Best of 2024: From Startup to Exit

2024 has been an incredible year for TiE Seattle’s From Startup to Exit podcast – featuring inspiring conversations with entrepreneurial leaders, innovators, and changemakers. As the year ends, we’re excited to share the Top 4 Episodes of 2024 that you don’t want to miss!

The Founding of OfferUp - Nick Huzar: https://www.buzzsprout.com/2234096/episodes/13413716

The Founding of Rover & the Vision Behind Pioneer Square Labs - Greg Gottesman: https://www.buzzsprout.com/2234096/episodes/13615903

Mega-Successful Exits: Chronus & Ally.io - Vetri Vellore: https://www.buzzsprout.com/2234096/episodes/13899931

Developer Joy Through Generative AI - Rajeev Rajan: https://www.buzzsprout.com/2234096/episodes/15463924

Brought to you by TiE Seattle
Hosts: Shirish Nadkarni and Gowri Shankar
Producers: Minee Verma and Eesha Jain
YouTube Channel: https://www.youtube.com/@fromstartuptoexitpodcast

Transcript

SPEAKER_02 0:01

Welcome to the Startup to Exit Podcast, where we will bring you what costs entrepreneurs and VCs to share their heart-earned success stories and secrets. This podcast has been brought to you by Ty Seattle. Ty is a global nonprofit that focuses on entrepreneurship. Ty Seattle of the GoPro. Encourage you to become a Thai member. Become a member.org The founding of Rover and the vision behind Pioneer Square Labs with Greg Goddessman.

SPEAKER_01 0:57

Like with a lot of great startups, uh Rover came from a very personal uh problem and experience that a poor customer experience that I had. So uh our our family pet uh uh lab named uh Ruby uh uh was um we didn't have anyone to watch her and so this is in the Seattle areas there's this wonderful uh tournament in Spokane called uh uh uh Hoopfest. And a lot of uh I think it's the largest three-on-three tournament, basketball tournament in the world, right? Happens to be located in Spokane, Washington. And so my two boys uh would participate in that, and we uh uh we as a family drove down to Spokane, but for that particular weekend we could not find anyone to watch Ruby. We asked, and the and the hotel that we were staying at didn't allow uh for dogs, and it was just we you know, we were maybe we shouldn't go, but the the you know, we they were on teams, and so they had, you know, there were people were depending on us to to show up. So we put Ruby for the first time in a in a local kennel here. It's actually uh in the central Seattle area. I won't name it because it's probably done more to hurt the kennel business than any kennel in the country in retrospect. But uh we we put her in a local kennel and uh and we went off to uh uh to Spokane for um uh for Hoop Fest. Uh one of my sons actually did really well that that weekend and uh he ended up uh winning uh winning the tournament. Uh he's he he's no at this point he's no great basketball superstar or anything, but uh he had a great team and they did well in their particular bracket. And so we were a little bit late coming back. So on the way home on Sunday, there was some traffic, and I called this kennel and I'm like, hey, we're running a few minutes late. Can you uh we're gonna be there at like 5.04 or something? Uh can you keep the can you keep the doors open? We really want to get Ruby, and they said, of course. Um, of course, we show up like at 5.01 or something because we were racing to try to get Ruby and the doors were locked and we couldn't go in and get get Ruby. And so we come back the next day to pick up Ruby, and Ruby was scratched, uh scratched up, um, had kennel cough. Uh we paid an extra 70 bucks roughly to keep her there for that extra night. I'm like, this is the worst, and I was just furious. I was so upset about this whole customer experience. And by chance, there was a um there was a startup weekend uh happening, and so I uh I pitched this idea of hey, uh there's probably um uh there's probably someone that would have loved, a neighbor or a local person that would have loved to have taken uh Ruby, would have, would have done it for less money than we paid the kennel, and it would have been a radically better experience for us than than putting it in, than putting uh our our beloved you know uh family member uh Ruby in a in a in a cage. And and um and I pitched it at a startup weekend, and that was the story of, and it won the startup weekend. Um you know, a funny part about the story is uh I had 10 people on that team, um, gave them all a little bit of equity. They all made in retrospect made a lot of money from that that very short weekend. But uh one of the uh folks on the team was a a young uh developer, software developer named Phil Kimmy, and he was going into his junior year of college. And I said to Phil, hey Phil, um, what are you doing this summer? And um he said, uh, oh, he didn't really have a uh a proper summer job. I think he was gonna build websites for his dad's friends, dentist, or I don't know, it was some crazy thing. And I said, Hey, you want to build this rover thing a little in a little more detail than we had done over the weekend? And um he said, sure. So he uh we had an office at Madrona just right down from me, and uh we started building out rover, not really expecting it to become a company or anything. Um and I was the CEO and and and Phil um was uh was building it. And uh long story short, we we built sort of that initial uh that initial prototype, the initial site, people started coming. Um and um if Phil Kimme, who's the uh another co-founder, had a proper summer job, there would be no rover. That's the truth. So he never he's now the VP of engineering, he never went back to college. So uh fantastic uh story. He's now got you know hundreds, you know, hundreds of people reporting to him. He's just fantastic.

SPEAKER_05 5:54

So that was a fun little the other key part of establishing a successful marketplace is establishing trust uh between the consumers and the suppliers, and uh having a dog myself, um you know, very concerned about uh leaving the dog with somebody I don't really know, and what kind of environment do they have, how many other dogs uh do they have, and so forth.

SPEAKER_00 6:19

So uh how did you go about establishing trust with the marketplace? I think it's something we're still working on.

