20VC: Fundraising Wisdom that is Total BS; Dilution, Meeting Associates, Taking the Highest Price, Always Be Raising | Why Second Time Founders Are More Investable & Why Not To Hire People Out of College with Dan Siroker, CEO @ Limitless

Dan Siroker
I very much believe you should either be in fundraising mode or not always saying the highest price is almost certainly going to be a mistake. When an investor asks how much are you raising? More often than not they're actually asking how much do you think you're worth? And let me let's start the negotiation on valuation right now because 20% is what they want. If you say, you know, we're worth, yeah, we're raising 10 million, they just take 10 million divided by 0.2 and then that's what they think that you think your valuation is.

Harry Stebbings
This is 20 vc with me, Harry stabbings and I think this is the most tactical show that we've ever done on fundraising. This show happened after me and this kid guest disagreed on funding round dilution amounts on Twitter. How nerdy can you get? And I'm so glad we did because this is one of the best shows we've done on fundraising. So I'm thrilled to welcome Dan Sirocco, co founder and CEO at Limitless for his latest funding round, Dan took a really unusual approach, resulting in 1000 preliminary offers with valuations as high as a billion dollars and resulting in him taking a $350 million series a valuation.

Now, prior to founding Limitless, Dan was the founder of Optimizely, scaling the company to 120 million in a era and raising from some of the best, including Peter Fanten at benchmark who led the series a. But before we dive in, lets face it, your employees probably hate your procurement process. Its hard to follow, its cobbled together across systems and its a waste of valuable time and resources and as a result you probably are facing difficulties getting full visibility, managing compliance and controlling spend its time for a better way. Meet Zip, the first modern intake to pay solution that can handle procurement and all of its complexities from intake and sourcing to contracting purchase orders and payments. By providing a single front door for employee purchases, zip seamlessly orchestrates the procurement process across systems and teams, meaning you can procure faster with the least amount of risk and get the best spend ROI for your business.

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Weve gone back and forth on Twitter. Ive obviously been a huge admirer of yours from afar for a long time. So thank you so much for joining me. Thank you. Feeling is mutual.

Dan Siroker
Been a big admirer of the show and glad to be on it now. I think great entrepreneurs are shaped by their early years and so I just love to go back. When you think about how your parents or how your teachers would have described the ten year old Dan, what do you think they would have said? They would have been very astute to notice that I was very into computers. So from very early age we always had a computer around and I owe my mom's boss.

She was working as a secretary at Stanford and her boss was professor Hector Garcia Molina. And he had this amazing generosity where every time he would buy himself a new computer for home, he'd always have my mom buy the same one for herself. And then me and my twin brother actually got to play with it a lot. So we'd always have the latest and greatest thing at home because of his generosity. And that, I think, propelled me to what I'm doing today because I'm into computers, which is something I've been doing ever since I was ten and even maybe younger along the way.

We have many great yeses and many hard nos in life and I find that they shape us, the highs and the lows. When you think about a great yes that you think really shaped you, and also a really shit no. What comes to mind for each before we dive in? Yeah. The first yes was about eight years ago when my now wife said yes to getting married.

Dan Siroker
Any other yes I've gotten from venture capitalists or employees or kind of pales in comparison to that big yes and then nos. There's one pattern of no's I've gotten that now my team knows is the, the most motivating no I get, which is the version of a no that starts with no. That's not possible. And I am a big believer in technology's ability to do things that were thought of as impossible before. I'm very motivated when somebody has a cynical or pessimistic view on what technology can do, and there's nothing more motivating to me than hearing that and then trying to prove them wrong by showing them, by building the demo, by building the product, by building the feature, to prove that that is something that technology can do.

And in some ways, every version of every startup I've ever done, there's some seed of that idea that no, that that's not possible. That motivated me to persevere. Do you agree with Mark Andreessen's statement that there's no such thing as a bad idea, only a bad time? I think that's largely true, and I find when I heard that, I think what I think about is, you know, I've had lots of pivots in my startups. Everything I pivoted away from almost always could have worked.

You know, it's not so much that, it's the unequivocal, at least in my mind, maybe this is my delusional, optimistic founder mind. I never thought to myself, oh my gosh, this would never work. It was always a version of, if you draw the analogy, like climbing a mountain, if you're starting to start up at the base of the mountain, and as you climb the mountain, you see other paths to the top that seem a little bit easier and a little bit better, and you've learned a lot along the trip, like, oh, I'll just, I'll go down a little bit to go back up that path. It's not to say your current path, you couldn't get to the top of the mountain. You know, eventually you'll get there.

It's just going to be much harder. So in that sense, I think it also goes to this idea that, you know, ideas are cheap. It's all about execution. So I do think almost any idea can work with enough perseverance. Rarely, very rarely is it just fundamentally broken as an idea.

I told you beforehand, we kind of just go off on tangents, but I am fascinated. We had Daniel Dines, the founder of Uipath, on the show. It was ten years to 500k in ARR. Not exactly hypergrowth scaling. You scaled now, and you've pivoted many times.

As you mentioned, if I'm a founder coming to you asking your advice, Dan on do I pivot or do I stick? What's the advice that you most often give founders, knowing all you do? The best advice I give is advice I've gotten. So there's two things I've heard on this topic. One was an early investor in optimizing and actually a coworker of mine back at Google, Elad Gill, who's now a very successful investor of himself.

Dan Siroker
I once sought his advice on this exact question. He told me pretty bluntly. He said, things that work tend to work really fast. It was this anti pattern. Most people would say, well, you got to stick it out and be perseverant and keep banging your head against an idea.

You have to keep executing it. But if you don't even see glimmers of hope, it doesn't have to completely be working. You know, you have to see some version of a glimmer of hope in the thing that you're doing. Even some of the stories like Airbnb, that people just thought of as this, like, it took for years and years of perseverance. There were glimmers of hope very, very early on that the idea was really powerful.

That was very eye opening to me. And you can kind of say, okay, yeah, if we've been at it for, you know, six months, and you don't see a lot of the glimmers of hope, then maybe it's time to pivot. The other one was recently I saw Dalton Caldwell was asked this question, the YC group partner, and, uh, he said, a good pivot feels like coming home. And that is something I've definitely resonated with every time I've, you know, pivoted or changed idea or adjusted kind of what our focus is in many ways similar to my mountain climbing analogy. It feels like you're on a better path.

It feels like you're closer to your core, closer to the problem, you know, closer to being able to, you know, solve it. And you were kind of on the periphery, and now you're in the core. So that would be my two thoughts of advice. You know, things that work tend to work really fast, and if you're going to pivot, should feel like you're coming home. I can tell you're not a venture investor, Dan, because you should never give attribution for other people's wisdom when you can take it as your own.

I always actually ask the one question, which is, are there more experiments that you're excited to run? And if so, what are they? And if not, then it's probably time to pivot. Like when you've run out of experiments, probably time to change. Yeah, I think that's totally true.

Dan Siroker
And I see experiments as kind of Pareto optimal or 80 20. Like, you've got all your most juicy, exciting hypotheses. And, you know, if those aren't working, you can always come up with new things to try, but it's almost always going to be like if the last five things haven't worked. Like, is that new six thing going to be the key success? Sometimes, but almost always, if you're naturally going to try the things you're most optimistic and bullish about.

But at some point, it's not so much that you don't have the experiments. It's like you're starting to ask yourself, is this even worth trying? Is there any remote chance that what I'm going to try next is even going to make a difference? When I speak to you now, like, the thing that's just really striking to me, Danielle, is just like the experience of starting companies, going through the hard yards and finding product market fit, not finding it, the pivots, which is why I love to back serial entrepreneurs and I struggle to back first time founders. Just so much mistakes and shit that you don't know that causes costly time.

Do you agree with me in the value of serial entrepreneurship? What do you actually say? It's kind of overrated, and every time's different? Well, I, you know, I have these tweets that have gone viral where I compare. I say, first time founder x, you know, second time founder y.

Dan Siroker
And it's usually some painfully true thing that I did when I was a first time founder x. And something that's sort of insightful, something I've learned, that's why a good example, one of them was, you know, first time founders brag about how many employees they have. Second time founders brag about how few employees they have. You know, it's sort of like this deep insight into, like, how to build a company. And I definitely think there's some truth to that.

It's surprising to me how many, despite all of this great content out there and why combinator and all this trying to help first time founders? They all kind of make the same class of mistakes over and over again without really, you know, internalizing the learned wisdoms. Another way to put it is why is that, Dan? Is that just human ego humanity? Is that just humanity of raising too much, hiring too much?

I think the core of it is the kind of person that makes a successful founder is usually pretty nonconformist. It's very hard either because the market has pushed them out from traditional jobs and they just can't succeed in a traditional job, so they start a company, or the entrepreneurship has pulled them in to want to be deeply autonomous and have control over and destiny. And so it's just very hard. I've actually really struggled with this. I was just talking to my old co founder from Optimize, getting his advice because he's a YC group partner now.

