market like where do you place this i can tell you where i hope it is right and what i hope 95 no i actually hope it's 2005 right like i hope because if you think about it like depending on the seat you've been in the last five years have either been an unbelievable bull market or like the worst bear market we've ever seen.

15:45Michael Walrath: Right. So in my seat, right, the last five years have been like, you know, the worst bear market that we've seen since 1999. In the, but where I was sitting in 1999 was the equivalent of in being sitting at one of these AI. Yeah. I mean, DoubleClick wasn't open AI, but in that world, digital marketing, it was like that. And there was a point where DoubleClick was, you know, worth, you know, $12 billion. Right. And, and everyone looked at it and said, this is insane. Right. It's a highly unprofitable company that, um, but it was, you know, it was how to play the trade. Right. Um, and so, you know, what I like to think is from where I sit that it's 2005 is, is that, you know, for software in general, like we're about to enter the next phase of this is incredibly productive stuff and businesses need productivity, right?

16:38Michael Walrath: It doesn't, I also have a very, you know, sort of counter narrative on the jobs thing, which is like, we're not losing jobs. We're going to create a ton of them. A hundred percent. Like I'm so uninterested as a CEO in cost savings at this point, partly because we run a very disciplined business. Don't, I don't want to talk about like AI saves us money. I want to talk about like your AI, you know, if you're my marketing head and you tell me you can do the same marketing with 90 % less heads, I want 10 times. Give me 10 times, right? Or 20 times. That's what I want. I don't understand how more people don't get that.

17:10Michael Walrath: That's history. History is hard to understand. But there is no history of technology. Well, they're being told. It's because they're being told that that's the case. I mean, just as like profitable, efficient growth. Well, what does that mean? It means less headcount. It's the growth is, no, not necessarily less headcount. It just means, it still means growth. Growth is still a big part of that word. Yeah, but the profitability piece of it is as well. and software business 70 % carry. Yeah, but when I say profitable, efficient growth, I mean, you know, economic profitability. But people will read into that whatever they want to read into it.

17:39And I agree with Mike on that. That bastardized my phrase. I agree with Mike on that point around it. It's like, I want our engineers to be working at 100X, not one engineer working at 100X. Like, that doesn't...

17:51Michael Walrath: Because growth is, you know, like, this will surprise some people because they think I'm the profit guy, right? Like, growth is the most powerful... Of course. You know, value driver you can have. The only thing that rivals the value driving of organic growth in a business is the value destruction of chasing organic growth when it's not there. Right? You're saying growth is not nice. It's like saying the six-pack sucks. Yeah. It's amazing. It's amazing. And it's amazing in a lot of cases if you have some operating leverage for what I just described, which is like, you know, if we grow 10%, right, which is faster than we're growing today.

18:30Michael Walrath: But if we grow 10 % a year off our current business, that gives me like$25 million of additional money to put into R &D and marketing and sales this year, next year. So if you are you, you're playing the game the right way, like your way. I'm playing it my way. You're playing it your way and it makes a lot of sense, right? The reasoning made sense. If you're one of these AI companies, they don't have the ability to be in this position with EBITDA, with the security, etc. etc. There's a whole different game on the field. And what's your analysis of how they're playing, which is very much, it feels like this is a moment in time where there's a chance to make, build some really big special companies.

19:13Every buyer in every department in every part of the market is going to buy AI technology with an experimental mindset. It's a chance to get in, and then you're going to have to make a bunch of decisions around how to continuously provide them value to hold on to that customer. You're going to be able to raise easily to do so. You might crash and burn, but if you did, you do a bunch of secondaries and your employees do a bunch of tenders and everybody plays, you know, wins to some extent along the way. It's very different to an Airtable. It's less binary. How do you think about this version of the game?

19:47Kind of made sense, no?

19:48Michael Walrath: Yeah, no, I mean, I look at Airtable and, you know, I think Airtable is a great example. Like they actually played the game, I think, in a very intelligent way. So the reason why that, you know, why that deal wasn't a catastrophe was because they didn't spend all the money. They had a lot of cash. Right. So they had tons of cash. Right. And, and it, again, I don't know anything about that deal. I posted, you know, a little bit on X just, just from the outside. You know, it seems to me that, you know, that team probably wanted to focus on something else, right. Something that was entirely outside of AI thing out of the deal.

20:20Michael Walrath: Yeah. And so it goes back to like, that was a good deal for the early investors and an acceptable deal for the late investors and a pretty good deal for the founders. And it was pretty for the employees who decided to stay signed up after they raised money at$12 billion. And, you know, I would also argue, though, it's not just the employees that are there now. I mean, think about if you were the first VP of sales, your 409A is pennies. And yet you stayed for four years, you helped build a $100 million company. And then you did leave, you did go on to writer, the first VP of sales. like these air tables and these companies when they did those really big rounds because we all know people that worked at these companies whenever they did those big rounds in 2022 everybody made money you're but there's a very very small they're not selling more than 10 percent of their equity stake they're a seven figure outcome from a company that ended up being a dud there's there's pretty i don't look i don't know there's lots of ways around things but the rules are really specific you can only sell like two and a half percent of enterprise value for secondary market during any tender offering here's what's interesting and again air table is just a really interesting example right is you know they raised 800 million dollars right they didn't use it right they still had it on the balance sheet right so one of the reasons why that you know the deal value was two billion dollars was they still had like 700 million i don't know the numbers exactly but 700 million on the balance sheet so so now if you imagine a world where Airtable hadn't raised that$700 million, right?

