Episode Transcript
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(00:04):
Good morning. Welcome back to the Founder'sSandbox. I am Brenda McCabe, your host on this
monthly podcast now in its third season. TheFounder's Sandbox is a podcast where my guests
(00:33):
are business owners, founders, professionalservice providers and corporate directors.
And we all share a mission and we find ourselvesspeaking here on the Founder Sandbox. This
mission is really to work through the powerof the private enterprise, be it small, medium
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or large, to create change for a better world.And each of my guests tells a story, right?
The origin story. that touches on the topicsthat I'm so passionate about resilience, scalable,
purpose-driven enterprise, all with good corporategovernance. And we do this in a fun sandbox
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environment here in the Founder Sandbox. Iam absolutely delighted to have as my guest
today, Tim He. He is joining us from Dallas,Texas today. And Tim. is he's going to be
speaking to us. He checks a lot of boxes, buttoday he's going to be speaking from his experience
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as an advisor to pre-seed and seed companies. And we share a common kind of subject matter
expertise. We work with a lot of founders thatare seeking to find a co-founder or we're working
with them to how to divorce a co-founder, whichNobody likes to talk about this, but it happens
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more frequently than not. Matter of fact, Timhas chosen for this episode, the title of Scaling
Your Co-Founder Relationship. So Tim, welcometo the Founder Sandbox and thank you for joining
me today. Thanks for having me. This is gonnabe a lot of fun because the thing with co-founder
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relationships is that when it's bad, It's bad.You you think of divorce, arguments, sometimes
even litigation, but when it's good, it's prettymagical. You build very valuable companies
that change not just your lives, but the world. And it creates a type of team and culture
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and company that people want to root for. Andwhen I get to see that, that's the best part
of my job. And it's actually pretty magical.It's very fulfilling, isn't it? It is. So you
check a lot of boxes, but we're going to focuson that. You are a founder yourself, prior
founder, advisor, creator, writer, and coffeesnob. So we'll get to your love of coffee
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later in the podcast. When you reached outto me, it did kind of make me giggle because
nobody likes to talk about divorce, right?Let alone your co-founder. And you specifically
reached out to me because the work you do andyour platform at Cherry Tree is around co-founder,
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choosing the right co-founder and the like. I have experiences with my clients on making
that tough decision to divorce a co-founder.And I read some of your blogs. And you do
provide sound advice on getting what I callthe prenuptials in place. So kudos to you.
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And more in the podcast today. So I lovewhat I do, right? And my consulting firm where
I advise kind of scaling companies to workwith them on purpose and resiliency. advice
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to founders when working at Cherry Tree andfinding the right co-founders, scaling it that,
it doesn't crack under startup pressure. It'sprobably rot with your own origin story as
founding a company. Can you share that withus here, Tim today? Of course. Yeah. I'd say
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almost 10 years ago now, I started a companywith five other co-founders. So six of us in
total. which is pretty unconventional in thesort of software startup ecosystem, but it
wasn't intentional on my part. I was in collegeat the time and I was thinking, you know, I
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want something to do other than homework. SoI found a bunch of my friends and asked them
if they wanted to start a company with me. And I didn't expect them all to say yes, but
they all did. And so we were like, sure, let'sjust do something together. And that was sort
of the beginning. And you were six co founders. Yeah. And let's carry on. That's good. That's
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unconventional. It was a lot, but it was alot of fun. You know, I was best friends with
some of them. And then some of them were mutualfriends or classmates that I met in school.
And so they also had different relationshipswith each other. Not all of them knew each
other in the beginning. All of them knew me. but to varying degrees as well. And so I kind
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of got to see the entire spectrum of what aco-founder relationship can be. And at the
same time, I was teaching entrepreneurship inSeattle and a lot of my students would ask
me the same questions about co-founders. Youknow, the basics like how do you split equity?
How do you choose titles and roles and responsibilities?How do you fight with each other productively?
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All those things that me and my co-founderswere going through at the same time. And so
we made a decision to be very open and transparentabout it. I shared with my class how I split
equity with my team and the reasons behind it. And I shared with them what we debated about
on the product side or the marketing side andhow we came to a resolution. And so the students
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had a very behind the scenes look at whatgoes on with co-founders. And then COVID hit.
And so I started writing online for my studentsquite a bit. And then over time that became
a book about co-founders. And then when I publishedthe book, you know, more people started reaching
out to me, but it wasn't just college studentsanymore. was people with venture backed companies,
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companies going through YC and all sorts ofindustries all over the world. And then somebody
was like, Hey, I don't want to read a 200 pagebook. I want something quick. something easy
and actionable. And so that's how I got startedwith the Cherry Tree newsletter, which comes
out every Monday and Friday. And it's nice andeasy. It's very relatable and actionable.