Pete Kuhman. I don't really know how to give advice to other founders and have it stick. You know, some of my best investors have Jedi mind tricked me because they've sort of never directly said what they thought. They've sort of influenced me through persuasion. I think this is why a lot of first time founders make mistakes and don't listen to common wisdom.

They're just deeply wired to be nonconformist. And the idea of doing something the old traditional, boring way is kind of maybe unexciting. So. And that, and there's naivete. So it's a combination of ego, arrogance, non conformity, and probably naivete all combined.

You end up with a lot of founders who they're not. They're not, they're not going to kill the company usually, but they waste a lot of time and energy on things that ultimately don't matter. What do you think are other core examples of first time versus serial entrepreneur, where it's just very striking, the differences. Focus. Focus.

That's a huge one. I made up for lack of focus when I was a first time founder by just sheer hours. You know, I just worked every waking hour. But now with the beautiful things I have, the benefit of hindsight. I have ten years I put into my last company, and I can recognize that really only three or four things that we did made the difference in the success or failure of the company.

At the time, I was doing thousands of things, and I thought all of them were important. But in the moment, you can't tell. You don't know what is the key things that help and are going to meaningfully change the outcome versus the things that are just work that feels like it's important, and that that ability to focus, that ability to remember that the main thing is that the main thing should say the main thing. That's the thing. I think a lot of first time founders fail for me.

I also had the constraint of having kids, which also forced me that the second time, as a founder, to really focus on the things that matter, because I don't have nearly as much time as I once did as a first time founder. So that's a skill. I think a lot of first time founders can really improve. Okay. The main thing being the main thing.

And, you know, the importance of those two to three things. But, Dan, I did my homework pre this show. I spoke to so many of your teammates, and they said one of the things that makes you so special is your ability to get very in the weeds, to really be at ground level and know exactly what is going on in each part of the business. How do you think about the hire great people and let them do their work and know those two to three things that you should focus on versus being everywhere for everyone? I've really made a lot of mistakes in my past around hiring and abdicating responsibility to them, and I think it was the ramp founder recently on the show, viewers who talked about this.

Dan Siroker
So you can't abdicate your responsibility to the people you hire. You have to be involved enough to really hold them accountable, to understand the details, to probe, to push. And that's something I certainly failed at in many cases. My first time around, where I hired people who are really great. I mean, that's partly why I hired them.

They did 15 years of the job that I had hired them to do. And so how could I, this, like, 20 something founder who's never been the head of, go to market at a huge multibillion dollar public company, give them advice or hold them accountable. And so that's something I really struggled with the first time. I just didn't even know that was my job. You know, I just sort of thought, get out of the way.

Be a, you know, be the kind of founder that, you know, gives them ownership, autonomy. And what I really learned is that at the end of the day, you, as the founder and CEO of the company, you hold it back like they're going to be there. They're many of the people who join your company, even if they're great executives, they're just on for a little bit of the ride. You know, I've had several times optimizely where they'll join. They have their, they make their decisions, and then they end up leaving.

We either part ways amicably or not. And then I'm left holding the bag. I'm like, boy, if I'm going to be left holding the bag at the end of this, I better be bought in on the things we do. And some of the biggest mistakes we made are when I sort of abdicated my responsibility there. So, you know, today I try to really be involved where I feel like it has the biggest impact.

I'm not all up in everyone's business. I'm up in the business that I think is the highest impact to the company. And that amount of accountability and focus, I think helps set the example for everyone else, the other managers at a company, knowing that it's their job to, to be enough in the details that they can hold people accountable. It's a balance. You never know.

And I try to pick the things that I think are highest impact, but only with hindsight will you know for sure that those are the highest impact things. Before we move on to kind of lessons from optimizing, which you kind of touched on, I do just have to ask. So if you're an investor today, would you have more of a leaning towards backing serial entrepreneurs over first time founders as a. Yes, I. Absolutely.

Yeah, yeah, yeah. Because the other part about the nice thing about second time founders is by the time they decide to be a second time founder, like, you kind of already de risk one of the main things, which is perseverance. I would much rather, rather invest in somebody who's like 100% going to stick with it and try to make it work. And maybe 80% is smart than the other way around. There's a, there's a lot of, you know, people who are smart but end up giving up because it gets hard and it always gets hard.

So when they're secondary, found, they're willing to sort of put themselves through their punishment again. That alone is kind of a strong signal to me. And you've learned a lot. You know, I personally, I've learned a lot. I'm much better because of the first company I had.

I also think clock speed is so important in going from zero to one. And as part of clock speed, that is assembling the best team to take you from zero to one. And as a serial entrepreneur, your network is so much better, more refined than a first time founder who's hiring friends and kind of anyone who can join at that stage. Absolutely. Yeah.

Dan Siroker
The caliber person that I can hire today is far, far better than the person I could have hired, you know, when I started optimizing. So I do think that's a huge factor as well. You can hire much better if you, and certainly if your first company did okay, did well, you sold it. That also, I think helps a lot when, you know, an employee thinks, should I join this person? Oh, they had a good, they had it.

You know, they've done one good thing, maybe they'll do another. On the flip side, though, just help me out on this. I never like it when a founder's like, if next company I'd do this. I'm like, no, no, no. The great founders of our time have one company.

It is their mission. Daniel Eckert, Spotify. You name these great founders that we have the collisons at the stripe. This is the unwavering mission of their life. Is that wrong of me to expect it to be the founder's life mission?

Dan Siroker
I think when you're in the moment and you are the founder and you are the CEO of the company, that should be your mindset. But, you know, you never know where the company goes. If the company doesn't make it or doesn't become the next. You know, there's like ten companies that you described. There are going to be huge, multi billion dollar public companies the first time around.

Bill Gates, Mark Zuckerberg. It's more likely than not that the company that they've started will fail. And then the second most likely is it's going to have a medium to okay outcome. And so that, and then they decide after that they want to start a new company. That's a huge pool of people who I think they shouldn't be knocked on for whatever reason.

If their company failed, you know, if it failed because of fraud or whatever, then you shouldn't invest in them. But more likely than not, it's some timing to market issues. You know, there's some factors that can explain the failure. I wouldn't, you know, not invest in them. There's just only, you know, yeah, if you can invest in Mark Zuckerberg every time, you should do it.

There's just only so many of those out there, and oftentimes you might not even be get into that round. So we're gonna get onto rounds because I think we have some differences of opinion here, which I'm really looking forward to, to be fair. I do just have to ask. We mentioned kind of mistakes and lessons. I think, like, the best thing in podcasts, honestly, is when someone shares mistakes and attaches lessons to them.

When you think about optimizer, you scale it to 120 million in ARR. What are the biggest fuck ups that you made in your leadership that you have not taken with you to optimize to limitless. The biggest pattern of failures fall into. The camp of my gut says we should do a, somebody else thinks we should do b, we end up doing b, and it turned out poorly. There's plenty of times where I said we should do a, and it turned out poorly.

Dan Siroker
That wasn't anything. I remember the things that I really just stay up at night and, you know, I've been, I'm over it now, but it takes a long time to get over your company. Are things where you're in your, in your bones, in your gut. As a founder, you should, you don't feel is the right move or the right focus or the right investment, but by smart people who you've hired, you're bored. You know, it's not because you're being bamboozled.

It's people that you've decided that are going to help influence the path. You go with their gut and, or you go with their decision and it turns out poorly. Many, many examples of this, you know, from moving to the enterprise too quickly to sort of not recognizing the core of what we had, to sort of abandoning the core problem of solving churn. Like, there's all of these things that, like, I, time and time again felt in my bones we should do something. And I didn't have even the words or even the argument, sort of.

I like to think I'm deeply analytical and data driven, but oftentimes it's just my intuition, and I could because I couldn't verbalize my intuition. I couldn't even feel like I should defend the path we should be on. I didn't do the job of the CEO to be decisive. And I think those were the biggest lessons I learned. The biggest mistakes I made were not following my gut.

My question to you, there is so many founders make the mistake of moving to enterprise too quickly, thinking that it's the holy grail. Having had that experience, what are your biggest piece of advice to founders on when to move into enterprise and when to stay at the core? I think the most important thing is to understand what's working about your business and what's not. I think we had a core magical thing working at optimizing from the almost beginning, which was this product led growth motion, which, by the way, didn't exist. That term was in many ways, actually the person who coined that term used optimize as an example of product led growth before the term existed.

Dan Siroker
And a good example is we had on our website, when you go to optimizely.com back in 2013, you could put in the URL for any website, you could put it into our homepage. You don't have to sign up, and you could instantly start making changes to the website and seeing what our visual editor looks like. That alone, that was such a magical part of our product that led to not just small businesses, but Starbucks. You know, Starbucks.com, comma. A guy there who's in charge of optimization and conversion for Starbucks.com had that experience, and he sought forgiveness, not permission to put, you know, to run our product for $79 a month.

