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Telling the stories of startup founders and creators and their unique journey. Each episode features actionable tips, practical advice and inspirational insight.
00:00:00:00 - 00:00:23:14
We got to fail fast. I know Greg loves this one, Avery. I mean, you got to fail fast in everything, right? Scott, what's wrong with that? I essentially became an excuse for founders to take any bit of friction that's in front of them, and to either give up or to, like, hard pivot so far to the right or left that it's it's it's like in a different market or so different, completely different concept.
00:00:23:16 - 00:00:43:09
And I believe that Erik man, it's really failing fast. And pivoting in general is more about collaboration within your initial idea, not floundering around left to right and essentially not ever staying in the lane long enough to find the kernels of truth in the depth that leads to success and a solution.
00:00:43:09 - 00:00:53:08
Welcome to the Founders Journey podcast. Inspiration education for Founders by Founders.
00:00:53:08 - 00:00:57:11
Hey, welcome back to the Founders Journey podcast. Back
00:00:57:11 - 00:01:12:20
here with, my co-host Peter Dean. Peter, it's like it's been forever since we did one of these, together. You've been flying solo for the last, for the last few recordings. I know, I, I was like, I missed you. I wish I could be together. We're reunited.
00:01:12:21 - 00:01:42:07
Unknown
Where? Reunited once again. So we're reunited today for actually a great episode. We are joined by, Scott Chisholm. Scott is actually the founder of, I'm gonna let him tell the story, but a founder of a company called classy. Classy, was a unicorn. And was a SAS platform that was in the nonprofit fundraising world, ultimately acquired by Go Fund Me.
00:01:42:07 - 00:02:08:06
Unknown
So he's had a a crazy journey. We're going to take a little unique format with this, with this podcast today. So, Scott, welcome to the show. Thanks for having me. Glad to be here for the host Reunion. Yeah, it yeah it's right. Lisa's no tears and stuff in her. That's right, that's right. Between between my traveling, through my travel schedule lately and and Peter's it's been it's been wild, but,
00:02:08:12 - 00:02:28:02
But good. Good to have you on. Real quick before we get into it, because we're going to, we're going to take a little bit different approach. And, and I mentioned, that I love the stuff you put out on social media. I follow your stuff on LinkedIn and, and you really put out some incredibly relevant content for, for founders that we're going to really focus on.
00:02:28:02 - 00:02:50:22
One piece of that today, which I think is, is particularly relevant. But real quick, if you could take 30s tell the story of classy and also tell the story of what you're doing now. Yeah. For sure. Well, first of all, it's great to be with you guys. I appreciate the invite coming on. Love to talk about the classy story, but also everything management, leadership, operations.
00:02:50:22 - 00:03:13:07
It's kind of like the the core of my content online. So I appreciate the the compliments there. So for folks that don't know, classy. Classy is basically a SAS company for nonprofit fundraising. You can think of it like, Shopify meets HubSpot meets Salesforce for nonprofits. And we got into it sort of around the 2011 time frame, when crowdfunding was really taking off.
00:03:13:07 - 00:03:36:01
Consumer crowdfunding, Go Fund Me, Kickstarter, Indiegogo, and we basically built a the earliest version of class was essentially a white labeled point solution, B2B, though, for nonprofits to get into the crowdfunding space. So it was their brand forward. You would never know that the nonprofit was using class necessarily. We were basically provided all the infrastructure behind the scenes, and then we built the suite out to be much more comprehensive.
00:03:36:03 - 00:03:59:23
There's a full on event, platform now embedded in there. There's direct giving, there's recurring giving, there's international giving, there's more CRM functionality, etc., etc.. So it's a whole basically platform for nonprofits to have an online identity and be able to, really raise money from anyone, online these days. Initially it was really targeted at, millennials, which feels old now.
00:04:00:01 - 00:04:23:02
But, you know, young people kind of getting into giving online because everything was checks and cash. When we started Classi, 1% of giving was online, and now it's you'd think it's like 30, 40% or so. It's actually only like 12% still, which is really crazy. So it's just it's lagging other industries. The nonprofit space, tends to be a little bit antiquated.
00:04:23:02 - 00:04:40:22
That way. I'm not necessarily because the leaders of nonprofits or any, you know, less innovative, anything like that. It's just the technology cycle and the companies that compete in the space. It just tends to be way behind the curve. So in the most macro sense, we felt like we were bringing great technology that existed in the for profit space to the nonprofit sector.
00:04:40:22 - 00:04:56:14
And that really was kind of the thesis behind the whole thing. You know, you said 30s. So I'll wrap up here. But it was a wild like you said, it was a it was an up and down and all around journey. I mean, it was it was truly we went through the wringer many times. I'm sure we'll touch on it in a little bit.
00:04:56:16 - 00:05:20:15
But it ended up very positive. We sold the company, to go fund me, I think in 2022 around there. So I transitioned from CEO. I had a very brief stint as chairman of the board, and now I'm just an advisor to the company. So, that's been a really, interesting but positive experience. Very different from someone that's in it, in the weeds, you know, to to now be sort of on the outside.
00:05:20:17 - 00:05:40:15
But I'm very proud of the, the team at Go Fund Me and especially classy for, just, you know, continuing to build it into a behemoth of a SAS company, and not getting too bloated along the way. Not not ending up in manager mode as, Brian Chesky would say, the company's actually running quite efficiently and doing really well.