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And then people started replying to the emailasking for personalized advice because they
said that, you know, 500 words is not enoughto solve a tricky situation. And that's how
I got started with co-founder coaching. Andso now the Cherry Tree Company as an umbrella,
comprises of the newsletter, which is free.And for people who are maybe just starting
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out and want to build good habits, and thenalso the coaching component as well, for people
who are either going through some high growthstage, like raising a fund or going through
a major pivot, or they just want to talk aboutsome concerns or curiosities they have about
co-founder relationships. Let's go back to yourco-founder, your six co-founders. that company
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still exists today? What was the, so what wasthe outcome? Yeah. It was a software company
in the real estate space. And so COVID kindof took us out, but it didn't take out the
friendships. We are all still best friends andvisit each other over the holidays. In fact,
when I, when I move in a couple months, I'mmoving to a city where two of them already
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live right now and One of the things I lookedfor was an apartment that was close to them
so we could all hang out together. COVID tookout the company, but not the co-foundership.
All right. You did speak about the newsletter.why did you choose that medium? And again,
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I think you said there are typically 500 words.I've read a few of them. I blog myself. And
we shared a couple of our blogs back and forth.reached out to me, said, oh, I've written about
that, and how to split equity and the like.So what made you choose the medium of a newsletter?
Yeah, I mean, I've always liked writing. thinkit makes me, it forces me to think very hard
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and clearly about what I wanna articulate. Backwhen I was teaching, I found that I would have
a topic or a concept in my head, but when Iwent to explain it to somebody, I couldn't
quite articulate it the way that I felt, especiallywhen they started asking very thought-provoking
questions. I felt I was stumbling. I felt thatI... had an answer in my head, but I couldn't
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quite deliver it to them. But, you know, becausewe all went remote, I was writing for them
and that was a forcing function to get everythingcrystal clear. And that became a really good
habit for me. Plus I've always liked reading. I follow several other newsletters as a reader,
as a customer of theirs. And so I've alwaysbeen intrigued by it. And then one of my friends
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who is at a private equity firm specificallyfocused on newsletters was telling me a little
bit about the backend of newsletter businessesand the unit economics for it. And I realized
it was a very viable and very scalable businessopportunity. And so I thought I would do this
practice because it's good for my own just thinkingprocess. And I get to update it every every
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week, twice a week with new information thatI find. And so a newsletter kind of just made
a lot of sense. Excellent. And then the shownotes later, we'll put the the URL is it
cherry tree dot v hi.com, right? We had toaccess your newsletter. So teaching you're
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teaching in a university in Seattle, entrepreneurship,you're so young, it's amazing. How did you
get into the teaching position? I got verylucky. on my first, sorry, on my second
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quarter of college, I was working retail inthe mall selling glasses. And it was at about
9 p.m. right before we were closing and a customerwalks in and you know how it is. Nobody wants
to deal with a customer two minutes before closing.I'm a new kid so the manager is like, you go
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talk to them, get your practice. So I go andI talk to the customer and we just make small
talk. I'd tell him that I wanna get into businessschool. want to... be a part of startups and
all this exciting stuff. I was 18 or 19 at thetime. And he was like, hey, you should talk
to this professor. He teaches at the businessschool as an entrepreneurship professor.
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And I think you guys will really get along.So he wrote down this professor's phone number.
that was it. He didn't buy any glasses. We closedthe shop and I walked home. I didn't think
much of it. I was trying to make a sale. Ihad that note in my pocket and when I got
home, this was maybe around 10 PM, I was changingout of my work clothes and I had that note
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and I thought, hey, maybe I should give thisprofessor a call and his name is Alan. And
so maybe I was naive or impulsive, but I calledhim at 10 PM with no forethought. I didn't
think, hey, maybe I should email him or callhim tomorrow morning. I just had the note in
my hand and I was like, let me just call himand he picks up. And we talked for about an
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hour and a half. Oh my goodness. About the,yeah, about the classes he's teaching, about
how he became a professor and his alumni. And it was very clear to me that he loved teaching.
He was in his late fifties, early sixties and independently wealthy from running his
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own companies. He had retired for a number ofyears and then come back to teach because he
just loved teaching. And so. I was like, hey,can I take your class? It sounds really cool.
But the administration was not happy with thatbecause I was a freshman and he only taught
senior classes. And I was not only not in thebusiness school, I had not taken any of the
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prerequisites and the class was already overbooked.Oh my gosh. So. We were all stacked against
you. Exactly. But he said, just come to theclassroom at this time and sit in the corner.
