Last week in software: 11x, Deel, Rippling & spy-bound

We had to record this unusual episode. In what feels like a single day, a year's worth of drama has unfolded in software.

It almost seems like John Oliver would talk about it. But since he's busy, we decided to do an episode for him on 11x and the chaos that's emerging.

• (00:00) - Introduction
• (02:03) - Deel, Rippling and the spy
• (05:35) - 11x
• (08:13) - TechCrunch acquired
• (09:33) - Fake Customers Controversy
• (13:54) - Insane Churn Rates
• (19:38) - Investor lawsuit? nope
• (23:11) - Employees. Not happy.
• (29:23) - Product Performance and Market Fit
• (34:25) - Future Prospects and Challenges

Sources
Techcrunch on 11x
Hasan's post on X
AI SDR test

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Creators and Guests

Host

Mikkel Plaehn

Marketing leader & b2b saas nerd

Host

Toni Hohlbein

2x exited CRO | 1x Founder | Podcast Host

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[00:00:00] Toni: You know, as a, as an investor you only have two states of being externally.
[00:00:04] Either you are a super fan of the business
[00:00:07] Mikkel: Yeah.
[00:00:08] Toni: or you're suing the business. Like there's nothing, there's nothing else. There, there doesn't exist a pipeline stage that says we are publicly thinking about suing our company
[00:00:19] like that, that just, it doesn't exist, right? The only time that they would say that, you know, they're considering suing or suing is when they've already
[00:00:26] handed
[00:00:26] in the
[00:00:26] Mikkel: when they filed it is public
[00:00:28] Toni: it's already public. Right.
[00:00:29] Mikkel: But it's also like, honestly, imagine you're watching a thriller. And the main character gets asked like, are you gonna kill Greg? It's like, yeah, I'm gonna, I'm, I'm gonna kill him in a couple of weeks. It's like, okay, great. It's like plot ruined. It's the same. You don't do that. You don't do that. Greg is gonna panic here.
[00:00:45] I can't, okay. Anyway, so last week. Everyone in software pretty much lost their collective minds because there's a new motion. Everyone is like insanely interested in. I don't know if you've heard of this motion, I think it's called Imposter LED Growth.
[00:01:06] Toni: I heard it's I heard it's spy bound
[00:01:09] Mikkel: Spy Bound.
[00:01:11] I gotta
[00:01:12] Toni: or prison brown bound.
[00:01:13] You
[00:01:13] Mikkel: The thing
[00:01:14] Toni: you wanna do.
[00:01:15] Mikkel: You and I ha we've worked in software vc, back company startups for more than a decade by now. We're old. We used to have, I used to have hair when I started just to put it into perspective.
[00:01:26] So we
[00:01:26] Toni: Mikkel was running around and people were like, oh, I wish I had his
[00:01:29] hair,
[00:01:29] Mikkel: Yeah,
[00:01:29] that's true story. True story. And my wife also said no.
[00:01:35] Anyway, so the thing is, I don't remember this amount of drama. In such a short period of time. Meanwhile, the whole industry has blown up over becoming efficient and AI all over the place. It's like, what the heck is going on with deal and rippling here? I just gotta say like, this is insane. This is insane.
[00:01:57] Toni: So, and I think, you know, people probably, you know, have heard about this story now.
[00:02:03] We'll just quickly repeat it before we jump into our main thing, but. Basically deal dispatched a sales rep to rippling to work for rippling
[00:02:13] Mikkel: Or did they have leverage on the
[00:02:15] guy who
[00:02:16] Toni: yeah. You know, they have dirt on him, you know, they have his, you know, family locked away
[00:02:19] somewhere.
[00:02:20] No. But and then that sales rep was sending competitive information to deal, I mean,
[00:02:25] those are two competitors, right? Kind of, you
[00:02:26] don't think immediately, but they're competitors, they're competing. And basically that sales rep was searching. The deal, the rippling CRM for, oh, there's someone you know, either trying to get a deal customer or. There's a competitive scenario with deal
[00:02:42] and then basically kind of sending information over to the deal guys
[00:02:45] so that they could, you know, either protect that customer or under bit rippling in a specific way and, and kind of basically, you know, win win more deals
[00:02:54] with it. So that's what happened.
[00:02:56] The way that they figured this out, I don't know how they figured this
[00:02:58] out, but They kind
[00:02:59] Mikkel: did a honeypot.
[00:03:00] Toni: they, they set a trap
[00:03:01] basically to, to basically kind of say, okay, now that's what it is.
[00:03:04] Honeypot, you mentioned, and then, you know, part of the funniness here is that this sales rep when he realized that he was caught, he took his laptop and ran to the bathroom and locked himself in a stall for four
[00:03:17] hours,
[00:03:18] Mikkel: And he did not wanna come
[00:03:19] out.
[00:03:19] Toni: probably to like delete files.
[00:03:23] We're all in the cloud anyway and probably we're already kind of seized anyway.
[00:03:27] And yeah, that was, that was
[00:03:30] last week. You know,
[00:03:31] Mikkel: SaaS. comedy on Netflix. Uh, That's gonna be a new category you're gonna have to watch there. It's uh, no, it's
[00:03:37] absolutely
[00:03:38] Toni: What, what I think, what I think is the most insane about this, right? So dealer's, a big company,
[00:03:43] 800 million a a r, I don't believe this whole thing that this was a,
[00:03:47] Mikkel: The C level
[00:03:48] was involved.
[00:03:48] Toni: like a rogue director that kind of came up with this thing. I don't, I don't believe that I believe C-level was involved.
[00:03:56] Mikkel: Yeah.
