July 9, 2024 • 35 mins
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In this episode of Masterstroke, Monica and Sejal chat with Ned Renzi from Enjoy the Work, a seasoned venture capital advisor. They explore what it takes to go from a passionate founder to an effective CEO. Ned, a founding partner of Birchmere Ventures, shares traits that make entrepreneurs successful, like a passion for problem-solving and a relentless drive to improve.
They talk about the importance of postmortem and premortem analyses in refining business strategies and decision-making. They also highlight the role of investor board members and the need for collaboration and trust in growing a business.
Don't miss these valuable insights as Ned discusses "walking dead" companies in the venture community and how founders can become leaders by mastering general, functional, and self-management skills. He emphasizes the importance of loving the problem you're solving, not just your product or technology, for long-term success.
Georgianna Moreland - Creator, Executive Producer & Managing Editor;
Matt Stoker - Editor
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Ed Renzi (00:03):
There's a lot of walking dead among the venture
community.
Right now, these funds areeffectively out of business.
They just kind of don't know ityet, or they just need to let
the time play out.
Monica Enand (00:12):
They're walking dead companies.
Georgianna Moreland (00:14):
Oh yeah, welcome to Masterstroke with
Monica Enid and Sejo PetrzakConversations with founders,
ceos and visionary leaders intech and beyond.
Monica Enand (00:34):
Today we have Ned Renzi joining us.
He is currently working withthe Enjoy the Work team as an
advisor, and we're so excitedbecause Sejal Ned has worn all
of the hats you can possiblywear in the startup world.
He founded a company, so he wasa founder.
He spent two decades as acapital allocator, as a VC,
(00:57):
raising funds and deployingcapital into the startup
ecosystem and advising companiesfrom that perspective as an
investor, and now he's doingsomething interesting that we
want to learn a little moreabout at Enjoy the Work as an
advisor and coach.
Sejal Pietrzak (01:13):
Very cool.
Well, so nice to meet you, Ned.
Thanks for joining us.
Ed Renzi (01:17):
My pleasure.
Sejal Pietrzak (01:18):
Actually tell us about Enjoy the Work.
Monica may know about it.
I'm just learning about it.
Tell us a little bit aboutEnjoy the Work, ned.
Ed Renzi (01:26):
Yeah, so Enjoy the Work is a collection of
ex-operators who advise andcoach founders, and our mantra
is we help turn founders intoCEOs and it's an amazing
partnership.
Like I said, they're allex-operators and in that process
of teaching founders to be CEOs, we focus in three primary
(01:47):
areas.
We focus on teaching themgeneral management, functional
management and self-managementand so like.
On the general management side,it's everything from how to
hire, you know, like processeslike Monica had mentioned on top
grading in our email exchange,getting your company into an
(02:07):
effective operating rhythm, kpis, okrs, mission vision, values,
communication, architecture,managing a board, et cetera, and
so just like all those things.
And then on the self-managementside, you know what we find is
some founders just need to getbetter at listening.
Some need to manage conflictbetter.
Founders just need to getbetter at listening.
Some need to manage conflictbetter.
Some just need to get theircalendar under control and get a
(02:30):
good sleep and exercise routine, and so it's sort of whatever
they need to work on.
We have playbooks, frameworksand things like that.
That none of them are 100%perfect, but kind of is a good
starting point, and then wecustomize those to help the CEO
go where they want to go and wehold them accountable to it.
Sejal Pietrzak (02:48):
I love each one of those three pieces.
They're so important, not onlyfor founders but I think for
anybody in business and workingat a high intensity job.
Really important.
That's great.
Monica Enand (03:05):
Yeah, and I want to hear more about those
playbooks and frameworks thatyou talk about.
But but I want to first talkabout Ned you we talked about.
You were at Birchmere Venturesallocating capital and you
raised and deployed six fundsand achieved a cumulative value,
a market valuation of $15billion.
And achieved a cumulativemarket valuation of $15 billion.
(03:26):
And I know some of theentrepreneurs that you've
invested in and I know you'vespoken about loving the great
entrepreneurs and the companiesthat you've worked with.
You've invested in Cvent,ironclad, sleeper and Paper
Learning, amongst many others.
I know, but when you're lookingfor an entrepreneur to either
work with or invest in, what areyou looking for?
Ed Renzi (03:49):
Yeah, you know, I think there's always a lot of
things you would look for interms of intellectual horsepower
and grit and things like that.
But if I had to focus it onjust like two things one, we've
had the most success with peoplewho fall in love with the
problem and then, second, peoplewho are relentless about
getting better and winning.
(04:10):
And so if I take a step backand look at all the companies
that you mentioned and others,the founders who were solving a
problem they deeply cared aboutended up being the most
persistent and dogged and stuckwith it.
Right, they just couldn'timagine a future without solving
the problem they wereaddressing.
And if I counter that with somefounders who are in it, where
(04:30):
they fall in love with theirtechnology or they fall in love
with their product, they tend tohave some biases that when that
doesn't work out, I found itharder for them to pivot right.
They try to find another way tomake their tech work, or they
try to find another way to maketheir tech work, or they try to
find another way to make theirproduct work, rather than
looking at new ways to solve theproblem.
(04:50):
So the people who fall in lovewith a problem we've seen have
more outsized success.
On the second point, I'd say Iwas really fortunate to work
with smart people who werecoachable and committed to
getting better every day, everyweek, every month, every year.
Right, that kind of growth thatjust compounds over time.
It's kind of like thatcompounding lends itself to that
(05:12):
phrase you hear it takes 10years to be an overnight success
and people are just relentlessabout getting better.
We've had a lot of good successwith I love that phrase.
Sejal Pietrzak (05:22):
It takes 10 years to be an overnight success
.