Like you might not get credits for the class,but just sit in the corner and pay attention.
And so I did that and I started answering questionsin class. Questions that some of the upperclassmen
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may not necessarily have been able to answer,which was very surprising to me because I had
never done well in school. Throughout high school,I barely got into college. My parents were
on me all the time, but this was the one classwhere I felt like I knew what I was talking
about. And so I went to all of his classes andeventually became his assistant. And that
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slowly changed. And I, was an assistant forabout 30 courses and then later become a co-instructor
at both campuses. And so I got really lucky.It was unconventional, but this, this mentor,
Alan sort of gave me that opportunity. AndI finally felt like I, I was doing something
that I was good at. Amazing. That's an amazingstory, very unconventional, but I love that.
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You heard it here on the founder's sandbox. My guest, Tim He, got into teaching, and then
eventually COVID hit. You started continuingto teach virtually and started providing your
content through a newsletter and your regularpostings two times a week. So bravo. You also
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have time to run another business. I introducedyou with many titles, but you are a coffee
son of so what is it with the coffee, Tim? Yeah.All right. You taught up in Seattle, right?
And we all know he's from Seattle. But whatis it about the coffee and it's called dumbfound
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coffees? Yes, yes. It's a fun story. It's quirky.I A couple of years ago, I helped this coffee
founder a little bit with his business. wasmy friend and I helping this one man show.
He was bagging the beans by himself, sealingit, weighing it, driving it in his truck to
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the post office, handwriting notes for everybody.And he also had a day job. So he was doing
this on top of that. And he had a wife and fourkids. And so he really needed some more extra
hands. And so We started with helping him literallyjust bag beans. And then we got to understand
the coffee business and how to market coffee, how to optimize shipping and logistics to
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save on costs and sort of everything in between.It was really fun. And my friend and I always
joked that we would start our own coffee company.And then right after working there, I went
to work at a very large coffee chain, globalchain, strategy team. And that was very different
because there are thousands of people at thiscompany with billions of dollars in budget.
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And so I saw this industry from a completelydifferent lens. Right. And it was very interesting
because there are so many similarities betweenthis, you know, global corporation and a one
person coffee shop. And of course I love coffee.I've been drinking it for as long as I can
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remember drinking a little bit, a little sipof my mom's coffee when I was a kid. I'm Canadian.
So I grew up drinking Tim Hortons for thoseof you Canadians out there, know what it is.
so I love Tim Hortons. It's so good. Tim Hortons.Yeah. And of course, you know, Tim and Tim,
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so I have to get it from them. Uh, but yeah,fast forward, uh, three or four years now,
my friend and I got in touch again and we said,Hey, let's start a coffee company. Uh, we've
been wanting to do this for years. We've, wefinally have the circumstances and sort of
the, the, the personal financial, uh, privilegeto do this now. Um, let's, let's get something
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up and running. And so we're thinking, how dowe differentiate? There's a billion coffee
companies out there. Um, there's coffee for,for veterans, for teachers, for hippies for
everybody, except for founders. And foundersdrink a lot of coffee. I'm a three time founder.
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My friend was also with founder and we drinka lot of coffee. My friends drink a lot of
coffee. And there's something satisfying abouthaving a cup of coffee and sitting down at
your desk, getting ready to lock in and geta ton of work done. It's just a very satisfying
feeling. And so I wanted to capture that feelingplus just the fact that founders drink a lot
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of coffee, but also this idea that the bestfounders I've talked to take their work very,
very seriously, but they don't take themselvesseriously at all. And I think that's the one
commonality between all the best founders thatI've come across. And so the name dumbfound,
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you know, it starts with dumb, but it actuallymeans amazed or in awe. And it's the founders
journey. Right? You start off dumb because youdon't know what you're doing. Maybe you're
taking a huge risk. are, you know, you're startinga company, you feel dumb a lot. And if you've
been a founder, you know exactly what I'm talkingabout. But you keep grinding and you keep working
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at it. And little by little, it starts tobecome a really amazing journey. People looking
on the outside, they're like, wow, how did you,like, how did you start a company? That's,
that's amazing. That's crazy. And even morethan that, you look at your progress. Even
though some days it feels like you're goingbackwards, it's really awe-inspiring. And so
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that's why I wanted to capture with Dumpfound.In the name of the company. Bravo. I will
have to order some from you. You know, I use the term pre-naps. Tell me in your consulting
practice now, because you are working full-time. This is your gig and the coffee. What is it
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that you found the secret sauce to scaling aco founder relationship? Right? What is it?