He put rab testing product on his homepage. And so Starbucks, that's an enterprise company. But we missed, you know, we had sort of this confusion around, there's SMBs, and the way you go with them is product led growth, or at the time is sort of self service. And then there's enterprise. And the way you go at them is with human beings who, like, fly up to Seattle and meet with the headquarters.

And we had this magical thing of getting large enterprises to adopt our product without a human being in the loop. And I think we too quickly ran away from that. So it's recognizing that was a core thing working well. And then we looked at the numbers and said, oh, okay. Like, of all our businesses, the ones that are retained, the best are enterprises.

So let's go after the enterprises. So let's go hire a big enterprise sales team, like, then that last leap was, like, too naive. We should have thought more about what would be the best way to get the Fortune 100 companies using our product. And I think we could have done that by being true to our core and going after this much larger market. So if I'm a founder asking you advice as a portfolio founder of yours in your angel portfolio, and I say, how do I know when's the right time?

What advice do you give me? I would say, when you feel market pull, when you feel the market, like, I gave an example of Starbucks, you know, they're going past all of the processes. They're going past all, like, they're seeking forgiveness, not permission to use your product. You're seeing signals that there's more than just a logo. There's a person at that company who feels the pain so viscerally that they've even heard about what your product does, or they've tried it themselves.

Dan Siroker
And now what a salesperson can do is augment and sort of maximize the potential of that relationship. They're not just, you know, cold calling into the Fortune 100 trying to get somebody to pay attention to your rinky dinky startup that, you know, more likely than even if they got a meeting they're going to dismiss because they have no intrinsic interest in what you do. I find one thing that early founders often make mistakes on is they give titles out too easily. Oh, you're a CPO, head of sales, and at, actually, titles are quite expensive, in my experience. Do you agree with me on the challenge of giving away titles too easily?

What have been some lessons for you there? And I got a shitload of hate, by the way, this weekend because I said, can we abolish, like, founding engineer? You're either a founder or you're an engineer. Yeah, I mean, I do think titles, they're a bit weird because they're both kind of free to give, in one sense, that it doesn't cost you more money, but they're expensive in that it creates a sort of, like, mutually assured destruction. You know, as soon as you give out that first VP title, then everyone wants to be a VP.

Dan Siroker
And that's why I think companies actually go in these ways where early stage, everyone's ahead of, you know, you're ahead of marketing, head of engineering. You don't have distinction between VP SVP, and I think that's actually the sweet spot. You kind of want to be in a place where it's clear who is ultimately accountable for a particular function. You don't want just everyone to be an IC. So that's why I kind of like this, you know, ahead of, because it makes it clear.

But it also doesn't box you out from one day, you know, hiring an executive from the outside and bringing them in and making them, you know, something that maybe they're more accustomed to. The one thing on titles that I do think is important to recognize that, at least in some circles, in particular the Bay Area, anything with the word found in it, founding founder, co founder, has a certain weight that is hard to ignore. Like you, you're kind of. So I don't think you should be dismissive of that concept. To be a founding engineer is so much more meaningful to somebody.

For example, if 80% of your friends are founders of companies and you are just a software engineer, but you started your first employee like that, just psychologically, I think, makes it hard. You constantly have this pull. Should I just go? And many of your found friends by the way, who are co founders? Like, these people are founders.

I could do this. And so you mitigate the risk that somebody's going to go off and try to start their own company and call them that. That's why you have an employee number one, employee number two. And people take real pride in the fact that they're employee number four at ramp or at great company. I see.

Like founding marketer, they were employee number 26. Yeah. Yeah, right. Well, what do you see is the downside, though? What's the downside of calling them a founding marketer?

It loses the meaning that is quite rightly deserved to founders, to the founding team. It kind of cheapens it, and then I think it makes it more difficult to layer. If you have a bluntly, a very junior marketer being a founding marketer, and then we want to bring in a killer, it's just going to be really difficult. They're going to be like, wait, so I'm kind of under the founding marketer who is clearly not at the same level as me. No, I don't want to do that.

Dan Siroker
One say, one thing I'll say about titles that I unequivocally believe is that if this is something that a candidate brings up early or even during the interview process at all, it is a pretty red flag. It shows you kind of what their values are. The best people I've hired are people who've come in with really fancy titles, and the topic of titles didn't even come up. You know, they show up, they could have been, you know, CTO or principal, or they show up, they'll be a software engineer. No, no big deal.

That is such a positive sign when title is not something they're overly fixated on. And, you know, it shows that they care about the problem, they care about the company. They know that if they do well, they'll grow within the company. So that is one thing I think, is you can, you can say almost unequivocally, like somebody coming in, and this is one of the things that they're sort of focused on. It tells you kind of what their values are and what they're, what's meaningful to them.

Any lessons on comp in the hiring process? I generally feel like people should comp better than they think. You know, I think especially startups where you have some semblance of funding. We've been lucky that we've gotten, you know, great funding from almost the beginning. So I don't think it's fair to say that you should punish people when it comes to cash comp, if they join a startup, you know, obviously you can't match what some of the highest company, OpenAI is paying millions of dollars.

Dan Siroker
And Google, Microsoft, you know, you can't match that, but you can still pay, you know, 75th percentile in, in terms of cash. And it shouldn't be a huge lifestyle change just because they're joining a startup. I think that's a, you know, ten years ago that was this idea that you're exchanging, you know, risk for reward and you should like punish people when it comes to salary. I feel like if somebody who's great has a choice between working at two startups and one startup gives them a lot of equity and little cash and a lot of equity and a lot of cash, they're going to take the ladder. And you want to hire great people, not hire people who are willing to accept the marginal efficient salary that you can offer them.

So that's my philosophy. I also compensate pretty internally fairly like I operate on the model. If everyone knew what everyone else made, they're like, okay, that generally makes sense. So for example, we hired somebody, a great software engineer. We thought, wow, actually the market is showing that this person should be 30k more than the other folks on the team.

And so not only did we hire her at that price, but we also raised everyone else's salaries to match because we didn't feel like it was appropriate to sort of punish somebody just because they came in earlier, even though somebody else later the market showed should be, should be paid higher. Okay. It's really challenging in one pivotal moment when secondaries become available now more so than ever for early team members. And obviously it's important that people get the right to do it in a lot of cases. Any lessons on how to do that the right way, how to not lose motivation, incentive, when suddenly people have got $5 million from their early stock.

I have a pretty non conformist view on secondary, and I think this is going to get me some trouble because most of my investors feel the exact opposite, which is I think that you should let early employees who have vested their stock sell their stock at any point. You shouldn't feel like the vested stock is yours if they've vested that stock, and if they're working at your company, that should be almost as close to compensation psychologically as cash is. If there is a willing buyer, obviously you want to make sure you don't cause a distraction and your employees are going out trying to find buyers. But for us, for example, in our series a, we're way oversubscribed. We actually have.

We raised our series a over a year ago, and we haven't even started spending it. So we had far more investors who wanted to invest than we had, you know, capital to sell them. And so I gave our employees a chance to sell up to 25% of the rest of the stock. No judgment. Like, it wasn't frowned upon.

And in my theory, and we'll, we'll see if this proves out true or not, my theory is that is more retentive, not less retentive, to give people the opportunity to view their stock as more liquid. I think it's kind of most, what most investors will tell you, most investors say, give them golden handcuffs, force them to stick with you. But I think that, again, that's kind of an antiquated notion. Assuming that there isn't market liquidity, then they can't go elsewhere. So I'd rather be thought of as the startup that lets people sell their bested stock and give them more stock as they continue to do well, then sort of treat stock as this sort of like lockup that you can't sell.

I like that idea. But I was chatting to a founder friend of mine who was in this position. He was like, the challenge is it creates a tale of two cities, which is the new employees who have unvested and the older who have vested. And suddenly there's like the rich people in the team who've got not rich, but, you know, have sold and have more liquid cash and those who are coming in with less liquid cash. And it kind of creates this old versus new vibe.

Do you worry about that? Not as much. I mean, that is a possibility. We don't have that now. We also tend to hire more senior people.

Dan Siroker
Like, we don't hire people straight out of college. We hire people with experience. So we're not hiring people who are super early in their sort of wealth accumulation. And so in general, I don't, I don't, I don't feel that vibe. And by the way, we also, it's not just that company primaries.

If there are secondary buyers and there have been, who've come in between rounds, we also give the opportunity to employees to sell then. So if you're able to, which is, again, maybe not always true, if you're able to offer liquidity and you have a willing buyer doing that, you know, every six months or something, I think is a healthy thing. It, or it relieves the pressure for some people, especially people living in the Bay Area. And there's something about that ability to provide that liquidity, you know, that makes, you know, if you're able to be the difference between them being able to buy a house or not. I think that in general, there's a certain amount of retentive power that is very hard to do any other way.