21:47Michael Walrath: Had only raised$100. And never raised another round, which they never needed, right? They only sat in the bank. That's known, right? So if they raised$100 million and they built a company and they just built it on cash flow because the company was break-even, it wasn't burning a lot of cash, it clearly didn't burn through the$700 or$800 million. They didn't play the moonshot or nothing game. They held onto the cash, let it sit on the balance sheet. Doesn't that give you an idea of a really confused group of people like i'll tell you why i look at that and i say first you went and you raised this money you said that's he's making the same point you're making but then they didn't know what to do with it right this is led on to it this is why he's the point i'm saying is like so i'm gonna say what i said before which is nothing's more powerful than growth yeah at creating value nothing is more destructive to value than chasing growth when the growth isn't there so somewhere along the line they realized that like spending that money wasn't going to get them incremental growth this is the big problem in the market and and and and because of that they didn't destroy value because because if you think about so so if you like fictional like in the alternate timeline right air table i forget what the numbers were 600 million of revenue you know 400 i think 400 million of revenue maybe like 700 in cash 700 of cash yeah that's how you get to the 1.2 so roughly three times arr right making you know basically break even you take that same business burning$150 million a year and seeing a declining growth rate, it's not worth three times ARR.

23:19Michael Walrath: It's effectively worth cash. It's worth half of a turn of ARR because the burn rate is so high. And so I actually give that team a lot of credit for identifying, like, Yex lived this, right? We were at the peak of the pace of decline of growth. We're spending 74 % of revenue on sales of marketing right so that was that was with a massively declining what year was that it was like 2001 okay late 2001 i think the push on that is that airtable went and raised this money they had a vision they had ideas they they wanted to invest it in growth in a bunch and you invest in growth doing two things innovation m &a distribution right like one of the two oh m &a yeah and at some point they didn't have anything left to spend on.

24:07You have AI happening. They had no ideas on what to do with that. Demi-A point is interesting enough, though. They didn't go and buy a bunch of companies.

24:13Michael Walrath: Well, I think they did have some ideas. I think they wanted to go do those separately with a fresh capital structure is what it would appear. Which is mind-blowing. Because the people that actually screwed the employees end up being the founders in that situation. Look, I don't like pointing fingers at anybody, especially founders. I think this is such a hard thing, as you three all know, that like, you know, it's hard, it's really hard to get me to criticize founders. And my advice to employees would be understand the, the, the economics of like, these are not sure things, right? These are, these lottery tickets are like just as likely to be what I learned in 1999, which is like, it was, you know, my stock options were struck at$185 a share, right?

24:54Michael Walrath: You know, in the end, I think DoubleClick sold for 12, right? Like, you know, I learned so much through that experience that like it was the most valuable thing I ever did in my career. Right. I didn't make any money. Yeah. But it gave me what I needed to go figure out, figure out the next market cap when it sold. I think they sold it for 3 billion. And you at the height, it was 12 or the height. It was like 12. Yeah. Yeah. My point was, sorry, just to land the point with the air table thing, like if they had only raised a hundred million dollars and if they had never done that big round, the outcome to the founders would have been the same.

25:26Michael Walrath: Yeah. The outcome to the early investors would have been the same and more of the employees would have made money. And so this is exactly why I'm so annoying on Twitter about like, you know, Andrew Russ Hogan this morning, like, you know, said like, oh, well, like instinct is now worth$10 billion. You said there's a difference between valued at and worth. There's a total, there's a difference between valued at and worth. Like, Antable was never worth$12 billion. Right. And you know, it, what it wound up being worth was 1.2 right and 1.2 billion dollars is a great outcome it's just unfortunate that more people didn't participate because you know the market you know by the way it was only we're only five years since the last time the market was psychotically overheated that's the other weird thing about the situation is like the companies that are truly left for dead right now this is the private software companies that were 2021 we're gonna have a we're gonna talk to one of those founders in a little bit.

26:22It's fascinating. David Sachs made this point a long time ago that the mania, the psychology of mania is so everybody in hindsight can say, oh, that was never worth that much. And that was all a bubble. And in the moment it is because your point is, I'm speaking to founders and I want them to know that there's a different path available to them than raising a huge round and pursuing growth at any cost. And that sounds true, of course, but for the founders where that capital is available to them in the first place, because there's always this class of people that they don't have the option of raising$300 million.

27:02Their business is struggling. So it sounds nice, except that there's a whole class of other people whispering in their ear that if they don't take the money and they don't get the market share, that when things settle and consolidate, they will be on the outside. They won't be in the pole position of driving the consolidation back to them.

