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Demystifying the conversations we're already here at RRE and with our portfolio companies. In each episode, your hosts, Will Porteous, Raju Rishi, and Jason Black will dive deeply into topics that are shaping the future, from satellite technology to digital health, to venture investing, and much more.
Will: But you also have to respect a founder and CEO’s lines of reporting and their need to give their people direction. And frankly—
Raju: So, you’re not going to take the HR person to Coldplay?
Will: [laugh].
Raju: That’s not what you’re going to do, Will?
Will: Not as an investor-director, no. I—
Raju: Okay, but then you could take the CEO. You could take the C—
Will: I’ve heard that that’s the CEO’s job [laugh].
Raju: Okay, fine [laugh]. I don’t know where you heard that from. But interesting. Okay, yeah, I like that.
Raju: I’m Raju Rishi.
Will: And I’m Will Porteous. Welcome to RRE POV, the show in which we record the conversations we’re already having among ourselves, our entrepreneurs, and industry leaders for you to listen in on.
Raju: Hello listeners. Thanks for joining us for yet another installment of RRE POV. I’m Raju Rishi, and I’m joined by my partner, Will Porteous, and today we’re going to discuss what happens post-funding, what to expect from this new VC relationship, how to get the most value out of it. So, money’s in the bank. Now, what?
Will: [laugh]. I got to say, I think this is a great topic, and one where we can go a lot of places on, I think, partly because we’re both so committed to supporting our entrepreneurs and wanting to get things off on a really constructive footing, as each—you know, there’s never more excitement than the moment when you have just made an investment and you’re moving forward on something new with an entrepreneur and their team, and I think—I know we both feel really personally invested in the success of each new company that we invest in.
Raju: Absolutely. And I love this topic. I mean, it’s actually kind of fun, you know? It’s like, you don’t invest in companies because—you know, obviously you think they’re going to be profound winners, and you love the team, but you also like to be there and work with them. And you know that initial step after you’ve put the money in, you know, is kind of like a slightly different delta from when you’re kind of evaluating.
So, let me ask you a question. I’ll kick this off for you, Will, first, like, what’s your, like, first conversation like? You know, the money’s in the bank and you pick up the phone, or the entrepreneur calls you and they’re happy, and you’ve gotten the, “Hey, the wire transfer is done, and we’ve got everything is set.” Like, what’s that first conversation like?
Will: You know for me, it always starts with as much listening as possible. I think that the part of the importance of the role of the venture investor, particularly as a board member as you and I usually are, is to come in, listening and assessing before making any judgments, right? Then the money is dropped, whatever you came to believe in the due diligence, some of it’s going to prove to be right, hopefully, most of it. There will be things that aren’t as you expected, and I think it’s important to start that first conversation with a lot of patience and really in listening mode.
And I also think it’s just important to establish and respect the boundaries between the company and the board, and investor group. At the end of the day, we don’t run companies; the management teams and founders that we’ve backed run those companies. And the best relationships start, in my experience, with an understanding and a respect for boundaries and a commitment to openness and sharing information. Because you want to get you want to start to establish trust with people. So, that’s a little bit of how I tend to approach those first conversations.
Raju: Yeah, yeah. I actually like to lock down my lunch preferences for board meetings immediately.
Will: [laugh].
Raju: You know? Like, for me, like, I like Mexican, but not too spicy because it costs me about 30 minutes extra in the bathroom the next day. So, you know, just, there’s a balancing act [laugh]. No, I’m with you. You know, one of the first things I like to request from the folks that I invest in is just, I’d love to get an onboarding session, you know?
Not… much like a new employee, but with some differences, right? Like, I don’t need the employee handbook and everything like that because I don’t pay attention to that stuff anyw—no, I do. I’mg very careful, very careful. But you know, things like review the business plan, you know? Go into the product and the competition to a little bit more extent than what we did during the diligence, with total transparency and honesty.
Like, what are your hiring goals? What is your go-to-market goals and you know, how are we going to do it? And then, you know, just operations. How do you onboard a client? How do you support a client? What’s been working, what’s not been working? So, I know that’s a mouthful, but, like, first conversations, just always, like, delighted to be here, you know, happy to be on board, but I really want to learn. And you know, the best diligence exercises that I’ve performed with companies, I don’t need much for onboarding, but there’s always gaps, and so, kind of, that’s what I like to do, is get onboarded and just become part of the team.
