A Product Market Fit Show | Startup Podcast for Founders
00:10:35 · Pablo Srugo
[00:10:35] S0: I think a hundred percent. There's kind of a burned all boats, and the other thing on that note I think that was – and especially important today because today it's so hard to fundraise, right? Two years ago, everybody was raising $5 million pre-seed grants. Now it's tough, and there's power to constraints, which is part what you're saying. He’s constrained on one hand because he is like what else am I going to do if I don't do this? So I might as well keep doing it. He's also constrained on the other hand because he doesn't have VCs that have backed him for 5, $10 million where he can just start trying this out, trying that out. He's just got to grow with the rate that he can grow, and he actually talked so much about how he couldn't get enough funding. And so the fastest he could grow is effectively like a 2X, and that was what he did. And I thought to myself – because this whole WeWork thing came out. They’re filing for bankruptcy, which is a whole other tangent I want to touch on in a minute. I think to myself what if Vision Fund existed in the ‘60s, and what if this guy went and somehow secured $10 million way too early? What would that have done? Part of me believes – because I've seen so many founders I've spoken with who told me – these are billion-dollar founders who were like I bootstrapped early on where I raised like 200K, really, really small, and it was such a blessing at the end of the day. Most of them, by the way, try to fundraise. They just couldn't. They were like, ultimately, it’s not like they wanted to, like they were thinking, oh, I really should bootstrap. It was like I'm trying to fundraise and I can't.
00:11:54 · Rob Woodbridge, Pablo Srugo
[00:11:54] S1: No, no, no, keep your money. [00:11:54] S0: But then they look back – exactly. Don't let me pay myself so I can eat. But when they look back, they're like the fact that we were bootstrapped helped because, again, there's power in these constraints. And so I think about the Phil Knight story, and I go back to this kind of analogy. What if there was Vision Fund? What if there were VCs back then? What if he would've raised 5, $10 million because he had this big idea about how he's going to disrupt Adidas and Puma or whatever with this strategy of whatever? What would've happened? There’s an argument to be made that the market was tiny back then. It was only going to grow at a third rate. He only could have pushed so much harder, and there's a huge argument that Nike might not exist today because he could have over hire, try to push on things that don't really exist, try to have this idea of the market's going to move at the rate it's going to move. Of course, you can pull on it a bit, but only so much. And if you think I've raised five million, now I'm going grow 5X instead of 2X and you don't, things get complicated, right? And that could have been a reason for him to give up.
00:12:58 · Rob Woodbridge, Pablo Srugo
[00:12:58] S1: I don't even think that – you're right. If he had had money, I don't think that he would've built his – made his own sneakers. I think that that was out of – born out of necessity because he couldn't – it's a funny thing, though, that – I mean, you can never know what happens. You've seen many shoe companies come and go in that period of time since Nike was built. He ostensibly created the industry. He built this industry, and so you're right; I don't think that he would've been able to do it. I don't know. Money clouds everything, and I think, all those founders that say, oh, I'm so glad I bootstrapped, it's a load because they were forced to. And in hindsight, they understood, and I think that that helps for their next company or the next company because they understand what it takes to build a company. There's nobody that wants to be in this situation where every dollar… [00:13:52] S0: No, of course, you don't, but I mean it. Here's the opposite side. I've seen founders who they went – they had their exit, right? Now they're on Round 2, and especially last couple of years, I mean, if you were a proven founder with a cool story, you raise money, 100%. And I can tell you what happens when you raise more money than you actually can deploy is you get fat. Whether it's you hire a bunch of people… [00:14:14] S1: Lazy, man.
00:14:14 · Rob Woodbridge, Pablo Srugo
[00:14:14] S1: Lazy, man. [00:14:15] S0: Lazy. You polish everything. Why wouldn't you do it? You have the money to do it. I think it was Jack from Clio, CEO of Clio who – one of the things he said to me was, “Because we – just think about the overhead when you start hiring. You think that, if you have 2X to developers, 2X to marketers, you move 2X fast. But if you don't even really know where you're going or if the market isn't ready to take that growth rate, it's not just wasted effort, wasted dollars, it's actually decreasing productivity. Because when you're smaller, there's no communication overhead. It's you. It's three other people. You're on the same boat. You're swimming the same way. You don't even need to talk about strategy because you know it, and so these are the things I think about back then. I'm like, man, this is a $100 million, $200 million market in shoes. There were these competitors that had market share. You’re only going to grow so fast. The fact that he was constrained and had to just do what he did and take it kind of slow – and by the time that Nike come – came out, as you said, out of opportunity, out of necessity, he had a whole distribution company built out. Never planned it, but organically, that's what happened.
00:15:24 · Rob Woodbridge, Pablo Srugo
[00:15:24] S1: He built it step by step. One of the best parts in the book, it totally resonated with my thinking as a business, as an entrepreneur, as an early entrepreneur. Never considered way back when I was young, like 100 years ago, VCs weren't something that you went after, right? It was reserved. There was not a lot of it, especially in Ottawa. So you're building a company based on revenue, and so there was this scene where the company lost, Nike lost $57,000 in a year. They lost 57,000. Think about that for a second. Nike lost 57,000. It's nothing today to any company. [00:16:04] S0: Right. It's like what an engineer makes in a day or something.
00:16:04 · Pablo Srugo, Rob Woodbridge
[00:16:04] S0: Right. It's like what an engineer makes in a day or something. [00:16:07] S1: Pretty much, yeah. Lament that. It's 57,000, and the board was beside themselves. They're like, “I can't believe you lost 57. What are you doing?” They were completely beside themselves. But that's the thinking that I always grew up on. For me, it was that I never understood how you could lose a penny at the end of the year and still be in business. It doesn't make any sense to me. That's illogical. So I get it. It was what drove me is that you, in essence, are an all-cash business. The cash that you have is what supports you. Maybe you get a line of credit or a credit card like everybody does, but at the end of every year, if you're negative, that said to me, hey, dude, you're out of business. And so I get that thinking that it was like you – and back then when this – when he was building it, that was the mentality. You don't lose money. You can't lose money. And that was the first hurdle to get through is that how do you convince a board of friendlies, no doubt, but a board nonetheless that it's okay to lose $57,000 in this company when that was unheard of? And that stuck with me because it seems so innocuous, especially when we talk about WeWork and the money that they're spending out and all of these companies. I work for a bunch of those companies. It’s $57,000 an hour is what they're losing. [00:17:32] S0: Yeah, that's right. No, it's nothing. [00:17:34] S1: Not in a year.