00:05:40:15 - 00:05:59:11
And, and from everything I can tell, the product and sort of the customer experience just keeps getting better. So I'm super proud of it. Both companies have raised over $30 billion combined for individual and nonprofit causes. Go Fund Me is larger than class C, but class is a significant portion of that. So it's, it's a really cool story overall.
00:05:59:13 - 00:06:22:00
So there's one piece of the story before we get into the advice part of this, which, which we're going to spend the lion's share of this podcast on, there's one there's one piece of the story I think is particularly interesting, and it's something that I think you and I have in common. You sold, was it a majority interest along the way to a large private equity firm?
00:06:22:04 - 00:06:51:04
But talk about that experience because you've written about it online and, you know, you had is this successful outcome. But this was not this was not a straight line. I mean, you you almost got fired along the way at that. Great to talk about that experience a little bit. Yeah. So I mean, one of the issues, was that we actually sold a minority stake in the company to a company, to a private equity firm that was used to having the majority, and that was actually one of the root causes of, of the blow up.
00:06:51:06 - 00:07:09:02
But it was our seriously financing, we had, several term sheets from VCs that you would know. We ended up taking one, we chased valuation basically, that had the best valuation. And it was from a private equity firm that was kind of swimming downstream, like we were we were at scale, but we weren't huge.
00:07:09:04 - 00:07:26:14
So they were kind of swimming downstream. We were kind of, you know, maybe reaching a little bit for that type of investor. So was always a little bit of an odd fit. But they had domain experience that they had invested in the space prior. And they were in San Diego. So for us it was like that those combination of factors really were attractive to us.
00:07:26:15 - 00:07:44:12
Oh, someone down the street. Someone from San Diego. This can be a San Diego story. And the valuation again was was really solid. But you know, what that did was paint, or create, you know, an expectation wherever they need to be perfect afterwards, because they had stretched on valuation, they had stretched out of their terms.
00:07:44:14 - 00:08:03:04
And they also were private equity minded. They weren't venture minded. And private equity mind is all about not losing money and basically not taking large risks for the most part. And there's other ones that do venture is more about like, let's take larger risks. And we know that, you know, some of our portfolio companies are going to fail because the couple that are really successful are going to return the money.
00:08:03:04 - 00:08:22:05
And more private equity is basically like sort of like Warren Buffett, where it's like, you know, Berkshire Hathaway model, which is, you know, we don't want any losers in our portfolio. We don't care if they're just massive runs, but we want them all to make money. And so that was a different that was kind of a different cultural, ingredient, if you will, to the at the board level.
00:08:22:05 - 00:08:43:12
And it's sort of that conservatism seeped into the overall culture of the company. And all of a sudden we started focusing, I call it short term syndrome. We started focusing on the monthly and quarterly results, more than any other thing in the company, at the expense of the founding principles and what made us special in the first place, at the expense of the long term roadmap, the vision, those types of things.
00:08:43:12 - 00:09:04:14
And those conversations sort of just got swept to the side. So you can see the the picture I'm painting here was like all of a sudden we were this just energetic long term, you know, really, I think performance driven, big thinking culture. And it just turned into sort of this like incrementalism, death by birth, death by a thousand cuts, incrementalism, culture coming from that investor that had a ton of influence.
00:09:04:20 - 00:09:21:14
Where it really blew up is, you know, we weren't hitting the numbers that they wanted us to. It was all about basically us starting to work with bigger customers, enterprise customers. And we just the transition didn't happen to their liking and fast enough. It actually did happen later by the way. And and it's one of our most successful areas.
00:09:21:16 - 00:09:40:21
So good things take time. Right. But it wasn't it wasn't on their timeline. And so yes, they tried to fire me. They tried to push out management. They basically blocked new capital coming into the company. They blocked options going to any employees. They did anything they could do to basically bleed us out. And what happened? The culture there got even worse, right?
00:09:40:21 - 00:09:56:18
Like it was almost like we had a sickness. We couldn't explain it all to the employees. We had a really transparent culture, but this was one thing that it would have freaked them out too much. It would have been it basically would have been detrimental. So we had to hold back some of that, some of the conflict and, and just deal with it ourselves at the board level.
00:09:56:20 - 00:10:11:19
But at the end of the day, every employee down to the lowest ranking person knew that something was wrong. They knew that the company sick of the culture, had changed. Yeah. You can't hide. Everything really hurt us. Yeah, really hurt us. But we were able to rally enough money to buy these guys out. And we're talking tens of millions of dollars.
00:10:11:19 - 00:10:33:14
I mean, still to this day, people say, Scott, I haven't heard of anyone buying out their series C investor like that usually doesn't go well when you stand up and fight versus just sort of sitting down and letting them do the things like bullying you around basically to get control. So we ended up it was a hellish two, almost two years, and it came down to the wire where we had raised the money.
00:10:33:16 - 00:10:50:11
They had agreed in principle to terms. And by the way, the leverage we had, was that there was some gray area around them breaching fiduciary duty. So, they were on the board. They had to basically act in the best interest of shareholders, not just themselves. And there were many instances where that was definitely not the case.
00:10:50:17 - 00:11:08:01
And so we used that as leverage to basically force them to agree to a buyout that was, you know, satisfactory for everyone. But the last is get this the last day. We think this is a done deal. We get a call from their lawyer and they say, you guys missed some arbitrary deadline to get us some information or whatever.
00:11:08:01 - 00:11:26:15
Deal's off. And we were like, oh my God. Like, are you fucking kidding me? I called my wife Carrie, and I was like, oh, I think we're done for all that. Yeah, yeah, it's literally like the ten years of my life. It's like, you know, we're penniless and it's done. And I, you know, I tears in my eyes.