[00:03:57] Toni: I believe there was a meeting, maybe not with the whole team, you know, do we need to have this CHRO in here?
[00:04:03] No. Like she can stay where she is, but probably the CFO was there.
[00:04:09] CEO, definitely maybe a few
[00:04:11] others. And they discussed this and, and then it was like, okay. You know, the ones in favor say aye. And then it was like, the ayes have it, you know? And everyone was like, yeah, actually, Jack, Jamie, Bob, I
[00:04:24] think, I think we should go ahead.
[00:04:27] Dispatch this spy. This is how we're gonna do it. You know, Jessica over there is gonna take care of it. And then we're gonna, you know, lift the whole conversion rates. Imagine, you know, because it must have happened like this or some other way. This, this, you know, a meeting like this. Where, where they just agree that this is the right step to take.
[00:04:46] That's insane to me.
[00:04:48] Mikkel: Or, or
[00:04:49] he's, what's the term? Like a double spy? It's like a double con, double cross he's doing, he's actually, he's not a part of deal . It's all orchestrated by riping . This whole thing is just, it blows my mind.
[00:05:00] And by the way, if you wanna sue anyone on this show, it's Tony Hine. He made this comment. This is all, by the way, an op-ed. In recording we're gonna make, because we're also gonna talk about another very tender subject that also happened in this last week.
[00:05:14] And that's gonna be like the main of the show.
[00:05:16] This is like a special, we've never done this before, curing industry news, but I think you and I, after having just slacked. Back and forth. Talked on the phone, talked on Google meet, talked
[00:05:25] on a walk
[00:05:26] about
[00:05:26] Toni: packages of popcorn because we're like just, you know, scrolling the
[00:05:29] feed.
[00:05:29] Mikkel: a box of Red Bull. We were just like, you know what? We have to record it now.
[00:05:33] We can't just not do it.
[00:05:35] So if you haven't heard about 11 x, which is the company we're gonna talk about now, it is one of those AI SDR companies. We've talked about them previously on this show. I think our opinion is so far, it's not working. It's not like you're hearing every single company.
[00:05:49] Applying AI SDRs, and that's okay. You know what? Maybe at some point the technology will catch up. They're kind of the catalyst. We're one of the first, I believe, to enter in building this tech well funded, backed by Andreessen Horowitz, a few others, and I think grew. How fast did they grow? Tony? Do, do you
[00:06:04] recall?
[00:06:05] Toni: So last year I saw him post that he added a million dollars a RR per month. And you know, I think when they kind of did the round with Andreesen, so they had a round with benchmark, which was like 20 million.
[00:06:17] I. Then literally the next month they didn't round with Andreesen for 50 million or something like this. Andreesen Horowitz. You know, it's
[00:06:23] Mikkel: Yeah. Oh, that
[00:06:24] small company,
[00:06:25] Toni: it's not like we're talking some like, you know, backseater,
[00:06:28] you know? I dunno. No, no. This is Andreesen Horowitz we're
[00:06:30] talking
[00:06:31] Mikkel: You know, I, I like those guys, especially their haircut. It's kind of, you know, they're
[00:06:34] they're cool. They're
[00:06:35] Toni: I see. I see what
[00:06:36] you're, what he did
[00:06:37] there.
[00:06:37] Mikkel: but anyway. So Hassan Suka founder there said they were growing really fast. They raised a bunch of money. I think you called them the darling of ai
[00:06:45] SDRs.
[00:06:45] Toni: Yeah, no, of, of course. Right. And I mean, they also made a big thing out of moving from London to San
[00:06:51] Francisco because like, hey, that's the only place where you can build AI companies. I by the way, asked Sana if he wants to jump on the show and kind of just have that conversation. Didn't, didn't reply.
[00:07:00] I
[00:07:00] mean,
[00:07:00] Mikkel: go for
[00:07:01] it.
[00:07:01] Toni: You know, it, it's fine.
[00:07:02] Mikkel: He got shit to do.
[00:07:04] Toni: and, and I think the way we wanna actually kind of look at this today is yeah, sure. We all, or we have at least ml and I have read the TechCrunch article around 11
[00:07:13] acts. If you haven't, we'll link it in the show. We also have a couple of other links, but I think what we wanna do here today is kind of a fair assessment. A fair from our perspective assessment,
[00:07:24] you know, and, and I think a large part of why this story took off on LinkedIn. I mean, first of all, you have all his competitors, like there's tearing into it.
[00:07:34] Like most of their posts were like taking off basically. But then I think the other piece is it's actually a little bit of chardon freuder.
[00:07:42] You know, that's kind of going on there. It's like, ah, you know, these guys that, you know, raised from Andreessen and doing this AI thing and I knew it all along, they're all cheats,
[00:07:52] right? I think that that is kind of driving a lot of the popcorn here that's being consumed by folks scrolling LinkedIn. And I think, you know, we have an opinion.
[00:08:01] We have an opinion
[00:08:02] on, you know, what probably is right, what probably is wrong and and you know, was there anything wrong to begin
[00:08:08] with? Right. Kind of, that's, that's almost another question to ask, and I think that's what we wanted to
[00:08:12] jump into today.
[00:08:13] Mikkel: And the thing is, we, we only have the same facts that you, the dear listener have and the ones we put in the show notes, obviously. So, a lot of it's gonna be opinions that, that that's okay. I think we're gonna have a bit of fun with it though. The other interesting thing to this story by the way, is TechCrunch itself got acquired about, I wanna say a month ago in case you didn't know.