SPEAKER_01 6:26

Now we have you know almost a billion dollars going through the rover system. It's be you know, it's a it's a massive uh company now, and and I think much bigger than we could have conceived that it would be, and I think it still has a tremendous amount of growth. By the way, the the market size when I originally thought about it was as a competitor to Kennels. It never never was that. It was the it was the the your in-laws watching your your your dog, it was the the the the friendly neighbor, it was not going on the trip in the first place. That's the the much bigger market than the kennel market. And so what we are really you know, what rover really is is a, or at least on the boarding side, because we have other services as well now, but uh boarding is still the major uh the major business for rover. Um what it really is is a is a replacement for letting your your parents or your mother-in-law watch your pet. And that, by the way, sometimes that might sound free, but of course it's never free. The trust and safety part is still a huge issue. Um, I still think that we um are trying to figure out ways to establish trust. But here's some of the things that we tried to do. Uh, one is um, you know, we we really highlight uh reviews. And so if you go to Rover now and type in your zip code or try to find a sitter in your area, uh there will be people around you that will have hundreds and hundreds of reviews. And so you can go and and and and read what your neighbors have said about leaving their dog, you know, or cat or other pet with with uh with rover. And um, and so um you know one way to do it is through uh through reviews. I think we really worked on the quality of the of the uh of the uh pictures and the uh quality of the of the sitter profiles because that's another way to establish um uh uh some kind of trust. You know, we we really worked hard on things like uh response time. So one way to garner trust is hey, you go there, you ask the sitter, if it takes three or four days for that person to respond, that's obviously not good. And so um our algorithm you know uh ranks sitters uh along a bunch of factors, but one of the factors is is how fast they respond back. And so again, little things, little small things that that establish um that establish uh trust. Um but it's uh it's an ongoing challenge. Um I still feel like that uh trust and disintermediation are probably still the two biggest issues for us at Rover. And at our board meetings today, uh we still talk about how do we continue to build so we're lucky in that.

SPEAKER_05 9:18

What is the uh business model for uh for Rover? Um, because uh at the end of the uh the uh visit with the dog, it's easy for me to just pay cash. Um so how do you get in the middle of that transaction and take a uh do you take a transaction cut? Uh what what what is the what is the model?

SPEAKER_01 9:38

Yeah. Yeah, you're you're mentioning disintermediation, which is a huge issue for all marketplaces, and it's a big issue for Rover. Um I we can talk because I think that's one of the most interesting uh areas where I think we've we've innovated, and this is a really credit to Aaron, Easterly, and team um coming up with a really innovative technology way to address that, although I still think we're we're always working on disintermediation. But the business model, just to answer your question directly, is we take a percentage of the transaction. So um and that so if the when the sitter says it's gonna be you know 20, you know, 25% um uh type of transaction fee uh on that uh on that uh service. And so and that again, it comes out of of of uh uh the I mean it's sort of when when you see it in the end, it kind of shows up in in different kinds of ways, but but essentially it's a fee uh on that service. Um we're trying to add value to the the transaction, so um so hopefully uh everyone feels like we uh are are more than earning our keep, but uh but like a lot of uh of transaction uh and marketplaces, you know, we take a piece of every transaction that comes through our system.

SPEAKER_05 10:54

Uh visits. Uh you know, I would think that uh if I use rover for the first time, and let's say I paid through rover, and you know, take and rover takes a transaction fee, and I'm really satisfied with the dock sitter, why wouldn't I just go directly to the dock sitter next time and just avoid uh going through rover?

SPEAKER_01 11:16

Well, again, I think this is this is uh uh disintermediation or or uh is uh is an issue again for all marketplaces, including for rover, but here's why you wouldn't. Um our algorithm ranks sitters by a bunch of criteria. So we talked about response time, for example. The number one criteria, however, that we rank sitters by is repeat usage. So if you are a rover sitter and you have a bunch of one-time sit, but no one ever repeats, there's a couple re reasons that that might happen. One is is that you're a terrible sitter and no one wants to go back to you. By the way, you know, over 90%, I think it's gonna be well over 90% of folks get five-star reviews. So the uh uh and I think in part that's because people are happy with the service and it's so much better than the alternative, but it's also that people may think, hey, someone's gonna be looking at my review, so I I don't want to you know rate someone lowly that is you know lives close to me. Or so anyway, so uh reviews tend to not be the best indicator. We think the best indicator of of quality sitting is repeat usage. So one reason that you might uh not re use a have high repeat usage is that you're not a good sitter. Another reason that you might not have uh high repeat usage is that you're cheating. So I go to you, Sharish, I sit you, and the next time I say, hey, well let's just go around the system and let's just use rover. Well, our out our algorithm detects that. And so guess what? Like if you do that, um the chance that you're gonna show up high on the next when someone else is looking for a sitter in your area is very low. You may show up again if we don't have proof, you you know, we're not gonna kick you off the system. We don't know that you're cheating, but the algorithm's pretty good at detecting based on experience that someone might be cheating, and um and so um you're gonna show up very much lower on that list until you prove that you get a lot of repeat usage. And so when you go to Rover, um those first couple pages that you see of sitters um are going to be sitters that are close by but also have a lot of repeat usage because we know they're great sitters in terms of the quality. People go back to them again and again, and we know they're not cheating. And I think that was a brilliant um insight in terms of how to use technology to help uh undermine um uh cheating and disintermediation. Now you mentioned is it foolproof? I you know, gosh, how big would Rover be if we were able to catch because so now let's say you did this the first time, so you cheated, and now you take the you take it off market. Maybe that was someone that would have sat would have been a would have been a relationship we would have had for the last 10 years. So we're definitely suffering, especially in newer markets. So you think about in Seattle, there's probably less cheating than there is in a much uh less mature market, right? Because we haven't had the algorithm hasn't had time to really uh sort rank the the repeat usage, uh the high repeat usage users in a way that is effective. So um but but uh but a brilliant insight in terms of how to leverage technology to help with this. Wow, okay, so there's someone I trust and respect who who was supportive. And then I flew down and met with, because obviously the Mandrona folks had their own, you know, and I loved them and respected them, but they had, you know, I was doing it uh there, right? So I flew down and and and talked with Brad Feld, who had been a uh a wonderful mentor to me and a fellow investor, and he's just an incredible um VC. And I said, Brad, um I'm I want you to talk me out of something. I'm thinking about potentially leaving Madrona and starting this studio concept, as you said, Gary, very risky. It was a startup, and please talk me out of this and tell me I should not be doing this. And he heard that, and his response was, well, yeah, it's certainly risky, but here's a check. Um you tell me how much you want, how much you need to invest in it. I'm your, you know, and I I will lead uh that first investment round. Um and I'll back you. And with that, I I came back from talking with Jeff and talking with Brad, and I I was I needed that. And I think that's what people don't understand, no matter how successful or how you know, say for a senior executive at an Amazon or someone who's even had other entrepreneurial successes. We all need that push. Someone telling us it's gonna be okay, I've got your back. If you do this, I'm in with you. That could be a co-founder, uh, that could be uh another investor, that could be a spouse or a family member, but it is so critical to the entrepreneurial process to have people that believe in you, even when a whole bunch of other people don't, but having someone say, I gotcha. This is and to me, had those, you know, had Jeff and and um and Brad said, no, no, no, you should stay, I I would still be a Madrona. So um I the answer is every deal is unique and every deal is different. So so in general, if it's our idea and we start something and we get some traction with it, then that you know, we're gonna take more equity in that case than if it's someone else's idea that they bring to us and um and we work on it in that context. Um but we well with the way we think of ourselves as a as a co-founder with you generally, though, if you sort of think about it. So uh we we basically say, hey, we're partners. And um, and we might be the junior partner, we might be the senior partner, it just depends on the situation. Um, but we just we like to think of ourselves as as founders and and we stay, you know, both, you know, and then we put you know hundreds of thousands of dollars, you know, uh of uh of either dollars or work into the beginning of that company. And so um, and so and that entrepreneur is gonna bring sort of his his or her expertise to it, and we like to think that we could be great co-founders uh together. So um, and we've again, you know, thus far, uh every time that we spun out a company, it's gone on to get funding. And so I think one of the uh benefits of going with us, especially in a difficult market, is is that we uh we tend to have a very high success rate of at least getting that first round of funding.