27:20Michael Walrath: Yeah. The world is a hard place as a founder, as again, the three of you all know. And it's only made harder by the fact that you have access now to like, the best thing about raising money in 2005 when I raised money was like, there was no public square. Right. It was all a very private process and like no one, it's not like everyone knew. And by the way, this whole thing was like, why do we have to say what the valuation was on every deal like that used to be a secret no and not only that like people were companies would try not to file yeah so that your competitors didn't know you even raised money yeah really yeah oh yeah and it and now i think what ended up happening in 21 was you would have these industries that would pop up overnight they're they're like the industry where companies would build demo instances on your website there was a reprise yeah there was like 10 of those companies or whatever.

28:09And so companies would raise off the fumes of those raises. They're like, Hey, I was involved in this. I can now raise off of it. It's a market signal. Yeah. And I think that that's just persisted, unfortunately.

28:19Michael Walrath: Yeah. And I think it's, it's probably, I think it's, it's very important from a recruiting standpoint today, which, which is interesting because to me, like, you know, I have children who are entering the workforce now and like, you know, my advice to them is, Hey, you, you have to be extra careful if the company's hot, right? Like if you care about equity right and everyone cares about equity in this world because the lottery ticket thing but in this world that you know we operate in and but i think that the higher that last raise was right like you you know if you're employee number 15 at instinct i think they have 14 employees now right like you're 15 employee number 15 at instinct what's your 409a valuation going to be 5 billion right employee now imagine being employee number 15 at like coming in at a $5 billion value.

29:01Michael Walrath: Like the math is different. Right. And I'm sort of, you know, I make this case to candidates all the time. Like, yes, you can go to X, Y, Z. Like you can go to the company with 50 million of revenue who want, who's, who's valued at, but not worth five times what X is worth today. This episode of Topline is brought to you by compound growth marketing. The way your customers buy has shifted before they ever reach a rep. They're asking at LLM who to trust, who to shortlist, and why. Decision-making is impacted by investment at the top of the funnel, and most B2B marketing teams under-invest because it's difficult to measure.

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32:40We launched GTMSkills.com, along with new programs like Leading with AI and GTM Engineering School. We introduced DreamFuel, bringing elite performance coaching to operators. And we're expanding access through Pavilion Scale, Pavilion Gold, and Pavilion Ventures, connecting members not just to ideas, but to the people, opportunities, capital, and ownership that can change a career. The next decade of GTM is going to look very different from the last one. If you're an operator and you want to be ready for it, come join us at Pavilion. Go to joinpavilion.com to learn more. so if we take a few companies because i think this is a really good point and it's really confusing so if you look at let's say one of these inference companies almost all the top five inference companies have doubled revenue in four months and so they're about to hit let's say the top two or three are at a billion dollars in revenue valued at about 25 to 30 billion dollars right and they were all raising new rounds right now you look at harvey ladora they have grown massively in the last six months.

33:43Massive valuations, but massive revenue growth. When you look at those companies, if you had some young person come to you and say, hey, I'm thinking of joining Legora right now. Is this the right moment, the wrong moment? Was the right moment like six months ago, but now it's the wrong moment? Where are these companies in that calculation? Instinct seems like the frothy, crazy company of the moment but what about these ones i mean i think it probably depends on what you so so i

34:14Michael Walrath: think there's a lot more to where you choose to work than there should be a lot more to where you choose to work than just like can i you know can i make you know six million dollars can i can i secure the bag yeah as the kids say right um is that is that what it is i don't know apparently that's the thing so can you can you secure the bag right and and like you know when i was I guess for a moment I thought for about five minutes when the stock you had secured that I maybe you know secured the bag I also was making$35 ,000 a year as a entry-level sales guy at Tubaclick so the bag wasn't very big at the time I think there's a lot of reasons to you know decide where you want to work and hopefully people think about more than just the probability I really do believe there's probably an inverse correlation between the the the hype the hype value of a company and the probability of not zero, right?

35:08Michael Walrath: Like everyone thought Google was way overvalued at one point and Facebook, you know, plummeted after its IPO and a lot of wealth has been created. So Google even, you know, there will be winners in this. There's no question about it. There will be the ones where it's like, okay, like everybody made millions, right? I think these tenders are really interesting. Fireworks just did a tender for$115 million for their employees. And if you're an employee, what's interesting is that as high the valuation goes in these companies, the probability of tenders increases. So when you join these like 20,$30 billion companies, there's a high likelihood they will do two tenders a year till the market breaks.

35:48Till the market breaks. Right? Till the market breaks. This is the kind of thing we'll look back on and be like, can you believe it? Can you believe it? But for now, till the market breaks, that's going to happen. And so you look at that and you're like, crazy valuation, but this might not be so bad for me from a financial perspective. When you grow one tier below, you're like, okay, I'm getting into a company that's really good revenue growth and a decent valuation. And my equity might materialize into something. So if you look at that, like two sorts of companies and you put them together, it makes a lot of sense why everybody's trying to get into these companies to me, because the calculation from a risk versus upside perspective is very reasonable.

36:27It is until it's not, right?

36:29Michael Walrath: So I think if you, I don't know, I'm not going to pick a company, but say there's one of these companies that's$25 billion in revenue or$600 million of ARR, whatever ARR means these days, which is not what it means in my public disclosures. But let's just call it, let's say$600 of whatever this new metric is, and it's worth$25 billion. If I joined that company in the last, you know, six months, right? Like, and there's going to be a tender in six months. Like, it's not like I'm holding penny stock equity, right? Like, you know, when the tender comes around at, you know, at first of all, am I vested, right?