[00:08:32] as far as I could, can recall the story, there goes. We're gonna keep everything as is guys. We're just gonna keep going. Staff as is, eh, cut everything. Cut half the team, everyone out the door. And now this article. So I was just like, hmm. When I saw the title, I was like, I wonder, I wonder if there's been a leadership change in direction of this company, plus limited resources.
[00:08:55] Are they
[00:08:55] cutting corners
[00:08:55] Toni: there was some, there was some really heavy, deep research going
[00:08:59] on with the intern on perplexity, you know?
[00:09:03] Mikkel: Exactly and hallucinations. What? So I think, you know, one thing I at least learned in school is to also be critical of the sources. And I think you should be critical of what Tony and I are sharing the opinions we have. I think you should be critical of Tech Crunch.
[00:09:17] I think you should be critical of 11 x and Hassan Zuka as well. We're gonna jump into this story now and have a bit of fun because I think basically TechCrunch gave us the blueprint and the first, the first one in there is really, they have fake
[00:09:33] customers.
[00:09:34] Toni: Yes. So what, what happened there? Apparently and I think this is where TechCrunch did some good journalism actually. Apparently three of the logos that were up until recently where we prominently cited on the website basically say they were never customers. And. And, you know, those are big companies.
[00:09:57] We're talking about zoomin for Airtable. It's not
[00:09:59] like everyone, you know, it's not like the PR department knows
[00:10:03] what some random
[00:10:04] rev ops dude did somewhere. Right. So, you know, totally get that. But apparently especially in in Zoomin info's case, kind of this is where they, they were happy to shed some light on this apparently. Was like, well, yeah, we had a conversation. We never got to like any contract, maybe, you know, nothing like that.
[00:10:21] And for the last four month, four month, ZoomInfo has been trying to get their logo off the website and out of the, out of the outbound
[00:10:34] messages from 11 x
[00:10:36] Right. Kind of in those 11 X outbound messages was like, Hey, you know, customers like ZoomInfo, et cetera. Basically. And, you know, and, and this is, this is where I gotta say have I ever myself put up a logo on the website that kind of, you know, wasn't using it anymore
[00:10:53] or
[00:10:53] kind of churned,
[00:10:55] Mikkel: Don't say it Don't do it.
[00:10:57] Toni: yeah, totally, totally did that.
[00:11:01] And you know what, and, and just listening to, you know, I can, I can tell you 80, 90% of folks listening here, same thing.
[00:11:09] Absolutely same, same, same story. You can blame all the marketing process which Hassan did in his, in in his rebuttal statement
[00:11:17] basically. So we also want to, you know, put this side, we say, Hey, you know, that, you know, shit happens. And
[00:11:21] I, I totally agree with him. I think where it gets a little bit more than just like, oh, we forgot to update, or we'll be like, ah, we're kind of pushing a little bit too far. Is the whole, no, there's, there's, there's ZoomInfo proactively reaching out. I think I even saw the lawyer word somewhere
[00:11:34] there. You know, with, you know, two has and the CEO,
[00:11:38] like, no, this is, you can't, you know, that party, you can't blame on Martin
[00:11:41] anymore. I'm sorry. Kind of. If, if, if a company like this with a lawyer, NCC is in my inbox, I'm like, you know, I'll, I'll spin a lovable myself and remove it.
[00:11:51] Mikkel: Yeah, yeah, yeah.
[00:11:51] yeah.
[00:11:52] Toni: You know,
[00:11:53] Mikkel: No, it's
[00:11:53] crazy. Also, just the amount, like the amount that it's the majority of the logos on the front page, not
[00:11:58] customers.
[00:11:58] Toni: Yeah, I'm not sure if it's, the majority was three and I don't
[00:12:01] know kind of what it is, but like, was really nice. Logos
[00:12:04] like ZoomInfo, Airtable, like, juicy and the third one didn't wanna be mentioned. Probably like similarly juicy, but just doesn't wanna have
[00:12:10] anything to do with the scandal. Right.
[00:12:11] Mikkel: I gotta say, I wonder how ZoomInfo found out. Like, I can see someone in the Rev Ops team going like, I heard about this 11 x. Maybe we should check it out. If this could be from us. It's like, wait, we are using it already. Who, who should I talk with internally? Let me, I need to figure out who has access to this
[00:12:25] tool.
[00:12:25] It's like, oh
[00:12:26] Toni: The, thing is actually, technically speaking, these two guys are
[00:12:30] competing
[00:12:30] Mikkel: I was actually gonna say like it, what is the interest of ZoomInfo here? Because they're in the same space. Are they about to drop on ai SDI themselves? Have they already? Actually, I don't know though. But,
[00:12:41] You know,
[00:12:41] Toni: I I think some of it, not, not kind of the whole thing, but 11 X also offers like lead sourcing and stuff. And
[00:12:47] guess what ZoomInfo does? You know, it's like, I think, I think there's a little bit of this there, but, but anyway, right. Kind of, that's the, that's the you know, fake customer thing, which. To a degree.
[00:12:59] I think all of us are guilty of
[00:13:00] this. And then a temptation is in crazy high. Jason Lemkin was even, you know, weighing on this topic and he was saying like, Hey, you know, I. I get it. I, you know, I didn't say he did it but he said he, he understands how big that conviction is or
[00:13:14] the, the, the, what is it called?
[00:13:16] The, the temptation.
[00:13:18] But urge everyone to resist it.
[00:13:19] Like, you know, he's like the pope basically like, ah, you know, I know people, you know.
[00:13:23] Anyway.
[00:13:24] Mikkel: I just gotta say, the funny thing here is if you look at to your point, Hassan's rebuttal on X, right? He has a long post with basically some bullets rebutting all the points in the Techron article. And his point here is like, Hey, we never claimed customers. We didn't have the customers named.