Ed Renzi (05:31):
Yeah, it's a funny, monica.
I don't know if I ever told youthis story, but I got into
venture in the late 90s and Iwas part of this partner
training program and I got sentto Silicon Valley is kind of my
first trip out to the West Coast.
And I went to this conferenceand I kind of felt like a fish
out of water and that there waslot you could imagine, a lot of
just like really smart butself-absorbed people who I just
didn't relate well to.
(05:52):
And at the end there was onefireside chat with an elderly
gentleman who turned out to beBill Draper, who's one of the
Godfathers of Venture.
And so I kind of go up to himafter the pitch and I said you
know, what you said reallyresonated with me and I had this
line.
I said I'm a recovering engineer.
Three years in this newindustry, this new career, what
(06:13):
advice do you have?
And he kind of looked at medown over his bifocals and he
said, kid, good news happensover 10 years and bad news in
every phone call.
And uh, you know, it's like1998, everything's up and to the
right.
I kind of shrugged my shouldersand said, yeah, whatever.
And then, you know, monica,it's like six, nine months later
we invested in Cvent and it was, like you know, 11, 12 years
(06:35):
later till the IPO.
And I look back and he wasright, right, it was the old
fashioned way of buildingcompanies.
Monica Enand (06:46):
No, absolutely.
You know, I felt that way aboutmy venture.
There would be these moments intime where you had some
liquidity event or you'd havesome transaction with partnering
with Vista or partnering with aprivate equity team and people
would go, wow, congratulations,How'd you get to this success?
And I would think God, it doesnot feel that way.
It feels every day like thereis bad news every day.
(07:06):
I get 99 problems all the time.
That's right.
Sejal Pietrzak (07:11):
It always in anything in business, doesn't it
?
It feels, when you look back,like everything was a smooth,
linear road, but in fact it wassuch a roller coaster and
there's so many ups and downs ineverything that you do and in
every role that you're in, and Ithink it's really important for
(07:32):
everyone to maybe realize youknow when the downs are
happening, you know that it'sgoing to get better, and when,
then, the ups are happening, youknow.
Just be prepared.
Don't think that it's alwaysgoing to be that way and have
false expectations.
Ed Renzi (07:47):
Yeah, I think that's right.
Nothing goes up and to theright.
And even if the business isperforming well and the numbers
are going up and to the right,it's still an emotional
rollercoaster, right, you'restill every day dealing with
people, issues and contracts andfundraising and board meetings
and things are working.
Things are not working right.
So, to your point, it is thatemotional roller coaster.
Monica Enand (08:17):
We actually did an episode recently, Ned Sejal and
I did, about managing up.
So I'm going to ask you andwe've been on boards but I think
, as we've never been kind ofinvestor board members, so as an
investor board member, when thebad things happened, what would
you say the CEOs who handledthat well, how did they handle
(08:41):
it with you and what do youthink they did well?
Ed Renzi (08:44):
Well, how did they handle it with you and what do
you think they did?
Well, yeah, so we're bigbelievers in these premortem and
postmortem analysis.
Like my original training myfirst 12 years I worked in the
Department of Defense andspecifically with Navy SEAL
teams Right, and when we woulddo operations after the
operation, we would do thesepostmortems that were completely
without judgment and you wouldunpack what happened, kind of
(09:06):
step by step, no pointingfingers, and you would try to
figure out were we lucky or werewe smart?
Were we prepared or notprepared?
Right, because sometimes yousucceed and you were lucky and
those are the dangerous lessonsto learn.
Right, because you think youcould replicate that and
sometimes you fail, but it'slike in blackjack you played
(09:27):
your hand correctly and youstill busted, but it's still the
right play.
And so you sort of have totriage these situations and have
to have trust among themanagement team that you're all
on the same page, you're all onthe same team and you're not
really throwing people under thebus.
You're just trying to figureout what worked right and didn't
work right because of ourprocesses and what didn't work
(09:49):
right.
And if it didn't, how do weimprove our processes, and so
you know, kind of coming aroundto say you divorce process from
outcome and have people who arejust relentless about keep
improving the processes.
Monica Enand (10:01):
And you did.
You get involved with themanagement teams in doing this
as an investor board member.
Ed Renzi (10:07):
It's funny, yeah.
So Jonathan Lowenhar, ourfounder, and I lived a few
blocks from each other in SanFrancisco and we would meet
every quarter and he's alwaystelling me what he was doing
with this enjoy the work whichhe just founded and was a solo
practitioner for a while.
And I would always just marvel.
I'd say like I would never letmy companies pay for that
(10:28):
because I do that for mycompanies.
And he would say, ned, you'relike 5% of all board members who
roll up their sleeves and workclosely with companies like that
.
Most investors don't do that.
Most are just on too manyboards to practically do that.
And you know it turned out hewas right.
And the more I get into it andnow that I'm on the advisor side
(10:49):
of the table, I'm finding outeven more things.
Founders tell me now that theynever told me as an investor
board member.
Sejal Pietrzak (10:56):
What are some of those kinds of things that they
tell you now?
Ed Renzi (11:00):
Well, I'd say two major categories.
One is just on the people sidethat you know.
A lot of times they hire peopleand they turn out to be wrong,
and sometimes you know it rightaway.
But it kind of makes you lookbad if you sort of bring this
person on and they're notworking.
It looks like you don't knowwhat you're doing.
You know, et cetera.
(11:20):
So instead of fixing theproblem, you try to cover it up
and make it work.
You know, et cetera.
So instead of fixing theproblem, you try to cover it up
and make it work.
And then I also think there'stimes the business isn't working
as it should Like.
You have early warning signs ofa plateau.