So I think it's worth it. Why didn't you hire people out of college? I used to do that. I do think for the most part today, the best team is a small team that is tightly aligned, highly focused, and typically, you know, if you think about a team, as every person has an opportunity cost and you've got n squared connections between people, if given a spot, you could hire somebody to start out of college for less money or somebody who has five or ten years of experience. I would rather spend more to hire the more experienced person and keep the team smaller than sort of bloat the team by just filling butts and seeds with 20 people today, I feel like we're having a greater impact and ship faster than we ever could with 120 people and software engineers at optimizely.

So that's working. And I just don't want to mess it up by hiring a bunch of junior people who kind of, you know, there's this old saying, the best way to slow down a project is to add a person to it. So I don't want to do that. I don't want to hire a bunch of junior people and help train them. And to have that at the cost of Vervoci, which right now is very.

High in terms of, like, the funding that we mentioned there and being well oversubscribed, I think we're going to have an interesting chat here because we actually first, like, engaged on Twitter when I was, like, a funding round that makes 10% available total, bluntly, will not result in great investors because you can't get a great investor to be engaged with seven, 8%. And you disagreed with me on Twitter. Why did you disagree? And what experience led to that? This is one of those classic things that investors tell the public, and most founders don't know the counterexamples.

Dan Siroker
Like, there's a bunch of things that are all in the founder or investors interests that are sort of in the lore of how to raise money and what's accepted, what's not, and rarely do people see the exceptions. And so this is one of those where, like, yeah, the best investors benchmark Andreessen, they will invest less than their supposed minimums for the right company. You can't call your shots if you're not doing well. But if you're doing well, you shouldn't assume that just because you've seen that somewhere for the average company, that those constraints should necessarily apply to you. And I think minimums is a perfect example of that.

Even if you talk to LP's of great funds and they promise these LP's a certain set of investment theses and portfolios, but if you talk to the LP's and say, hey, LP, in big successful venture fund, would you like that fund to either yes, invest or no, invest in some of the best companies, let's say the best likely company of the year. And if they say, well, the only way to do that is for less than the target ownership percentage. Every LP would say, yes, I'd much rather get 1% of the next google than 0% if that's the constraint. So that's why I disagree, is because I feel like a lot of founders, they just fall into the pattern of what they think is common wisdom, not knowing that there are many exceptions to all of these sort of standard, very much investor favored terms. I get you.

I think the caveat is it's you. And I mean that nicely and not blowing smoke up your ass, but you scaled a business to 120 million in ARR, and the first zero to one for limitless has been very successful and efficient. 99.9% of founders are not like you. And I almost worry that they will, listen, go to raises with like, hey, we're doing 10% dilution. And it's like, yeah, Dan's a different story.

Parker Krecling is a different story. Well, I appreciate that, but I also did this before I was me, my very first series a, I got, you know, I got benchmarked to agree to, you know, I think it was maybe 8% or something. Talk to me about that. I'd love to hear about that. So you, how did that round happen?

You met Peter or you met, who did you meet? How did it go? Yeah, so this is 2013. Peter was the first person I had met, in fact, it was a very memorable conversation. It was also very competitive, and that's why it led to this, I think, uh, them willing to sort of flex and obviously, you know, they had certain constraints and I was able to meet them, and it was a negotiation.

Dan Siroker
You know, that's the thing I should say, is that it is a negotiation of which every negotiation, everything is up for negotiation. And in exchange for less ownership percentage, they also got a lower valuation. Um, and so I do think that is something to consider, like you, that's maybe if I go, if I zoom out and just generally around fundraising. I think some of the most common mistakes founders make is they're not empathizing with the investor. They don't understand the world from the investor's point of view.

They'll take like a clip of me on your show and say, oh, Dan says, get less than 10%. And they think that their job is to get everything, everything for them, when really often the best negotiations are when the person on each side of the table is thinking about what motivates and drives the other person to the other table and other side. And if you find common ground, you're able to negotiate one thing that doesn't happen to matter too much to you and matters a whole lot to them. That's a great way to trade something that you really want for something that they might really want. So what's your advice to founders on what they should give on versus what they should not give on?

When it comes to those negotiations, I. Think it's fair to give on valuation. You have to recognize that the person who's investing, many times, depending on where they are in their career, they're putting a lot of reputational bet on you. And so you need to give them the thing that they can tell other investors when they're at their fancy Utah ski conference and they're like, oh my gosh, you invested in this company like you did the public fundraise with rewind then, and you need to tell them, no, actually, here's the thing that I got that is so valuable. And every other investor on their peer group says, good for you.

Dan Siroker
Add a boy, add a girl. And so recognizing, even just thinking about what it would take for that person to be able to do that, I think is important because that's how you get somebody to feel. Like every negotiation you're compromising, you want them at the end, you got to work with this person. You don't want to extract every little, you don't want to squeeze them dry so that the day after the term sheet and day after defender, doctor sign, there's a whole bunch of resentment from day one. So I think that's important is recognizing where somebody's coming from and how you can give them some wins.

That's different for each stage and every investor, but it starts with empathy. You got to understand where they're coming from. How do you advise founders on when to be willing to have a board? Often VC's want a board seat. I've been lucky not to have a board for limitless.

I do think generally boards are helpful for first time founders, and of course the right board members can be helpful for any company. I think is Vinod Khosla, who said something like, 80% of venture capitalists add negative value to startups. I don't know if that's true, but he's met a lot more venture capitalists than I have. And I've certainly worked with a lot of really, really great venture capitalists. Often the best advisors and the best venture capitalists I've had didn't need to be on the board to be helpful.

You know, Elad Gill is a good example. I quoted him earlier like, that was a very pivotal conversation. That was just somebody who happened to be a small investor in our company who I called and he answered and we had a conversation. Those are the kinds of things that can be really meaningful. I do think boards, as a company gets bigger and bigger, closer to going public, are really important for governance and accountability.

But when the company is so early on, very, very hard for a board member to get up to speed, they're showing up once a quarter and you have the context of being the founder. Ultimately, the board may not have. So I generally think if you're a first time founder and you find somebody who is aligned around the right values, long term, it's probably worth doing. But I don't. Again, it's one of the things you shouldn't assume you have to do every time you raise money.

I do just want to ask, you know, you're a pronoun on fundraisers. When you think about running your process, how do you do it step by step, how do you think about structuring it? Can you just walk me through that? Yeah, it's actually interesting. Like each fundraise I've done, I think, you know, I've raised probably 280 million in my career over two companies.

Dan Siroker
And every time I've done it, I've actually done it a little bit differently. It's also very much my process for honing my pitch, which is like a stand up comedian goes to these rinky dinky bars on a Wednesday afternoon or whatever to learn what works and to stick with what works. And so for me, each time I've raised money, I've actually done it a little bit differently. A year ago, the most recent time, what I did very differently and worked really well. I broke this sort of conventional wisdom that you should do a fundraise in private and just go down and meet the five investors everyone says you should go talk to and hope they say yes instead.

So let me just draw an analogy why that's so ridiculous, how like 90%, 95% of companies raise money. Imagine. And I'll just start with, when you add an investor to your company, especially if they're a board member, that's like getting married to them. It's actually harder because you can't really get divorced. It's getting married without the possibility of divorce.

And if you want to be at your company for five or ten or 20 years, that's a really, really big decision. Now, imagine if your job, if you wanted to marry somebody for love, and the only way you could find the person you wanted to marry was you had to drive down this one street in Menlo park called Sandhill Road. You had to go down five beautiful offices and pick one of those five people. If that was the only method by which you had to decide who you'd marry, you would think that's ridiculous. And now you have the possibility with social media to do the opposite, to do what Tinder or any great dating app lets you do, which is cast a wide net and see who's a good fit for you.

And that's what we did with our last fundraise, which is we cast a wide net. It started off, not really, actually, as a goal of fundraising, is really try to build trust with customers around our business and showing them we're going concern. The byproduct is we put our deck out. You can see it's about seven minutes. It kind of went viral.

A couple million views and thousands of offers to invest. We ended up getting many offers at a huge distribution of valuations, and we ended up with a partner who. Yeah, we could have perhaps found down Saint Hill Road. They were actually an office there. But ultimately, I felt like that was the best path.

Who did you choose? We chose Nea, which has been a great partner. Nea has very. The thing I loved about Nea still love, is they have very long term orientation. They're often buyers at the IPO, they're not sellers.

Dan Siroker
So that was the thing that drew me to them. And there's so many things in there, both acts and words, that really reinforce this, especially as I talk to references and other founders that they took money from. Should you always take the highest price, Dan? No, absolutely not. In fact, always saying the highest price is almost certainly going to be a mistake.

I know now, because I have real data on this, so I actually have a distribution of the valuations we got from the last series a. We had offers actually 22 offers at a billion dollars. We turned them down and took 350. So we chose. We actually have this issue.

I can share the deck if you want, or the graph if you want, but the most common was 200. We had several folks between 304 hundred. And we had a handful of outliers at a billion. We not only chose 350, but we also invited everyone who offered more than 350 if it made sense. We invited them to be part of an RUV, a roll up vehicle to participate even a little bit in the round.