00:11:26:17 - 00:11:54:01
They got back to us a couple hours later and said, okay, we'll let it pass, but you need to pay us $50,000 more in legal fees. Like, this is the type of people that that they really are like that they were just grinding us. They're like grinding you. Oh, yeah. It was so bad. And now I've since I've heard more stories like this, all all across the startup space, I was more public, I didn't I, you know, it's like the name that I won't mention, like Voldemort in Harry Potter, right?
00:11:54:03 - 00:12:10:11
Yeah. Like like I don't name the name because I don't want to be super disrespectful. You look it up, you can share it out. Yeah, but like, at the end of the day, it's not just about this particular firm. It's about firms that treat startup startups and founders like this. And I think that's really the topic. It's like you got to know what you're getting into.
00:12:10:11 - 00:12:23:09
There was certainly fault on my side. You got to go in. Why is I as wide open to these things? And you have to understand the difference between private equity and venture. But even within the venture space or even just within the equity, there's good actors and bad actors and you got to vet and you just not everyone acts like that.
00:12:23:09 - 00:12:39:13
And both sides. Yeah. And you got to understand that, like, you know, you got to interview the person that you're, you're about to take money from, from, from a values perspective just as much as anything else. Sure. They have money. Sure. You know, they say it's the partner, not the firm, all that stuff. But the firm has values and the values are reflected through the partner.
00:12:39:13 - 00:13:04:18
If those values don't align with the company's values, then you're basically screwed from day one. And that's kind of what happened. It was really the values. At the end of the day, all this other stuff was just sort of downstream effect of that value misalignment from day one. What you said, Scott, is really important, right? You mentioned before, I mean, you were chasing valuation and it's it's a really easy thing for most startups to, you know, for most early stage companies to do.
00:13:04:18 - 00:13:29:04
i mean, you start getting into, look, there's a lot of chest thumping that, you know, can occur and it's totally natural. And, you know, it's not a criticism or a judgment. It's just I've done it too. Right. And but understanding those values and really doing your own diligence on whether it's a series C, private equity, you know, venture private equity later or whatever.
00:13:29:06 - 00:13:55:11
Really understanding if you're aligned on strategy is is just critical and really understand. Like what are those shared values. And there are the doors. Some firms what you mentioned is pretty egregious. Right. And you start blocking options and you start trying to bleed the lead. The company try, but you know, it's not always kind of that bad. But if you don't have that share alignment and values, it, you know, these things just can go so badly.
00:13:55:12 - 00:14:14:03
And and you said it right, ten years of your life. And I've had those moments as well. Right. Where words, you know, my God like everything I've been trying to build and got that close. And it's like, you know, you're dealing with you're dealing with those kind of issues. That alignment of values is so, so critical, so important.
00:14:14:03 - 00:14:35:06
And you know, we took money a series D later from I will say the name of the firm, Norwest Venture Partners. And man, was it night and day. I mean, that just how they acted from day one. It was. Yeah. It was like, duh, man, if I had just known some of this stuff or acted, you know, had the same type of relationship pre deal pre-term sheet with this firm who really was slow.
00:14:35:06 - 00:14:53:09
They're methodical. They built the relationship. They asked the questions about us about the value stuff and really aligning on a go forward plan things like that. So you know couldn't you know couldn't speak more highly of those guys. But generally speaking, I think the lesson to all founders and I still I mean, I'm still I still try to practice this now is just.
00:14:53:09 - 00:15:10:07
Yeah, regardless if it's an investor, partner or any partner, you have to you have to have alignment on values and you have to have alignment on the on on what the expectations are. Sounds so simple, but so many people rush into things because they're excited about it, whether it's valuation or something like, yeah, we'll worry about that after like, you know, month from now, Scott, we'll figure that one out.
00:15:10:12 - 00:15:32:05
You know, like that's not you really got to take an extra couple days even is worth it. Especially with the valuation that it's like, oh, this is our best deal. And it's hard not to take it. It's hard to say, well, we're going to take this for less because they align on values. How do you tell your current investors that you know, whoever they are?
00:15:32:09 - 00:16:02:15
I would I would even take it down one level deeper, Scott. And you know, and not only understand and really, I mean just really, truly understand the firm and the shared values, but the but the partner and this is, this is experience that I've had right where really understanding who's on the deal side is the person that you're negotiating with going to actually be the person that's going to own this relationship on the part of the firm?
00:16:02:17 - 00:16:29:17
You get that kind of bait and switch that comes on and you start to develop. You start to get alignment with the deal partner, but all of a sudden the, you know, that that shifts and it's like the it's like you're dealing with a whole new firm. So really understand who is it that you're actually going to who's attending the board meetings, who are you talking to with your monthly update calls, who's who's your main everyday contact?
00:16:29:19 - 00:16:58:00
And that's I mean, in my experience, that's where really that can make or break the relationship. A lot more in this goes to, this goes to if you only get these things with experience. Right. And, and along the way you get with any startup, you get good advice and bad advice. And we told Scott when he came on today that, you know, I think among Scott's post, my favorite recently, I think it's probably a few months ago, that you put up Scott was the worst advice you've ever seen.
00:16:58:00 - 00:17:17:23
And Peter and I, before you came on were joking, know, saying like, what's the worst advice you've ever gotten? Because there's so much of it that founders get. So we don't we take a different approach. So Peter is going to play the terrible consultant, board member, investor like the one we've all had, right? That just spews the bullshit.
