Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy, Jesse Zhang
[00:00:00] S0: How much do you think you're sleeping? [00:00:00] S1: I mean, it really varies. This week in New York, it's probably four to five hours a day. And it's not good because I'm not someone whose brain functions that well on less than eight hours. [00:00:00] S0: So if you think about the difference between the first and the second company, obviously now you have a company that's working extremely well. It's growing really, really fast. What did you do at the beginning of Decagon that was informed by your prior experience to make this one go better?
· Jesse Zhang
[00:00:00] S1: I think this is broadly true of starting companies. I think the first stage is by far the hardest because you're kind of just finding direction. And finding direction is very difficult because by definition it's not something where you can just have a goal and you're just grinding towards it and you can get there. Your goal could be, yeah, finding a direction, but it's more exploratory. So I think what we actually are quite good at now, and Ashwin, my co-founder, who's amazing, he also has similar background, he started a company before that got acquired. I think when you start a company the first time, you often share the same experiences, which is finding directions very difficult. So I think this time we were a lot more thoughtful about it. And again, it goes back to what your strengths are. I think we view our strengths as, hey, we're very good at problem solving. We're very just rational about things. We're just good at execution. And so if that's the case, then I think we just try to systematize the ideation process and it just comes down to, okay, whatever you work on, it has to be something that people will really invest in. And how do you tell if that's the case? You can just go really deep asking them. And I think people are usually a little bit, almost embarrassed or not comfortable going super deep in these questions. When you talk to a potential customer, they actually don't mind answering questions such as, okay, if we built this for you, exactly how much would you pay for it? Would your boss need to approve it or your boss's boss who needs to approve it? How would entire organization think about ROI? How would you present ROI to the leadership to protect yourselves and also make you look good? And I think if you really go deep there, it's almost you're basically asking classic sales qualification questions when in founder form. And because you're a founder, it's just feels a lot less salesy for you to go deeper. That process is what gives you a lot more signal. When we first started, we fortunately were able to get in front of a lot of large companies, mostly digital native ones. And we just asked these questions and we kept digging in. We had a bunch of different ideas at the time. We're not tied to any idea and it's just kind of open exploration.
· Jesse Zhang, Patrick O'Shaughnessy
We were looking at things ranging from data analysis to security to pre-sales to ops stuff. And that process was very helpful. It just shows you that there's a lot more signal to gain than just talking to customers, which is the general advice, or building something that customers want. Building something that people want. Yes, that is true, but it's very hard to just know that, yeah, they'll just tell you what they want, but then it turns out that that's not useful. [00:00:00] S0: What was the literal process? Would you go to a single person and ask them about multiple of your ideas at once? Or would you target it more one idea to one person? [00:00:00] S1: You have to target it based on what that person owns. If that person's very senior, you can ask about multiple. So if you talk to a COO, for example, you can talk about a bunch of different use cases. That gives you some signal too. And then if you're talking to more of a VP of a certain area, you're probably focusing on one use case. [00:00:00] S0: So maybe go in detail through one of these conversations so that others maybe could benefit from what you've learned. So what is the order of the questions? How would you structure those conversations to get the most information possible?
· Patrick O'Shaughnessy, Jesse Zhang
[00:00:00] S0: So maybe go in detail through one of these conversations so that others maybe could benefit from what you've learned. So what is the order of the questions? How would you structure those conversations to get the most information possible? [00:00:00] S1: So yeah, let's say we get into the call and you start by just doing very high level discovery. Hey, what are the sorts of projects that are ongoing right now? How do you spend your time? What is kind of stressful for you right now? Et cetera. And then you can kind of get a sense for the types of use cases. And then very quickly you can just form hypotheses literally on the fly of, okay, what would a product be? That makes sense here. And so then you're kind of explaining, okay, yeah, so what if something an AI agent could do XYZ, would that be helpful? And most likely they will say yes. Because there's this thing that happens where if someone's on a call with you, they almost feel they owe you like— [00:00:00] S0: A positive that you can—
· Jesse Zhang
[00:00:00] S1: —take away. So they're oh yeah, yeah, that'd be great. Now you've kind of solidified at least the potential product ideas. They might adjust it a little bit. They'll be yeah, no, actually, no, it should work this, and so on. I remember we talked to a lot of ops leaders, Matt MacInnis from Rippling is a great friend of Decagon and telling us about all the different things that happen on his team because there's so many. And similar with other ops leaders we would talk to. It was kind of a range of companies as well, people like Oura Ring and so on. And you get down to it and you're like, okay, great, now we have these use cases. How much would you pay for it? And that kind of forces them to think because most people are not thinking about that as they're talking about ideas. They're like, oh yeah, this would be cool. As soon as you force them to think about how much you pay for something, it kind of is a forcing function for finding some order of magnitude, some level of scale. And so then they're like, okay, well yeah, you have five people doing this full time. If the AI agent could do this, well, maybe we'd be able to get rid of one of them, assign one other one, and then as a result I'd pay you 20k a year or something like that. And then in your head you're like, okay, cool, so now at least you have a general order of magnitude. 20k of course isn't amazing, but if it's like I could quickly churn out a ton of these, maybe that's interesting. But most of the time that's not the case because there's not that many good ideas out there. Honestly, most of the time at the end of this exercise you're like, okay, great, glad I didn't pursue this further because that would have been a waste of time. And at the end, people are paying you like $100 subscription per month and it's like a big company, so you just do this exercise. And the nice thing about this exercise as well is that it puts the customer in the same frame of mind as you and so then they can tell you other things. Essentially what happened with our company is like we were talking about all these use cases and they were like, okay, great, yeah, if you did this, we have five people over here, but by the way, we have a 500 person support organization and there's a lot of opportunity there and we'd be like, okay, great, tell us more. Right. And then you kind of dig into it.
· Jesse Zhang, Patrick O'Shaughnessy
And I think this just goes to show that as a founder, you kind of have to build your own conviction and kind of do this process yourself. Because at the time, essentially what everyone told us, including very smart older founders that we knew and so on, was that excuse case super obvious. There's probably just going to be incumbents that are just tacking onto the product. And because it's so obvious, there's probably a reason why no one's super big right now or there's going to be someone that's ahead, but no one really knows. And even for me right now, and other founders talk to me about other spaces, it's like, yeah, I have my own opinions, but I don't really know the details of the space. And the only way you can really know is by talking to customers and getting that signal. And in hindsight it turns out that in any sort of wave at any time, I would say a very small number of good ideas. And your job is to ideally find one of those at the right time. And so, yeah, by the definition it's going to be pretty non obvious and pretty difficult. And so if you can do this process well, it'll give you the most signal. [00:00:00] S0: Do you remember the highest number anyone said for how much they'd be willing to pay for something in one of these ideation sessions? [00:00:00] S1: Yeah. So the time was probably on the order of low to mid six figures.