So we got kind of this benefit of great lead investor and this wide net of hundreds of smaller investors who then are sort of evangelists and supporters, and they'll help retweet things when we post launches. So we had kind of the best of both worlds. No, dude, I am joking. I totally understand and agree, and I think the biggest challenge is people struggling to scale into enormous, enormous valuations. So I totally agree with you there.

You mentioned NEA and their kind of continuous financing pathway that they can do. Often founders are told, ah, signaling is really dangerous with these large firms because if they don't do the next round and they can, as a serial founder, are you like, the signaling argument's not true. Are you like, it's worth thinking about? How do you, how do you think about that? It is a factor for sure.

Dan Siroker
And you have to, again, it goes to empathizing with your investors. You have to think through the world from their point of view. And especially somebody who's, you know, if somebody says, I want to invest in limitless, and they're saying to their partners, look, and I think we should invest in this incredibly high valuation relative to revenue, that you need to understand that they need to be armed with the right evidence, motivation desires to do that. And if one of the, you know, headwinds is, oh, by the way, hold on, looks like Andreessen Horowitz. They invested.

They did the seed round. Like, why isn't Andreessen leading this round? Like, you need to have a good answer to that question. And that's something that I do think most founders don't recognize. It comes back to empathy.

You have to understand, for this person, it's likely almost certainly you'll get one person at a firm, if you got a good company, you're doing something well. It's almost impossible not to get at least one person at a venture firm to love what you do. Your job often is to get that person armed with the data, information and support to convince their partners that it's investment worth making. Yeah, I totally agree. I think, you know, one thing that people forget is the craft of salesmanship or sales in inside a partnership, and you have to get other people along with you in a lot of cases.

So I totally agree there. How do you advise founders on how much they raise and how they say the price? Like, should they shoot for a smaller amount? Let people go over it. There's a cat and mouse game here.

How do you advise them? Well, first thing I'll advise you is I want to just demystify one, and I want to share some code that you may not know. When an investor asks, how much are you raising? What they're trying to do, often they may actually want to know literally the amount. More often than not, they're actually asking, how much do you think you're worth?

Dan Siroker
And let me, let's start the negotiation on valuation right now, because like you said earlier, often, you know, 10% or 20%, let's say 20% is what they want. If you say, you know, we're worth, yeah, we're raising 10 million, they just take 10 million divided by 0.2, and then that's what they think that your valuation, that you think your valuation is, is. So instead of answering the question how much you're raising, the best answer is, we don't need to raise. So we don't have a budget. We're driving.

We want to sell no more than this percentage of the company, and we're letting the market decide the valuation. That's how I frame it. It kind of pisses off investors because it doesn't play into their game of, again, it goes back to when they write up their memo for their partners and say, okay, what valuation should we go in? It doesn't give them what they need, so they get a little frustrated. But I usually say, and the other thing, by the way, that I think I frustrate so many investors, I've been doing this for ten years, and I probably need a better answer.

But oftentimes people ask me a very simple question, are you raising money? And my answer almost always is never yes or no. They want just a yes or no. Usually it's some version of, well, no. But if over the next week, we get a term sheet we can't say no to, we're probably going to take it.

So that's something you also got to recognize, that, are you raising money? Yes. Causes them to then have this perceived clock that, okay, if they haven't raised money in three months or six months, then what do the other investors know that I don't know. So these are small little traps that you can fall into, but at the end of the day, I don't think it really matters that much. These are all sort of marginal benefits you get from sort of understanding where the investor is coming.

One of the worst things that I've heard from, like, you know, investors and team members is like, oh, the round they're not raising right now. And like, if you want to make it happen, you can always make a round happen if you want to. So I agree with you. And please, anyone listening, do not take Dan's advice. That was terrible advice.

No investor ever wants to hear. We'll let the market decide. It makes our lives so much more difficult. How do you think about actually a really challenging thing when you've got one term sheet and then you're kind of waiting for others, but they're pressuring you to get an answer, but you do want to wait and see what the others say? How do you manage this timing process on term sheets?

Dan Siroker
So this is actually something you can think about and be proactive about upfront. So I'll give you an example. Last year when we did this fundraise, we did this kind of in public, we put the deck out, and then for any of the people we felt were good finalists, we gave them a calendly link for the first meetings. And those meetings are all one week. So no more than one week.

And that's another benefit of doing this in public, is you can do it all in parallel. If you're just taking investor meetings willy nilly as they come, you get into the exact problem you're describing, which is you might get a term sheet from one investor, but you haven't even started the meetings with another that you actually want to work with. So I do think thinking about how do we structure and sort of calendar out the raise ahead of time. For me, it was all first meetings are one week. And then everyone asks, oh, how's around going?

Oh, this? And I just tell them, like this week, from this date to this is first meetings, I'm having final partnerships meetings. I have three final partnerships meetings next Monday and then two more the following Monday, and then they have transparency. The thing is, they also don't want to miss out. So it's actually a mutual benefit.

The investors who haven't given you terms yet, they want to make sure they're not too late to the game. And then you just set expectations with everyone that, like, that's your calendar and, and I'm going to make a decision by X date, then they work backwards from that. So I think if you don't set those constraints, you end up in exactly the situation you want, which is, by the way, what investor? The investor who's giving you that term sheet wants to preempt it. They want to get in early, they want to get a better price.

And so they know that if they do it before you're getting information from everyone else, that's going to help them. So you should just work backwards and try to avoid it. Do you not feel that with the transactionalization of the process, you lose the ability to get data on what they're like as a true partner? If you're just running it as. I think there's definitely some truth to that, but I also think the opposite.

Like when somebody, when an investor, and usually it's an associate, reaches out and says, hey, we really love your business, we'd love to catch up. That's them kind of being transactional too. That's their full time job, to get meetings booked for their senior partner. And when you meet with that partner, it's not really building a relationship, it's them evaluating you to be decided. Should we preempt their next round?

Not to say that you should treat their lack of relationship building and transactional nature with your own, but you can very quickly get up to speed with a lead investor, like I did with Nea, by doing a ton of references. You know, as soon as it's clear that you're going to potentially, you know, get married and take a term sheet in that moment, you can ask them. Give me the contact info for every founder you've funded in the last five years. And even Peter Fenton did that. Peter Fenton, when I asked for references on him at the time, he was this amazing luminary.

I asked him for references. He gave me twelve founders and CEO's, their phone number, their email. He didn't even introduce me just to just reach out. And I got this great conversation to talk to twelve amazing people. I talked to every single one of his references and that's how you can really get to know somebody.

The sale part, when they meet you during the fundraise, you get a really unique narrow view of them. You really get to understand a person when you do the references on them afterwards. Should founders always be raising, Marc Suster says about lines, not dots, and building that relationship over time. But then it does take time away from running the core business. Lines, not dots or.

I very much believe you should either be in fundraising mode or not the one thing I actually really recommend. So before I did this public fundraise, the way I actually practiced and actually got the story in a pitch, right, was anytime prior to that, some investor would reach out, I would actually send them a calendar link for my investor week. It was. It was a week somewhere. Usually it was like once.

I didn't think at the time I was doing it maybe once a quarter. Now I do it once every two quarters where I just. But I do back to back, usually associate meetings where you hone the pitch over and over again, and I just, when they reach out, I say, hey, super interested. But right now, I'm not fundraising. If you're interested, book a time.

And so you build up sort of these bookings that then the week comes, and then you're investor mode, so you can get out of product mode or customer mode. You're not kind of distracted along the way. And you can really, really hone a pitch when you have like 30 back to back associate investor meetings where you're practicing your pitch and tweaking the deck every single meeting. By the end of that, you have this really, really honed product, like a stand up committee. I said earlier, I totally agree with that.

In terms of the constant a b testing and really measuring what works and what doesn't, should founders engage with the associate level, and how does that vary? Yes. I mean, I'll say yes, but I'll say yes in a way that's probably reinforcing the part of the Twitter verse that think associates don't have much value. I view them as practice. I view them as if I can get past a, and oftentimes when I did this, these are associates who didn't even Google me ahead of time.

Dan Siroker
They show up ten minutes late to a 30 minutes meeting. But if by the end of that meeting where they care that they're just mailing it in, they show up. I use those 20 minutes I have with them to really nail it, and I really practice my craft. And the same way that Chris Rock will go down to New Jersey, you know, the dive bar, and nail, if you can nail your craft there with a 20 minutes disengaged associate who doesn't really understand your business, you can really nail it with the people who understand your business. And I know others disagree.

Some people think, I think Keith Wabash said, like, you know, the questions you get from a truly great investor are different from the ones you get from an associate. And there's definitely some truth to that. But I think that by nailing it, there at minimum, you know your deck is polished. You know you're answering all the right questions. You've heard a lot of the objections ahead of time.