00:17:18:00 - 00:17:41:12
And and you and I can you and I can and then all three of us will have a conversation about that. So. So, Peter, you're that you're that bullshit spewing consultant. So hit us. Peter. Hey, this is something we've all heard. Hit us with the best advice. Is this one here? This is one. Yeah. I don't think anyone on this call has not heard this.
00:17:41:14 - 00:18:02:10
Maybe less than ten times. All right. We should really be failing fast, shouldn't we? Like we got to fail fast. I know Greg loves this one. This is his favorite. I mean, you got to fail fast and everything, right? All right, so, Scott, what's wrong with that one? Right. Well, I, you know, I think early on it had the best of intensives.
00:18:02:10 - 00:18:24:08
It fell fast. Came from the the Lean Startup. Right. Yeah. And you know, he bought he brought basically, you know, sort of like, operational lean Six Sigma sort of principles to the startup building process. And so basically failing fast just means iterating fast and finding, you know, what works and what doesn't, getting to that solution quicker.
00:18:24:08 - 00:18:46:18
So so you got to start with that and be intellectually honest. But essentially the definition was warped over time and essentially became an excuse for founders to take any bit of friction that's in front of them and to either give up or to like hard pivot so far to the right or left that it's it's like in a different market or so different, completely different concept.
00:18:46:20 - 00:19:12:12
And I believe that Eric meant it's really failing fast and pivoting in general is more about calibration within your initial idea, not floundering around left to right, and essentially not ever staying in the lane long enough to find the kernel of truth and the depth that leads to success in a solution. So what you found later on in the next generation of entrepreneurs, they read this book and be like, oh shit, this isn't working.
00:19:12:12 - 00:19:30:10
Like you know, five people didn't convert on my landing page. That means my idea sucks. So they would completely do a different idea, or they'd be like, we're out, right? And they would say, you know, yeah, we raised a couple million bucks, but sorry, guys, we failed fast. You know, like the concepts over. So that's that's why I hate it I think it yeah.
00:19:30:12 - 00:19:50:15
Venus to the to the entrepreneurial. Yeah. In a group and yeah a lot in AWS. And you know how long it's got. How long did it take you to build classic start to finish. Oh I mean, because we had a couple of years prior to even becoming a SaaS company self probably 15 years. It's it's like approaching 20 years, you know, in the next six years.
00:19:50:15 - 00:20:24:00
I mean, it's a long time. Greg. How long did it take? How long do you think Outmatch 14 years. Right. Yeah. Peter you do like render tribe. Yeah. I mean, same thing you've been out of for for 15 years, right? So yeah, I mean, this is the thing because I agree with you. Like there is it in all of these pieces of bad advice I will go through, like there's a kernel of truth, but it but it has become this really bastardized thing to say, hey, if you can't figure it out in your first year or whatever, go on.
00:20:24:00 - 00:20:48:14
Just, just figured just go start another business. When you talk to like founders, it just you screw up so much and it really I've always taken that to me. And I think when Eric wrote that it was about optimizing, right? Yeah, it was about experimenting and optimizing, not just thrown whole shit out the window. Right. And saying like, you know, we're on to something else.
00:20:48:16 - 00:21:09:08
Yeah. And it's so frustrating as a mentor to startups to see them like not really have a business because they're switching, right. And they're moving around. They're like, what? What do you really do? You have a problem you're trying to solve. What is it? Why are you doing this? Why like the why is the most important thing? Is that rooted in anything?
00:21:09:08 - 00:21:28:00
Or just trying to find a business out of like, floundering around with like something that, like you said, Scott, like, oh, we don't have enough conversions. I'm like, well, there's reasons. Go find out what the reasons are. Right? Like instead of saying, well, it doesn't it doesn't work right, I don't know. All right, Peter, give us what, give us give us more.
00:21:28:04 - 00:21:47:11
Give give us more of your best advice. This is my best. Spending a lot of money for your advice on this. On this podcast, by the way. So we want your best. You should. You should never do business with your friends. Ever. Oh, this is an interesting one. So, Scott, what do you think about that? You know, I don't know who came up with this early on or why they did.
00:21:47:13 - 00:22:12:11
You know, I think that, most people are scared off by working with friends or family because of this sort of, you know, adage. For me, I had the complete opposite experience. I built classy with basically five roommates, at the time, and they stayed for years. I mean, it's not like, you know, we all were at each other's throats and and it blew up after, you know, year two or something.
00:22:12:13 - 00:22:28:08
Somehow I got named the CEO. You know, that worked out decently well, but I, I always question, like, why? You know, I think it was just because I drove to the lawyer's office and got the paperwork. But we were all sort of, like, United. Hey, there's good advice, but yeah, so everyone kind of fell in their lane, and they did their thing.
00:22:28:09 - 00:22:45:04
They led their function, and they were there for years and years and years. And you know, the hard part about working with friends that you care about those people. But I would argue that if you're in a company that you're working with strangers at first, but they become friends in a way. Right? Like that's a very hard line when it's, black and white like that, like, you know.
00:22:45:04 - 00:23:07:03
So no, but when you work with friends and family, you start off with, a level of trust that doesn't exist with the stranger. And I think that's, that's really valuable because when you end up, you know, hitting a speed bump or a major bump in the road, you have sort of a resilience and you have some sort of connection that's going to help you, withstand, you know, that turbulence, whereas a stranger might be like, fuck it, I'm out.