37:03Michael Walrath: Second of all, like, you know, I'm not, I'm holding equity at 12 and a half billion. Like, I don't know, whatever the 498, right? Yeah. So, yeah, maybe double it, but as a, you know, you're not, as an employee joining now, you're probably not securing the bag, right? So what you need is you need$100 billion or$200 billion. Maybe some of these companies have that opportunity. But what we're also seeing is a lot of companies who candidly look and act and smell like, you know, they look like, walk like, quacks like, you know, a software company. Right? Not an immature software company. Like operations aren't there.

37:37Michael Walrath: Highly unprofitable. Durability of revenue. With a lot less revenue durability. and you know so so you know and these things are two billion three billion on a hundred million of do any of your kids work in tech they do yeah are they in the bay area no okay no so none of them do like the 996 they're not at the office i think i think yeah they work they work both of my kids work for an office early stage companies and uh both kind of semi-remote type things and they work really hard and I like it. I mean, it's, it reminds me of what, like, you tell, you tell them about the double click days. You're like, yeah, it's like, you know, I mean, the, you know, they know because they were there for it.

38:16Michael Walrath: Right. Like they, my kids are just old enough to remember that, like, you know, I would have dinner and then I'd go in the office for three hours. Right. It was like, you know, there was no, if one of them came to you and said, I just got an offer from HubSpot, what would your like advice in that moment be? Because I, we know of people that HubSpot, even though they're a struggle city right now, they've got a good foundation they still are hiring people so they need people and so if somebody comes to you and says HubSpot's one of my options I could go to one of these crazy AI companies I have an offer there I have an offer at Fireworks and I have an offer at HubSpot and you look at like this whole set of things that you think go into the job and the upside and all of that which one's the how do you think through these two?

39:02Michael Walrath: Yeah I think we probably as entrepreneurs you know we're all entrepreneurs the four of us right and we're all you know i think of a generation you know of like where we sort of where the implicit contract was like you know you get equity and that equity has you know a very reasonable likelihood of being worth something in the future right you know spending time with my kids and their friends and we have a lot of young employees at yaks i don't think that this and i'll get in trouble for saying this that most of this generation is as focused on that as like I was when I was that age. Certainly what I've heard.

39:40Michael Walrath: If I were advising my kids or my kids' friends, what I would say is find the place where you're going to learn the most, right? If that's a super hot, crazy value startup and like you feel like that's where you're going to learn the most, you think there's more to learn at HubSpot today or FireWords? I don't know. Probably the same. Really? I want to go work at fireworks. Yeah. Yeah, my guess is that's more exciting. right um i think there's a lot to be learned in you know in in any of these situations because you know it's not like fireworks and harvey and these other hot companies don't have problems they have a million problems have a million problems just like we do of course and and problems is how you learn like you know i started working at double click in 1999 there were eight rounds of layoffs between when i started working there in 1999 and when i left in how'd you make it through all those it was the best environment ever every time there was i mean i made it through because I was one of the top sellers.

40:33Michael Walrath: You don't let me do the top seller. I happen to be very well positioned. I sold to direct marketers. And so like it was like the best environment ever for direct marketing. It's such an interesting situation for like a company like HubSpot because you're in such a corner and you need good people to help you fight out of this corner. But I can't, I've thought about this a bit over the last few days. I can't come up with the reason to choose HubSpot today as an employer. I find it interesting you chose HubSpot here as the example. Well, we're always talking about HubSpot. They're investors in Quotipot.

41:08I know. They are investors in Quotipot. That's why I'm keeping my mouth shut on this. Not allowed to say anything. Yeah. But I think, I mean, I would look at Zoom Info. Like Zoom Info is a company. Struggle. Struggle the most. And so when you go back to Mike's comment earlier, just on like public companies and just looking what's going on, I don't like they're a business where I don't think they have the same problems that yucks has because i'm just like in the go-to-market space like who's who's renewing with zoom info right now yeah so how do you win when you just cannot attract talent anymore where like what you're doing is so boring and your company is struggling so badly what do you think

41:46Michael Walrath: about that yeah i have a as you might expect a relatively non-conventional bring it i love it here for it i think this whole idea of like you can't attract talent is utter really utter and i I think we sort of over-index to the resume and the hotness of the company is directly correlated to the talent of the people at the company. Obviously, there are really talented people who are starting and building and growing these companies, and there's really talented people who work there. But by that measure, I shouldn't be able to employ anyone at Yext. Yeah, of course. No one should want to work at Yext because we are probably one of the lowest valued based on revenue or EBITDA multiples, you know, in the market.

42:33Michael Walrath: Yet, like, every day what I see is amazing talent in the building and amazing talent who wants to be in the building because we're working on really interesting problems. It's like we have a little bit of that, you know, sort of on your shoulder. Mighty Ducks or Bad News Bears energy. Like, you have this. You could do that with a spot. HubSpot doesn't have this. Well, they need a vision. They need a vision to be motivated around. But when you go to their events, they do not have this energy. And that's what I'm saying is the difference. I find the strangest part of it is Dharmesh's role because I never under, he just feels like he's in the corner like working on his own stuff.