SPEAKER_02 18:33

The founding of OffRUP with Nick Husar.

SPEAKER_03 18:41

Yeah, well, I think like most entrepreneurs, I believe that you have to kind of have this passion for a problem and you can't get it out of your head. And so for me, I had to just happen to be where I was in my life. I had done startups before. In fact, the startup I had before this, I was sleeping on an air mattress. Like they're a lot of work in the early days. Uh so I had no plans on starting another company. Um, but my wife and I bought a house and we had a room full of stuff. Most people have like that junk drawer in your house. We have we had one of those two. Uh, but I also had a room full of stuff. And when she said she was pregnant, I go, this is awesome. And I go into dad mode and I'm gonna stand there and I'm in the doorway of this room and I'm gonna sell all this stuff, and I'm looking at this room saying, This is gonna take me forever to clear this room out using Craigslist. And I looked down at my phone, which is like the first uh my first iPhone was like the second gen iPhone, and I just kept going like this. I'm like, why can't I just take a picture? Like I have this device in my pocket now. And if you're familiar with Life Pretty Smartphone, uh the option on Craigslist was like 15 minutes, right? You had to take a picture of a camera, you had to tether it up to a piece of you know, computer, then you had to upload it. Uh and so I just thought, like, huh, I think that part could be easier. And then I think I closed the door, I didn't even post anything on Craigslist. And I went about my life. I just kind of forgot about it. But it kept nagging at me for months and months and months, and so kind of out there looking for a job because I left my previous startup, and my here I have my wife that's pregnant, I have no income, but she's working at Microsoft. So I don't want to be a deadbeat dad. I'm like, I have to get a job. But after about five months, and I was already kind of sketching this stuff out, and I kept thinking about I said, Well, I think we're all gonna have these smartphones. Um, and if and I think the cameras are gonna get better, and I think we can look at the problem um and reimagine it. And so if you look at Craigslist, it was built in an era of the PC, which made sense as the tools they leverage. But if you look at the smartphone, you can take all that that complexity and make it far more efficient. So my belief was we would have these devices, we could leverage the cameras, we can leverage the maps, we could leverage payments, we could do all these other things and remove a lot of friction. So my belief in the early days was because of this platform shift, we could rethink local commerce as we know it. Um now, most folks in Seattle thought we were nuts. Uh, you're crazy trying to disrupt Craigslist, nobody's been able to do that. And my my view was I don't care if we convert a single Craigslist user, because I I did a lot of homework and talked to a lot of people, and my conclusion was there's a lot of people that just don't use it that much because it's not worth their time, or they're scared of the trust and safety, especially women. Women were very scared of using Craigslist. And so um I just felt like, man, we got to go all in on mobile, and we gotta be the simplest and most safest way to do local transactions. And so we just built the whole company around that, you know, that belief. And I also like to say at the end of the day, yes, we are definitely a secondhand marketplace, very dominant in that. Long term, though, that was never the vision. My vision was to become the platform for local commerce full stop. Because you think about it, where's all the stuff going? Like, where's all the Amazon stuff going? And what's happening is value is growing all around us. Like our homes are actually getting bigger, we're actually having less kids. A quarter of the US population with two car garages can't even park in their garages anymore. And so that's what I want to get after. It's like I want to remove a lot of friction and do it as as simply as we can, and as a result, we should unlock value locally. And that's that was the belief ten years ago. It's still the belief I have today.

SPEAKER_07 22:17

So you uh uh started this in Seattle, and uh let's talk about raising money in the early days for all right, because now you know you have the flywheels starting to move, so you got to reach achieve scale, so you needed money. Uh in my mind, you were in Seattle, not known for major marketplaces at that point. We had Amazon, but they were not in local commerce, right? Amazon was still early days, they're evolving from books to other things. Um, and then uh Craigslist, eBay, all those guys were I mean, Silicon Valley was much more location-wise, better suited to start an offer up, right, than Seattle. Um, and uh you also had uh theoretically, in the minds of the investors of incumbent, so big called Craigslist, even though none of them had used it, I'm sure. None of them bothered to ever go on Craigslist after you said, Hey, have you ever used Craigslist? No. Then they're quickly going in and checking, what's on Craigslist now?

SPEAKER_03 23:16

It's not the core demo, no.

SPEAKER_07 23:17

Yeah. So how did you raise money in the early days? What metric you showed the investor that you you you talked about two things, right? You talked about the circle, I want to win the circle, and you uh all these hacks. What metric when the early days you showed the investor saying, hey, this is gonna work? That's when the investor said, Yeah, we'll take a bet on you. Because the odds of you making from the money-raising standpoint was harder in my mind than your business working. Your business had a good chance of working, but raising money in this town in those days was a tough, tough, tough proposition. So, what'd you do there?