Will: I love that. I think for me, that onboarding process often begins with my intuitive understanding of the strengths and weaknesses of the team. This is fresh in my mind because I just went to the first board meeting for a new investment that we made that we’re going to be talking about here in a few weeks. And there are 20 people in the company, and I think 18 or 19 of them are developers with an incredible pedigree. It’s an incredibly technical engineering organization, and they have a very strong sense of what they’re building, and there’s only two people that talk to customers [laugh].
And that’s often the shape of companies when we get involved. There’s a lot of technical capability, a lot of product that’s been built, and there’s a lot of go-to-market organization to be built. And I tend to come into those moments listening for the assumptions that they have about their product and about their customers, and which of those assumptions they have a lot of data for, and which they don’t. I also find—and I know this is true in your case—I tend to come in thinking about skill gaps and functional needs. And every company has skill gaps and functional needs.
This is not unique to startups, but there is a certain amount of, does the leadership, does the team know what great looks like in the functions where they haven’t hired yet? And are there obvious people in their network, kind of, waiting in the wings for those roles or not, and kind of starting to insert myself in that process, in those conversations, is often one of the first things that I do.
Raju: Amazing. That’s actually really cool that you can get to that level of insight that quickly. Usually it takes me a little while to do that, but that’s awesome. Okay, so, you know, first conversations over. You kind of said, “Hey, you know, let’s get onboarded, let’s kind of understand where things sit.”
How about board meetings? You know, what sort of needs to be done? What’s your preference around that? How do you think about that? There’s always a dialog with—you know, it depends, like, if you do a seed stage investment, you’re the only board member, it’s kind of a different dynamic than if you’re have existing, but like, you know, any kind of, like, things that entrepreneurs should be aware about in terms of how you like to do that?
Will: Well, I find board meetings and the conversation between the director and the company obviously becomes more formal and structured over time, until you get to the quarterly cadence of public companies with their committees and all of that. But in the early days, I think it’s really important to break down the informality and make sure that there’s a free flow of information that’s happening between the CEO and the board, whether there’s a board meeting scheduled or not. And I think that if you have frequent flow of communication—and it could be over text, it could be over email, it could be, hey, the CEO is going to send out a weekly update on what’s going on—it enables you to make your time as a board really valuable. So, I think number one is to establish informal, frequent communication norms so your management team feels really comfortable sharing whatever is going on.
And then you roll up to board meetings and everybody knows what the issues are. And I find a lot of the burden of board meetings is management teams having to re-educate or reinform or reset an understanding with their outside directors who haven’t been thinking about the company in the intervening weeks or months. And so, I really encourage frequent communication between board meetings. And then I like to see board meetings where you’re trying to focus on the top three or four obvious questions. You’re not trying to do too much in the span of a one day, which is really just a couple hour session, and you have some sort of identifiable strong chunks of work for the board to focus its time on, and a good pre-read for that. Those are the hallmarks, I think, of good board meetings in the early days of a company.
Raju: I love that. That’s awesome. And [barking]—I got my big German Shepherd in the background, if you can hear him. He’s there [laugh].
Will: [laugh].
Raju: He has a lot to say about board meetings. He just, you know, [crosstalk 00:09:50]—
Will: I’d like to take him to a board meeting. I think he—
Raju: Yeah, I’m telling you people, would like… they would straighten up. They would definitely straighten up.
Will: He brings a certain presence of authority.
Raju: Yeah—
Will: You do, too, but—[laugh].
Raju: Yeah. Yeah, yeah. Sometimes. Sometimes. Yeah, I do—board meetings are super important. I mean, like, you know, logistics is not an issue. Like, depending on, you know, as you said, in our investment stage, either we have existing board meetings that you kind of work into, or you don’t. And actually I have to, honestly, give a huge, huge shout out to our assistant, McKenna Paulson here because you and I never think about that, ever, and she’s an absolute godsend. Juggles all the details perfectly—
Will: Oh, my gosh.
