00:41:48 · Joubin Mirzadegan
[00:41:48] S1: Sorry. Explain that again. But you didn't end up raising those amount.
00:41:51 · Immad Akhund
[00:41:51] S0: Raised the full amount. Yeah. I'm just saying I... In my mental model, I was like, this is how much we would have raised if the market was not so good. Yes. Right? So not like completely shitty market, maybe we wouldn't. But like if it wasn't like a frothy market, like... Or like if I wasn't like good at raising, I would have raised less. And then I try to allocate my costs against that versus how much I actually raised. So I will try to do... And mostly, like for us at least, is hiring. You know, for token companies, it's probably slightly different. But you know, for us, it's mostly like, what does the hiring plan mean if I had raised, you know, half as much or whatever it was? And then I'll only unlock the rest of the money if I think I'm doing like, you know, if I have grown enough to justify spending more money. Like, if it's like, you know, I'm so sure that I've grown way beyond what the next round would look like, that I'm like, okay, know, now I can unlock the rest of the money. So basically, think it's fine to raise a lot of money, just don't spend it. But it does require discipline. But at least my observation hasn't been VCs are telling me to spend it, really. I think this is probably like separate point, I don't know if you have it in one of my tweets, but like, I don't... My experience at least with Mercury has been like, you want VCs to be your partner. If you're ever in a situation where VCs are telling you to do things, you've kind of screwed up that relationship already. And I am telling VCs, hey, what do you think? I'm thinking of doing this, etcetera. And they have opinions, but I've never had any of our VCs say like, hey, you know, do this instead, and I think you should go do this kind of thing. It's been much more like, okay, that's reasonable. Like, what have you thought about this, etcetera? Like, it's it's very collaborative. And I think that's how VCs like to operate with the entrepreneurs. I think this whole model of like VCs are telling me to spend money or like VCs are telling me to do x is like kind of a a flawed model that I don't think entrepreneurs should like fall into.
00:43:52 · Joubin Mirzadegan, Immad Akhund
[00:43:52] S1: Mhmm. And so I guess the counter argument... Let's take the VC point aside, because obviously, I agree it's self serving. Yeah. But the argument that they would make. Yep. Which in some ways maybe hold some water in my mind is like you limit your paths. For example, okay, let me just take like, okay, if you raise at 1.6 Mhmm. And the business didn't do as well as it has, like, obviously now that decision in hindsight looks great because you took less dilution and you've raised three x that valuation. Yep. But if that wasn't true [00:44:27] S0: Yeah. [00:44:28] S1: And you, let's just say you raised it, I don't know, 800,000,000 instead, and you got acquired for a billion. Mhmm. Because it was, you know, it still made sense for an acquisition. That'd be like one argument. Argument two is the raising at a extremely high price puts in some ways, especially in B2B, like enterprise, like inordinate amount of pressure where there is, especially on go to market, like headcount equals revenue. And if you've signed up for this giant valuation, you're probably signing up for a bigger number than you otherwise would have, which maybe the market may or may not be able to sustain. And now you start doing unnatural things.
00:44:28 · Joubin Mirzadegan, Immad Akhund
[00:44:28] S1: And you, let's just say you raised it, I don't know, 800,000,000 instead, and you got acquired for a billion. Mhmm. Because it was, you know, it still made sense for an acquisition. That'd be like one argument. Argument two is the raising at a extremely high price puts in some ways, especially in B2B, like enterprise, like inordinate amount of pressure where there is, especially on go to market, like headcount equals revenue. And if you've signed up for this giant valuation, you're probably signing up for a bigger number than you otherwise would have, which maybe the market may or may not be able to sustain. And now you start doing unnatural things. [00:45:19] S0: I think it goes back to my previous point that the founder's always gonna take it. So you just have to manage around it. Right? So to me, the M and A point, I don't think it matters too much. I mean, for most PCs, whether they get 1.2 X or one x, which is like the preference stack, it's like basically the same. So, you know, it's like... You're basically in like some sort of failure scenario. I'm not worried about the VC. I'm saying [00:45:41] S1: more from the founder perspective. [00:45:42] S0: Even the founder. It doesn't matter. Like, [00:45:43] S1: it's Yeah. Yeah.
00:45:43 · Joubin Mirzadegan, Immad Akhund
[00:45:43] S1: it's Yeah. Yeah. [00:45:44] S0: Like, again, if you're not spending the money, then like actually, you know, generally speaking, M and As sets a price, and then they add the money on top. If you've got more money in the bank, you've got a higher valuation, really. So I don't think M and A is an issue. I think down rounds are more often an issue, and it is quite hard to do down rounds. In really frothy markets, when the markets turn, people actually... I don't think... At least my experience hasn't been their mind doing down rounds. There was a bunch of down rounds for like actually pretty good companies in '23 and '24, and everyone was like, okay, know, everyone acknowledged '21 was crazy, and that it wasn't really a down round. This was just like the right size round. So I think it's manageable, again, if you're not spending all the money. If you're spending all the money and you've overspend money and you didn't come up with like any productive outcome from it, like, that's always gonna be a problem. And that ties into my last thing. I think you need really good discipline on spending money. So nobody has that. You say... [00:46:39] S1: Like, do you... Like, don't you think you're... [00:46:41] S0: You should. [00:46:41] S1: I just feel like most founders [00:46:43] S0: You know, there's this statement [00:46:44] S1: that's their burn proportionally. I...
00:46:47 · Immad Akhund
[00:46:47] S0: There's a statement that, like, VCs like saying, that, like, founders or CEOs have to be good capital allocators. And, this is just, like, a co part of that. Like, how do you spend money? And, like, let's just take sales and marketing, or let's just take sales, I think it's easier to do that, right? You just have to understand, if you hire five salespeople, how quickly will they pay back their salary? Right? I think that's the math equation, in my opinion. And like, you pick the right target, and to me, if you have product market fit and it's a good target, it should be around one year. So if you are spending money, and you're growing the sales team and they're keeping to that kind of one year target, you're like pretty good. Like, it basically means you, you know, if you spend 10,000,000 on sales, you have 10,000,000 more in revenue. If you spend 50,000,000 sales, you have 50,000,000 in ARR or whatever, which I think is a pretty good math equation. Like, you'll have... I would be shocked if you can't raise a future round, that's your math equation. Now, what happens in these frothy markets is people like go way too heavy in sales and marketing, their payback ends up being three years or five years, and no one's going to fund something with like a three to five year payback on spend. Or like, yeah, whatever. Some negative thing happens there. But like, you just have to have like some discipline about it. It's not like you know, if you have, like, zero salespeople, you don't hire 50 salespeople. You hire two people, and then you hire five, and then you, like, make sure you're managing against that payback. But, yeah, it's not... And again, if you went to any investor and any board meeting and you're like, hey, this is how we're thinking about sales. This is the payback we're targeting. This is how we're gonna ramp up, and we're gonna measure the payback every month, and we're report that to you. You know, no one's gonna be like, are you crazy? Why aren't you spending all this money? Like, I just don't understand the situation where, like, someone's just like, I raise more, therefore, I burn more. Like, I don't know. Like, what are they doing? Like, that's not the job. Like, the job is like going, like, every dollar you spend, you should be getting ROI from it. And if you can't justify ROI, don't spend the money. Yeah. I just...