And I remember in particularthere was one company spun out
of Stanford seed stage.
I was on the board through theseed A, b and the C rounds and
(11:41):
it was one of these things upinto the right.
It was a tech-enabled servicein the ed tech space and the
company was performing extremelywell.
But at the board meeting a lotof the numbers just weren't
making sense from an efficiencystandpoint.
I would ask these questions andI would get these kind of vague
answers and I just could notput my finger on it and
(12:02):
ultimately, right after we didthe Series C, we started missing
our numbers and it turned outlike when the business was
having issues, we were throwingpeople at solving the problems
and not tech, and so we weren'tscaling efficiently.
And that's fine, like a lot ofcompanies do that.
But a long story short, weended up having a good exit in
that company.
The CEO ended up gettingreplaced by the Series C
(12:25):
investor and like six monthsafter he was replaced, we were
taking a walk in China Basin andI asked him I'm like hey, when
did you know things weren'tgoing well?
And he's kind of like sixmonths before we closed the
Series C.
And I'm like how could you nothave like raised the flag?
Yeah, we could have solved thisproblem, we could have fixed it
.
And he just like I just didn'tfeel like I had anybody to talk
(12:47):
to, I didn't feel like I couldtell anybody and they'd enjoy
the work.
We pride ourselves.
In addition to the three areasthat we teach the founders,
we're also that confidant.
Like you both know, as founders, there's conversations you need
to have.
You can't have with yourco-founder, you can't have with
your family and friends.
You can't tell your board.
We're often the first phonecall and that's kind of what's
(13:09):
different now in my role thanwhen I was an investor board
member.
Monica Enand (13:13):
I think that's critically important because
even as I listen to you say that, thinking about myself in the
CEO chair thinking I needed toraise a Series C, I don't think
I'd be looking for problems.
I mean, I might have an inklingthey were there, but I wouldn't
be trying to dig them up andsurface them.
I'd be trying to package thecompany.
Ed Renzi (13:31):
That's right.
It's like, hey, we got ninemonths of cash.
I need to get this fundraisedone, then I'll fix it later.
Then I'll fix it later yeahthat's right, that's right.
Sejal Pietrzak (13:41):
That's really important.
You know something you said Nedearlier was the CEO may tell
you oh, certain people that Ihired were not the right people.
I understand that you have aninteresting methodology you use
for hiring and to get the rightpeople.
I know a lot of our listeners,whether they're in startups or
(14:05):
any kind of company, who aremanagers and are looking to hire
people would love to hear aboutsome best practices.
Can you tell us a little bitabout it?
Ed Renzi (14:15):
Sure, absolutely.
It's a process called topgrading and I beg borrow and
stole it from a book called who,which is a pretty famous book
in the Valley about hiring, andwe just sort of made some tweaks
to it.
You know, as we implement it,we found what works most of the
time for our companies and not.
The focus is on defining theoutcomes and competencies needed
(14:39):
to succeed in a role, which isvery different than a job
description.
Right, because it's much moreresults focused.
Right, most of the people Italk to feel like they're really
good at hiring, but the datashows it's a 50-50 proposition
at best, especially if you'reusing traditional techniques.
And what top grading does is itforces a rigor and a process
(15:02):
that gets you to the rightperson more like around 90% of
the time, so it's a much higherhit rate.
And so when you start workingon the outcomes, you want to
interview for those outcomesthat define what success looks
like 12 months out, 24 monthsout, et cetera.
And as the interviewer, we sortof force you to say what does
great look like in this role, onthis outcome, what does good
(15:25):
look like, what does poor looklike?
And it's a lot of work up front.
It's time consuming andworthwhile.
But I liken it to the old adageis if I have six hours to saw a
log, I spend three to fourhours sharpening the saw, and
that's what sort of putting thisscorecard together feels like.
Then on the competencies,there's a list of about 50
(15:47):
competencies the top gradingprocess identifies.
We advocate picking the topfive or six that are needed to
succeed in that particular roleand interview specifically for
those competencies.
And these aren't competencies.
You make up it's a defined listof 50 or so and you pick the
ones that most apply.
And, as you know, nocandidate's perfect right.
(16:09):
So you're gonna be interviewingthese candidates and they're
gonna fall short in some areas.
Right, they're gonna be good,not great, or they're gonna be
poor and they need to improve.
And so what I have myexecutives do is have three
buckets right, not great, orthey're going to be poor and
they need to improve.
So what I have my executives dois have three buckets right.
There's a bucket of easy tochange things, medium to change
things and hard to change things.
And so, for example, if youreally like a candidate but
(16:30):
they're not good at somethinglike oral communications or
written communications, that'sin the easy to change bucket
right.
They have the intellectualcapacity and if they have the
willingness to change and put inthe work, that's an easy thing
to learn in 30, 60, 90 days,whatever right.
I'd say to the far right.
There's the hard to changethings right.
That could be like they don'thave the intellectual horsepower
(16:53):
to solve problems that you needsolved in that particular role
or you identify a potentialtrust or integrity issue and
those are just red flagshowstoppers.
We just sort of send thosepeople out the process.
Then you'll find a lot that arein the middle, somewhere
between easy, medium and mediumhard to change.
You have to make the decision ofyou know one.
(17:15):
Are they worth it?
You think they could generatethe outcomes and they're willing
to put in the work to make thechange and they commit to it,
then yeah, go ahead and hirethat person.
But if you get the sense thatit's going to be too much work,
you can't oversee or take onthat project Because startups
cannot just always be in thisemployee training mode, right?
So people kind of have to dothis on their own.
(17:35):
If you don't think they'regoing to make it, then we don't
hire Right code If you don'tthink they're going to make it,
then we don't hire them, right.