SPEAKER_03 23:56

What was your yeah? Yeah, I mean, I think kind of multiple things. So, for one, I feel fortunate we have some really amazing angels that supported Offer Up early on in Seattle. And and a bunch of them, I think, believed in me and my team, even without any metrics. Like, you don't have any metrics here, what you're just launching a product, and so you know, we were able to raise a few hundred thousand dollars to some local angels. And that was enough for us to kind of cobble our way to kind of get a basic product out there, but not a lot of growth, not a lot of scale. Um and you're right, I think from you know, we are definitely more of a Silicon Valley style company. Um, I think Seattle is a wonderful place to raise capital for say more of enterprise or StAS type products, but you don't see a lot of consumer uh companies in Seattle. So I think the challenge, of course, with consumer is often uh real revenue scale is deferred, right? You have to get an audience growing versus monetize it early. And I have feedback by the way, I don't want name names, but from a local investor that said, well, you should just charge a dollar a host meeting. I'm like, I'm never gonna do that. Why would I put a key in the host? Like that makes no sense to me whatsoever. And then of course the response was to go to demonstrate revenue tracking. I'm like, well, that sounds great. Uh as a VT you would say that, but uh for to grow a marketplace, that makes no sense, right? And so uh you name it, I pitched every institution in this town multiple times. I got rejected by the we got rejected from Tech Stars twice, by the way. Um, you know, we've been pretty much rejected. Every major kind of institutional investor uh rejected off road. So again, we were fortunate they had enough angels that were able to somewhat survive, you know, on that. I also think, you know, I knew fundraising was hard. I've been in this town for a while, but you know, going through it again um even back then was was extremely challenging. And so, you know, we went for two years before we raised our Series A. I think most people would have tapped out. Um I had at least a product out there, but here I am now. I don't have an income. Even the first money we raised, I've the baby was already on. Yep, I was a father now.

unknown 25:59

Right.

SPEAKER_03 25:59

And my and my wife was working. I told her, I said, there's two ways this is gonna go. Either this is gonna fail miserably and you're gonna resent me, or it's gonna work and you're gonna be super proud. But there's no middle ground in this. So luckily, luckily my wife's pretty happy now. Like that.

SPEAKER_07 26:14

Your family unit is as important in this journey as as uh your developers and your co-founder. And people just kind of think of separation, right? Yeah, I I I gotta work and then I can I can have a family. No, the the pressure of uh a startup is clearly unknown uh for first-time entrepreneurs and certainly for younger entrepreneurs. They just think, hey, I'm just gonna work 24-7. Well, you got a baby. That's gotta be fed every couple hours. Uh you know, and your wife in your case, in your case, your wife was working. So wow, that that's an incredible, uh, incredible journey that you that you went on. That was that's amazing that you somehow felt in you that you were going to make this thing work. And till you ran it to zero, you're gonna do it. So you know I I like that story. I like that story a lot.

SPEAKER_03 27:12

And to the point, by the way, in family, I encourage anyone listening, like you take them on the journey. You don't have to tell them every intimate detail and how terrible your day went, whatever. But don't you you need to bring them along because they they are supporting you without that significant other uh that's supportive, I think it's gonna be a real hard row for anybody to be an entrepreneur. And so I think it's important to share that. So when you do have a bad day, they can be empathetic. But if you're if you're not sharing anything, um it's hard for them to understand what you're going through. So it's a huge market. So like I'm glad these strategies all kind of played out because we are still, you know, Facebook came and they we didn't see them coming. Um and Facebook's a very sizable competitor, but we still have a lot of user growth and engagement all around the country special markets uh that we were very strategically focused on. So that was you know, I think back to the kind of the question that we definitely still went market by market, but at some point we had enough word of mouth and stuff to scale that it kind of didn't matter, right? So sometimes we would focus on driving more supply or more engagement in LA. Sometimes we'd say, no, we just want more installs across the US. So now we've been installed 139 times, so half the US population is installed off revolution. At least at one point. You know, but it's very market by market until you know you get enough scale where you know the economics are such that there's different strategies you can deploy. But I'd say in the early years it was definitely market by market.

SPEAKER_05 28:43

It's very difficult to get in the middle of that contact and take a clock. So how do you think about monetization from that perspective?

SPEAKER_03 28:52

Yeah, it's a good point. So, you know, we always focused um we said, well, it's got an audience that we'll scale and we'll monetize that audience via advertising. If that was uh a lot of early revenue for us. Um the challenge with local and being in the middle of a transaction, it it is a big one. And I believe in the U.S., you know, I I vent a lot about this to people because I think it's kind of a sad state work now when it comes to like local payments. Like if you go to China or even India, you realize how easy it is to pay for things. Well, here in the US, like uh you just feel like you feel like an idiot when you go to the point of sell systems. Yeah. Like, oh no, you gotta put the card in for that one, you gotta do this one. Like it is ridiculous how much time we spent just dealing with the with the archaic payment systems. Um or how many times do you go out to have dinner and uh you know you want to pay for your bill and it's they're waiting 15 minutes. We don't do that in China. And and I felt like we need ways to do this, and I you know, and so I think that's just the state of where we are right now, unfortunately, in the US is our payment infrastructure is antiquated, it's held up by the credit card companies. Um it's so fragmented if the uh the US system is like at the end of the day, we just need a QR code. That's all we just have a QR code to get it paid done. And it's all this other stuff kind of gets in the way. And so I think the challenge of local payments, and this isn't just an offer up challenge, but in the US, is you have to build it has you know, in China they got the the economic such that it's so you know, it's so cheap to do the transactions now. Um and the government's really supportive this that you know companies like uh you know Alipay, they just kind of eat that because they make up for, you know, in other ways. Here in the US, it's like cost prohibitive. It's so hard to do. And if you want to do a local transaction, the government now says, well, I'm gonna want to tax that again. So you're double taxable. Like you've already paid for the title, but now they're not gonna say, now you've got to pay for it again, right? Even though it's a used gift. And so that's the biggest child I think for payments in the US. It's not like, well, I would love to do local payments. I think it's the I think it should be our future. And if you look at cash, like we hit peak ATM, I think uh last year, like cash is continuing to go down. And so the what we're gonna we've got to get to a point somehow that it makes economic sense to make payments way more ubiquitous. But today just we just I just I look around the world and like we are so far behind when it comes to payments. And it's a big inconvenience. Like even standing there in the grocery store, like why are we all standing in line, you know, waiting to pay anymore? Like it makes no sense. So I again I think we're still, I mean, we're talking about this under the umbrella of offer up, which I definitely would love to get after this more, but I'm I'm just sharing my macro view of I think the bigger challenge that's out there.