43:02He's like, I stayed up till four in the morning vibe coding this. It's like, okay. I look at you and I think if I'm young and I want to join a company, you are out there. There's aggression. There's a point of view. There's a counterposition you've taken. I'm like, okay, I can learn something here. Like there's something to learn. But those companies are not counterpositioning. But that's a leadership point. Then your point is about leadership. It's not necessarily about like the structural dynamics of the company.

43:26Michael Walrath: Yeah, but all of that is downstream of leadership. And I actually think this is, you're getting to like the really the heart of the thing here, which is if you, if we had a time machine and we went forward 10 years, right? What's going to happen is 10 years from now, like 10 years is eternity in this world, right? 10 years from now, there are going to be massive winners from the Left 4 Dead category. And there are going to be massive winners from the new AI native category. And there are going to be massive losers in both. and and so you know i think that go back to your question about like how would i advise my kids i would say you want to work for the smartest person you can find yep and you want to make sure that you're culturally a lot culturally aligned to the people around you so like we've done crazy what you know the market would view as crazy things at yest right cutting cutting as aggressively as we cut to get to this to be one of the most profitable companies in the you cut half the you cut half the company, right?

44:17I want to, can we hear about that a little bit? Sure. Like what is that? Because to the point, this is the playbook for some company, some AI native company that hits a wall and has to transform into an efficient business. What was the journey to 30 % EBITDA margins?

44:31Michael Walrath: Yeah, it was, it's, it's really painful. And I made it more painful because what I did for the first 12 months was, you know, was, was buy into the idea that we were just one good go to market pivot or, or products away from returning to hyper growth. Right. And, and, you know, you, you, you know, I made the, you know, like the same mistake of, I, you just look past what's directly in front of your eyes, which is like growth is declining fast. What we had was a churn problem in the enterprise that we were offsetting by acquiring highly unprofitable customers in, in the small business side of the course, right.

45:08Michael Walrath: The death spiral. It's the worst problem you can have because you're basically - Losing high margin customers for low margin. You're losing high margin customers for negative margin customers. Yeah, yeah, yeah. At super high CAC or whatever, you know, not breaking even on them. It's just ugly, right? And you need to maintain the - And you put yourself in a position where every dollar of churn is so painful that you feel stuck in this corner where you have no choice. And what you eventually have to do is you have to bear down and you have to say, we're going to do the right thing for the business.

45:40Michael Walrath: And the right thing for the business is we're going to focus our product roadmap and our energies and our, and the resources we have on the enterprise customers. And we're going to help the unprofitable small customers find the door. Um, and that means, you know, really painful decisions like exiting markets and exiting site segments and things like that. And it, and you're signing up for a two to three year journey where you're, you're going to have negative growth. And this is all things I've talked about publicly, in 2024 our enterprise segment which is today 92 percent of our business it was probably 88 percent of our business or something like that at the time was shrinking at six percent a year our uh our small business smb segment was growing a little bit right you fast forward to today um i'll just use last quarter's numbers because they're relatively top of mind the year-over-year growth rate in our enterprise segment was two percent right which is not an exciting number but it's 800 basis points it's a percentage points higher than it was two years ago exactly the the growth rate in the small business segment was negative 23 so you're in that 12 months we we jettisoned 23 of our small business revenue in the aggregate we're like down less than one percent right so the headline is hey there's a company that's dying right one percent if you look into it the composition of the business much healthier you asked you want to get into like the what this process is like you you have to explain to people why you're doing what you're doing right like this was the, you know, so we had, there were a whole bunch of things we had to do.

47:07Michael Walrath: We've shrunk the headcount of the company roughly in half. Right. Um, I don't believe we changed the opportunity for people inside the company. In fact, I think we've gone the other way. Like, I think there's more opportunity inside Yext than ever because we no longer have all of these silos and redundancies. And so if you lead a function at Yext now, you lead a function, right? And if you work for someone who leads a function, you get to see how that function gets led. We had so many silos and, and wasted effort, you know, in the company that was so desperately seeking growth. And, you know, this is why like it's personal experience.

47:38Michael Walrath: The most destructive thing you can do to value is, and we're living today still that it takes a long time to change that. Because of being a public company, you're subject to all the public feelings. And I'm sure you've had activist members, I don't know if board members is the right word, but members throughout this, how do you deal with both sides of this? You know, like you're looking at the business, you're like i know what we have to do i have to rip this off but i've got to deal with this whole public yeah i mean i think one of the things that's probably somewhat unique about me is is i do i have the ability to just turn off the inputs right like you know the same way i can disregard the noise from the venture community you know about why you know the ais are going to all replace us i had to learn to turn off most of the noise from the from the public investor community And it turned out actually when you start to think that way, what you find is like, you know, this whole like, I think.

48:35Well, you need job security to do that. So I guess you need the support of Howard and the board.