What's your secret sauce? Or what have youobserved in high performing co founding teams?
Yeah. Everybody asks me what they can do fortheir co-foundership so that it improves their
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company. That's the wrong question. That's backwards.the best co-founderships I've seen all use
the company as a means to improve their co-foundership.Tell me about that. that one more time. This
is important for my listeners. Yeah. Insteadof using your relationship as a means to improve
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your company, use your company as a means toimproving your relationship. Okay. And I'll
give you some examples. Back when I was teaching,I would, you know, make groups of students
and teams randomly. would draw stuff out ofa hat randomly. And that didn't guarantee
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friendships. In fact, a lot of them ended upfighting with each other. And so I thought,
okay, maybe they should pick their own teams. And that didn't guarantee friendships either.
In fact, some of them ended up fighting evenharder than randomly assigned teams. And then
I thought, Why is that? How can we create teamswhere everybody gets a pretty good experience
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out of the class? Because we all know groupprojects, our group projects, and there's
always somebody who either pulls the team forwardor drags it behind. And so I was looking at
the best performing teams, the ones that blowmy mind. And I found that all of them, regardless
of whether they were friends before the classor they had met for the first time during the
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class, they all saw the class, the course as an opportunity to hang out and have fun,
joke around with each other, but also do somethingvery interesting like building a company. And
so that was always in the back of my head. Andthen when I talked to co-founders, I've talked
to over, I believe like 300 co-founders alreadythis year. The best ones, doesn't matter if
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they were friends before they started a company,but they use the company as a means. to improve
their friendship. So what does that look like?Well, it's easy for co-founders to silo and
say, okay, you do the engineering, I do themarketing, and we come together and share progress.
That works for clarity, but not so much forcompatibility. The best co-founders kind of
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do everything together. Even if they're, youknow, one person is not technical, they're
still very involved in the product with... talkingto users or creating documentation or making
wireframes or mock-ups. And for the non-technicalco-founder, they're also very involved in the
marketing and the sales and the pitching becausea lot of people think, oh, it's not my strength.
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So I'm not gonna be involved in it. You're theexpert on it. I'll let you handle it. But if
you think about friendships, that's not reallyhow we operate, is it? You don't divide responsibility
so rigidly with your friends. You do everythingtogether because it's fun. Share responsibilities.
Maybe somebody is better at it. Sure. But that's,that's part of the fun. And so when I realized
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that, and I, I communicated it to people whowere asking me how to do the opposite, do it
the wrong way. When I told them what I thoughtwas the right way, all of them had a light
bulb moment go off in their head. And I wouldask you how does friendship scale? If I'm going
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to pressure test your your your the, the, guessthe empirical data, right? You've taught
many, many classes, you've worked with co founders,you've worked with co founding teams, let's
say. How do you scale that? If you can imaginelike a staircase model at each step of a co-foundership,
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there are different levels of sacrifices thatyou have to make. So for example, when you
choose co-founders, you sacrifice the abilityto become co-founders with anybody else. And
then you start working on your product and yousacrifice maybe some nights and weekends. Maybe
you're sacrificing some Netflix time. And thenyou go up a step, maybe your company has some
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traction and you've got some users and you sacrifice having a day job or having a stable income,
or maybe you sacrifice some sleep some nights.And so the sacrifices become more demanding.
And if you translate that to a friendship, it'skind of the same. you become friends with someone,
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you're not necessarily eliminating all otherfriendships. but you are eliminating some options
for how you spend your time. Now let's say you have families or you move to different cities
depending on your stage of life. The sacrificeis the effort that you need to stay in touch.
Now, how many friends have we had in high schoolthat we don't talk to anymore because we just
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never stayed in touch because we didn't makethat sacrifice. And so back to the co-foundership,
a lot of times the company might be progressing.You have your product and then some users and
then some funding and then some more users. one co-founder decides that the next level
of sacrifice is not worth it. Maybe they cannotquit their day job. Maybe they have kids that
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they have to spend time with and want to spendtime with. they have, you know, whatever the
situation is, it might not be malicious. Itmight just be circumstantial, but for one
reason or another. they decide that the sacrificeto move to the next level is not worth it anymore.