For me, my secret is I probably shouldn't give this away, but anytime I get a question there, I almost always either change the deck or I'll add a slide to the appendix. So if I ever get that question again, it's very impressive to somebody. I think when you say, when they ask you, oh, well, what about Apple? How are you going to compete with Apple? And they say, oh, let me pull that up in the appendix.

And I have like a beautiful, well articulated with transitions slides in your appendix. If you can answer their question with a slide, you've already prepared your appendix. You at least show the investor that you're prepared. You're not just winging it. So that's another reason I meet with associates, is to build up my appendix.

I so agree with you, and I think the FAQs is a brilliant way to show getting ahead of time on their concerns and actually arming them with the internal material to sell it to their partnership. That's exactly right. That's exactly right. Oftentimes, especially, I found this, too. When you very quickly can tell if the person you're meeting with, they just, they have an inclination, they want to invest almost from the beginning.

Dan Siroker
And all of their questions, you'll find out. I actually, I think, are often the questions they think their partners or the senior partner at their firm will ask them. So they just want free, give me some ammo so that when my senior partner comes back to me and say, wait, hold on, how is this differentiated in AI? And isn't this commoditized? And how are you going to pick something in the app layer?

You have all of the things ready to go. You're sort of like, you've done their job, you've done their homework for them, and that's when you. And you're in a good mood. When you're in a investor meeting and you can kind of get this vibe that they're asking the questions not because of their interest, but because they're about to go sell their partners, that's a good sign. I'm not being a dick, but I guess I am being a dick.

But I guess at this stage, are you not? Like, I don't really want to work with someone who's got to go up and sell it to someone else. Like, Fenton does not have to sell a deal. I mean, like, he will present it in the way that optimizely is, and people will see the brilliance, but he's not like, selling in the way that we talk about there. My thing on this has actually changed quite a bit.

Dan Siroker
I think the best investor you can have for your company is somebody who's on the rising arc of their career. You want a Peter Fenton when he's 35, not 45. You want not to be ageist, but you want somebody before they've had their first IPO, and you want them to be the person who's going to have that. You're betting on them just as much as they're betting on you. Because what happens when somebody's had a lot of success and no knock on the people?

I got to work with amazing investors who had a ton of success, like Peter Fenton and Marc Andreessen, like, they've had a lot of success. Like, for you to truly be the difference in their career or not is pretty unlikely. And so you want somebody where they just in their bones and in their pocketbook, you are the difference between them reaching the pinnacle of their career. And so that's, you know, the same way that you'd rather get, you know, an NBA player, you know, who's in the prime, not somebody who's on their way out of their career. And they're good, they've done great things, but I think you, you get the best out of somebody when they are, when they're aligned around trying to build something with you, not because they're just a fancy logo on there, many logos of public companies they've taken.

How do investors differ pre success on the arc versus post success when they're legends? The thing I noticed is, well, there's some investors who just out of competitiveness, I think more than anything are going to be helpful no matter what. They just can't not be helpful because they just feel like it's kind of in their DNA, but they're not doing it actually rationally. Like, if they were rational, they would probably spend more of their time on the other parts of their portfolio where they could have a bigger IRR impact to their fund. And so there's a certain set of investors in that camp.

Dan Siroker
There's others who, I'll be honest, at some point it was clear that optimizely was going to be okay. We sold for a nice outcome, but it wasn't a multi billion dollar public company. And I could tell some of the other investors were like, okay, I'll do the minimum necessary. I'll show up to the board meetings, I'll do the work. I need to.

But I'm not going to bend over backwards to help recruit you. The best head of engineering I can possibly find. That just happens. You have to know that too. For a period of time, you'll be the darling you'll always have.

If you raise money for a period of time, even after you raise money, you'll have this darling effect. But then quickly, as if they're being highly rational economic investors, they're going to allocate their time proportionally to where they can have the biggest impact. The way I sort of hurt a little bit in the moment when I recognize that, but you also got to understand, it's a business. They're investors. That's rational.

You're the founder. Your job is to make the company successful. You can't outsource. The one thing that really kills me is when I see a founder playing the victim here and say, well, my investors didn't help me enough. Like, it's not their job.

Their job is to give you money and hopefully do no harm. If you got some help along the way, great. But like, your job as the founder is to make it succeed. And so playing the victim and assuming your vestor is the reason you're going to succeed or not, I think, is you're lying to yourself and lying to your investors. Can I ask, you've had some of the best brands benchmark your Andreessens of the world.

To what extent does venture brand being behind you make a large difference to company trajectory or not? I think it helps. It's not the difference maker. I think it helps with recruiting. Great, great talent can work anywhere, and if they have the choice between a company that's got great marquee investors who've done their homework, that de risks the founder to them, that de risks the company.

Dan Siroker
So I think that's probably the most tangible benefit. It may be marginally helps with customers. I don't think so. If you're b two b, maybe in the enterprise it might help, but for the most part, I think it's. It helps build a movement and sort of traction and momentum in the market.

It probably scares off competitors. I did notice this, that one of the unintended side benefits of the round we raised, I do think kind of made everyone else's job, who's a founder, trying to compete with us much, much harder, because first of all, we had hundreds of investors. So now that all those are conflicted out and you get this sort of momentum, like, oh my gosh, how are you? Like all the questions, they're getting their appendix. Appendix slide number one is how are you going to compete with limitless, you know, how are you going to complete with, with us, especially given, you know, all of the who's, who's invested.

So that probably helps. Maybe I don't, I don't appreciate that quite as much. I haven't heard that, but I assume that's happening as well. So that's one benefit. Do you think there's any big misalignments between venture investors and founders that aren't.

Called out enough at every stage up until the very end? They're pretty well aligned. You know, you get into these situations near selling the company where maybe the motivations and incentives are slightly out of alignment. I think a lot of founders actually have a very binary view on outcomes. They think either it's going to go to zero or it's going to be a multi billion dollar public company where actually, I think more likely than not, they're discounting kind of the middle of the road outcome where maybe it's, you know, two x, what you've raised, you know, or three x, or maybe it's slightly more.

And things like liquidation preference are really important and, you know, so I think those are the kinds of things where you do need to model out and think through what are the different middle of the road outcomes and how you might be misaligned there. So make sure you're not, for example, raising too much money and then getting to an outcome where, you know, investors have a very, very different financial, you know, they're basically like, for example, I'll just make it very plain, if you sell your company for as much as you raise or slightly more, the difference between as much and slightly more is incredibly meaningful to your employees, makes no difference to the investors. They basically get one x back. So in those situations, you really got to be thoughtful around how you want to raise and also how you structure that. Never take more than one x non participating preferred liquidation preference.

That's when things get really out of alignment. Do you think we're going to enter a world of pain around lick prefs? We've seen a lot of people raise a lot of money. I think investors will get their money back in a lot of cases. Not all, but everyone else will suffer in a lot of cases.

Do you agree? And any advice? I mean, I think it's very possible, especially in a situation where during Zurp, a company raised at x valuation and they have too much pride and fear associated with that valuation, and they're afraid of taking a down round if they need more capital. And so they trick employees by saying, hey, we raised an up round. But behind the scenes, what they really did was they added, like, a two X liquidation preference, which almost always means no employee is ever going to get any of their stock worth anything.

Dan Siroker
So I do worry about that. But if you're a founder listening to this, and you're contemplating an upround with a liquidation preference more than one or a down round, do 100% of the time, do the down round. It is much better for you as a founder with common stock. It's much better for your employees. It will hurt in the moment when somebody says, oh, my gosh, this company that I thought once was worth a lot of money during Zurp is now worth less, but that's fine, they'll leave or hire somebody else.

Like, you'd much rather be in a company with less overhang on the valuation, on the liquidation preference, than one without. Any big other mistakes that you see founders make in fundraising. When you look at the founders around. You, they don't recognize control as an important thing to maintain. There's the same Altman camp, which is like, you know, you gotta trust people at the small percent risk that you're gonna get screwed over.

This was before he got screwed over. So he had a very kind of like, you do right for the world and it does right for you. And I wonder if I should ask him what he thinks now. I do think when you think control and you think governance, you shouldn't view it as you're offending an investor. Like an investor was highly rational.

They would also ask for and want as much control as possible if they were the founder. And many former founders who are now investors understand that they wish they had more control. So things like super voting stock, I think you should make sure to ask for multiple board seats. You should ask for not having board members, maybe having board observers instead of board members. For certain investors, it's hard to ask because it kind of can feel a little personal, I think, because, like, well, you don't.

You don't trust me, but at the end of the day, you're just being rational. You, as the founder of the company, are actually, as a fiduciary, responsible to represent the interests of the common stock, and that's your employees, you know? And so if you want to do best for your employees, you want to rationally control as much as you possibly can around the outcome of the company for them. So advocate on their behalf, and likely your own, because you're also likely a large common stockholder, be willing to push for things like super voting and multiple board seats. Do you find most investors get in the way?

No, I don't, actually. I think more likely. I mean, I have some of the world's best investors and now I've come to accept that, like, they're busy. You know, I'll send an investor update. You know, we have like on my investor update list we have maybe 300, 200 people.