48:41Michael Walrath: Well, no, Howard, he moved on. He was the last chairman. I mean, before he went to chair. No, actually, I was always the chair. So, you know, that one I always had. No, Howard has been incredibly supportive. But when he left, he left. He walked out the door. Brian stayed for a little bit. And then ultimately he left as well. But yeah, I mean, the board has to back you. And that's not an always easy thing. I do think, you know, at some level, the board's probably got to wonder if they could ever hire someone else crazy enough to take this job. Right, yeah. But what you realize is like those investor voices.

49:12Michael Walrath: Like I've done all the things that have made everyone mad. I've withdrawn guidance. I don't do earnings calls anymore. I write a really long letter that very few people. It's kind of like my ex-posts, like, you know, long, but most people don't read them. but we provide like an eight page letter to investors every quarter we talk about all the metrics in the business and things like that what i was doing was spending 30 to 40 percent of my time talking to hedge funds talking to you know and what they mostly wanted to do was advise me on what i should be saying differently in the quarterly calls to make the stock move near term so they could trade it right and and so we've changed a lot do you have a head of ir ir right now no that's awesome wow no no we do no we no longer have an ira function day you don't do analyst day no we may okay we may do some some investor days over time like i i fundamentally believe in like this i think it's a month in the like buffett mongerism like you get the investors you deserve and over the last you know four quarters as i've sort of gone through this journey and really sort of said we're going to do what we do um what we've developed is a is a very concentrated base of very long-term shareholders who don't get agitated about the volatility in the stock.

50:24When you look at companies like Dell, NVIDIA, etc., I run a company that's been around now 20 years. And so it's never this straight line, just no problems, right? You have moments where you're growing, you have moments where it's down, you have moments where you have to stabilize the business. In moments where you've got low growth but stability, yeah a lot of these businesses and how i also found myself thinking is you're like trying to buy time to like find the opening like when am i going to attack what is the way to get what's the measured but you know risk on move to get 30 40 50 growth in any given moment yeah is that how you're thinking right now as well is that now i've gotten this to a point where we can play an infinite game and so now we're looking and saying okay how are we gonna attack Yeah.

51:14I mean, you know, it's funny, like. And how do you do that? Like, how much are you observing the market? How much time to spend, etc., etc.?

51:20Michael Walrath: Well, so the first two, two and a half years was really completely, it was, it was what I call private equity work, right? Like, we had to go in and we had to do the hard work. We had to, you know, we cut over a hundred million of expense out of the business, right? We did it as painlessly as we could. And then we went further, right? Then we basically did things that other people will think are crazy. So we stopped issuing equity as part of the standard compensation package, right? And the messaging around that was actually, we did that after we had cut all this cost. So it wasn't about cost savings.

51:52Michael Walrath: What we're doing is we're, this is one of my favorite topics. I'm going to talk about it for a second, if you don't mind. Stock-based compensation is one of the biggest problems that these sort of software companies have because they bought into this notion, same notion that like you have to do it. And when the stock price drops, you have to do more of it because everyone's entitled to the nominal value of the, if that's the way you think, what you should be doing is paying more cash. Right. And so, so, you know, what we ultimately did was we said, uh, other than our, our kind of most sophisticated, most senior people who really value the long-term incentive of the equity, what we saw was the same behavior every time, which is we give you RSUs, you sell them the day they vest, you treat it as compensation because you want to pay your rent and go out to brunch and buy a new car, whatever it is you want to do.

52:42Michael Walrath: And so the vast majority of our population was not taking advantage of this long-term incentive. We also have an incredibly favorable employee stock purchase plan. So for most employees, what we effectively have done is we've said, look, we're going to pay more cash, right? We don't need cost savings because we're already very, very profitable. We're going to pay you more cash. And we encourage you, if you believe in the company and you want a long-term incentive to buy the stock at what we believe are very undervalued prices and hold it for the long run, right? Better tax treatment. And we're not creating, you know, this whole thing of like RSUs, like people don't understand that when you have this behavior or they, I guess they understand it.

53:19Michael Walrath: They just don't think about it. Like every quarter we'd have this big issuance and then you sell half of it to cover, you're literally in the market selling it as a company to cover taxes. And then most of the employees turn around, they sell it again. So you've created sellers of your stock. During a time when your stock is volatile and struggling, the last thing you need are more sellers of your stock every quarter. But the point you made earlier, just to ask it about like the talent being, I mean, for Yaks, it's kind of in a privileged position though, because you can pay that cash. So you are going to see from a talent standpoint, you're going to be able to, you're probably higher than the 50 % median for employees, given that's how you all think about it, right?

54:01Michael Walrath: Yeah. The funny thing about this is that I would tell you that I think if you're - well is not higher than the 50th person well i mean maybe they're in the 80th i don't know but like it has to be higher than it feels like yucks pays well we pay i think you have to pay really well i think i think you know especially now that we have you know largely replaced you know general equity incentive with with cash i believe we pay incredibly competitively tech you know from a from a cash compensation standpoint um and look i think that's part of you know what attracts talent so And it attracts a certain type of mindset, which is like, you know, not necessarily the same one who just wants to roll the dice.