But that usually doesn't mean that they quit.That usually means that they stay at their
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current level of sacrifice and they keep doingthat. And so the other co-founder or the other
people are continuing to do that. And that'sa case where it doesn't scale. And so to be
able to scale, I'm not saying you have to sellyour house and free a personal runway or never
spend time with their kids. The important thingis to understand where each co-founder is on
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which step and where the company is at whichstep and to recognize what are the milestones
and the sort of achievements and the effortneeded to unlock the next step. And so when
you're very clear about that, it becomes very simple and apparent what you need to scale
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the co-founder show. Excellent. And I'm certainthat not not all relationships have happy
endings. And that's when we get to splittingthe equity, right. And hopefully, with your
advice, there were there's been, you know,a stakeholder agreement, a priori, and there's
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cordial negotiations. And that's for anotherepisode. So Tim, how Can my listeners contact
you? I'm pretty active on LinkedIn. You canfind me by searching my name, Tim He. Yes.
I also have the newsletter, the Cherry Treenewsletter. I read every reply to that myself.
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And it's really fun to see what people aresaying. So if you want to email me or reach
out on LinkedIn, I'm available on both. Sothat's Cherry Tree. And the coffee. coffee
company? What is it again? It's dumbfoundcoffee.com.Excellent. Excellent. Is it dark roast or you
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do that? Do you have several roasts? It's aso it's a medium roast from Costa Rica. Costa
Rica. It's delicious. I've tested over a dozendifferent coffees for this. My girlfriend and
I we were way over caffeinated many days tofind perfect bean and I think we did. All right.
I'm more of Guatemala and darkerist than wehave, but willing to try. Thank you. Thank
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you. You know, I do like to bring all my guestsback to the sandbox to touch on the three
cornerstones of the work that I do, which isaround resilience, purpose driven, and scalable
growth, and ask each of you to describe whatdoes the meaning what is the meaning of that
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word for you? And here's to you, Tim, whatdoes resilience mean to you? That's a good
question. I've been thinking about that a lotlately. And by default, you know, we all think
of the get knocked down seven times, give backup eight, or keep going when it's hard. And
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those are really inspirational when you feellike being inspired. but on the days that you
don't feel like you're being inspired, on thedays that you're knocked down and everything
sucks, I think it can be frustrating to hearstuff like that, you know, because you're like,
just go away, give me a minute and just leaveme alone. And I think that's also a sign
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of resilience, just taking the time and thespace you need. You don't need to be motivated
every day. You don't need to grind every day,despite what startup culture tells you. sometimes
being resilient is just recharging. And I'vebeen doing a lot of that lately myself, and
it's been helping me stay on this path. I'man entrepreneur and working with entrepreneurs.
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I like it recharging. How about purpose drivenenterprise? Yeah, very purposeful. I'm a bit
unconventional, but purpose. I, I like thiscompany, my company, because you're right,
I am purposeful. There's, there's a magic thathappens when I do my job, right? And co-founders
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have the relationship that they want. and thecompany that they want to build. And I think
if you do your job right, and you're genuinelyhappy because of a magical feeling, and I use
the word magic because there's really no wayto describe it. It's not the pay, it's not
the hours, it's not the freedom, it's not anyof that. It's a magical feeling. And if you
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have that, I think the purpose is good. And no other... purpose-driven company that I've
talked to denies the magic that happens whenthey do their work, right? I often, you describe
it as magic, right? It's the flow, you're workingwith your clients and just seeing that your
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inputs valued, right? I call that joy, right?So when you discover or feel joyful, in what
you're doing with your clients that is resonatedand purpose. Thank you. That's an amazing
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description of magic. What about scalable? The title of this episode that we chose together
once I understood your practice is scaling yourco-founder relationship. So what does scaling
mean to you? I mean, change is inevitable andscaling is just adapting to those changes.
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And in the startup world, we think of scaleas growth, as more users, more money, more
funding, more profit. And that is a type ofscale when you're getting out more than you
put in and it's leveraged and that's all great as a technical term. But I think scale doesn't
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have to be confined to that. It can be if that'sthe context in which We want to look at it,
but scale is just adapting to changes and hopefullythat change is good because you can also scale
down depending on your priorities. know a lotof founders who'd rather build a million dollar
company than a billion dollar company. They'remuch happier that way. And so everybody is
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obsessed with growth for the sake of growth and scale gets a bad rep because of that.
But if it's just changing and creating the circumstancesthat gives you purpose, then It's, yeah, it's
all good. Fantastic. Very refreshing perspective,Tim. Thank you. Last question. Did you have
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fun in the sandbox today? Yes, I did. Thankyou for asking. And that's just where I find
joy. Thank you for spending time here in theFounder's Sandbox. To my listeners, if you
liked this episode with Tim Heat, sign up forthe monthly release. of the Founder's Sandbox,
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where business owners, corporate directors,professional service providers provide their
stories so that you learn how to build yourcompany with strong governance as a resilient,
scalable, and purpose-driven company to makeprofits for good. Signing off for today, thank
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you for joining us. Thanks, Tim.