00:23:07:04 - 00:23:23:02
You know what I mean? Like, right. Yeah. I didn't sign up for this. So, you know, I don't think either one, it sounds like I'm saying yes. Always go into business with friends and family members saying that it's not necessarily a bad thing. You know, you shouldn't run away from that. In fact, I have my next business with my wife now.
00:23:23:02 - 00:23:47:08
So, you know, I think there's a lot of value in it. You know, I remember from the very early days of, of my last company where, you know, not everybody made it through the entire thing. The people checked out a different net. That was fine and cool, but, but man, I remember hiring people from the outside, and, and there were days where, like, you know, we bring in and this is going to be one of the pieces of advice like we brought in the hired.
00:23:47:08 - 00:24:06:19
We'll talk about it that way. Right. Like we brought in the person to like, hey, this is the person that's really going to shape up our sales or whatever. These people would come in and out and like, they didn't see traction. They were out the door like they had no relationship with us. It would be me and the founders, me and the me in that like core little pod of people sitting there saying, well, I don't know.
00:24:06:19 - 00:24:31:23
But they weren't leaving right? They, they were there. And, you know, there's something that that kind of camaraderie about, like, we're just all going to get in the bunker together, that it's just an enormously powerful thing. It's something you have to have at that really early stage. Yeah, yeah, I would definitely say that. I mean, my first company, I started with a friend and, I exited because it wasn't going where I wanted it to go.
00:24:31:23 - 00:24:54:03
And but we're still friends today. I mean, we we treated it. I mean, it was a situation that could have been bad, you know, could have been a situation where I wasn't happy at the time, but we just talked it through. And he's still one of my good friends today. And it's like, you have to just deal with those situations as an adult and respect the person, know what the business is.
00:24:54:03 - 00:25:12:11
It's a business like and still be a good person to them, you know? And what you get is someone that's going to treat you like that if they're really a friend, and then in the bunkers with you, like you said, they're going to treat you like that. They're going to give you grace, you know, and where maybe someone else won't.
00:25:12:16 - 00:25:30:09
You know, you just not saying this is bad to go find a technical founder and then you're trying to, you know, be aligned with someone that you become friends with. And, a lot of my friends today are people that I've worked with over the years, you know, like only to your point. But yeah, it's amazing. So that was great.
00:25:30:09 - 00:25:50:12
I, I have some other good advice for you guys. I think one of the things that you really should be focusing on, and this has been told to me recently, you got to find a bigger market and you're just too niche, like, way to niche for what you're doing. So why is that? That is intuitively right.
00:25:50:12 - 00:26:16:11
It doesn't sound like bad advice. Yeah. No it doesn't. It's typical, to run into sort of like second rate VCs that use this all, all the time and, you know, and founders even fall into this trap to if I can just find if I can just claim 1% of this massive market, I'll be a wild success. And what they're not realizing is even 1% of the larger market, it's like you're going to be unbelievably diluted.
00:26:16:11 - 00:26:35:04
It's going to be so hard to get attention and there's so much pressure to do that. Whereas looking at I look at markets like like like layers of the onion. So, you know, you start at the core like an archery target. You start at the core and then you work your way out. So I like to say crush a smaller market and then enter the next like grow into the bigger market.
00:26:35:04 - 00:26:52:07
So you can obviously see in the horizon there's a bigger market there. And you should be able to explain that to investors. But you say, I'm just obsessed with this little thing right here. And if we get this little thing right here, right then we're it opens the door to the next ring and the next ring and the next ring, but you're not building for the outer rings.
00:26:52:07 - 00:27:10:06
And day one, you're going to dilute yourself and you're going to waste tons of money build for the center and then add just a 10%, you know, additional features or whatever it is, depending on your your city for the next ring. And then and another 10% and you methodically go that way by the time you're at the fifth ring, people don't even know who you they didn't even see you coming.
00:27:10:06 - 00:27:34:07
You don't mean you're now you're everywhere, right? And I think that's just a smarter strategy. I couldn't agree with more. I run into these entrepreneurs that tell me that big market and they're they're like, we just need 1% of this. And the thing they're always missing is what you said in this post, do you know how much money it's going to take to even get a fraction of 1% in here?
00:27:34:09 - 00:27:53:20
Like there's no way you're going to win that. Are you freaking big? They Domini, there's no way you're going to beat them at their own game. Go beat them in a game they're not playing right. And then you can slowly work into they're not going to see you coming. And all of a sudden, whoa, they're probably gonna buy you.
00:27:53:23 - 00:28:32:00
They're gonna be like, what? You have an exit now because. Right. You just proved something they could never do themselves. The the advice that I, you know, given to founders in our portfolio a lot is go, go find me the market so small that the customers in that market truly believe you have custom built something for them, like go fund me that market, go find me a market of 500 companies, 50 companies that say, holy crap, like this thing classy was built or Outmatch was built or Render Tribe was built just for me.
00:28:32:00 - 00:28:52:04
I didn't even know something like this existed then, you know, start to expand out because that's that 1% logic that you don't. You split. You said it like second rate VCs. You hear this all the time. Writer, your analysts and VC firms. Well, how big is market? They're always a ten big enough. And like like all these things there's truth.
00:28:52:04 - 00:29:12:02
You need to know what is the full market potential go to. But if you actually try to approach it from a go to market, operationalize that thinking you're just going to run out of cash. Yeah. People used to say classes market was tiny. People used to say prominent VCs used to say that Airbnb's market was basically nonexistent.
00:29:12:02 - 00:29:31:14
And the list goes on and on and on and on. You it you can't size something that you can't see, you know. Right? Right. Well, especially when you're doing anything innovative too. Right? It's not obvious a lot of times what that end market is like. You know, Airbnb is a great example. Like how how would you have even size that?