54:41How do you do this and go to market? Like what's, if I'm an enterprise seller, right? And I have to choose between a couple of different options. Because I work with a lot of private equity companies and this is kind of what they do. They do not give equity to individual contributors. And so in most of the time, that's not a problem. But right now it's become this real tough thing for them because you're competing for enterprise sellers. There's only so many good ones out there. And you're competing against companies that have really rich cash com packages and really rich equity packages to match that.

55:14How do you compete for, let's say, top enterprise sellers? What are you doing on Chrome to offset some of this stuff?

55:20Michael Walrath: You know what the best thing you can do if you're a software company struggling with growth and potentially struggling with like, you know, sort of sellers who aren't making the money that they want to be making and you're trying to not lose your best sellers. Increased quarters. No. You can do that. The first thing you have to do is get rid of all the underperformers. Yeah. This is the type of like stuff you go through when you go through the process like we've gone through that makes you feel psychotic. is you look at the list of, you know, okay, we have 150 sellers, right? And you look at it and you're like, okay, 20 % of them are making quota.

55:59Michael Walrath: 80 % of them are not, right? And then the bottom 50 % represents 20 % of bookings. I'm making up numbers, but you can understand. So you're like, we're desperate for growth. And what that spreadsheet says on like the very sort of most cursory glances, if I cut the bottom 50%, I'm going to lose 20 % of my bookings. That's not true. It's not even close to true. It's the opposite. You go up by 20 % because you're giving the high performers those. So it's interesting. I would tell you that I believe, I'm fairly sure of this, but I'd have to go get numbers, is that at the peak of Yext's sort of, you know, nadir, right?

56:37Michael Walrath: At the first peak, right? It's my job to get to the second peak, to ultimately surpass the first peak. But like, you know, we were a third of the size. We had three times as many sellers. I think our sellers are making more money today than they were when the company was as hot as it could be. Right. We have less of them and they're better. Right. And that's great. That's a good culture. How many actually how many of those sellers were around during a peak? Like you have some long, long. We do have some long tenured ones and we have some some less tenured ones. We're doing some really interesting things on the go to market side of things.

57:10Michael Walrath: which we probably don't have time to get into today, but we are effectively eliminating all distinction between go-to-market roles, just as we have effectively - The distinction between like SDRs, account executives, customer success. So this isn't a novel idea, but we're doing it very aggressively. So we're moving toward, as we have done in R &D. So in R &D, we organize around either product or verticality, but we've largely eliminated a lot of the distinctions between products engineering and designers, right? we're now taking the same approach into our go-to-market where uh where in effect we want you know teams spending more time with customers with less distinction we just got so over siloed with all these different roles it's like if your your aes and your sdrs and your csms and your platform and your service people and enable it's like you wind up you look across and you're like we have seven different organizations that touch the customer and we have all this technology that basically makes the generalist the strongest participant in the in the organization it's interesting because it feels like CSMs are going away account managers and AEs are kind of becoming the same thing right and so and they'll get eaten up more by the eight good AEs than the good account managers because if you've got like a land and expand in one role type of model you'll want the more aggressive person there so it's actually like if you're in go-to-market and you're a classical account manager today or you're a classical customer success person you should be freaking out like there's going to be less and less jobs well it may be but I actually think it goes the i am a i'm a job bull so i think it goes i think it kind of goes the other way so so we we talk about models like wealth management or consulting as sort of models of for how we think about our go-to-market now so if you so so because it's becoming harder to tell the difference between like am i selling you software am i selling you services am i selling you expertise like what is it right palantir has shown everyone the way on this after a decade of getting beat up for it so if you when you when you start to and now everybody wants forward deployed engineers and they want to services and softwares and all that stuff, right?

59:09Michael Walrath: What that actually means is you have to fundamentally rethink the go-to-market around a team approach to the customer. And so interestingly, with all this siloization, what we get is, well, like, ah, my CSM left and they're the only ones who knew anything about my account. And now I have to start over. Like, I mean, I've heard this so many times. You might be the one person that had really good CSMs in the market. Most people are not, they don't feel that way about CSMs. Yeah, well, we have a great, you know, a really talented group of people, but like they became sort of a single point of failure where, you know, if they're out sick or they leave, then like they knew everything about the account.

59:46Michael Walrath: And so I really think this new world is going to require a completely different approach. And the approach that we're, you know, moving very aggressively towards is one where you sort of have practice leaders, right? And you kind of have, you know, you start to really blur the distinction between the AE, the account manager, the CSM, the sales engineer, the solutions designer, like all these different roles. And you, and you start to have these, these groups of people who focus on books of customers. And what we're finding is like the, the output is unbelievable because not only can they prioritize the work inside of an account, but there's like one team, one territory lead or whatever it is of the portfolio.

1:00:24And then there's people that are handling individual accounts.

1:00:28Michael Walrath: Yeah. And now think about like how this affects, like how people see their career path, because, you know, there's seniority, there are levels of experience and seniority inside these organizations. And so you can start to see, you know, I'm not an SE stuck over here or a, you know, a services person stuck over here. You can start to see a path. Yeah, I'll be the GM of this bucket of accounts. Exactly. And it's not a, like, you know, it's not that there's not different skill sets. There are, like, there are clearly some people who are more technically savvy, but the more closely they work with the people who are more commercially savvy or the more service oriented the better everybody gets um and then what you figure out is very quickly like as soon as i eliminate the silos there's layers of management there's all these different pieces then what happens you get more efficient right um so so i just think it's a it's a like this is the kind of stuff he said like what do you learn in a company in transition you learn a lot of things like like like that you do a lot of design work for sure because you're like how do i design and organize this group of people yeah and you get that right but eventually you also need to then go find that opening, right?