[00:13:38] Paid and use our product for a time and then churn. And so this is like, oh, we were lazy and stupid basically. And then really slow to your point with the lawyer, I think is, is how I would interpret that. Basically. So the other thing that's, that's kind of interesting as well is insane churn.
[00:13:54] Like you and I have talked about this. In uh, in previous episodes maybe closely tied also to the product itself, but uh, let's, let's talk a bit about the, the insane churn. We're getting a lot of, I wanna say mixed messages. I forget what they cited in the article itself. I think they, it was something like 80% or was it
[00:14:13] GRR retention
[00:14:14] Toni: 80. No, it was 80%. 80%
[00:14:16] churn.
[00:14:16] Mikkel: 80%. 80%, okay. Wow. And the rebuttal from Hassan Zuka was. That's, it's not that high guys. He didn't provide an alternative number, which I find kind of interesting
[00:14:27] just as an observer,
[00:14:28] Toni: don't know where I read it, but I read, you know, I think he puts up like 78 GR or something
[00:14:33] somewhere. So the the thing is, and this is what's super confusing, I've now, I. Six months ago, just after the Andreessen round, I talked to someone you know, with knowledge close, close to,
[00:14:42] close to the source here with knowledge of this whole thing.
[00:14:45] And he was telling me that they have a double digit monthly churn,
[00:14:49] which, you,
[00:14:49] know,
[00:14:50] if you,
[00:14:51] Mikkel: not a SaaS
[00:14:51] company anymore.
[00:14:52] Toni: No. So Exactly right. So kind of, he was, he was, he's a, you know, VP
[00:14:58] of like a a thousand people company. And he was like openly questioning and wondering. How Andreessen, you know, how they ended up that
[00:15:06] Mikkel: Yeah. How did I miss
[00:15:07] that? Yeah,
[00:15:08] yeah. Yeah.
[00:15:09] Toni: So this is number one, and this is kind of, you know, from sources inside saying like, Hey, this is the churn number.
[00:15:14] Then I talked to an investor like a month ago, and you know, it's, it's like a, it's like a, I don't know, people like that stuff. Again, it's a Chardon Freud, you know, and I'm, I'm guilty of it too, by the way.
[00:15:25] But another investor said like, Hey, they have like, 60% net retention rate or something like
[00:15:30] this, right? So that's another sign, like, okay, it's probably pretty fucking bad. Right. And I think, you know, if I'm trying to read between the lines, I think what's going on there is, they're just, they're just doing the accounting in a weird way.
[00:15:41] You know, and you know, some mixed signals are they're, they're ing people to be, you know, stay in the contract, don't let them out, and then there's some signals, hey, they kind of let some people out of the contract or have like this break clause there. And and the thing is, right, so if you sell ar, and this is, you know, CFO's close ears right now, but, if, if you sell a RR you obviously can use a metric called CARR, so contracted a RR you know, very similar to like booked a RR or something like that. So stuff that, you know, is papered in a contract with a signature and everything. But it's not, it's not, it's not really, it's not
[00:16:16] really really a RR yet.
[00:16:17] Right. And I think that's what they did.
[00:16:19] I think kind of they closed a, you know, 50 k deal. With a three month break loss and they counted the 50 K fully in into contracted ai, and maybe they were even upfront to their investors that that's actually how they report.
[00:16:31] Right. I don't think this is a absolutely crazy way to report on your ai. I think it's actually okay.
[00:16:40] The caveat here though, being is if you have people exercising the break, like majority of the time.
[00:16:49] Mikkel: Yeah.
[00:16:50] Toni: Then I think that is a reason for you should maybe be adjusting this a little bit,
[00:16:54] right? So in other words, if you have a break loss after three months, which I think is actually fair, especially for AI products and the POCI totally get it. And you have 20 or 30% breaking. You know, you probably, probably that for works out for you. I think that's okay. At least as it seems like from those employees that work there people have been exercising this break close way more often,
[00:17:17] Way more often. You know that they're talking a difference between more than 10 million a IR versus really only having 3 million ar.
[00:17:24] Kind of, that's the difference we're talking, right? I don't know what the math comes out to kind of specifically in new, you know, in a NBIS kind of world, but. It seems significant. Right? And I think in this sense I think in this sense using a, a, a metric to pump up this, you know, this revenue that actually doesn't really exist. I think, I think that's a little bit bold.
[00:17:47] Let's just say it like that. But also, also folks not unheard of either,
[00:17:52] right? Kind of just like with the customer logos, it's, you know, it's it's hard for me to say like, oh, you know, that obviously is against industry standard. It's
[00:18:00] like, no, you know, people playing around with this metric.
[00:18:02] Mikkel: you also just gotta realize even, even those numbers aren't great. Like, even though they aren't great, you still have two top tier VC firms choosing to invest in that company. So it all can't, it can't be all bad either. Right. I think probably they have a really good acquisition engine running and some tailwind right now.
[00:18:21] Or was it because Andres and Horowitz and, and the other guys just fell prey to the hype and just had to get on board this
[00:18:28] AI train?
[00:18:28] Toni: No, I don't, I,
[00:18:29] don't believe
[00:18:29] that.
[00:18:30] Mikkel: and I,
[00:18:30] don't believe that
[00:18:31] either.
[00:18:31] Toni: I, I don't believe it's stupid investors that
[00:18:33] didn't do the due diligence. I think Sure. There was some fomo and some speed on the deal and like, and stuff like
[00:18:38] that. The, the, the bigger question to ask, like, do you think Andreessen would be interested if this company, after two, three years of operating would be a two 3 million ar.