SPEAKER_02 31:45

Mega successful exits, Cronus and Ali da Io with veteran.

SPEAKER_05 31:57

What made you decide to become an entrepreneur?

SPEAKER_06 32:01

Good question, Surish. Sometimes I ask myself that. Um I don't know. Seriously, I remember I always had this urge to be an entrepreneur, right? Um not necessarily to make money. In fact, I remember in my college or undergrad, uh, there was this yearbook where one of the questions in the yearbook was, if you had a billion dollars, what would you do? Billion dollars obviously is a lot of money. And I still said I'll start a company, right? So for me it was not about money, it's about the journey, it's about getting something off the ground, something that does not exist in the market yet, and working with a great set of people, iterate quickly, learn quickly, and build something that's of value that didn't exist before has been magic. And uh that probably is what pushed me to it because I had a very comfortable job. I was considered as a strong performer inside the company. To leave that in 2007 to go startup did not make a lot of sense. Uh in fact, my old father thought maybe I got fired and that's why I'm doing a company. I mean, people could believe that I was leaving this job at Microsoft. And uh I mean I was running the Visual Studio platform team and the partner ecosystem. It's a substantial role, right? And uh but I thought if I didn't do it then, I would never do it in my life, and I didn't want to deal with that. Right. I said I have to do this, it's been a long time role. Uh even when things are not going, uh things are going so well, you still have to. I became worried about timing, right? If I don't do this now, when will I do it? I had the realization sorry about that. Uh I had this realization that if I cannot give up on the money and the responsibilities now, next year it will only be more. I'll not do that and I'll never do it at the startup. And uh that increases the sense of urgency. In fact, I remember one C were telling me I already have 72 tools. I cannot have a 73 tool, but I want this functionality. So we built this, we are the first team, I believe, to build this into Slack and other collaboration platforms so people can have access to the goals and uh clearly have prioritization of why they are doing what they are doing without having the burden of having to install yet another tool. And the third insight we had was the friction of work between OKS was still very high, and our other vendors have not quite solved it really well, and we focused a lot on extremely simple user experience and a lot of integrations, extremely easy two-click integrations to line of business tools like Salesforce. So if you are working on an objective that's about generating revenue, you don't have to worry about spending time updating all that OKR. We could just two-click connect to Salesforce, pull in that information and update it. That's as an example of integration we did on to reduce the friction and improve through ease of use. All three bets, it we just got very lucky, we turned out to be turned out to be right. None of those ideas again came from me, it came from actually all the customer interviews we did. But our team executed phenomenally well, and within about a month or two of launching, we had customers like Slack. It was an RFP process where we went up against other vendors and still wonders. And within 18 months or so, most people are saying, including G2, we were seen as a leader in the OKR market.

SPEAKER_05 35:20

Great. So now this time around, um you did raise uh funding uh and quite a bit of funding for um uh for Ally. Uh was it because uh this time around you had uh conviction and you felt that uh now that you had conviction early uh early on that you could go raise money? That's right, Firish.

SPEAKER_06 35:40

I mean the customer traction was I mean was the main was what gave me the conviction. Right very, very early on, we started seeing so many trials, really high profile organizations like Slack again, signing up for the product, like Airbnb, signing up for the product. And I realized the trajectory of this company was different from what I saw in Cronus. The second reason I said raise money was my competitors in this market had raised a lot of money, and I wanted to make sure I had gravitas, right? Not just money, but also right partners. Um but to be honest, raising money, my seed round was very hard. I had a lot of no's, right? At least 20, 25 no's I think. Right. And uh because it made sense, right, from a VC perspective. This is a guy saying he has some insights into how to build a product is very four years later than the other vendors who are already well funded. So I can understand why from a VC point of view it did not make sense. And eventually though, some people decide to take a bet on us, and uh I think maybe Syrish, you introduced me to at least one of them, right? So they decided to take a bet on us. And uh what happened though is right, as soon as our seed road happened in I think January of 2020, right? I think. Uh anyway, January of 2019. Um within four months, Axel came in. Or Axel and some other QVCs came in. And uh it was not something I sought out. They came in, and of course they were phenomenal partners, right? So we decided to actually want to partner with the more than eating their money. And within three months of that, Tiger Global came in. Uh I mean, if I remember, Scott sent me this note saying, Oh, can I grab coffee? And I was a moron, I didn't, I was so naive, I didn't know what he meant. I said, Of course I'll grab coffee with Scott. And then at the end of the conversation, he calls back and says, I'd like to invest, right? So I was not necessarily seeking money, but uh fortunately money found us, and we are the business was doing really, really well. So it made sense to take the money because we knew we could deploy the money, right? We in a disciplined way though. And so and then our CDC happened like a year later, again, because the business action was really good. We had some incredible logos, we had extremely good NRR, right? The retention rate, land and expand was a core motion for us in the bottoms up, and we had like 142% or something, our NRR was really, really solid. So all of that helped to attract capital. So after the seed round struggle, things are easy.

SPEAKER_07 38:04

One thing that you uh you brought up in your early days at Microsoft when you took your first job uh or your first assignment was the crisis of confidence, right? Everybody what would you give entrepreneurs out there um advice on uh how to handle this? Because they're gonna face their own self-confidence crisis, uh employees and teams, customers and investors, but you continuously faced it, you brought around uh a conviction to that story. What would you say that entrepreneurs need to really do or look out for uh to build confidence of uh with people around them, whether it's employees or customers?