Raju: —super nice human being—
Will: Moves us across continents, like, [laugh] seamlessly and on time and well rested, so that we can be the best version of ourselves when we get there.
Raju: Yeah, I have to just say, it’s like a logistics standpoint—which is something that you usually talk about in these first couple of—like, a month into it—you know, she handles it, and we don’t really have to think about it all. But the board meeting itself, I mean, it’s really, like, as you said, right, amount of detail and content. You know, early on you’re going to focus on, you know, sort of the core issues of the companies without as much rigor, and then later you’re going to get to this quarterly cadence with a lot more content and, you know, right, amount of detail. I—you know, just so people know—I prefer between 125 and 175 pages of dense PowerPoints [laugh]. Like, I want to know if you close deals, I want to know children’s names and ages for the buyer, influencer, and champion, have they attended a Coldplay concert. Like, that’s… that’s… things like that.
Will: There’s an obvious vulnerability there that we won’t go into.
Raju: Yeah, yeah. Okay. Now, actually, I think just in general, if you want to get to know me, I’m, let’s say a Series A, even a Series B, I think it’s 15 to 20 pages max in terms of content. Focus on the things that matter. Don’t, you know, sort of give us so much detail.
And this is a little bit of a fine tuning over time, but yeah, if it’s like a Series A company, we’re going to—or, like, a seed company—we’re really going to focus on the top three or four things that matter, and the other things kind of have awareness about and knowledge of. But as you get later, you really want to keep [barking] these things down to something that’s digestible, and you want to create repeatability around those kinds of things. I don’t know, how do you feel?
Will: Absolutely. I very much feel that way. You know Raju, I feel like that first conversation and those first board meetings is a critical time to focus on something that you always talk about, which is sequencing. And that moment when a management team has just closed a financing is a moment of relief, they’ve got a ton of resources in the bank, and they’re suddenly aware that they can really go and pursue a lot of the possibilities that they’ve talked about. It’s an incredibly inspiring moment.
It is also a moment where people tend to open up the aperture, [laugh] and they tend to think more opportunistically about where they might point the resources that they’ve just been given. I think that really honing in on sequencing and the allocation of resources and the steps that are going to lead the company to value creation, next financing, and helping a management team, kind of, see that through-line is one of our most important jobs in those early conversations. Because when you just closed a big round of investment and you’ve got new board members coming on, you kind of tend to think, okay, the sky’s the limit here. Possibilities are endless. And the reality is that there’s a very finite amount of money in the bank, and you’ve got to really put things in place in the right order in terms of what you’re going to do.
Raju: Absolutely, I love that. That’s said really well, Will. Said really well. Yeah, I mean, listen, first board meeting to me is like a Tinder date, you know?
Will: [laugh].
Raju: Like, a company looks nothing like it’s [unintelligible 00:14:08] room, you know what I mean? Like, I—what? [laugh] what is this? Yeah, okay. You know it’s like, mostly like, if I squint, I can see what I looked at.
Will: Are these actually the people we met [laugh]?
Raju: It’s like, what happened? What happened? You know, there’s obviously the proximities. I think it’s close, but there is some deltas and you learn some nuances. Like, hey, you know, we do have all these clients, but, you know, we might be churning in six months, right, because we haven’t created enough stickiness in the product or something like that.
And you know, obviously they’re not going to disclose that during a financing round, and nor should they, right? Frankly, you don’t know. Like, you know, between now and six months, you might be able to figure out, and you hopefully will, and with the support of your new board member, figure out how to retain those people and focus in on a set of features. So, you know, to me, that’s, like, yeah, we got the logistics out of the way, we got the board meeting template kind of ironed out, and then that first board meeting, to me, is, like, okay, yeah, what are the deltas to what we, kind of, really envision? So, I like to kind of iron that out during the board meeting.
And then the one thing I also like to do is build rapport across the board because generally, there’s other board members there that, you know, I may have met one of them, maybe two, but like, you know, probably not all of them, and in some cases, none of them because you’re just dealing with the founder and the executive team. And so, you’ve got to sort of understand them a little bit as well. And you know, it’s just the nature of the beast, right? So, you’re walking into a room and there’s a pre-existing sort of mode of operation. And you’re not trying to disrupt things too much, but you definitely want to influence it because there’s a reason, you know, they wanted RRE’s money. And you know, Will Porteous’, you know, involvement on the board.