But it's really implementingthat process with that rigor and
discipline has really increasedthe hit rates with our
executive hires.
Sejal Pietrzak (17:48):
That's really interesting.
Yeah, you know, I think you cando that every time you're
hiring, which is to think aboutthe outcomes, think about the
tangible results and then alsowhether someone can learn it.
I'm always hiring at differentcompanies and have done so much
(18:08):
in my life and I think a lot oftimes maybe our gut instinct
takes us to those questions.
But it's really great to havethat methodology so that you can
actually, you know, clearlyhave some kind of ranking system
or something written down, andit's sort of sometimes you fall
in love with candidates becauseof their personality or because
(18:30):
of something or another, Um, butmaybe they're not the right fit
for for the role at the time.
Ed Renzi (18:36):
Yeah, and again I just focused on like the 30,000 foot
view of what separates thatfrom other hiring methods that
the book really gets into detail.
On screening interviews,because, like one of the things
when I start working with acompany, one of the things a lot
of direct reports to the CEOcomplain about is they spend too
much time in interviews thatwere just a waste of time.
(18:57):
That person should have nevergotten to me, right.
And so we're really rigid aboutputting in like rigorous
screening processes and onlymaking sure the candidates like
there's ways to screen out a lotof the B and C candidates and
just sort of a 20 minute phonecall.
So it's only like the sort of Bplus and A's that sort of make
it through to the interviewprocess and then it gets into.
(19:20):
Also, like, how do you do properreference calls?
Like most reference calls areperfunctory or people skip them
and different things like that.
And what we found is there'sways and tricks to sort of learn
useful things in referencecalls.
And so one of my Birchmerecompanies right now is a pre-IPO
company.
We're interviewing for cro.
We've been looking for thisrole for like 15 months and we
(19:43):
finally got the person andsomething turned up in the
reference check, which nobodyexpected.
It's kind of like you know, um,you know we're not starting
over again, because part of thisprocess is also you just kind
of keep the final live untilthat person actually starts.
Even when they accept an offer,it's not guaranteed, right.
You got to make sure they showup and stuff and so yeah, but
(20:05):
you know we have to restart withsome candidates.
Monica Enand (20:08):
I've actually spent energy on reference
calling and the questions that Iask and that the way you can
ask a question and put somebodyin a moment and then ask them
can really elicit a completelydifferent response and you can
learn things about theirinteractions with the candidate.
It's just really in thephrasing of the question
(20:30):
actually.
Ed Renzi (20:31):
Do you have a favorite question that's worked for you?
I do, let me hear it.
I could tell.
I could tell I do.
I always I'll flip theinterview.
Monica Enand (20:40):
Okay, yeah, you're not supposed to be interviewing
me, but okay, well, I do alwaysask, and so I'm wondering, now
that you've studied referencecalling, tell me if this is a
good one, but it has worked forme.
So I always ask if I called yousix months from now and told
you that we had hired thisperson but that we fired them
you heard it six months from nowwhat would you guess would be
(21:01):
the reason?
And 90% of the time the personwill go oh, because they pissed
somebody off, or oh, you know,they just blurted it out, like
if you guessed why would theyget fired, why would it be?
They blurt out the reason andthen you're like, wow, okay, you
didn't.
You said all these glowingthings during this reference
call.
You never even failed tomention, you know you didn't
(21:24):
even mention that.
Sejal Pietrzak (21:26):
That's a really good one.
I don't think I've ever askedthat.
Ed Renzi (21:29):
It's the gold star, right, because we that that is
what we call a pre-mortemquestion, right?
So, like when I talked aboutthe when something doesn't work
and we do the post-mortemanalysis, the pre-mortem is hey,
if I hire this person in six or12 months from now, they don't
(21:49):
work out.
What are the most likely?
Two or three reasons, right,and that pre-mortem is an
effective framework we useacross the company, right?
So if you're setting financialgoals and you say, hey, if a
year from now, at the end of theyear, we don't hit our goals,
what are the most likely reasonswhy?
New product, new, real and thenwhat you do is you identify the
top three or four risks and youbuild risk mitigation plans.
Hey, we're launching a productSeptember 1st.
(22:11):
What are the top three reasonsIf the launch doesn't go as
planned?
What are the most likelyreasons why?
Maybe it's scalablearchitecture, or you're having
an issue with the database, ormaybe it's like a channel
partner you use whatever andthen you build risk mitigation
plans, and so what you did istook that and applied it to
interviewing, which, you'reright, that is the best question
and that framework works acrossthe company.
Monica Enand (22:34):
Oh, wow, okay, I didn't even know.
When you said premortem, Ithought that was interesting and
I've, of course, have donepostmortems or retrospectives.
I actually sometimes, when welaunch new products, people want
to call them postmortems and Iwould always say I call them
postpartums because I feel likewe did something new.
But anyway, whatever you callthem, but I I had never actually
(22:55):
thought about you the wayyou're saying pre-mo.
Is that something, sejal,you've ever done?
Sejal Pietrzak (22:59):
I've never heard of that either and I think it's
fascinating.
I've never actually asked thequestion because you know it's
kind of a negative thing that oh, what if we fail.
But it's a great question toask which is any initiative
you're doing, whether you knowyou talked about it in the
hiring concept, but it couldalso be in any kind of product
launch or initiative or newstrategy.
(23:21):
What would be the reason why wefailed at this?
Ed Renzi (23:26):
That's right, sejal, and one of the most effective
scenarios to ask it isfundraising and so not like in,
say, the first or second meeting.
But now you have an investorstarting to lean in and you sort
of have built enough trust andconfidence and to sit down with
that investor and say, hey, look, we're coming up to the
investment committee in twoweeks.
