Lenny's Podcast: Product | Career | Growth
01:04:18 · Lenny Rachitsky, Keith Rabois
[01:04:18] S1: Do you see those sorts of things at the beginning when you're seeing a seed stage startup? [01:04:22] S0: Yeah, it's a great question because I think people can conflate two things. There's a difference between seeing it and understanding the potential. So what I'm looking for when I need a founder is can they articulate where the accumulating advantages can be in theory conceptually. They don't have to have demonstrated it. Yes, there's an occasional example. Once every five years you might find one where early you can actually point your finger on it empirically, but that's way too strict as a bar for an early stage investor. But I personally want the founder to articulate to me where they can build accumulating advantages and maybe even sequentially identify when they would start either taking advantage of them, leveraging them or measuring them. [01:05:14] S1: So when you're evaluating startups these days, I know this is a very hard question to answer, but just is there anything in particular you're looking for that you get really excited about?
01:05:14 · Lenny Rachitsky, Keith Rabois
[01:05:14] S1: So when you're evaluating startups these days, I know this is a very hard question to answer, but just is there anything in particular you're looking for that you get really excited about? [01:05:24] S0: I'm a founder-driven investor. So the only thing I really care about is, does this founder have a non-zero chance of changing an industry or the world? And if they do for a seed or series A investment, I'm in, period. Don't ask any other questions. That's all I need to identify. Not every investor who's been successful has the same algorithm they're running. There are technology-driven investors. I would say Marc Andreessen's probably someone like that. Vinod's a mix. He's both founder-driven and a technology-driven investor. There are investors who are products/market-driven investors. My colleague, David Wyden, I'd say is that. I think Alfred Lin at Sequoia is mostly that. So you can have different approaches, mental models, paradigms. But for me, it's, is this founder extraordinary? Do I have reason to believe that this founder is the next Brian Chesky? [01:06:19] S1: You mentioned that you're an investor in all these companies you listed are doing incredibly well. And you're on the boards of a lot of really successful, incredibly good teams and companies. Is there just something they are doing the way they operate that is different from companies that are not as successful?
01:06:36 · Keith Rabois
[01:06:36] S0: I think the subtle signal, let's say very early, is speed. And it's one of those things that's easy to say, but let me try to be more concrete. There's a tempo, an operating tempo that a successful company develops that develops very early in a company's trajectory and is incredibly impressive. I remember when Roelof Botha was on my board at Square. He led the series B. So he joined our board. And six months in, so two board meetings in, he said to me, he's like, "I haven't seen this kind of tempo since our PayPal days." And he'd been a VC at that point for nine years. And I was curious, I said, "What are you noticing?" And he's like, "At board meeting X, you guys identify an opportunity or problem. And by the next board meeting, you've shipped solutions, addressed it, featured just constantly, consistently." And I think that's right. So the time between the seed and series A at Faire was pretty tight. And I remember at the time my chief of staff was Delian Asparouhov. And Delian said to me after the second fare board meeting that he shadowed me at, he said, "If there's one company in Silicon Valley that would cause me to leave being the VC, it'd be Faire." And I was like, "Interesting. Why?" And it's like, "The pace of execution." And his answer was exactly the same as Roelof's. He's like, "There is something slightly off. And by the next morning meeting, not only have they identified the root causes, but they've shipped and reacted and measured the impact of the solution. And that compounds, that speed really does come out." So that's just one trait, but you see it. It did lead me to, for example, preempt the series A of Ramp. So I led this seed in May-ish of 2019 and gave a term sheet to preempt the A in September. So pretty quick. One of the two signals was how fast Ramp was able to be on the precipice of shipping the cards. I'd been working in financial services for a long time at that point, 19 years or so. And there's just a lot of moving pieces to ship a card. You need these program managers, you need the sponsoring bank, and you need this and this and this. It usually takes nine to 12 months. Best case, nine. Ramp was on the precipice in three months. And I was like, "Oh my God, I've just never seen that velocity." That was one of two, maybe three inputs.
01:09:15 · Keith Rabois, Lenny Rachitsky
And I was like, yes, makes sense to double down already, even if we hadn't shipped anything yet. So I think that's one. Critical density of talent, you see companies just creating an unfair advantage. The team was X when you invested in them. So, "Wow, this team is getting better, deeper, better," et cetera. So that's another signal. The third thing that I've noticed though is I think they have a different hiring philosophy ultimately, and maybe there's exceptions to this, but most of the companies I work with that are thriving have basically skipped hiring senior people, senior experienced people, mostly internally group talent. And I think that model has worked really well. It's definitely true of Ramp, definitely true of Trade Republic. It seems to be a mostly common ingredient, but there's probably exceptions. [01:10:12] S1: Wow, that is an incredible answer instead of traits. Just to be clear, what you're saying on that third piece, so it's not hire fan CVPs from other successful companies and instead develop people internally as a trait of-
01:10:12 · Lenny Rachitsky, Keith Rabois
[01:10:12] S1: Wow, that is an incredible answer instead of traits. Just to be clear, what you're saying on that third piece, so it's not hire fan CVPs from other successful companies and instead develop people internally as a trait of- [01:10:25] S0: Internally and almost turned it into a competitive advantage, meaning your strategy. We're just not even going to interview people. We're not going to try. We're just going to promote from within. And I think in some roles, it's not like you're hiring a GC typically right out of law school. But although we have done that once and it worked out pretty well, believe it or not, but I wouldn't recommend that. I have this blog post. Well, Delian wrote this blog post of lessons he learned from Keith. And one talks about hiring senior people. And the rough prism is, are you hiring for value creation or value preservation? If you're hiring for value preservation, typically some experience is useful. On the value creation side, it's probably not. [01:11:07] S1: It's interesting how much of this comes back to just your initial point about hiring and the team being everything. So number two was talent density. And three is helping people develop and be into the role versus finding someone. And then obviously, speed all trickles down from just who you're hiring.
01:11:07 · Lenny Rachitsky, Keith Rabois
[01:11:07] S1: It's interesting how much of this comes back to just your initial point about hiring and the team being everything. So number two was talent density. And three is helping people develop and be into the role versus finding someone. And then obviously, speed all trickles down from just who you're hiring. [01:11:24] S0: Yeah. I mean, I've watched people use even chief of staff roles to groom talent. The one company board meeting I was at this week that is phenomenal on any metric. And the last two, his CMO, who's fantastic, is performing miraculously, was his last chief of staff and his new head of product probably is his current chief of staff. And just created this institution of factory where he can absorb ambitious, talented people and over one or two years in osmosis, train them to be senior successful leaders. [01:12:02] S1: When you talk about speed, I think about Ramp for sure. When Jeff was on the podcast, their CPO, he just, our title was velocity, velocity, velocity. And I know they have days. If you go to days.ramp.com, it's the number of days since they launched and they're just always looking at that number, how long is it? [01:12:20] S0: Oh, yeah. Every board meeting starts with that. The first slide, day 1,184. [01:12:26] S1: And they're like, what are they worth? 100 billion, not quite, but they're insane. [01:12:30] S0: Probably not quite that much- [01:12:30] S1: Not quite but it's insane. [01:12:33] S0: ... but a reasonable fraction of that.