Will: Well, and right back at you, Raju. I mean, I know you have deep and close working relationships with your entrepreneurs, and sometimes you’re probably coming into companies where there are other investors on the board who feel like they have [laugh] those deep, close working relationships with their entrepreneurs. And figuring out, kind of, what role we’re going to play as a director in a given company, and frankly, helping the board take shape so that people feel like they have a role and a place to make their contributions actually becomes important. I care a great deal about establishing constructive board cultures early on, and by no means do I feel like I need to be the lead director in all my companies. Actually quite the opposite. I love it when somebody who I have a lot of confidence in is a great lead director, and when they do the work and they put in the time. Because it takes a lot of time to be a good, engaged lead director partner. But when you have someone doing that, the rest of the board kind of needs to support that person in doing the constructive work.
Raju: Interesting. That is a good way of putting it. That is a really a good way of putting it. I love that. Okay, so, you know, kind of addressed, you know, sort of like that first conversation, we had our first board meeting, and now, you know, fine tuning a plan.
Will: Yeah [laugh].
Raju: Because, you know, we found Tinder dates there, like, hey, you know, like, okay, so, like, we thought X, and we kind of like, had modeled, you know, X. And for our listeners, I mean, RRE, Will, and I, when we look at, you know, sort of the investment model, we love it, but we tend to discount it a little bit, you know, sometimes more than a little bit because we’re like, okay, this revenue projection, you know, looks out of whack. They’re expecting, you know, some kind of crazy performance from every single sales rep, you know, like, 200% of quota, you know, across the board. And so, you’re like, “Okay, that’s not possible,” so you discount it a little bit. And, you know, you kind of got to get real about, you know, product go-to-market, KPIs, et cetera.
And, you know, this happens every time, right? Like, I’m not even saying this is kind of a one-off. I don’t think I’ve been to any boards where there isn’t some, at least a micro-adjustment, if not, you know, sort of like a wider, you know. So, you’ve experienced this multiple times, Will. You know, like—
Will: Sure [laugh].
Raju: How do you create that balance of, like, A, you know, I know this is the plan that you kind of shared, you know, to new investors, and we’ve come in investing, how do you have that dialog with entrepreneurs, and what do you focus on as, like, the cornerstone for it?
Will: Well, I find that it’s really important to give people permission to deal in reality, the reality of what they actually have. And reality often at these early stages, there’s often a reality gap between what was shared in the investor presentation and the fundraising process and the reality, and that gap falls in two big areas. One is product readiness? Is the product really commercial grade? Is it ready to go to market?
And the other is just in the strength of customers’ willingness to commit real dollars for real revenue and the pace at which deals are going to close. And I think that getting grounded really quickly in the reality of what you have is important because once you have a common understanding of that reality, you can comfortably, as a group, make hard choices. You may conclude, you know what, actually revenue is going to be pushed out a couple of quarters here, and what we really need to do is dial down the burn and focus on making this a great product. And the faster you get to an understanding of that absolute reality, the more you can make great decisions as a group, in partnership with management. And until you establish that shared understanding of reality, you’re going to be talking past each other. So—
Raju: So, for you, is that the first board meeting, or it is the second or third? Or do you let it play out a little bit?
Will: That’s a great question. It’s within the first two. It’s rarely the first conversation or the first board meeting, but it is often within the first two. And it needs to be within the first two or so because time’s going by, money’s being spent, you’ve got to be willing to be kind of frank and direct and clear about what the reality of things is. So, I find it’s very helpful to talk in terms of forecasts and results on every topic, whether it’s—obviously we do that a lot around sales, but I also like to do it around engineering. When I ran engineering years ago, I had what I call the reality ratio, which is the guidance that engineers gave me on when things would be ready and when they were actually ready.
Raju: [laugh]. Yeah, exactly.
Will: And it was a time-series measurement all the way to the date the product shipped, right [laugh]? And the point is, to force people to hold themselves accountable to reality because when you make decisions in a fact-based reality, everybody makes better decisions.