[00:18:49] Mikkel: No.
[00:18:49] Toni: So, and, and I think that's, that's the story
[00:18:52] here actually, right? It's like, I think they did post that there were like a 10 million, 12 million or something like
[00:18:57] this. And it's, it will forever be unclear
[00:19:01] how, how,
[00:19:02] clearly they're communicated in the documentation that that's actually not the
[00:19:05] case, but you know.
[00:19:07] Mikkel: and that's the, it breaks us to, brings us maybe to the other thing by the way I just wanna throw in here is the alleged Andresen Horowitz lawsuit kind of, which, which was in there. I think it's been disputed. I think it's that as far as I can tell, it seems like. They got a comment that they're not actually intending to take any kind of legal action.
[00:19:26] And I think it's also interesting if you checked, I saw, I saw, I mentioned this to you I think the SAS CFO on X saw Twitter saying, was there any wrongdoing?
[00:19:34] Toni: Mm-hmm.
[00:19:35] Mikkel: Like, what's there? And if not, then there's no lawsuit.
[00:19:38] So doesn't mean Andresen Horowitz necessarily is happy with their investment. It doesn't necessarily mean that, but legal grounds wise dubious, I
[00:19:46] think,
[00:19:47] Toni: So I don't, I don't know how this legally
[00:19:49] all of this works out. I can't comment on this.
[00:19:51] I think, I think for me it would be like have they, have they fundamentally misrepresented the business during the due diligence process?
[00:19:59] And, and Will, will we on LinkedIn and X figure this out? No, no, we won't kind of from the answer.
[00:20:04] Forget about it. It's just not gonna happen. I think the, you know, two things in my mind, like, one thing is you know, as a, as an investor you only have two states of being externally.
[00:20:16] Either you are a super fan of the business
[00:20:18] Mikkel: Yeah.
[00:20:19] Toni: or you're suing the business. Like there's nothing, there's nothing else. It's, it's, it's those two things.
[00:20:25] There, there doesn't exist a pipeline stage that says we are publicly thinking about suing our company
[00:20:32] like that, that just, it doesn't exist, right? So if you ask them for comment they will obviously, you know, I. The only time that they would say that, you know, they're considering suing or suing is when they've already
[00:20:43] handed
[00:20:43] in the
[00:20:43] Mikkel: when they filed it
[00:20:44] is public.
[00:20:45] Toni: it's already public. Right. That would be the only time where they would say yes, kind of. We did
[00:20:49] that. So up until then, if you ask them, if you ask them for a real comment, you will get that They're super
[00:20:54] fans, obviously,
[00:20:55] right.
[00:20:55] But it's also like, honestly, imagine you're watching a thriller. And the main character gets asked like, are you gonna kill Greg? It's like, yeah, I'm gonna, I'm, I'm gonna kill him in a couple of weeks. It's like, okay, great. It's like plot ruined. It's the same. You don't do that. You don't do that. Greg is gonna panic here.
[00:21:11] I don't think they're suing them, by the way.
[00:21:13] Toni: so that's actually kind of, you know, at the end of the day, I don't think
[00:21:16] they are. I don't think they are. I
[00:21:18] don't think it makes sense.
[00:21:19] But also, and this is, I think the most disturbing thing, at least for me in my head, is like you can say about tech run what you want. Like recently kind of acquired, you know, everyone is being slashed and so forth. I think, I think they don't print something like this
[00:21:36] without having at least someone saying something like this.
[00:21:39] Mikkel: there will be a discussion like also, hey we have a relationship with some of these folks, like some of the VCs potentially we wanna maintain, right? I. I think you're right. Like they, they have sat down and discussed this like, is can we publish this? Is, is, are the sources strong enough? Do we believe these people you actually spoke with?
[00:21:58] Right. And I think I think you're right. They have, they have had that conversation. Maybe they also even had legal counsel to be honest, as part of this which is not uncommon in
[00:22:06] this process.
[00:22:06] Toni: Sure. But like, let's, let's not forget, you know, this is not the New York
[00:22:09] Times.
[00:22:10] Mikkel: No, no, no, no,
[00:22:11] no,
[00:22:11] Toni: they're
[00:22:11] that standard and
[00:22:12] Mikkel: But it's also not the
[00:22:13] sun,
[00:22:14] Toni: yeah. that's right. No, exactly. And I, and I think they were probably sitting around the table, it's like, Hey, is this BS or is it not? And then someone said like, Hey, you have this call recording here with this person.
[00:22:23] And she didn't want to be on the record. He didn't want to be on the record, but they said like, Hey, that, you know, seems likely. And that probably was good enough for them to kind of take this and, and print this and. They should. I made the, made the story a lot more fun,
[00:22:35] also a lot more interesting for, you know, it hyped up the Char Freud a lot
[00:22:39] more than, oh, you know, we had this logo too long on the website.
[00:22:42] Right.
[00:22:42] Kind of. I think that, you know, if you break it down, that's almost for me, that's the core of the
[00:22:47] whole thing.
[00:22:47] Mikkel: think, I think journalistically speaking, or me as a reader, I think the only way they could have done it better is if, if it was like the Travis story out of Uber where they had leaked internal emails and memos and stuff to, to back up the story other than just quotes. But it's also like, who's gonna give you that?
[00:23:04] Like, it, that
[00:23:06] requires
[00:23:07] Toni: Well, all the, all the disgruntled
[00:23:09] employees that we're gonna
[00:23:10] talk
[00:23:10] Mikkel: Yeah. Yeah.
[00:23:11] So let's talk about them. Let's talk about the employees. Like when I read it basically when I read the article and I saw the next two points we're gonna get into, it's like, oh, a lot of employees are leaving and unhappy. Product is underwhelming.