And, you know, I'll get, you know, on a good email, maybe 20 responses or like, you know, something and where if I ask them to do something, but most people do, they were just one of many companies. So you just got to recognize that like, even great investors, you're just one of many. You're too kind there. I respond to everyone. You can say, dan, awesome to see the user growth.

Well done. It's 5 seconds. I, I actually do the same. I have a few angel investors. I do the same.

Dan Siroker
Mostly because when I don't get those. Back and it's like 5 seconds, for fuck's sake. Do you know all the work that went into that update? All right, Harry, I'm going to add you to my investor update list. And I will look forward to just for the, just for the Attaboy or good job, or here is how I can help.

You saw me. Honestly, I think it's so important. So, yes, good. What was the best venture meeting you've had? Like, when you look back and like, ah, that one was like my favorite ever across both companies.

It was probably the first meeting I had with Peter Fenton in 2013, I think was mostly the most memorable. The first reason it was memorable is because he came in with this entire contraption around his knee. He could barely walk. And the reason was he had just been helicopter skiing and he like broke his knee or something. We still showed up to the meeting.

He then, by the way, he thinks, has a similar kind of dynamic with me where he has to sort of prove to the world other things. Anyway, he ended up to learn how to fly a helicopter after that because he wanted to conquer the thing that had broken his knee. Anyway, the reason I remember it, because I remember so vividly the very first question he asked me, which at the moment, I had no idea why he's asking or why it matters. And now with hindsight, I totally get it. The very first question he asked me was, Dan, what's going to get you excited to be at this business in five years?

And this is 2013, in 2018, exactly five years later. It was exactly when I started to feel trapped, resentful, disengaged, going through emotions. And he exactly astutely figured, asked and pointed out. And at the time I probably gave him some answer that I felt was true. But if I had really listened to that question, I think I could have done a much better job of staying in love with the business, because I think what he found basically, and maybe this is just his track record, is the companies he's taken public.

They're all founders who have just been perseverant, who can keep it up, who stay in love with a business 510, 2030 years into it. And I think I mistook that question as, oh, that was an interesting question. You know, I thought it was maybe he was trying to flatter me. He's like, oh, he wants. But it was really actually trying to understand what motivates me, what drives me.

And that's something I've definitely learned with limitless. You know, I will be at limitless. This is my life's work. I'm going to be doing this. Even if we failed, I'd be proud to have done the kind of problems we're trying to solve.

That was probably the most memorable meeting. I just have to ask you as an investor state, it's a really freaking hard world to navigate investing in a world of AI, of such transients, of leadership. One week it's Mistral, the next week it's llama, the next week it's OpenAI. How do you think about where we are? How do you analyze the landscape today?

I know it's broad and shit question, but just help me understand how you think about it and where we are. I think the most important thing to do if you're an investor today is find founders who are obsessed with problems. Problems, not solutions. Many founders, especially ex crypto founders, tend to think of AI as the solution to all the problems in the world, and they're, they're actually technology in search of a problem. I learned this anti pattern at Google, actually.

Dan Siroker
I started my career there as an associate product manager. And Google is notorious for building products that are technology in search of problems. Google Wave, Google Buzz, Google Glass, like all of these products were basically some smart engineer or technologist. Starting the sentence with wouldn't it be cool if. So, if the startup you're evaluating or the technology you're considering began with the origin of wouldn't it be cool if and the cool isn't problem, the cool is technology in search of a problem, then I think that's a very strong anti pattern.

I would focus and that's the only companies I really invest in today are companies that deeply care about the problem. And it just so happens that maybe AI or technology can solve it. It's not that they're sort of wed to this ideological idea. So I think that's the filter you should use. It shouldn't be, is it app layer or foundation layer?

It shouldn't be first time or second time founder. It's, is this founder obsessed with a problem in the world? Is the problem real? Are there other people have that problem? And do I have confidence that this founder will persevere to try to solve that problem and maybe have some of the skills necessary to use technology to do that?

Not, oh, cool. It's, it's like, you know, mistral is the latest, greatest. You know, those things are ephemeral. I would focus on problem obsessed founders. How do you think about visibility of problem?

And what I mean by that is that everyone's like, oh, AI customer service, AI sales rep are probably two of the most prominent kind of use cases that we see. Yes, there's a problem, but everyone else sees it. How do you think about differentiation, competition, and actually, if it's a problem that the world sees, is there a lower quality of problem? Yeah, I mean, I think every problem can expand over time, so I don't think it should be so much. Is it the problem big enough or small enough?

Dan Siroker
In some ways, actually, you kind of want to choose founders who are excited about smaller problems because it tells you that there's, that they're not just falling in love with what they saw on Twitter or social media, that there's actually something they care about. And the best version of that story is, hey, at my last company, gosh, it was so annoying that we had to do blah, and now, you know what? I started this company to try to solve blah. And it's like some niche thing. I think Coinbase might have been similar because Brian had seen things at Airbnb or so you want somebody who both firsthand saw that problem and maybe felt it themselves.

The best CEO for a AI customer agent is somebody who started their career answering customer support calls. That's what you're looking for. Is this founder market fit around the problem, not somebody who's like a McKinsey consultant who said, if their first slide is, here's the market map and here's the market size and here's the niche we're going to. That's very, very, to me at least, and maybe I'm missing out on good companies, but to me, that's immediate red flag. You want somebody who understands the problem and just couldn't sleep at night if this problem wasn't solved.

And maybe there's 100 other companies out there, but this one is the one that will succeed because the founder cares so much about the problem and understands the problem. And let me just give you some empathy for why that's so important. I found when we started optimizely, the thing that made it work, and I had like two failed startups right before that I could explain. But basically the thing that clicked for optimizely is it was the product I wish I had in the Obama campaign in 2008. And because I had used a b testing from Adobe and from Google, I saw all of the pain points.

I saw what was so hard about those products, and it wasn't the lack of features, it was in fact the opposite. What you wanted in the product, in the market was something that didn't require a developer, was what you could see. What you see is what you get. And we did not do a lot of things that a McKinsey consultant said you should do. We didn't have multi barrier testing.

We didn't have all these things that some outsider would have said was necessary. But if you're an insider, you've done the problem yourself. You know very quickly what matters and what doesn't. And so as a founder coming into a new market, if you've been the person doing customer support calls, you know the problem so much better than an outsider who has it. So that's what I would vote on and that's what who invested.

You said there about kind of the features. And I think feature creep is one of the most dangerous things. How do you think about simplicity and product today, the importance of it and how to provide prevent feature creep? This is one of the things that I think the CEO really needs to lead on because it's very hard for anyone else at the company to say no, especially when it comes to customer says, I have this problem and you have an engineer who says, I know how to solve it. And then you end up with a product that solves the customer problem by itself.

Dan Siroker
That's not that bad. You know, that's good that you have engineers who are empathetic and listening to customers, but that times 100 features, you end up with a bloated product that isn't really focused. I do think as a founder you're able to take in and understand and sort of intuit the market, the customers, investors. Ideally you have a good enough understanding of the technology to understand the effort necessary to build things. Not just the effort to build it upfront, but the effort to maintain it.

So you have to know that everything you build, I have the saying around building features that no good deed goes unpunished. I think I have to. I've never seen a situation where we'll ship a little feature and we're done. It's always like, oh, shoot. Then there's this edge case we didn't think about and, oh, this other person wants to do this other thing.

So it's like opening a commitment that you have to keep beating. So again, it goes back to saying no, being decisive, choosing what you think is the most important. The main thing is the main thing, should say the main thing. What are the key features that users actually care about? What will they actually use?

What is the biggest thing that you said no to, that you should have said yes to in either company? And did it teach you anything? At optimizely, we said no to areas that ended up being huge, successful companies. Product analytics is a good example. I tried to buy amplitude when there are four people, in fact, they were about to raise their.

Dan Siroker
I remember we were sitting at, I think at Chipotle and Soma with Spencer and I. To this day, I'm so impressed with. I just, I was offering him insane amounts of money. Life changing for him. It was four people.

And they took the term sheet from benchmark and said, that is one where in that moment, I should have just said, okay, we're going to crush them and do product analytics. I think too much of my ego is associated with that. I should have been more zuck like and just said, okay, they didn't accept our offer, let's go just beat with them. We already had the distribution, we had the market, you know, and we could have been amplitude or more. And amplitude is now a big public company.

Another example is segment, another area where it was adjacent to what we're doing. We tried to acquire them, they were later staged, then they said no, they ended up being successful. So we had these sort of adjacent ideas that were actually really compelling that we saw early enough. And funnily enough, both of those companies, I thought, oh, it's too late. Amplitude got this huge lead, you know, and so I was too, I guess, down on myself and maybe too ego driven to see it had to be my idea.

But I think both of those are things I said no to or got said no to that I should have said yes. You crush launches. Like when I was looking at the launch for pendant, it was just really well done. Well done in the way that like Apple will crush a launch. Any big lessons for you on what it took, what it takes to do launches well, having done especially pendant so well so recently, if I had to.