Raju: Yes. I—a hundred percent. Thank God my wife doesn’t have a reality index for my to-do list.
Will: [laugh].
Raju: And I hope to God, she doesn’t listen to this podcast because she’s going to have a reality index, which is, like, 3x, [laugh], you know? I asked for it 3x the timeframe that he commits. Fantastic. That’s awesome. And I’m very much same way. I don’t think it’s worth having a reset during the first board meeting. I think it kind of it sets in, like, you don’t know how the company operates yet, right?
You don’t know if their modus operandi is to beat expectations because they’ve sort of underpromised overdelivered—typically rare, typically rare, frankly, or, like, how far of an overpromise is it and what parts of the business are being overpromised? Is it engineering? Is it customer support and onboarding? Is it, you know, sales and marketing, you know? Is it burn?
Okay, so wonderful. I love that topic. Now, you’re on the board. You know, how would you… like, dude, I think the world of you as a human being, as a board member, I would want you on any board I’m on. Like—
Will: Too kind.
Raju: How can a board, your new boards, get the most out of Will Porteous?
Will: Oh, gosh. I mean, I think, first of all I try to do, and I know you try to do, is be a good director and be close to management and be supportive. I think that finding ways to engage personally with your directors and keep them in the conversation about strategic decisions, hiring decisions, is the only thing you need to do. As investors who serve on multiple boards, you and I walk into every day knowing about half the things we’re going to do that day. We are going to look at companies, we’re going to talk to LPs, we may actually have a board meeting, but we also know, statistically speaking, that we’re going to have two or three interactions with our portfolio companies that are unplanned, that are unscheduled, that are simply people informing us of stuff, checking in with us, and that feeds a really productive relationship, so that we don’t wait for the board meeting to learn things.
We learn them today and so we can act on them and find ways to help the company. We act on them and get ahead of financing questions, hiring questions, and that sort of thing. I think the best relationships with directors are ones where they’re working on supporting the company on a handful of topics actively. There’s not a lot I can contribute to the codebase. There may be some useful suggestions I can make about product requirements, although VCs are, I think, rightly criticized for always having dreamy ideas about the products that should be built. There’s maybe things I can contribute in terms of financing, hiring, strategy, sequencing, all of those topics, and I tend to be engaged in one or more of those topics with each of my companies at any given time. So.
Raju: Yeah. I love that. That’s awesome. And, you know, I would just suggest, you know, you find out—the raw guts of what Will said is absolutely true. Like, there’s handfuls of way that your board members can support you that are, you know, kind of across the board, like, you know, sort of interviewing, you know, key executives, or providing guidance around sequencing of the business, but you should also find out what the superpower for each of your board members is and leverage it.
Will: Yeah.
Raju: Are they a go-to-market expert? Are they great at hiring? Do they come from, you know, a financial background and so they understand modeling really well? Are they hyper connected in the sector? And I know you are. Like, you know, some of your companies will like space and, you know, that ecosystem, you know pretty much everyone there is to know. And you know, plus, I don’t know if Will talks about it, but he can tow a car by just lifting the front-end with his bare hands and dragging it. So, if you guys—
Will: Yeah. So, I could work at an auto body shop if I weren’t doing what I’m doing here. Paths not taken. Know what your board members are good at. Our partner Jim once drove a cab in New York City. He’s also a graduate of many survival schools.
Raju: Yes, and—
Will: Just saying, know what your board members are good at.
Raju: Yeah, exactly. I’m exceptional at massages and blackjack. So like, you know, if we need—no, actually, I’ve been an operator multiple times. So, for me, if I’ve invested in you and I sit on your board, you know, I got a wide variety of skills that I can, you know, or hints or tips that I can give you from a startup mechanic standpoint, but definitely go-to-market, you know, hiring, business development, all those kinds of functions.
Will: Do you suggest taking management teams to a Coldplay concert?
Raju: Whoa, we’re going to get there. That’s a Gatling gun question. You’re just jumping the Gatling gun. Yeah.
Will: Okay.
Raju: So yeah, we got lots of those coming. But yeah… no [laugh].
Will: [laugh]. Not a good idea.