If, for some reason, you getpushed back in the investment
(23:48):
committee and this is notapproved, what's the most likely
two or three reasons why?
And what that will uncover isbehind the scenes, when they're
having these hallwayconversations about your company
and your deal.
It's going to identify thepushback your, your champion, is
getting internally and then itgives you a chance to sort of
say, ok, this is what I get infront of that partnership and
(24:10):
that investment committee.
Here's what I need to emphasize, because this is the questions
he's getting.
Monica Enand (24:15):
Yeah, you know, actually I did do that in
fundraising and it's interesting, I never thought about it that
way.
But I have to tell you thatwhen I first started fundraising
, I never did that.
I that took me a while becauseand it was probably this, and I
will tell you that my body gothot, my face probably got red
and cause I will tell you thatit took up some nerve.
(24:38):
It was the working with stupidinvestors and sorry, working
with stupid investors for a longtime and then not passing, not
then having it fall apart andfeeling like I wasted so much
time that finally got me tostart asking that question.
Um, but it was such a scaryquestion.
It's like why is my baby ugly?
(25:00):
Like, if you like, you know itreally is a like, tell me why
this would fail.
I think Sejal's right.
Like it's a hard, it's sort ofa negative question.
Sejal Pietrzak (25:09):
I'm literally writing this down right now
because I want to remember itfor you know.
Monica Enand (25:15):
For example, going you can listen to our podcast.
Sejal Pietrzak (25:19):
I know, but I want to write it down to that
Even today, when I'm in meetings, I'm I'm asking that question
because it's such an importantthing to think about that.
I don't know that I've everphrased it that way.
It's even in life, when youlook at it and you know you're,
you're saying, hey, when I goand do this and it's not
successful, for whatever it isI'm speaking at an event or your
(25:41):
son's having a test coming up.
If it's not successful, whatare the reasons why it might not
be successful?
And then you know, you canimagine even you know your son
and he's has a big exam and hecan list out all the reasons why
.
Well, I didn't spend enoughtime studying, or I didn't do
this and I didn't do that, andmaybe he can get even more
specific.
(26:01):
And then that maybe can guidethe decisions today because you
know what could cause thefailure tomorrow.
I wanted to ask specificallyabout the VC world right now.
Ed Renzi (26:21):
Sure.
Sejal Pietrzak (26:21):
Are VCs having trouble raising funds and, if so
, why?
What's going on in the macroeconomy right now that's
affecting venture capital?
Ed Renzi (26:31):
So I'd say, you know, the venture industry is in flux.
It's gone through several boomand bust cycles in my career and
it's still looking for a newequilibrium.
So you know, venture works onthese 10 to 15-year cycles.
Each fund's a 10-yearpartnership, but it could take
15, 20 years, especially ifyou're an early stage investor,
to get out right.
And so what's happening isthere just hasn't been a whole
(26:54):
lot of exits and money gettingreturned to LPs, so those LPs
can, in turn, re-up in the funds, right.
And so what's that?
The industry, I'd say, from2015 to 2020 or so, had a
velocity where the successfulfunds were raising new funds
every two to three years, andnow it's kind of like every four
to five years, right, becausethe IPO markets are closed.
(27:16):
Washington is very unfavorableto big tech right now, so
there's fewer M&A transactionsgoing on, so it's harder to get
to liquidity, and so if there'sno liquidity, there's no money
going back to the LP, so there'sfewer funds getting created.
I think, on top of that, there'sa lot of funds that were raised
in 2018 to 2021 that deployedmoney really fast at really high
(27:39):
valuations, and the metrics thevaluations were out ahead of
the metrics, right, and somemost companies are not going to
grow into those and those fundsare not getting to exits, and so
there's a lot of walking deadamong the venture community.
Right now these funds areeffectively out of business.
They just kind of don't know ityet or they just need to let
the time play out, and it's veryopaque to founders, right.
(28:01):
So you know back to some ofthese questions you ask when
you're fundraising.
One of the questions we alwaysask is how many de novo
investments have you made in thelast 12 months?
So you want to find out arethey actively deploying capital
in new investments, not justfollow on and things like that?
You know my sense is it's goingto take a few more years to
play out.
Monica Enand (28:22):
So when you say walking dead, so some of the
funds are dead and actually Irecently got it.
I'm blanking on the name, butthere was a famous fund that
just went under their walkingdead companies as well as.
Ed Renzi (28:35):
Oh yeah, that's right.
So, like I can see I can see inmy portfolio we're sort of in
year nine of a 10-year fund,right, and we had some early
successes and obviously a lot ofearly failures, because we're
doing pre-seed and seed and sowe sort of have this portfolio
right now where there's three orfour companies that really have
legs.
We think they have IPO or bigexit potential and their numbers
(28:58):
reflect that right.
They're sort of 50 to 100million year revenue growing at
high rates that suggest futuresuccess.
But then you have that handfulof companies that didn't fail
but they didn't have good enoughmetrics to raise money and they
did what good founders do,right, you get to break even,
right.
And so now we have thesebusinesses that could be, you
(29:18):
know, two to 10 million revenuegrowing 10, 15 percent a year.
Not enough to get ventureexcited, not enough to to to
exit at a multiple the foundershappy with, and so they're
almost like somewhere between alifestyle business and something
that's going to take likeanother 10 years to get to an
exit that the founder wants.
And there are a lot ofcompanies out there like that
(29:41):
and for me that's the founder'schoice If the founder is
comfortable running a $30million business with good
EBITDA and that's what they wanttheir life to be.
You know that's great.
I do have other founders whohave certain ambitions that you
know they do want to keep takingbig swings right.
Sejal Pietrzak (30:02):
And right, wrong or indifferent ventures a young
person's game.