00:29:31:14 - 00:29:49:16
Like what is the market if you're thinking about it in the terms of, you know, what's the market size of people who are going to rent other people's houses, like how do you even size that market? Right? I mean, you know, you just got some random dudes that will go crash on people's couches. That's your market now, right?
00:29:49:16 - 00:30:13:19
It's just it's a it's just a totally different approach. What else you got for us, Peter? I'm I'm concerned. Greg, I think your team's great, but you need to build out some more experience. Executives on your on your team. Yeah, you definitely need more experience, you know? Can you can you bring in for us, like, a home run hitter on the sales team?
00:30:13:21 - 00:30:38:02
Hey, I have a great story about this. Go ahead. Scott, you know, this this actually touches I was like, founder mode, manager mode thing, with Chad with, you know, the Brian Chesky sort of, brought up in Paul Graham institutionalized recently. You know, that that that sort of conventional wisdom is, you know, higher grade executives and get out of their way as a founder.
00:30:38:04 - 00:31:04:21
This particular piece of that advice is just saying, add, you know, you have a gap, add an executive. And there's not necessarily anything wrong with that. But I would say that executives are the riskiest and most expensive hires that you can basically have. So right, you really need to be bought into that and you need to take your time and be really meticulous with that selection process, because I've had many executives blow up in my face that I had to I had to fire in a in a pretty short amount of time after they started.
00:31:04:21 - 00:31:25:11
And there's nothing more harmful to the company than bringing in, you know, a gray hair and it not working out. So you really need to be careful there and not rush into it. If you, you know, if you don't have technical expertise or whatever and you have a gap, well, then you needed a technical co-founder. You don't need someone that worked at Microsoft for, for 20 years.
00:31:25:11 - 00:31:48:06
You need someone that's scrappy and knows how to do early stage startups. So there's also that misalignment there where the that where that the gray haired executives experience comes from matters quite a bit based on your stage. And then when you get them in the door, even if they're good, you can't just hand the baton off to them and they've got the whole function covered, and they're going to meet all of your expectations in your dreams.
00:31:48:06 - 00:32:05:13
And you can just kind of you can kind of chill, elevate above them, maybe sip margaritas on the beach or something while they take care of your company. Like that's never going to end well. That's what Chesky and later Paul Graham calls manager mode, which is essentially it's, it's not it to say management sucks or managers are bad.
00:32:05:18 - 00:32:31:03
It's to say founders wake up, don't just take the advice of putting executives into these leadership roles and then absolving yourself of all responsibility, or assuming they're going to get the quality standard right. That made the company special in the first place. What is wrong with the Microsofts for a startup? The Microsoft executive for a startup, this is what the shiny object thing that people step in.
00:32:31:05 - 00:32:50:14
Yeah. So so that example is basically saying, hey, we're a small startup and we need we need technical expertise. Maybe our co-founder is technical, but we need someone to run the engineering group or something. And that's what the board saying to you. So you kind of agree. You're like, okay, we need to bring in. We don't have enough engineering talent here as a software company.
00:32:50:16 - 00:33:16:00
We need some engineering leadership. Okay. Then they go out and they start looking for who to hire, what, you know, where do they come from? And the person that works at Microsoft might seem attractive from a resume perspective. They've done lots of things, but that doesn't mean you. Since I've been working, they're working at a bazillion dollar company that they can get down to your altitude, which is basically early stage startup in the weeds and be effective.
00:33:16:02 - 00:33:38:09
So the size of the company in the in the type of experience in the team that they've led in the past matters quite a bit. So that person for Microsoft could be amazing for a bigger company to come into your company and actually suck. So this this actually brings up another sort of thing I've written about, which is that in a plus, player in another company could end up being a C minus player or an F player at your company.
00:33:38:09 - 00:33:56:20
And one of the factors that influences that is just the size of the company, the culture of that company, how they do technology and their ability to move fast and make quick decisions. All of those things matter because of where they came from. It's not to say that person is a terrible knitter, it just doesn't make sense for your particular stage in your startup.
00:33:56:22 - 00:34:27:17
So really early stage, there were like maybe ten people at, at my previous company, we brought in a really, really, really high level. He was a CRO at a publicly traded company because we needed sales help. And this came in somebody affiliated with our business. One of our investors had a contact with him, and he, and he decided he wanted to he was he wanted to leave the corporate world and go in the startup world.
00:34:27:19 - 00:34:54:20
But I think, like a lot of times, what you get with this is he had absolutely no idea what that meant. And, you know, the experience I had is he damn near killed the company. Not and I and I and I say that not to say it was all his fault or anything like that, but no, but the learning from and he's actually a really good guy, but the learning from it was we, we were not in any position to be able to support somebody like that.
00:34:54:22 - 00:35:19:07
And I think that's the stage dependency. Right. Like we could not give somebody like that what they needed to succeed. So we took a very clear a player and we stuck them and we made him an F player because we couldn't give him anything that he needed to actually go do the job we needed him to do. And I think that's that stage dependency where that, like Peter said, that's shiny object syndrome, right?
00:35:19:07 - 00:35:36:15
Of every, you know, hey, we're hiring a guy and you know, they're coming in from Google or they're coming in for me, right? It means nothing. I mean, it means nothing. Should we the show me the so me, the scrappy startup player who's been involved in, you know, a few of these things has maybe had a success along the way.