Raju: No coldplay. Yeah, yeah. All right. Now, communication. You’ve mentioned it several times. How do you like to communicate with your companies? You know, what’s your, sort of like, tips or recommendation or style?
Will: So, I think it’s really important for investor directors to respect the chain of command inside of companies and to really make one or two executives their principal points of communication. And it’s not to say that you don’t want to have relationships with the whole executive team. You do, but you also have to respect a founder and CEO’s lines of reporting and their need to give their people direction. And frankly—
Raju: So, you’re not going to take the HR person to Coldplay?
Will: [laugh].
Raju: That’s not what you’re going to do, Will?
Will: Not as an investor-director, no. I—
Raju: Okay, but then you could take the CEO. You could take the C—
Will: I’ve heard that that’s the CEO’s job [laugh].
Raju: Okay, fine [laugh]. I don’t know where you heard that from. But interesting. Okay, yeah, I like that.
Will: So, my point is, I like to have a really informal free-flowing regular exchange of ideas and updates with the CEO, maybe the CFO, and unless it’s a special topic where they know I’m going off to work on something with a member of their management team, and they’re like supportive of that, I’m very careful of engaging with a whole team, simply because you don’t want them to feel like they’re reporting to a board member about something. You want to really respect the CEO’s reporting relationships and their need to give direction.
Raju: Yes, I agree a hundred percent. I’ll expand that a little bit. I agree with the CEO, the CFO, and I will expand that a little bit to the founding team.
Will: Sure. A hundred percent.
Raju: Just, yeah, just because, like, you know, until the company sort of ages to the point where, like, they have, like, aligned accountability, founders tend to have, like, sort of a little bit of a free-flow role, [unintelligible 00:28:17], maybe we talked in a different podcast. So, my recommendations to founders and companies that I’ve invested in is, like, get in the habit of dropping small notes, right?
Will: Totally.
Raju: I don’t need you to wait until the board meeting for every piece of information. I don’t need you to overthink, like, how dense of a piece of communication. A little bit that keeps me in the loop, so that I don’t have to, like, you know, find out really, you know, crazy things at the board meetings, I would say, relay good news and bad news. Like, significant good news and bad news immediately. That’s, like, a tip.
I also suggest, like, doing a face-to-face outside of board meetings a few times a year because at the board meetings, we’re going to see each other face-to-face, but you know, you can’t really get into you have to be respectful for the rest of the board, and you have to be respectful for the format of that board meeting. And you can be a lot more freeform outside of that. And you know, just the general thesis I will tell my entrepreneurs is, like, significant deltas to the plan should not be a surprise.
Will: A hundred percent.
Raju: Headcount, spend, revenue, churn, whatever it might be, you know, should not be sort of like a surprise. So, I prefer little bits of detail. I actually love when notes are sent that don’t need a response; they’re just an FYI kind of thing. Because, you know, we have a lot of boards that we sit on, and so if you got to sort of engage in every little piece of data, that can occupy a volume of time, but getting those updates? Super, super valuable.
Will: I completely agree, and like you, I love the text update. In fact, I just got a product update from one of my companies while you were talking, and it’s some cool new features, and all the board members are excited, and now everybody’s in the loop about a release that’s coming up. It’s super, super low, low intensity good news. Actually I actively diligence the way people communicate bad news during the fundraising process. So, when I’m doing references on a founder or an executive team, I will go and ask people who they worked for how they communicated bad news in the past.
Because in my experience, this is a personal quality. You either are reluctant to share bad news because you feel like you have a set of expectations with someone that have been set, or you are really good at getting out in front of it and you know how to break the ice on sharing something. And I strongly prefer the latter, and when I don’t have it, I know that I have to poke a little bit with people, and say, “Hey, how’s everything really going? I haven’t heard from you in, like, two weeks on things. Like, how you feeling about this quarter? We’re kind of halfway through the quarter. Like, you should be, kind of, you know, at the least the 40% mark right now. How’s it going?” And I don’t like having to do that, but with certain personalities, I know that I do.