Talk to us a little bit, maybe,about the coaching side and how
(30:22):
you know you recommend anddoesn't have to necessarily be
just to CEOs or just to founders, but just in general about
coaching and the value of it andwhat are some of the things
that you know you wouldrecommend as people are
considering getting coached.
Ed Renzi (30:32):
Our model is a little bit different.
Like, our model is, like I'llsay, much more intensive than
any of those.
We meet with our founders on aweekly basis.
We know the business as well asanybody outside the company,
right, more than typicaladvisors and mentors, better
than board members, et ceteraAlmost any better than anybody
(30:53):
else on the team.
And the other thing enjoy thework does is we bring a team of
people to this.
So, like I said, we're all,we're 12X operators and, for
example, like, say, I wasworking with your company,
monica, you and I would havethese weekly calls what's most
important and what's urgent toyou and your business, and we
would work through those issues.
(31:14):
And all of a sudden, you comeup on something where one of my
partners has a superpower.
So, say, you're launching a newproduct, I would pull my
partner, mike, into a meeting,right?
Mike ran seven product teams atAirbnb and he could help you
with that product launch.
Or if you're doing ago-to-market as you scale up,
you just closed around and youwant to scale up sales, devin,
(31:35):
one of my partners, was chiefrevenue officer of three
different unicorns.
I'd pull him in for a couple ofmeetings, right?
Our newest partner, sarah is anexpert in payments.
She's already met with a coupleof my companies.
How to, you know, increaserevenue from payments and also
decrease our strike costs, youknow.
So, things like that.
My partner, kristen, who I thinkyou met, kristen I mean Kristen
(31:56):
, I IPO'd company, right, so Ihave a company preparing for an
IPO, you know.
I have them start meeting withher.
Or she's also helped meinterview some VPs of marketing.
So you get the sense of like,if you're a founder considering
this, where are you on thatspectrum?
Are you looking for somethingmore on the self-help side?
Are you looking for this likeweekend immersion, or are you
(32:17):
looking at something that'sreally going to change your
trajectory long term?
Right, because I look at thesecompanies in three logarithmic
phases.
Right, there's a zero to onephase, where you create
something from nothing, andthere's a one to 10 phase where
you build repeatable, scalableprocesses, and then there's just
sort of blitz scaling.
Right, get, get big, no problem, no solution.
(32:39):
Higher position, manage thoseposition players and our goal is
to help the CEO keep their jobas long as they want to keep
their job.
And so, like, some coaches arereally good at the zero to one
phase, or some are really goodat the scale up phase and what
we try to do is help thefounders and we have these
playbooks and frameworks and ourexperience levels.
And what we try to do is helpthe founders and we have these
playbooks and frameworks and ourexperience levels.
(33:00):
And you know, monica, I meanI've invested in you know 50 or
100 seed stage companies but ahandful of them made it to IPO
once or twice a portfolio.
I've stayed with them to do theIPO.
So I've seen this movie a fewhundred times.
I joke with my founders thatthe best I could do is help them
make new mistakes right,because I can help them avoid a
lot of the big mistakes thatI've seen.
(33:22):
And I think it's up to foundersto decide what they're looking
for in that coach advisorrelationship.
Sejal Pietrzak (33:27):
That's really great.
Monica Enand (33:28):
It's great that you're talking about sort of the
job, sort of training you forthe job and keeping you trained
for the stage and what is stageappropriate for the business,
the magic here at Enjoy the Work.
It sounds like you're fusingboth those things and then
having partners around the tableand then playbooks and best
practices.
Ed Renzi (33:47):
That's right, because you're coaching and advising the
whole person, not just the CEOin that particular role.
Right, because if you'recoaching just the business stuff
and just the CEO things andthat person's not sleeping well
or their marriage is fallingapart or their kids won't talk
to them, they're not going to besuccessful in their CEO role.
And again, we are nottherapists.
(34:09):
You know we don't get into likeback issues that people are
dealing with from their past.
We recommend therapists or CEOsif, if, if, if they need them,
but we do coach the whole person.
Sejal Pietrzak (34:20):
You know, just in this conversation I've taken
two pages of notes.
Ed Renzi (34:23):
Isn't that funny.
Sejal Pietrzak (34:25):
Literally like think that I know that I can
improve and I want to use andnot forget and I'll listen to
the podcast too, but you know Iwant to remember it right now.
So this has been really great.
Ed Renzi (34:37):
Excellent.
Monica Enand (34:38):
Yeah, Sejal has multiple companies that she's
board chair for and on the boardof, and high-growth companies
and just some pretty spectacularthings that she's doing, so I'm
sure she'll use thateffectively.
Sejal Pietrzak (34:53):
Yeah, that's right.
That's right.
Well, ned, it has beenfantastic having you on the show
.
Thank you so much for your timeand for sharing so many
valuable lessons and interestingfacts about what's happening in
the macroeconomy as well, and Iwant to thank you so much for
and it was great to spend timewith you, great to meet you.
Ed Renzi (35:14):
Thanks for having me.
It's my pleasure.
I really enjoyed theconversation.
Thanks.
Monica Enand (35:19):
All right.
Well, that was another episodeof Masterstroke.
Thanks, sejal Ned, and thankyou to our executive producer,
georgiana Marland.
Georgianna Moreland (35:26):
Thank you for listening today.
We would love for you to followand subscribe.
Monica and Sejal would love tohear from you.
You can text us directly fromthe link in the show notes of
this episode.
You can also find us on theLinkedIn page at Masterstroke
Podcast with Monica Enid andSejo Petrzak.
Until next time.
There's a lot of walking dead among the venture
community.
Right now, these funds areeffectively out of business.