[00:23:23] I was like, you just described. 80% of software companies in scale up mode right there. It's like, I'm sorry, open Up Glassdoor. All of them. All of them. They're gonna have not the greatest rep, like honestly, because it is a chaotic environment. A lot of change happens and if you can't keep up with the change, you're gonna be left on the station not getting that promotion or being let go or replaced by someone else.
[00:23:47] And yeah, it's often also not like that super seasoned leader. Who totally understands how to work and manage people. By the way, there's a lot of learning on the backs of people happening as well. And I was like, when I read that one, it's, I, I felt like, Tarantino, like the world's smallest
[00:24:05] violin.
[00:24:06] Just, just, just, playing a little bit. And don't get me wrong, I'm not happy about this. You know, being in the industry myself, I think it's terrible how unhappy our employees in general everywhere is, but it's just, can you fault 11 x for that? I mean, obviously you actually, you can, yes, they could have done a better job, but it's, it's also just
[00:24:25] pretty normal.
[00:24:25] Toni: No. Yeah. So that's, that's the point, right? Kind of. It's, it's pretty normal. And this is not about normalizing stuff,
[00:24:33] right? K of some of the examples in the, in the article is hey, people aren't getting paid on time
[00:24:40] Mikkel: That's not okay,
[00:24:41] Toni: That's like a weird, like, it's a weird admin chaos
[00:24:45] thing. Just like, dude, I mean, you have 70 million on your bank account.
[00:24:47] He even says like, we've barely touched the 70 million. Like, why can't you pay your folks in time? There are things in there that, you know you know, they're playing shenanigans
[00:24:56] with people's notice spirits and stuff. Like, if you quit, you don't get money anymore. So people quit after they got their paycheck and like it's, you know, that's just, I don't think this is good
[00:25:06] Mikkel: let's, let's take some of the quotes here. He doesn't believe in people taking holidays. Say,
[00:25:11] okay,
[00:25:12] Toni: yeah. And he disputes that also in his
[00:25:13] ex.
[00:25:14] Right.
[00:25:14] Mikkel: But it's also like, okay, so are people not getting any holiday there? I would just ask, and that's not pointed out in the article as being the thing, the other thing is like, oh, the founder would be on on Slack in three in the morning with urgent message.
[00:25:25] And I was like, yep. You just described a lot of founders right there in software. I think where it changes for me is again, actually back to the Uber story, when there's sexual harassment, when there's a bunch of other things. Like the paycheck not Okay. By the way. And I also think, obviously as a leader, should he maybe keep to himself that he doesn't believe in people taking holiday?
[00:25:45] Yeah. Yeah. He totally should. I don't think that's a great taste either. But also like you have to realize some of the people building some of these companies such as 11 x, they are special. That like Elon Musk is a special. You have to be a bit special to want to put. You know, a rocket that goes to Mars, you, you have to be special.
[00:26:04] And I think that's that's also the case here, to
[00:26:06] be honest.
[00:26:06] Toni: No. And also think kind of, people can vote with their feet,
[00:26:09] right?
[00:26:10] Mikkel: Yeah,
[00:26:10] Toni: if they don't wanna work for that thing, then, then, then just don't by the
[00:26:13] way. And, and, and that's what they're voting with, right? But, but if then someone is deciding to leave, don't fuck them on the way out. I
[00:26:21] think that, that, that is just, that's bad taste.
[00:26:24] And again, it might be like one or two instances where that happened and it's getting blown up right now, but I think that that is bad taste. And
[00:26:31] yeah,
[00:26:31] Mikkel: I think it's also like, it's common. You have to also realize, and I, I've spoken with a few about this, it's like where it's like, Hey, I'm not sure their reputation is that good. It's like, well, most companies in scale up, they by accident. Not by Ill will hire too many people. Then they realize the burn rate is too high and what needs to happen, they need to do a reduction in force, which means you're gonna have a lot of unhappy and un, you know, disgruntled employees basically.
[00:26:57] So, so it is common. Sometimes not even Ill will,
[00:27:00] Toni: I I think there's one other aspect to this though, which I totally sympathize with. If you have benchmark and, and reason in your boardroom. You, you need to, you, you better show the rocket ship growth that you've promised,
[00:27:13] Mikkel: Yeah. yeah,
[00:27:14] yeah,
[00:27:15] Toni: and the high churn. And then we're gonna talk about the, the product in a second seem to not make it easy for Asan to
[00:27:23] make this be a rocket ship.
[00:27:25] Mikkel: Yeah.
[00:27:26] Toni: And it doesn't matter how much money you have left on the bank account, kind of, if you have Sequoia or Andris, you know, any of these guys in your, in your cap table, there's also gonna be the day where they're like. You know what, Hassan, maybe it's time for you to step aside, right? Kind of this, this, this.
[00:27:40] No,
[00:27:40] there's
[00:27:41] Mikkel: let's just give this to Zoom in for now.
[00:27:43] Toni: I'm telling you. And I think it's incredibly difficult to live up to that, to the story that you sold.
[00:27:50] Which is your job, by the way. And then kind of deliver all of that stuff despite all the headwinds, despite all the, you know, uphill battles. And, and, and it's really difficult to, you know, keep that pressure for you and not push it to your employees. And to a degree you want to push it to employees because maybe then they work more and stuff, right?
[00:28:09] So it's like, I totally get that. But it's also a bit of an outcome of the situation, if you will.
[00:28:13] Right. What is, I think funny around the whole thing though. Is he himself says he has barely touched the 70 million. And it's also like, well, why exactly did you raise them?