SPEAKER_06 38:55

Very good question, Claudie. Uh I will say though, right, I think as an entrepreneur, the toughest thing I found is on one hand I'm extremely confident and passionate about what I'm trying to build. On the other hand, I do maintain a list of all the things that can go wrong. Right? What are the things I don't know yet about the business that I need to get to know because that's how I'm mitigating risk, right? We uh I don't think our job is to take on a lot of risk. Our job is everyday reduce the risk to the business. And uh so you are trying to play both, to be honest, right? You have to have high confidence. And for me, the confidence in came from I genuinely care about these problems. That is one thing I'd strongly suggest to entrepreneurs do not look at a space because you it looks interesting, but see whether you deeply care about the problem solving it for that customer. The solutions will change, right? I mean that you'll prevent and you'll do all those things, but you have to deeply care about solving that problem, in my opinion, or about that customer. In both cases with Ally as well as with Cronus and now with the third startup, I just feel like I deeply care about this problem. I spent the years thinking about this problem, and uh I just feel convicted that I have to go and solve it, right? Um and I think that that is key because and then on the other hand though, you do have your list of questions, right? I there are so many unknowns, particularly in my third startup now. I'm just starting, it's a long list of unknowns, right? That uh I can't pretend like I know yet, right? That's dangerous. So I do make a list and say I try to create a plan for what are the top three unknowns at this point that can kill the company, and I try to actually go and solve it. And I share that with my team too, right? We all share the conviction of we are trying to build something amazing, it's also a very important problem, and we all genuinely care about it, but we all are also um obvious. I mean, we also know that there's a list of unknowns, right, that's gonna stop us from solving it. And our job is to go make them known. So I think I would not say it's a blind confidence. It is confidence on one hand that comes from a deep desire to solve the problem. On the other hand, you have to be pragmatic about what is it you don't know and how you can get to know that.

SPEAKER_07 41:10

That's incredible that uh you kept this list so you can de-risk the company every morning. Yes.

SPEAKER_06 41:16

I think a lot of authority forget that. Yeah, I think I think some people do unconsciously, but I thought it was helpful to actually write it down.

SPEAKER_07 41:25

I I I've always believed that you have to uh sort of commit by writing it down, especially something so important, because it's just not uh it's just not investors uh that you only have to de-risk. You have to de-risk your employees, your customers, everybody. And I think in both you had that journey with both Microsoft and Acronis where you had to constantly de-risk that that seems like that seems like that's stuck. So I think entrepreneurs listening, you know, start making a list of things that you don't know and you need to know.

SPEAKER_06 41:56

And focus on the task, right? There will be a lot, right?

SPEAKER_07 41:59

And focus on what can kill your business if you don't solve it or get another source. Now, having been in Microsoft, why did uh it aid? Because by the time you got into Microsoft, which was a good 13, 14 years, a complete generation had gone by, new CEO, new culture, pandemic had onset. What made this work? What did you uh have uh have a special uh approach that they had not done? They had acquired enough companies. They continue to acquire other companies.

SPEAKER_06 42:28

I what made it happen? I mean we are a good question, Cody. Let me reflect on that, right? The reason I think the integration went very well, in my opinion, is number one, uh the culture of the company, Microsoft has changed significantly since the last time I was there. I mean, you wouldn't believe it, right? In the first month, my small team was part of Microsoft as a massive company, and people reaching out and asking how we can help. I've never seen that happen even once in my previous interest, right? The notion of one Microsoft, right? If you're gonna win together and we're gonna work together as one Microsoft, was very evident. And that actually helped a lot. So many teams helped us actually get integrated, our product, our team, right? That made a very, very big difference. The second thing is actually us, not just me, there are several people in Ally who came from Microsoft background. Us being very familiar with the Microsoft culture made it much easier, right? In many cases, I knew other leaders in other parts of the company. So I could reach out and ask for help or figure out how we can get to our product milestones and so on. The third thing is actually uh both Microsoft and my ally team tried to actually make this integration work. The reason we were here, we could have been independent, was to get 100 million users. And we were we just want to get there, right? So we were working super hard. In fact, uh some people remarked right, we are still working like a startup, right? But now we are part of 200 billion. And uh my take was I don't know any other way of working, to be honest. Right? This mission of getting to so many people, bringing purpose is so important, and we didn't want to lose this opportunity. So we were very driven. My team did a phenomenal job. But without the culture, without the help from other teams, uh none of this would have happened. So all three were, I think, core.

SPEAKER_07 44:24

So entrepreneurs, right, are are in a new era, right? Because uh when you left Microsoft 2007, 2008, yeah, we had a slump, then we had this incredible boom, right? 15, nearly 15 years of just only up and up and up. Now we've had some market correction, now you need now they are on to unit economics, just not growth for growth's sake. You know, those all kinds of other factors have come in. Uh now the now that that all that reality is, and with your experience in two startups and two successful exits, what would you tell first-time entrepreneurs who are just starting out on this journey and haven't had the experience you had with uh with your last two ventures?

SPEAKER_06 45:12

Uh to be uh Gaudi, I don't know if you know that. I think you know this, right? When I started Coronas, it was 2007, and within four or five months, the financial crash happened to those uh within a few months, the crash happened, right? It was definitely not a great time, right? Uh to start a business. But I've learned actually, I would say two things. One is, again, what I said before, believe in what you're doing. It's going to be a tough journey. A lot of people think they get excited about an idea, they think it's gonna it's exciting and they're gonna make life is gonna be great, but I that's not been the case for my last two journeys, right? It's a lot of struggles. Every day there's a struggle, every day there's a challenge. There are days where I've uh woken up and thinking, man, everything has gone to hell. I don't know how we're gonna last a day or a month. And that same evening I've gone to bed thinking we are king of the hell, right? So it's it's an interesting journey, but it's not easy at all, in my opinion. So you have to believe in something. You have to uh that's long, long lasting, right? Uh that is one. I would say the second is I think constraints are your friend, right? Having less money, right, um, or whatever the constraints are, right? I think they are, they make them your friend, right? They are your friend. They're the best creative ideas. When you're driven and passionate about an idea, constraints are actually not a bad thing at all. You will find incredibly creative solutions to solve problems. And history has shown this repeatedly, right? And uh that's what we can all do. Uh I I'm not terribly worried about the market conditions or fundraising conditions, to be honest. Uh, because I think people are passionate driven, will be creative, and they'll still manage solved problems. That's why they say the greatest companies get created in tougher times, right?

SPEAKER_07 47:01

And that that's why Cronos was successful and you built on top of it because you started the hardest developer joy through generative AI with Rajivrajan.

