A Product Market Fit Show | Startup Podcast for Founders
00:50:19 · Pablo Srugo, Cosmin Nicolaescu
[00:50:19] S1: In other words, there's value of getting the right investors on board, and those big investors with big funds need to put in big dollars. [00:50:24] S0: Correct. General Catalyst for us has been like invaluable, and and in general, like both H and R Block and Armadino, they were the ones who introduced us to them. Got you. And and you're able to it's like having a top tier investor is so valuable, and and we've been fortunate to know a lot of the the top tier investors in the industry at at Stripe and in Brex as well, which I'm very grateful for. The second piece is, it's very hard for me to predict the future. It's very hard for me to predict how macro economy will work and how easy fundraising is or not based on that. There's cycles in and out. It's very hard for me to know what I should spend money on. Like, everybody last year was talking about the cost of tokens is going to go to zero. And I actually took the opposite side last year because at the end of the day, tokens represent capacity and we're very constrained on capacity. We don't have enough energy, we don't have enough data centers, and the demand is is exponential. And so if I think about it from that angle, I think actually token cost will probably increase, which is what's happening today. And so I got asked this question at a panel a couple months ago, which is if you project out maybe a year or two from now, do you think you're gonna spend more on humans or tokens? And I don't think the answer is obviously humans. I think there's actually a good chance that you spend more on tokens than
00:50:24 · Cosmin Nicolaescu, Pablo Srugo
[00:50:24] S0: Correct. General Catalyst for us has been like invaluable, and and in general, like both H and R Block and Armadino, they were the ones who introduced us to them. Got you. And and you're able to it's like having a top tier investor is so valuable, and and we've been fortunate to know a lot of the the top tier investors in the industry at at Stripe and in Brex as well, which I'm very grateful for. The second piece is, it's very hard for me to predict the future. It's very hard for me to predict how macro economy will work and how easy fundraising is or not based on that. There's cycles in and out. It's very hard for me to know what I should spend money on. Like, everybody last year was talking about the cost of tokens is going to go to zero. And I actually took the opposite side last year because at the end of the day, tokens represent capacity and we're very constrained on capacity. We don't have enough energy, we don't have enough data centers, and the demand is is exponential. And so if I think about it from that angle, I think actually token cost will probably increase, which is what's happening today. And so I got asked this question at a panel a couple months ago, which is if you project out maybe a year or two from now, do you think you're gonna spend more on humans or tokens? And I don't think the answer is obviously humans. I think there's actually a good chance that you spend more on tokens than [00:51:36] S1: you spend on humans. Are you also finding that the spend on humans, like, a per human basis is is much higher than it used to be?
00:51:36 · Pablo Srugo, Cosmin Nicolaescu
[00:51:36] S1: you spend on humans. Are you also finding that the spend on humans, like, a per human basis is is much higher than it used to be? [00:51:43] S0: We took the approach of again, not probably scalable, but everybody at accrual has the same salary. That's wild. [00:51:51] S1: I dude, I've never heard of that before. That's crazy. [00:51:53] S0: So Sid and I make less because I think it's only fair for for founders to to be in that situation, but everybody else makes the same amount of money because one, again, the roles are very fluid, like, I I don't wanna optimize for that. Two, we're hiring pretty senior folks, premature folks, and so, like, I don't wanna have different levels and and all that, like, I don't care about it at the end of the day, you're in this function and you're doing the best that you can at helping the company as much as possible. [00:52:20] S1: But does that mean some people come in, they get a huge pay raise relative to what they were making, some people taking a huge pay cut, or are you just like, you're you're hiring from the top of the mountain anyways, or or how's that how's that worked out?
00:52:29 · Cosmin Nicolaescu
[00:52:29] S0: So in general, I would say we've seen both pay raise and pay cuts. I would say most are pay cuts given where we've hired from, but they're typically insignificant. So everybody makes the same amount of money, but we're pretty generous in that amount to a certain point. And so the thinking that we had there was if we're going to hire senior people, generally they will have higher cost, higher expectation, higher market opportunities. We definitely believe that at this stage of the company, the reason why you're here from a financial perspective should be the equity, not the cash. Otherwise, don't join an early stage company. It's not worth it. If you don't think that early stage company will 10 x, 50 x, a 100 x, whatever, like something very, very substantial, you should not be at an early stage company. Go work at a big company. You'll have a much better quality of life relative to income. At the same time, there are costs associated to that. And so we don't believe that you should make like huge sacrifices, and if you do, like, you're not gonna be able to hire people that have kids, that have a house, that mortgage certain things. And most people that that we have in our company are in kind of that mix. The other thing I tell people is the value of your equity today is zero. It doesn't matter what our valuation is, either we go to zero or we grow significantly more, what the value is today doesn't really matter. So I don't do the math in terms of what the dollar value is, I do the math in what's your ownership. Like, what is the ownership in your company? And we give everybody like quite substantial ownership in the company because again, if we're not hiring a lot of people, we can afford to be much more generous with the people that we do hire from a cap table perspective without being overly dilutive to everybody else. So all these things kind of trickle in and and and kind of can compound one way or the other. And I basically every person that we hire, I walk with them like, here's the ownership that you'll have in this company, what do you believe this company will be at, here's where I believe it will be at, within a reasonable time frame, so like four to five years, not like fifty years from now, like within this stock grant, where do we believe each of us, what are we modeling on our side, Here's with your numbers, it looks like.
00:54:28 · Cosmin Nicolaescu, Pablo Srugo
Here's with my numbers, what it looks like. Here's the average if there's a delta, etcetera, etcetera. And getting them a sense of where this could be. And that's what should excite people, and that's what people should work for versus high cash guarantee, no risk. And we've had people that said, I need more cash, and respectfully, I tell them that, like, then you shouldn't be an early stage company. Like, you don't need to be at a 20 person startup. There's nothing wrong with saying, I I can't take this risk, or I can't afford to take this risk, then go look at a bigger company that will have very different equity packages and different cash packages. I think it's a very good filtering function, which I think we found right at equilibrium between not super low where we can hire people. We've been very successful at basically converting folks that'd be successful in our work trial, and filtering out people that probably are not fit for the super early stage kind of second. [00:55:17] S1: Yeah. And it it, you know, it gives you an edge, this idea that you're hiring fewer because especially on the stock grants, like, it's hard for somebody that's going through the more normal hiring path. Like, let's say another skilling startup that raised $50,000,000 to be able to match those equity grants just by the sheer number that they're gonna have 50 people, a 100 people, instead of 21.
00:55:17 · Pablo Srugo, Cosmin Nicolaescu
[00:55:17] S1: Yeah. And it it, you know, it gives you an edge, this idea that you're hiring fewer because especially on the stock grants, like, it's hard for somebody that's going through the more normal hiring path. Like, let's say another skilling startup that raised $50,000,000 to be able to match those equity grants just by the sheer number that they're gonna have 50 people, a 100 people, instead of 21. [00:55:34] S0: Because either you're gonna say, we give every all these companies give the same grants, and if you do that, you're just gonna dilute a lot more. So it's one thing to say, I'm giving someone 1% of the company, but it's a different thing if I go, what is that 1% in four to five years? [00:55:49] S1: That's [00:55:49] S0: right. Like like, dilution is something that, like, can can hit people quite heavily. And so that's why I do think you can be much more generous if if you have fewer people. [00:55:58] S1: Perfect. So listen. Let's stop it there. I think it's been a great episode. Maybe just as a last question, what would be like a number one piece of advice that you'd give or you tend to give maybe early stage founders that are in this kind of product market fit phase?