Raju: Yeah, interesting, yeah. I don’t diligence that, you know, how they share bad news, but I do encourage it, you know, immediately, right upon investment, I’m like, “Hey dude, if something—dude, like, if something bad happens, like your VP of sales, or we, you know, count churn that we didn’t expect to churn. It’s a big one, like, send me a text, you know, or send a quick email to the board letting folks know.” And I think it’s really important. I think it avoids this, like, showing up at a board meeting and, like, what happened? Like, oh my God. Like, this is, like, a crazy thing that you just don’t want people to feel like you’re waiting until the board meeting to share news.
So, those were, sort of, the core questions I wanted to get out there, Will, about, like, hey, we—RRE, Will Porteous, Raju Rishi—we’ve just invested in your business, and you know, like, this is sort of the, you know, first 30, 60, 90 days that you should expect how to get the most out of us. You know, how to communicate with us. You know what are our expectations. Anything else you want to talk about in this section before we move to a Gatling gun and kind of go to the fun stuff?
Will: I think we covered it really well. I think that the underlying themes here about integrity in your communication, living in the reality of how your company is doing, being really committed to forthright, engaged communication with your board members means that you’ll have a really productive journey with not just working with us, but I think, with almost all investors that we work with regularly.
Raju: Yeah, exactly. And I conveyed basically that I do like Mexican food, but not too spicy—
Will: [laugh].
Raju: —which I think is important for people to know, right? Like, that’s just, like, right up front. Like, we’re going to have a board lunch. We’re going to have a board dinner. I like it. Okay, let’s move to the Gatling gun section, which is random questions. And I’ll give you a second to think about this one. You’ve invested in a lot of companies. What was your—and you don’t, name the company, note—what was the worst first board meeting that you have gone to?
Will: I knew you were going to ask me this [laugh].
Raju: [laugh].
Will: It was a hardware company that we were in years ago, and it had—it was a very hot company, in the sense that it had raised money from a lot of marquee investors, the technology had tremendous potential, the financing round that we led had been very competitive, and we had probably paid up a bit on price. And we got there, and it was very clear that there wasn’t much movement actually happening in the pipeline. They had managed to tee up some great customer references, but the design cycles were going to be really long. And worse than that, they weren’t getting the level of performance that they had expected out of the most recent spin of the hardware. And we were suddenly—they had just raised a lot of money, and we were all kind of suddenly looking around the table at each other.
And there were a lot of investors. It was—there were a lot of people involved, and that was, frankly, a really telling sign because the company had been able to raise money well beyond its actual execution for some time. So, there were a lot of investors with a lot of expectations and very little to show for it from a reality standpoint, and we were just the most recent people to fall in love with it. So, that’s an awful feeling.
Raju: Oh, my God, that is an awful thing. I have two. I have two. I won’t tell company names. One was a company I inherited, so I was just joining the board for the first time. It was a little bit of a later-stage company, and, you know, I’d kind of gone through the onboarding and kind of seen the product. And I was excited about this one. I think, you know, it had a lot of potential, whatever. And I show up at the first board meeting and, you know, the CEO says, “Well, we have this accounts receivable error,” you know? And—
Will: Oh, gosh.
Raju: Yeah. “It’s not, like, we’re not going to get the cash, but we haven’t collected it yet, and so we’re kind of really tight on money right now, to the point where, like, we got to figure out if we need to do, like, a bridge or a something.” And I was like, “What?” Like, you know, kind of you expect the CFO or the VP of Finance, and, you know, this company’s been around a little while, and you’re like, my God, like, we’re all running out of cash, and it’s my first board meeting [laugh]. You know what I mean?
Will: Ohh…
Raju: Yeah, wackiness.
Will: Oh, that’s a terrible feeling.
Raju: You know what? Like, just step back and you’re like, all right, how do we address this in a way that, you know, doesn’t require financing? And you know, kind of people are creative. They come up with tools, and we kind of went through it. It was actually, in some way, really, kind of, bonding. Everybody in the room gets super, like, bonded when you’re like, how do we creatively figure out how to get the accounts in? The customers are good for it, but like, we haven’t really kind of put an emphasis on—so that was one.
Second one was a company where we made a minor, minor bet, and it wasn’t actually a full board member, but I show up and have a board meeting, and then at the end, I get notified by the investors that yeah, and by the way, we’re swapping out the CEO today [laugh].