They just kind of don't know ityet, or they just need to let
the time play out.
Monica Enand (00:12):
They're walking dead companies.
Georgianna Moreland (00:14):
Oh yeah, welcome to Masterstroke with
Monica Enid and Sejo PetrzakConversations with founders,
ceos and visionary leaders intech and beyond.
Monica Enand (00:34):
Today we have Ned Renzi joining us.
He is currently working withthe Enjoy the Work team as an
advisor, and we're so excitedbecause Sejal Ned has worn all
of the hats you can possiblywear in the startup world.
He founded a company, so he wasa founder.
He spent two decades as acapital allocator, as a VC,
(00:57):
raising funds and deployingcapital into the startup
ecosystem and advising companiesfrom that perspective as an
investor, and now he's doingsomething interesting that we
want to learn a little moreabout at Enjoy the Work as an
advisor and coach.
Sejal Pietrzak (01:13):
Very cool.
Well, so nice to meet you, Ned.
Thanks for joining us.
Ed Renzi (01:17):
My pleasure.
Sejal Pietrzak (01:18):
Actually tell us about Enjoy the Work.
Monica may know about it.
I'm just learning about it.
Tell us a little bit aboutEnjoy the Work, ned.
Ed Renzi (01:26):
Yeah, so Enjoy the Work is a collection of
ex-operators who advise andcoach founders, and our mantra
is we help turn founders intoCEOs and it's an amazing
partnership.
Like I said, they're allex-operators and in that process
of teaching founders to be CEOs, we focus in three primary
(01:47):
areas.
We focus on teaching themgeneral management, functional
management and self-managementand so like.
On the general management side,it's everything from how to
hire, you know, like processeslike Monica had mentioned on top
grading in our email exchange,getting your company into an
(02:07):
effective operating rhythm, kpis, okrs, mission vision, values,
communication, architecture,managing a board, et cetera, and
so just like all those things.
And then on the self-managementside, you know what we find is
some founders just need to getbetter at listening.
Some need to manage conflictbetter.
Founders just need to getbetter at listening.
Some need to manage conflictbetter.
Some just need to get theircalendar under control and get a
(02:30):
good sleep and exercise routine, and so it's sort of whatever
they need to work on.
We have playbooks, frameworksand things like that.
That none of them are 100%perfect, but kind of is a good
starting point, and then wecustomize those to help the CEO
go where they want to go and wehold them accountable to it.
Sejal Pietrzak (02:48):
I love each one of those three pieces.
They're so important, not onlyfor founders but I think for
anybody in business and workingat a high intensity job.
Really important.
That's great.
Monica Enand (03:05):
Yeah, and I want to hear more about those
playbooks and frameworks thatyou talk about.
But but I want to first talkabout Ned you we talked about.
You were at Birchmere Venturesallocating capital and you
raised and deployed six fundsand achieved a cumulative value,
a market valuation of $15billion.
And achieved a cumulativemarket valuation of $15 billion.
(03:26):
And I know some of theentrepreneurs that you've
invested in and I know you'vespoken about loving the great
entrepreneurs and the companiesthat you've worked with.
You've invested in Cvent,ironclad, sleeper and Paper
Learning, amongst many others.
I know, but when you're lookingfor an entrepreneur to either
work with or invest in, what areyou looking for?
Ed Renzi (03:49):
Yeah, you know, I think there's always a lot of
things you would look for interms of intellectual horsepower
and grit and things like that.
But if I had to focus it onjust like two things one, we've
had the most success with peoplewho fall in love with the
problem and then, second, peoplewho are relentless about
getting better and winning.
(04:10):
And so if I take a step backand look at all the companies
that you mentioned and others,the founders who were solving a
problem they deeply cared aboutended up being the most
persistent and dogged and stuckwith it.
Right, they just couldn'timagine a future without solving
the problem they wereaddressing.
And if I counter that with somefounders who are in it, where
(04:30):
they fall in love with theirtechnology or they fall in love
with their product, they tend tohave some biases that when that
doesn't work out, I found itharder for them to pivot right.
They try to find another way tomake their tech work, or they
try to find another way to maketheir tech work, or they try to
find another way to make theirproduct work, rather than
looking at new ways to solve theproblem.
(04:50):
So the people who fall in lovewith a problem we've seen have
more outsized success.
On the second point, I'd say Iwas really fortunate to work
with smart people who werecoachable and committed to
getting better every day, everyweek, every month, every year.
Right, that kind of growth thatjust compounds over time.
It's kind of like thatcompounding lends itself to that
(05:12):
phrase you hear it takes 10years to be an overnight success
and people are just relentlessabout getting better.
We've had a lot of good successwith I love that phrase.
Sejal Pietrzak (05:22):
It takes 10 years to be an overnight success
.
Ed Renzi (05:31):
Yeah, it's a funny, monica.
I don't know if I ever told youthis story, but I got into
venture in the late 90s and Iwas part of this partner
training program and I got sentto Silicon Valley is kind of my
first trip out to the West Coast.
And I went to this conferenceand I kind of felt like a fish
out of water and that there waslot you could imagine, a lot of
just like really smart butself-absorbed people who I just
didn't relate well to.
(05:52):
And at the end there was onefireside chat with an elderly
gentleman who turned out to beBill Draper, who's one of the
Godfathers of Venture.
And so I kind of go up to himafter the pitch and I said you
know, what you said reallyresonated with me and I had this
line.
I said I'm a recovering engineer.
Three years in this newindustry, this new career, what
(06:13):
advice do you have?
And he kind of looked at medown over his bifocals and he
said, kid, good news happensover 10 years and bad news in
every phone call.
And uh, you know, it's like1998, everything's up and to the
right.