1:01:33And then you have to attack that opening. Do you feel that when a business has gone through such a defensive period of time, that you're looking for the opening, but are the people that you have and the design you have set up to be able to capitalize on that opening? What has to happen then?

1:01:51Michael Walrath: Well, and so I think this is the, I started, I got halfway through this. So, so like the first two and a half years was PE guy, right? Which was a really interesting thing for me and i think really painful but like i had to do it right i say pe guy you're like looking at the business how to fix it i gotta fix it hey like that's what you were brought in to do though right like was it or no you went in and probably wasn't clear he said that he spent the first 12 months trying to deny no i tried the old i tried the right i tried the like we're gonna growth we increase sales and marketing spend like i'm gonna go get the growth growth is all that matters growth growth growth right and And it goes from 60 % to 70 % of revenue and nothing happens.

1:02:32Michael Walrath: Oh, my God. Really painful. But I had made the problem bigger. Exactly. So then we had to get into the - Too big to fail. Now we have a lot of people. If you realize you have these moments on this journey and it sucks. I made it worse. And now I have to fix it. Or I either quit or I fix it. Right. And then you know that it's going to be this like long process. After two and a half years, you were a PE guy. And so this is what's beautiful is, is that, you know, and I know exactly when it happened. It was probably just over two years ago. That work was largely done. Right. Like our last major reorganization, like we're always fiddling around with things.

1:03:13Michael Walrath: Our life was in June of 24. And you kind of wake up and you're like, well, like we're about to be really profitable. you can't cut your way to greatness and there are plenty of problems every day but like it was the first time i had a time you know moment since i started to think about like hey like you know i can actually now go back to being who i've been my whole career yeah which is the growth hacker yeah right like i mean you know we write media was you know we raised 20 million bucks or something it was like you know it was it was a billion dollar outcome at with with you know uh what jonah and noah did mostly at moat but i was very much part of was this very similar thing like and and and you know yax was very capital efficient early on that's when it got started to get really fun and i think that's when my don't give a started to really go up was was two years ago when i got actually now i had time to spend with our products and and teams and started building products and so this you know scout competitive intelligence we're launching a new product this week i'm not going to give it away here but maybe two um this is when i started to be who i was again and what's funny was once i got back into that mode the the sort of give a factor just really fell through the floor so but to austin's point did the employees notice that change right away or like they were they a little like skeptical because if you're if you're like yeah this pe guy that's been like cutting all these jobs like and now he's all of a sudden this big thinker yeah i'll tell you this i will say this i think one of the hardest transitions so i i believe that the company will grow again right i believe and i think it will grow meaningfully I'm not going to predict what those rates are going to be or anything like that.

1:04:47Michael Walrath: I know we're building things that our customers want. I know that we're building for the future. I think one of the hardest transitions the company will have to go through because we have created this culture of sort of extreme efficiency is getting back into the mode of like, hey, we can invest ahead of things. We can afford to, you know, we had a hilarious thing recently where we have this really great small team working on this new SMB product that we kind of sort of launched in what I would call like alpha about three weeks ago or a month ago. It was a Friday afternoon. I was like, hey, I want you to run some paid media to like, I want to see it.

1:05:31Michael Walrath: I think I'm being scammed. I want you to run some paid media. friends he was like yeah they're like no it's not ready yet like we need to we need we need we need to you know there's like hey look at all this list of things we got to fix and i was like no i just do it right and they're like i literally had to be like i want you to spend like two thousand dollars on paid media this weekend right like i'll pay you in gift cards to do it yeah exactly um no and it was you know it's like you have to this whole thing is such a journey that eventually you have to get back to the like okay we're going to be aggressive this is the beauty of this moment i I think, is that you have examples like Michael Dell and Jensen at NVIDIA, where these are companies that found growth again.

1:06:12But one of the ways that they found growth was doing something totally different to what they were doing before. Right. And we'll cover that the next time. In our next episode. Mike joins us on Topline. As soon as the stock doubles again, I'm coming back.

1:06:26Michael Walrath: Well, I will say this. Hopefully four months. After that first episode, I did this because I was like, looked at it. I actually did buy X stock. So thank you. Oh, great. Awesome. I was like, this company, what is going on? That's why you keep saying, let's get my back. You need some inside information. Mike, thank you for being our guest. It was great to be with you guys. Great to be back and we'll have you back and the stock will double. Let's go. As soon as it does, I'm back. Awesome. Thanks. Appreciate it.

1:06:56Michael Walrath: If you are looking for more Topline, Check out the Topline newsletter at toplinemedia.substack.com. That's toplinemedia.substack.com. Or if you're a video person, check us out on YouTube. Topline-media is what you want there. Have a delightful day, everybody.

1:07:31Thank you.