SPEAKER_05 47:19

Okay. So after you said four to five years um uh first uh for the opportunity uh for Atlasian uh CTO position, um what made you consider that opportunity? Right.

SPEAKER_04 47:34

So I've always been an engineer. I in fact, first few years I did a lot of work as an IC engineer, um, and then sort of, you know, I accidentally got into management, if you will. Like in fact, the first time uh I was I was doing uh performance assessments. I didn't even know I was a manager. My manager comes to me and says, Hey, you're doing performance assessments, and that was a little bit of a, you know, I didn't really realize I had gotten into engineering management, but I try to stay an IC and sort of like not be a manager for a while until until I found that um, you know, you get a lot more ability to take projects forward, and I started to enjoy the coaching aspect of it as well. And so those things led me eventually into engineering management roles. Um and so you know, that was sort of a an evolution of things um you know that led me there.

SPEAKER_05 48:25

Got it. I'm sure that you were speaking to the two CEOs of Atlassian uh when you interviewed with them. Uh, what were they looking for?

SPEAKER_04 48:37

Yeah, so you know, um in terms of Atlassian, like in terms, like I said, I was I was I've been an engineer all along, done a number of engineering leadership roles. Um and so I care a lot about the engineering function and engineers in general, right? And the Atlassian leaders, the the CEOs, we have two, um, we're looking for someone who could come and take Atlassian to the next level. So Atlassian is a fairly well-known company. We we we produce Jira, which is what we are known for, but we have other products like Confluence and such. And uh, Jira is actually a very well-known name with respect to technical teams. So any any software team, any technical team uses Jira for issue management, bug management, things like that. Right. Um, but the company's aspiration goes beyond that, right? So Atlassian wants to essentially do make it so that you can use Jira for non-technical teams as well. So an HR team, a finance team, legal team, etc. Because at its heart, Jira is a project management, issue management, you know, software. And people in any department, any company need to manage projects, right? If you're building a rocket that you want to put into Mars, like you want to be able to track issues and projects and things like that. So the company's aspiration is to essentially unleash the power of teams. You know, Jira is one piece of software to do that, but we have a whole what we call system of work, um, set of solutions that you can use to manage work in any company, any any technology, any vertical, you can use that. And so if you uh if you achieve our aspiration, really Atlassian would be something that would be used by all companies, small, medium, large enterprises, wall-to-wall, to get work done, to do knowledge worker work, right? So that's a big mission. And you know, Atlassian therefore has the potential to be in your top tech company. And to do that, you need world-class engineering. So, what Atlassian was looking for was can we have someone come in who can lead engineering as a CTO, take it to the next level in terms of world-class engineering, someone who's been in places where you know they've seen world-class engineering, and that was definitely true with me. And so that was the pull for Atlassian to uh have me come take the role. And for me, the attraction was to be able to come and lead all of engineering, the whole function. As I told you, I'm passionate about engineers and engineering, and to be able to have a vision for where I want to take engineering, and so to be able to come and lead the whole function and help the whole company go towards the next level of growth was uh super attractive to me. Right, right.

SPEAKER_05 51:12

So, um uh what would you describe your mission as a CTO to be? I've talked I've heard you talk about uh developer joy. Um that the key to your mission?

SPEAKER_04 51:23

Well, I I would say the key to my mission is is really how do I build a world-class engineering team, right? And so there are many elements that go into world-class engineering. You know, I actually break it down into three pillars. You know, the first is whatever software you build, better have trust with customers. And what by that, what I mean is it should be reliable, right? We are we build cloud software, so you want it to be four nines, you don't want it to go down. So reliability is important. Trust with your customers with respect to security is important. You know, customer data is super important, so you want to make sure you're a good guardian of customer data. Um, you want to make sure if customers have problems that they get support quickly and the product is supportable. So those are all things that go into customer trust. The second pillar for world-class engineering is you need awesome people, you need great engineers, you know, you need 10x engineers. Um, and so how do you find the best engineering talent? How do you make sure that your existing engineers in your team are learning the right skills to be world-class engineers, right? So it turns out, even though you're I'm here as a CTO, it's not that I you know only solve architectural technical problems. I'm also building the talent in the organization so that we can have a world-class engineering team and be known for that, right? And that helps us build amazing products. That's the second pillar. And the third pillar is what I call developer joy, which is has many components to it, one of which is developer productivity. But let me explain to you what developer joy is. All of us who are engineers who you know joined, who learned how to write code, wrote our first program, Hello World program, you know, saw the did a little printf or s or some kind of thing and saw the text appear on the screen, you know, that excitement that you felt, that joy that you felt, that you could go write something on a keyboard and it and something happens on the computer, right? That that's the joy we want in all our engineering.

SPEAKER_07 53:15

Let's uh if you could take a few minutes and describe to our audience the uh AI initiative within your product and or products you have created with AI baked in uh first and how what the use cases may be.