[00:28:24] Like
[00:28:26] why, why exactly 70 million
[00:28:29] actually. Right. But I think that's a topic for another show actually, kind of how
[00:28:32] some
[00:28:32] of
[00:28:33] Mikkel: Not this Joe.
[00:28:33] Toni: is shifting. But it's, I I'm just saying it's like, well, you know. I said, you could probably live a much funner life also in San Francisco you know, building this rocket ship without, you know, that, that, boardroom that
[00:28:46] you have
[00:28:46] there.
[00:28:47] Mikkel: I don't know what motivates him and drives him. Gotta say, I don't know. I, I have to say though, he's built, he's built something awesome so far, like you, we can fault it for all the sense and purposes, like for hours, even if we wanted to, but I. He got backed by some pretty strong guys. He's acquired a lot of customers still.
[00:29:05] He, he, he definitely has built a lot of IR and, and they also have built a product that might not work yet. And I think that's also pretty cool. Like obviously we wanna see success here. I think the sad thing about this whole story is it pulls down this AI SDR realm quite a lot and actually think it is a powerful,
[00:29:22] Toni: I
[00:29:22] would
[00:29:23] Mikkel: Even, even further. Yeah.
[00:29:23] Because the next point we we're gonna talk about now is the product itself actually. And you and I have kind of been teasing a bit at least on and off in previous episodes along with other folks like Kyle Coleman saying like, it doesn't, it doesn't work yet. Like we've not seen that Saster and growth on Hinge and 20 VC and us like covering it like.
[00:29:43] Like crazy and telling all these stories of companies that made it to 10 million with AI SDRs and one ae. Like it's not, it's not happening yet. We found one article I think it's from
[00:29:55] Toni: Late last year. Late last year.
[00:29:57] Mikkel: Someone. Decided to run a test of let's just include three A AI, SDR tools here, at least.
[00:30:03] It's 11 X Artisan and Ai SDR, which is pretty much, I think the three I, I think it's the three big one. It's really 11 x and Artisan that I kind of bump into here. And, basically bought a license for the software, gave it gave it contact to contact and and kind of monitored the results and how much it cost per reply.
[00:30:22] Now here's the cost per reply. I'm gonna give you for 11 x first two and a half thousand US dollars for a reply. We're not talking meeting. We're talking a reply that's positive. That's not a, Hey, don't you call here no more. Yeah, don't call here, don't call him at all. Don't call no more. Artisan 550 bucks Ai, SDR 1200 bucks.
[00:30:47] And as I saw those numbers, I just, I just paused for a second and went like, geez, they, they really have long ways to go still to make this work. They really do. Now let's not get into the specifics of how the tactic was run. I can appreciate that. A, a lot of factors play into how you do the outreach, what the hook is, what is the outreach even about?
[00:31:12] Is your product interesting? Do you have p like there's a million factors at play here, but it kind of at least. Resonates with what you and I have been hearing from other folks. We've spoken with on and off this show, which is just doesn't work yet. It's, it, it does not work yet. People are using those three month break clause at 11 x.
[00:31:30] People are hesitant to invest in some of the other tools. It's not taking off in the way we would expect it to yet.
[00:31:37] Toni: One, one other nugget I run into is out of these three 11 acts is still the only one that hasn't, hasn't claimed their G two review page,
[00:31:48] Mikkel: Yeah.
[00:31:49] Toni: you know, and you can be like, well, we don't believe in those bad stuff. And, you know, certainly
[00:31:54] I think there's a good point to it. But it, you know, it's a little bit, it's a little bit where there's smoke, there's fire
[00:32:00] kind
[00:32:01] Mikkel: Yeah,
[00:32:01] Toni: you know?
[00:32:03] Mikkel: Yeah,
[00:32:03] Toni: and it's just, it just piles on. It's just weird. Right. And, and I think the SDR role, you know, lends itself extremely well to be automated,
[00:32:13] I think. So it's super repetitive. I still do lots of data and like no one wants to do it, so I
[00:32:17] totally get, you know. Perfect. And I think some folks are kind of innovating really nicely in the market, and, and I think if there's anything here it's probably that 11 X isn't there yet.
[00:32:27] That's probably what it is. Right. And, and is this true for, you know, many other companies? Yeah. Is
[00:32:33] this true for the, the company you and I built, you know, before Yeah.
[00:32:38] And we failed even harder, right? So it's like nothing like, ooh, wow, these 11 max guys. But but it, it does add to the story that I believe, which is kind of the thing that everyone is taking away from is this Chardon Freuder on the one hand side, and it's the. Oh, you know, this darling unicorn thing is, is coming crashing out of the sky and it's really just, you know, the same like all of us
[00:33:04] basically.
[00:33:05] Mikkel: wonder if it's, honestly, I gotta say, I just wonder if it's because it's gonna become the, the simple of this AI hype
[00:33:12] that eventually it's gonna break. Eventually it's gonna break. Right? And I also gotta say, I wonder, do they truly have product market fit? Don't get me wrong, by the definition, that's 1 million ai they do.
[00:33:25] But the churn is crazy. Right? And I think that's probably true for all of them, by the way. And again, we're not seeing this getting picked up by every single company and scaling like crazy, like honestly. I think people there doing the POCs and then determining, hey, it's a great way to very quickly burn our TAM while paying for it.
[00:33:46] I think that's what a lot of folks are learning. And honestly, I think what this sector has not figured out yet is. How the product should operate and work. If I look at Cursor, they could have built it like a, yeah, it's not a copilot. Like you don't need to be in the code editor at all. It just writes it for you.