00:35:36:15 - 00:36:11:07
He's had a bunch of failures along the way. And that's the person you wanted that at that really not exist. Greg's example is good, a good example, because if you hire someone at that level of a big company, they're really not selling that much anymore. No, they're administering sales across a huge force. And if you're ten people, the CEO selling, everyone selling, that possibly can be and that person's job, if they're if they have sales next to their name is 100% hunting.
00:36:11:07 - 00:36:33:12
And I mean, how is that not the job? Like, I remember this this guy comes in again, if anybody knows who I'm talking about it, none of this is meant to speak ill of him. But this was you do large company like good. But I remember he came in and like the first four weeks on the job, he was he spent trying to redo all of our stages in our like our opportunity stages.
00:36:33:14 - 00:36:55:07
We weren't even $1 million. There are. And it's like, you know, there were like nine different stages of opportunities. And Salesforce was like, there's nothing even in Salesforce, like we don't have any there. We gotta put something in there where we need to sell something fast. Right. It's, you know. Yeah, it's it's wild. All right, Peter, we got one more piece of, of great advice.
00:36:55:07 - 00:37:20:05
Scott and I are really struggling in our business here, so, we need, we need one more piece of great advice to try to help get us. Get us going. I, I think you can never raise, enough capital. You guys got to keep raising. Just keep raising, just like this. But let's just have you just stack it as high as you can, get the chips, and.
00:37:20:11 - 00:37:49:03
Yeah, just keep it as much as possible. Scott, what's wrong with that? It's a very, self-serving, statement typically, said by, you know, VCs, private equity firms, whatever. Because they want to deploy more capital. And that makes sense. They want to they want to own a meaningful stake, and that's all good. And, you know, for the founder, I think that bootstrapping a business, at least for a while, breeds, breeds the best habits.
00:37:49:05 - 00:38:10:00
It forces discipline. It forces you to operate within constraints. You don't you can't just buy anything. And I think that in class, we did that for the first, probably five years. And then we ended up going on to raise, a good amount of money, actually, $200 million. So but when people see that headline, they're like, oh my goodness, did you raise that on day one?
00:38:10:00 - 00:38:31:05
It's like, no, not at all. Actually, people were willing to invest in us at those levels because we had proven traction and tractions every, every entrepreneur's best friend. But in the early days, staying tight and lean, it really drives focus and discipline. And that's something that is hard to reverse if you start gluttonous, you know, like you start with discipline, you start with focus.
00:38:31:05 - 00:38:58:09
That tends to sort of be a central piece of the culture. In the philosophy of the of the operators for a long time, if you start gluttonous, it's very difficult to go. Oh, now we're now we're all disciplined and lean. You know, that's a it's not something that works in reverse very well. So you know, I think it's just a, it's a way of, it's a cute way of basically saying like, you know, do the real work first with less money, prove that you have traction, and then raise large amounts of money later.
00:38:58:09 - 00:39:15:20
And don't let anyone push you around and say, oh, you know, the all this money is the solution to your problems. Like that's never going to be the case. It's really the answer is with the customer and you don't need ten, 20, $100 million to go figure out the problem that the customer is having or the solution for that customer.
00:39:15:22 - 00:39:38:10
Yeah, I think, you know, the the advice I try to give all the time is like bootstrap it until it's truly scalable and predictable, until you really know if you put X, Y, and Z in the top one, two, three is going to come out the bottom. And until then spend nothing, right. Once you once you get to that point and it's truly scalable and predictable, you can start to spend.
00:39:38:11 - 00:39:56:20
Let me ask you a question though, Scott, because I'm actually it's funny, I've actually got I've got a portfolio company right now and I hope I'm not going to say his name, but I'm I hope he's listening to this because he and I talk about this all the time. He's on the opposite side. And this this I absolutely love this guy.
00:39:56:21 - 00:40:19:18
And his business is phenomenal. Is there like but the struggle that we've that the conversations that we've had not a struggle. This is this is definitely in the first world. Good problem to have is now that he actually has gotten it scalable and predictable, he's still afraid to spend. What do you tell us? What do you tell a founder at that point?
00:40:19:18 - 00:40:42:12
Like what is the right amount of gas to start to apply when you when you when they become so fixated on bootstrapping and like we've been living on nothing for so long, I don't even know how to break that cycle. I've seen that too. And that's actually pretty. That's pretty tough to break, actually. It is. But I think it comes down to just looking at spending money as investments.
00:40:42:13 - 00:41:08:08
And those types of folks want to know that if I'm spending money on X, I'm going to get Y in return. And that's actually a pretty healthy thing. So look, you take a risk and you spend on X and you don't get why. Then maybe you slow down, maybe you recalibrate and you take a pause. Right. Like you can do it in, in sort of a really methodical, pretty low risk way versus just dumping, you know, you're not going to just dump money and double your sales team tomorrow or something, right?
00:41:08:09 - 00:41:29:17
You don't need. Right? Like, you can be methodical. But just know that, you know, not spending the money that you have to push into a market can be just as irresponsible as spending it recklessly, like there is a middle ground there. I would say on the side of caution and conservatism in terms of your frugality. But definitely don't just hoard money and just keep your bank account high.
00:41:29:17 - 00:41:47:12
That doesn't do anything that's not actually adding value to your customer or your shareholders. So you do want to try to push in, but just do it methodically and look at the unit economics. And if those things start to, you know, sort of, you know, get shitty, if you will, then pot, take a time out. You can always take a time out.