Give you any advice, it's just focus on the problem. Care enough about the problem that in the way you talk about your product and your launch, the problem is very clear. That's a big mistake. I think sometimes founders make is they do this big fancy launch and by the end of it, people are scratching their head, what problem is this whole thing? How does this help my life?

So I could talk to you all day, but I am cognizant of time, so we're going to move into a quick fire round. So I say a short statement, you give me your immediate thoughts. Does that sound okay? Sure. Yeah.

So why not do YC the second time? I probably should have. I kind of regret not doing it. I think I was maybe too much pride and ego that I didn't need it. YC has a lot of gifts that keep on giving, even if you're a second time founder, like work at a startup like office hours.

Dan Siroker
So I am very impressed with Gary's reinvention of YC recently. So I probably, you know, I regret it. I probably should have done it again. If you were to start another company and you could add a board member, any board member, who would it be and why? Probably Sam Altman or a lot gill.

Two folks who have been very helpful to me, who, you know, don't, who aren't on our board and probably don't need to or want to be. They're two fantastic people who have always had prescient advice and sort of deep intuition for the market and have both been honest and candid. That's the thing that you often I need a board member, somebody who doesn't shy away from saying the hard truth that you need to hear to try to save your ego. So especially a lot. I very much appreciate that in the.

Past, okay, you can call yourself up before your wife has your first child and give yourself some advice. Knowing all that you know now about fatherhood, what advice would you give yourself? It is going to be harder than anything you've ever done before. Set expectations incredibly low. If you're going to do this well and focus on what you care about, you're going to have to cut out a lot of the things in your life that you think are important to you.

Dan Siroker
But you'll realize very quickly once you cut them out or not. What is so hard? Especially the early days, there's just these, these tiny little human beings who you have to feed and care for, who are never stopping. You have this window of time before they start walking where it trains you. And I think that's probably why humans have evolved to walk later.

Is there just be too much? And I've also this theory. Humans in general, and probably kids in particular, have learned to nap and sleep just to give parents a break, because otherwise the parents would just throw the kids away. It's just too much if you don't have them napping every so often. And it's also just, it's, it's.

It's physically hard. It's emotionally hard. And then combine that with a startup, which is mentally hard, by the end of the day, you're just drained, you know, like, and I'll be honest, like, I've cut out, basically. I don't spend much time with friends. I have basically no hobbies.

I'm reminded of this Rick Rubin quote. He's like, I have no technical skills. It's like that, but for my life, like, all I do is spend time with my kids, my wife and work, and I'm happier than I've ever been in my life. So it's, it makes you create a level of focus that, you know, and of course, it's different with one kid versus three. Three kids was just a lot.

So that's what makes it hard. I think now, in hindsight, one was not so hard. Three is about three kids too hard. Would you have a fool's? Well, you know, I'm not, I'm not ruling that out.

I certainly think now is not the time, given all the other things on my plate. And I'm just loving and enjoying when kids are at this age. Like, I didn't appreciate how nice it is that they just want, like, the most valuable thing to them, the thing they love more than anything, is just spending time with you. And that is just so special to have a five year old who all they want to do is just, like, run around the house with you, which I was doing yesterday, or, you know, letting ladybugs go, or, you know, planting things. And that's such a special time, so that I.

And with another fourth, too, you then have to split your time a little bit more. So I think we're very happy with things, how things are, and it's only getting better. Someone once told me, really appreciate every time your child runs up to you when you come home, because there will never be a last day where they say, this will be the last time for sure. No, I definitely value and appreciate that. And it also creates a certain level of focus in my life that I didn't have before.

You know, I have a purpose, a meaning, and in a way that, like, you kind of miss if you don't have and you don't see. The other thing I love about, you know, this is a very techie answer, but I love watching how they learn and how they grow, imagining the parallels to AI and Agi and seeing and understanding intelligence and what it means to be human from first principles, to witness, to see a human being learn and observe the world in a world when AI and technology can do the same, today is also incredibly lucky and fascinating. To be able to do both and become an expert at learning both at the same time has been really fun. What worries you most, and what are you most optimistic about in the world that they're going to grow up in in 20 years? What worries me most about the world they grow up in, and today, frankly, is doomerism.

It is cynics around technology. It's people who see, who are clinging to a past that cannot and will never exist and sort of a approach to technology innovation that is cynical. You know, I think there's a time when I started optimizing in 2010 where it was cool to be a founder. Like, even in San Francisco, it was cool to be a founder. And then I think after the bus, the Google bus protests, and, you know, it was actually, I think, the movie silicon or social network that actually propelled a lot of people, and that brought in a lot of sort of, you know, entrepreneurs.

But, you know, you had a period of time where, like, being a technologist was cool, building something was cool. And I think that was good for society, that was good for entrepreneurs. And that's not always true. There's some countries where that's certainly not true today. In the United States in particular, you see what just happened in Florida, banning lab grown meat.

There's a move, a counter movement against technology and against optimism that I think could be really dangerous and we could go into the dark ages. You know, we had that. That's happened once in, at least once in the history of society and that. Do you not think it's too far down? Actually, no matter what the doomer is, AI is out of the box.

Maybe. I don't know. I mean, governments have control. They can do things to you. And all it takes is one or two bad policies here and there.

We're not that far off from regulatory capture around AI models. The unfortunate challenge is the doomers are on the same side as the regulatory capture, and there's a lot of money at stake. So doomers plus regulatory capture, I could see creating a world in which a lot of AI innovation is stalled. And you add to that that in order to do a lot of foundation model AI innovation, you need to spend a lot of money. So if it were true that it was as simple as, for example, the Internet, where you didn't need a lot of money to start an Internet company, you could ride off of the distribution the Internet was naturally giving you by having more people joining the Internet.

You could just, back in 1996, even 2000, you could just put up a website, and if it was any good, it would grow. And if it wasn't, it wouldn't. That's not so true today of AI, you need a lot of capital. You need, hopefully, a government get out of your way. It's very possible kids grow up in a world where we look back at today as kind of like the Renaissance.

Here's a good analogy. We could look at AI today the same way that before SpaceX, people looked at the space shuttle like, hey, we have the space shuttle. Then we retired it, and now we just stopped going out of space. And it wasn't until SpaceX came around and new technology was built and entrepreneurs like Elon Musk push frontiers that things get better. And that could very well be true.

Who knows? I hope not. I hope we have a thousand flowers bloom and a lot of startups, and I hope a lot of new innovation. But people are, people like to cling to their pearls, you know, like, technology changes hard, and certainly when it can impact your job, I don't think it's a 0% chance that the Doomers win. Do you think TikTok will be banned?

It is likely to have quite a bit of headland regulatory headwind, regulatory wise. And certainly, you know, the bill was passed, so they've got a year to sell it. And, you know, the rumors are now that, you know, Donald Trump's going to come in and make the key part of his platform, that he's going to unban it, which might actually work for him. So a lot of this posturing and a lot of government intervention here may be more around trying to appease what it takes to get reelected than it is actually making good policy. So, I don't know, final one for you now is ten years for limitless.

So it's 2034. What would be successful for you. If you were to paint the limitless picture in 2034, it would be millions. Of users, active users, daily. One of our biggest advantages today is that we're weird.

Dan Siroker
People look at our product, and why would I capture everything I say and hear, like, what's the purpose of that? And it will go from being weird to being accepted. It'll be. It'll be like, airplane Wifi. You're like, wow, that's weird.

And then it's like, oh, it's not fast enough. It's a societal change around the conception of what we do, the benefits of capturing what we say, what we hear, what we see, and using it to augment human intelligence with artificial intelligence, not replace human intelligence, augment human intelligence. To me, that would be success in ten years, is that our product is taken for granted, and it's people thinking about today and saying, wait a minute. Back then, you mean in 2023 when you wanted to remember something, you took out a rectangle that you chopped down from a tree called paper. You had a stick with ink at the end of it, and you scribbled things down, and that's how you remembered that was the thing you thought was the best idea to remember, and that people would laugh at that concept.

That would be success in ten years. Dan, listen, I've absolutely loved this conversation. Honestly, it is so refreshing to have such honesty and granularity to a discussion. So thank you so much for being such a great guest, and I've loved it. Thank you, Harry.

It was a real pleasure to be on the podcast and really excited to be here. I mean, that show was so much fun to do. I want to say a huge thank you for Dan, for being such a great guest. If you want to see the full video on YouTube, you can check it out by searching for 20 vc. That's 20 vc on YouTube.

Harry Stebbings
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20VC: Fundraising Wisdom that is Total BS; Dilution, Meeting Associates, Taking the Highest Price, Always Be Raising | Why Second Time Founders Are More Investable & Why Not To Hire People Out of College with Dan Siroker, CEO @ Limitless

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2: The Myths of Fundraising

3: The Value of Experience

4: Hiring Strategies

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