[00:34:03] But they've actually leaned into building it as a code editor with AI assistance, which kind of makes sense. It's still gonna replace headcount. It is but there's still someone operating it. Now I, full transparency, I have not worked with the I SDRs. I don't know if it's the same kind of copilot.
[00:34:20] But I just gotta say from what I've seen, really doubt it. Really
[00:34:23] doubt it.
[00:34:24] Toni: yeah, yeah.
[00:34:25] Mikkel: So, I mean this company are they gonna make it
[00:34:29] Toni: The, the, you know, it's really difficult to see. What are they gonna make It means I mean, honestly,
[00:34:34] I, I don't think they have crazy burn. They have 70 million on their bank account.
[00:34:38] They can make it for a very, very, very, very long time before there is a, oh no, we didn't make it. So I think in that perspective, like I, you know, I think it's probably gonna work out.
[00:34:48] I think, I think they have a lot to do though. Let's just kind of flip this around. No, honestly, let's just flip this
[00:34:54] around. I think they have a lot of fucking work in front of them.
[00:34:57] To make this a successful business. And I think yes, you need to have good employees that are motivated to do that stuff.
[00:35:03] Yes, I think you need to have a product that you know, is being loved and liked by their, their customers. And I. Yeah, you probably need to avoid some of the potentially, we don't know shady tactics
[00:35:15] being used here, right? Because it's, this whole thing is also a trust thing,
[00:35:19] right? Especially in the AI space.
[00:35:21] And people talk a lot about hallucinations and trusting those, but now it's like, oh, can I trust this business?
[00:35:26] Right. So I think, I think this is, you know, I think they got a lot of press.
[00:35:32] Like, more people know 11 x now. Like that's the, you know, I think it's gonna be a net positive. They're gonna get more demos because of it. But I also think there's gonna be a little bit of like, more scrutiny. You know, I think everyone, everyone is gonna have a three month break loss now.
[00:35:48] I think they were trying to get away with it. And I, that's why I'm saying kind of, I saw folks having, being forced into the 12 months and, and Hassan is like, for like. Enterprise customer special needs. We have a break loss kind of, that's specifically how I said it
[00:36:01] in the LinkedIn thing. I can see exactly what he was trying to achieve, but I think everyone now is wanna have the three month break loss. And there's gonna be more, more like this now that's gonna gonna bite them in the but a little bit. I think they can totally win this thing. I think if Andreessen backs you, you're the defacto industry winner
[00:36:17] period. Like game over for all the other guys. And now it's, first of all, you know, it's a question now, like, is that really the case? Because of that, I think there's just a lot of fucking work out of them, which
[00:36:28] is fair. like.
[00:36:29] that's, that's what companies startups do. They have a lot of work in front of them.
[00:36:33] Mikkel: But I think you're right with the trust piece though, the challenge they're gonna face is the ability to go and raise the next round to continue rapid pace, right? So they might get out, funded by some of the other guys and then lose the battle at the end of the day, right? Who
[00:36:45] knows? Who knows? But anyway, let's, let's see what happens.
[00:36:48] We just don't know. I think the, the challenge here is for sure when that kind of trust starts eroding, like. We can, we don't know, like, did, is there a potential lawsuit? Did they fudge the numbers? Did they do all kinds of things that just like straight up, no, you should never do that. We don't, but just by watching this story from afar watching has Hassan's rebuttal and kind of the chat around it, it's like, yeah, it's, it's not like they're running a clean ship.
[00:37:17] Like we can, we can say that
[00:37:18] much. Right? And
[00:37:19] Toni: Which is, which is again, like who, who does run a clean
[00:37:22] ship
[00:37:22] at
[00:37:23] Mikkel: Well, there's just sure, like, but there is all a scale. And all I'm saying is at the end of the day, there's gonna be someone who is gonna apply for a job or get headhunt and you're gonna like, Ooh, you were the guys who were
[00:37:35] in TechCrunch
[00:37:35] Toni: Yeah, that's
[00:37:36] Mikkel: And then not in a good way. So, you know, it does have ramifications. And how's this gonna unfold? Don't know. I think there's
[00:37:43] definitely learnings
[00:37:44] Toni: I mean, I, I personally know like a VP level guy that was concerning to to maybe apply a, a job at deal and pulled that because hey, you know, this, it seems a little bit shady here, right?
[00:37:55] So I think to your point, I think there's definitely something, I think a couple of things will become a little bit,
[00:38:00] a little bit more difficult for 11 x
[00:38:02] going forward.
[00:38:02] For sure.
[00:38:03] Mikkel: that's it. Very different story. Let's see if the drama continues. I think this is a really fun conversation. Again, this was our opinion. This was our kind of thoughts on this story. Let's
[00:38:14] see how it
[00:38:14] Toni: And actually kind of everyone listening and thinking, this is interesting. The invitation to Asan to come on and kind of chat about it or something else. It doesn't actually
[00:38:22] matter. Like we, you
[00:38:23] know,
[00:38:23] Mikkel: I'm curious about this story anyway.
[00:38:25] Like
[00:38:25] Toni: know, you know, feel free to ping him and tell him, Hey, you should really, really go on the revenue form and chat with Tony and Mikkel.
[00:38:32] And just ping
[00:38:33] him. Just kind of all, all
[00:38:35] Send him in an email
[00:38:35] or
[00:38:36] Mikkel: or use Artisan and start like an outbound campaign to get him on.
[00:38:40] I'm sure he is gonna love that. Tony. Thanks so much.
[00:38:43] Toni: mic. Thanks everyone. And hit the subscribe button, please, would ya? Okay. Thanks man. Have a good one. Bye-Bye.
[00:38:48] Mikkel: Bye.