00:41:47:12 - 00:42:10:19
You don't have to keep you see bad results. So that's what I would say. Yeah I think it's great advice. Right. Do it. Do it in a controlled way. Right. If you've got the cash pile behind you, do it in a controlled way. You don't have to take a million bucks, take 100,000 bucks. Try something. Right. Apply a little pressure, maybe take 250.
00:42:10:19 - 00:42:30:14
If you've got the cash right. Hire one of two people. Don't go hire tent. Like just little application of pressure to test to test that scalability that you're, you know, those sort of good indicators that you're seeing. Keep testing it a little bit like pressure tested a little bit more and a little bit more. And I think you know it in a controlled way.
00:42:30:14 - 00:42:50:15
Right. It doesn't as an experiment, it actually brings us back to the earliest, comments that we were making around Eric Reese, which is basically experimentation, early days. These are just experiments at scale. So. Right. Yeah, you probably have a formula that's working. You want to invest in that formula, but you're trying to figure out the next formula and the next formula, the next variables of that formula to add to it.
00:42:50:15 - 00:43:08:12
Right. So these are just b dimensions of growth or multichannel or new product. So you want to be testing these different things, not just throwing shit against a wall and seeing what sticks. You're going to have enough information where you're going to be making very intelligent, smart guesses here. Like these are informed hypotheses. And so you can make that $100,000 bet.
00:43:08:12 - 00:43:29:04
You put a person on that, see what happens in a year and then and then go from there. You know, the bet. The farm. I mean, I think you really, truly have strong conviction. Yep. Yeah. And I think I think you made a point before that ladders to this one. Hiring 4 or 5 more people. And when you have two like that could be a strain on you.
00:43:29:05 - 00:43:48:19
Like, you have to be careful, like, oh, we're going to just throw $1 million. We're going to add six salespeople. We have one like you could fail miserably on all six of those people because you haven't learned as an organization to function that way or to build that team. And building that fast can hurt you. I'm just speaking from my own experience.
00:43:48:21 - 00:44:09:17
Yeah, I'm learning from growing too fast. It hurts too sometimes. Yeah. You have to have that foundation and you have to have the formula. And if you raise money before you have the foundation or formula set, then you have to actually try extra hard to be disciplined until those things come into fruition. I was assuming your your case is he's the person has the formula and has a decent strong foundation.
00:44:09:18 - 00:44:32:02
So then it's about yeah that's exactly in the formula works. And finding other variables to add to that formula that make the the business model more durable and diverse. Yeah. Right. Yep. Yeah. That's awesome. Well, we could Scott, we could do this all day with, with Peter's bad advice to us and, but this was this is really, this is really fun.
00:44:32:04 - 00:44:57:02
And I know you and I have been talking about you on the show for a while. I'm really glad that we were able to, able to make it happen. I'm a big fan. I would encourage, if you're listening to this, follow Scott on, on LinkedIn. I'm sure you're on other social channels. So, Scott, if somebody wants to learn more about what you're doing today, how they can start to participate and actually work with you, what's what's the best way to reach you?
00:44:57:02 - 00:45:17:21
How do they find out about what you're up to today? Yeah, I'm pretty active on all all the channels. LinkedIn is a good one, but you can just visit Scott chisholm.com. It's Scott with one T. So remember that part. And you can subscribe to the newsletter. I put out content pretty much weekly deep sort of topics operations, leadership, that type of thing.
00:45:17:23 - 00:45:40:07
And yeah, I mean, that's, that's by far the easiest way to get. Yeah. To me go. And I just want to mention, Scott is an invite only CEO coach. So the advice that you're getting actually you can get personally like this is really important to know. There's a lot of coaches out there, but someone that's done it is really different.
00:45:40:07 - 00:45:59:10
So the type of banter we had here is the stuff that you have to be aware of. What kind of advice you're getting. You just have to be really careful about who you're choosing as a person, to help you. Appreciate you bringing that up. Yeah, it's a program. It's a private community for founders. It's called Hyland.
00:45:59:15 - 00:46:15:10
You can find it on my website, too. And I talk about it, but we've got about 50 CEOs in there now. We've been really deliberate about, you know, who we kind of let in and and just making sure that everyone's, at the same stage and sort of, you know, having similar problems, across all industries by not just sense.
00:46:15:12 - 00:46:35:20
But that's been a really fun, sort of give back, thing for me. Just getting in the trenches again. Keep myself sharp, you know, love it. Yeah. And we'll link we'll link to these things on our, on the show notes, as well. So, so just look in the description and, you'll see some links to, to get in touch with Scott and forgot and find out more about what he's doing today.
00:46:35:20 - 00:47:03:20
So, Scott, this is awesome. Thanks so much for, for joining us on the podcast. Love to do it again sometime where Peter can share some of his, some of his pearls of wisdom with us. Yeah. I'd love to come back. I'm sure that was more shitty advice to come. And go through the record for for the record, in case anybody wasn't clear what we were doing, we were taking just because now I'm, like, conscious that, Peter, people are going to be listening, just be like, why are they just making fun of this guy?
00:47:03:20 - 00:47:25:10
So, Peter, we took a LinkedIn post where Scott talked about the worst advice that, that he's ever been given. And we had Peter play the play the coach. So this was not Peter's advice. Peter was just playing the, playing the role of bad because everyone just dropped off the track forever. If you're gonna, you're gonna be known as the bad coach forever.
00:47:25:10 - 00:47:33:09
Now. Peter. Yeah, yeah. Well, this is great. Thanks, Scott. Awesome to have you. See you next time on the Founders Journey podcast.