SPEAKER_04 53:31

Sure, yeah. Look, um first of all, let me just step back and say that that you know the AI moment we are having right now, I think, is a big deal. This is a big, big moment for technology. If I go back in time, probably the two other big moments were when the iPhone mobile revolution happened, and then before that the internet, right? So I do believe that this is a big deal for not only tech, I think the difference between uh AI and sort of like the previous ones is this is going to be even more far-reaching in its impact on all kinds of industries and and all people across the the globe, right? So it's a it's a big moment for us to lean into. Like I said before, AI has been around and ML has been around for a while. What's really revolutionary is the LLMs and Gen AI and the ability to like really train a model to understand language and then therefore transpose you know text between um computer things and and languages and so on, right? Um, and so uh when I look at it, there's kind of two different things happening. There's the LLM wars, if you will, there's a whole bunch of companies building LLMs and so on. That's similar to the cloud wars, excuse me, or the browser wars of before. And you know, certain companies will operate in that mode, and that's what they will go after. And so there'll be some winners and and such. Um we are not in that game. We are we are in the game of applying those LLMs to our end users to make our end users more productive, right? So Atlassian is in the knowledge worker game, right? So if you think about what knowledge workers do in any kind of company, right? They do work. How do you define that work? You know, today a lot of that work gets defined in spreadsheets or you know, bespoke tools and things like that. Whereas what Atlassian is selling is a system of work, all the way from OKRs and goals at the C level down to uh team goals at the departmental level, down to Jira tickets at the individual level, right? So if you really, for any given company, this is what they want. They want to be able to track their system of work across their talent, across their people, across budgets, and manage all of that. And that's what Atlassian offers. And so for us, our main thing is how do we use AI to make that better, right? So if you're a company building a rocket that's going to Mars and you have a bunch of Jira tickets, what we would like to say is, hey, just come in and say in natural language, when is the rocket going to launch? Right. And imagine it goes and grinds through all the tickets and says, you'll be ready in 23 days. Okay. That's value, right? And so that's what we are working on is how do we bring not only natural language but also AI productivity to your to the work that you do using the products that we offer you, right? You have hired us to set up the system of work. How can AI make you more productive, right? Um, another example is we have something called Jira query language, JQL. And you know, a lot of people go and do a lot of JQL queries to find things and so on. Well, we have worked on something where you can do a natural language query and that converts it to JQL and then does the job for you, right? So basically, we are looking to infuse AI into all the things that people do with our products today to make them a lot more productive. And we launched that as something called Atlassian Intelligence last year. So that is the first wave of our products is Atlassian Intelligence in Jira and Confluence. You know, you can have a summarization feature, you have a sidebar chat that allows you to do things more productively. Um, and so that was the first wave. The second wave is what we call rovo, which we announced in April and we are going to launch later this year. And that also brings in something called agents. So now you can have agents that work like teammates that do specific tasks. For example, if you have a marketing agent that wants to do a press release, well, you can you can build an agent for that. So now we have a whole platform that allows you to build agents to do specific tasks. These agents aren't super smart yet, but they'll do one sort of uh you know narrow task really well, and that helps you with your productivity, right? So um so we have agents now and an agent platform. And then also we have improved search because search continues to be something that's really important to be able to find information in our enterprise, and that's part of our rovo offer. So that's our sort of second wave. So we're already into our second wave of uh AI, you know, from the Gen AI.

SPEAKER_07 57:52

I think you you're in this unique uh leadership position as a company and as a leader in that company. So if you could talk to our audience saying AI doesn't have to be scary or it is scary, then tell us.

SPEAKER_04 58:06

Yeah, yeah. Look, uh I think that um you know any any new technology, right, um comes with these kind of sort of fears of things, right? So long story short, my view is that AI is gonna help human beings be more productive at a at an aggregate level. I don't think it's it's gonna like take away jobs and things like that. I think, you know, at least my view is that it's gonna help us actually create more jobs and uh perhaps have human beings grow up the value chain in terms of being more productive and doing higher value things, right? To the extent you have teammates and agents that take away some of the routine stuff, uh, that allows you, therefore, you know, the human mind and the human brain is has uh enormous amounts of creativity and talent, right? So we can then uh reserve those brain cycles for those more creative kind of flows, right? And um, so I think I don't so that so I that's my view, is that I think it'll be net positive. Uh doesn't mean that there won't be like certain, you know, uh uses of the technology that we need to worry about. There's obviously things we have to worry about with AI as well, but largely I believe it'll be positive and we have to manage that transition carefully as a society, of course. But um I do think you know you can you can get more productive through AI. So that's our view. Um but also we are very early in the AI adoption. I don't think, notwithstanding all the hype and everything else, uh, you know, we are still very early. We 50% of knowledge workers, you know, we've done some surveys and things like that, and there are many studies out there, but I'd say, you know, 50% of knowledge workers don't use AI on a weekly basis. You know, maybe they use it a little bit, there's a little bit of a novelty effect, and then they they don't use it. So um, but those teams that are using it regularly are finding it to be about 1.6x more effective, right? So we are seeing that if if you actually have a use case that that that lines up and has you know product market fit, so to speak, with that with that set of people, they are being more productive in those use cases, right? Um but also a large proportion of knowledge workers and executives are struggling with how to use it effectively, right? So that that's some of the data we have seen and some of the research and so on, right? And so um again, I think we are early in that in that evolution. I think we are seeing some use cases where it's super productive, um, including for engineers. We have seen that, you know, like I said, some of the coding assistants help save you one to two hours per week. Um, and we are experimenting with them and also building some of our own. Um, but also I think um, you know, we're all trying to figure out what is that sweet spot and where does that productivity gain happen, right? Um so I think we should not get too caught up in the hype. We should understand what is working, what is not working, and that's the business we are in, right? So we are looking at hey, how do you get your job done? What is going to help you be 20% more productive, 30% more productive? And in some cases, there will be a breakthrough where it would be a nonlinear jump as well, but we're all still experimenting to find out what that is.

SPEAKER_07 1:01:13

So just a prediction. Uh, we'll hold you to it because this is our ways to get guests back to our show. So uh give us a prediction for um for uh Gen AI uh from Rajiv.

SPEAKER_04 1:01:27

Yeah, look, you know, um predicting is a dangerous game, right? But um I I I'll say this, you know, we are we are probably um overestimating you know uh how much AI will do, right? So one thing I will say is a year from now, we'll have made a lot of progress, we'll have a lot of use cases, uh, but we won't be anywhere near things like AGI and like you know human beings being replaced by AI and some of those kind of like uh you know cases that people are saying. Uh but I think we'll be much further along on the LLMs, especially with modalities. You know, today a lot of it is text. I think video and and audio and other modalities will become more commonplace as well in in some of these things. Um and then the LLMs are making a lot of progress. So I think the context windows will become much bigger for sure. And um with that bigger size, you know, you start to then be able to do more interesting things with code. So I think that revolution with respect to um coding assistance, I think will will continue to happen at a at a good clip. Um and then I think like a lot of things will become table stakes. Things that we thought of as AI features today, like summarizing something and so on, I think will just be expected. You know, just like spell check. Remember, spell check, grammar check, you know, you take that for granted, right? Um but so some of those things have become like it's no longer AI, it's just you know, it's part from the course, it's there. Um, I think agents will become more ubiquitous and we'll start to trust and use more agents in what we do, uh, little agents that do little things, but then make your day more productive, but not like complex agents that you can give an entire like go uh do this, you know, interview with Rajiv for me. Like here's my Gauri avatar that goes and does the interview for me. I think we are a little ways away from that one.

SPEAKER_07 1:03:46

Thank you for listening to podcasts.