Will: [laugh]. Oh, no.
Raju: And I’m like, “What?” Yeah.
Will: Oh, no.
Raju: Yeah, yeah. So, that was a little bit of a challenge.
Will: Tough, tough stuff. I want to come back to the first one, though because, you’re describing something that I don’t have a lot of patience with which is financial literacy in a founder or CEO. I’ve met too many founders who were building great products and building good businesses who didn’t have a basic understanding, at any given time, of the difference between bookings, cash, and revenue. And the understanding of the cycle between bookings to revenue, and the understanding of the cash collection cycle is the lifeblood of any business, even before you start talking about the expense structure. And I think that we back a lot of strong technical founders, but if you’re going to be a CEO, you have to understand that you’re running a business and you have to invest yourself in the language of the accounting profession that determines whether you’re making money or not, or whether you’re running out of cash or not.
Raju: I agree, yeah. And I think it’s important for founders—or CEOs, if they’re not founders—to actually look at the bank account number [laugh]. Like, that tells you a lot, right? It’s like, okay, I know that the money’s supposed to come in and blah, blah, blah, blah, and this is what we should be at. Why does the bank account say, like, we’re short by a lot. Like, what is the gap? Is it like sitting someplace else?
Like, that to tell you that’s just this very, sort of, like state-in-time barometer that should give people sort of pause to say, like, what am I missing? Or, yeah, or understand the business enough so that they understand how cash moves and when cash gets deposited. So, second question. Worst first date that you’ve had? Yeah, yeah.
Will: Oh boy.
Raju: Going to give you time. Going to give you time.
Will: Yeah. I mean, that’s going back a ways, but sometimes you just know, like, the chemistry is not there [laugh].
Raju: Okay?
Will: Those just turn into long, long, meandering dinners that can’t end fast enough [laugh]. So.
Raju: Yeah it’s true. It’s true. Mine is actually my first date with my wife [laugh]. We were in high school, so this is, like, the caveat. Didn’t have a lot of money and so the goal was, hey, you bring some ingredients, come to my house, we’ll cook. And honestly, it was simple stuff, like, making spaghetti and meatballs and house salad. And I was not very focused.
Will: [laugh].
Raju: So just, you know, put the spaghetti in there, heating it up and not paying attention, and there’s no water in the pot.
Will: Well, maybe you were distracted. Maybe you were paying attention to your future wife. And that’s totally acceptable.
Raju: Yeah, I—you know. But like, you should be able to, like, remember that there’s something cooking, [laugh] you know? And you should be able to like—you know, don’t need a fire alarm to tell you, like, it’s time to, like, put more water. And you know, you’re, like, messing this thing up. Like, I messed up, like, the one thing. But it turned out okay. Turned out okay. Turned out okay. Okay, last question. Have you ever been to a Coldplay concert?
Will: I have, but with my wife, both times.
Raju: Okay. I have also with my wife. But then they pointed the thing at us, I had to duck away because I don’t want my girlfriends to know that I’m married.
Will: [laugh].
Raju: No, no [laugh]. Yeah. No, uh—
Will: Or any of the heads of HR in your company.
Raju: Yeah. You don’t want your HR people to know that you’re married.
Will: [laugh].
Raju: [laugh]. No, I’ve actually never been to a Coldplay concert, but I did graciously get offered Coldplay tickets in Europe by a colleague of mine named Will Porteous one time, because—
Will: That’s true.
Raju: He couldn’t make it. Yeah. And that would have been amazing.
Will: Well, this was a great topic today. I think you and I could talk for hours about this. We care a lot about helping our teams get off to a great start, so thank you Raju for teeing this up. Any more questions from your Gatling gun?
Raju: No more questions. No more questions. You can wrap it up.
Will: Okay. For our RRE POV listeners, thank you so much for hanging out with us again. As you can tell, we love what we do and we love helping our companies, and we look forward to coming at you with another episode soon. Take care.
Raju: Thank you for listening to RRE POV. You can keep up with the latest on the podcast at @RRE on X or rre.com, and on Apple Podcasts, Spotify, Google Podcasts, or wherever fine podcasts are distributed. We’ll see you next time.