I kind of shrugged my shouldersand said, yeah, whatever.
And then, you know, monica,it's like six, nine months later
we invested in Cvent and it was, like you know, 11, 12 years
(06:35):
later till the IPO.
And I look back and he wasright, right, it was the old
fashioned way of buildingcompanies.
Monica Enand (06:46):
No, absolutely.
You know, I felt that way aboutmy venture.
There would be these moments intime where you had some
liquidity event or you'd havesome transaction with partnering
with Vista or partnering with aprivate equity team and people
would go, wow, congratulations,How'd you get to this success?
And I would think God, it doesnot feel that way.
It feels every day like thereis bad news every day.
(07:06):
I get 99 problems all the time.
That's right.
Sejal Pietrzak (07:11):
It always in anything in business, doesn't it
?
It feels, when you look back,like everything was a smooth,
linear road, but in fact it wassuch a roller coaster and
there's so many ups and downs ineverything that you do and in
every role that you're in, and Ithink it's really important for
(07:32):
everyone to maybe realize youknow when the downs are
happening, you know that it'sgoing to get better, and when,
then, the ups are happening, youknow.
Just be prepared.
Don't think that it's alwaysgoing to be that way and have
false expectations.
Ed Renzi (07:47):
Yeah, I think that's right.
Nothing goes up and to theright.
And even if the business isperforming well and the numbers
are going up and to the right,it's still an emotional
rollercoaster, right, you'restill every day dealing with
people, issues and contracts andfundraising and board meetings
and things are working.
Things are not working right.
So, to your point, it is thatemotional roller coaster.
Monica Enand (08:17):
We actually did an episode recently, Ned Sejal and
I did, about managing up.
So I'm going to ask you andwe've been on boards but I think
, as we've never been kind ofinvestor board members, so as an
investor board member, when thebad things happened, what would
you say the CEOs who handledthat well, how did they handle
(08:41):
it with you and what do youthink they did well?
Ed Renzi (08:44):
Well, how did they handle it with you and what do
you think they did?
Well, yeah, so we're bigbelievers in these premortem and
postmortem analysis.
Like my original training myfirst 12 years I worked in the
Department of Defense andspecifically with Navy SEAL
teams Right, and when we woulddo operations after the
operation, we would do thesepostmortems that were completely
without judgment and you wouldunpack what happened, kind of
(09:06):
step by step, no pointingfingers, and you would try to
figure out were we lucky or werewe smart?
Were we prepared or notprepared?
Right, because sometimes yousucceed and you were lucky and
those are the dangerous lessonsto learn.
Right, because you think youcould replicate that and
sometimes you fail, but it'slike in blackjack you played
(09:27):
your hand correctly and youstill busted, but it's still the
right play.
And so you sort of have totriage these situations and have
to have trust among themanagement team that you're all
on the same page, you're all onthe same team and you're not
really throwing people under thebus.
You're just trying to figureout what worked right and didn't
work right because of ourprocesses and what didn't work
(09:49):
right.
And if it didn't, how do weimprove our processes, and so
you know, kind of coming aroundto say you divorce process from
outcome and have people who arejust relentless about keep
improving the processes.
Monica Enand (10:01):
And you did.
You get involved with themanagement teams in doing this
as an investor board member.
Ed Renzi (10:07):
It's funny, yeah.
So Jonathan Lowenhar, ourfounder, and I lived a few
blocks from each other in SanFrancisco and we would meet
every quarter and he's alwaystelling me what he was doing
with this enjoy the work whichhe just founded and was a solo
practitioner for a while.
And I would always just marvel.
I'd say like I would never letmy companies pay for that
(10:28):
because I do that for mycompanies.
And he would say, ned, you'relike 5% of all board members who
roll up their sleeves and workclosely with companies like that
.
Most investors don't do that.
Most are just on too manyboards to practically do that.
And you know it turned out hewas right.
And the more I get into it andnow that I'm on the advisor side
(10:49):
of the table, I'm finding outeven more things.
Founders tell me now that theynever told me as an investor
board member.
Sejal Pietrzak (10:56):
What are some of those kinds of things that they
tell you now?
Ed Renzi (11:00):
Well, I'd say two major categories.
One is just on the people sidethat you know.
A lot of times they hire peopleand they turn out to be wrong,
and sometimes you know it rightaway.
But it kind of makes you lookbad if you sort of bring this
person on and they're notworking.
It looks like you don't knowwhat you're doing.
You know, et cetera.
(11:20):
So instead of fixing theproblem, you try to cover it up
and make it work.
You know, et cetera.
So instead of fixing theproblem, you try to cover it up
and make it work.
And then I also think there'stimes the business isn't working
as it should Like.
You have early warning signs ofa plateau.
And I remember in particularthere was one company spun out
of Stanford seed stage.
I was on the board through theseed A, b and the C rounds and
(11:41):
it was one of these things upinto the right.
It was a tech-enabled servicein the ed tech space and the
company was performing extremelywell.
But at the board meeting a lotof the numbers just weren't
making sense from an efficiencystandpoint.
I would ask these questions andI would get these kind of vague
answers and I just could notput my finger on it and
(12:02):
ultimately, right after we didthe Series C, we started missing
our numbers and it turned outlike when the business was
having issues, we were throwingpeople at solving the problems
and not tech, and so we weren'tscaling efficiently.
And that's fine, like a lot ofcompanies do that.
But a long story short, weended up having a good exit in
that company.
The CEO ended up gettingreplaced by the Series C
(12:25):
investor and like six monthsafter he was replaced, we were
taking a walk in China Basin andI asked him I'm like hey, when
did you know things weren'tgoing well?
And he's kind of like sixmonths before we closed the
Series C.
And I'm like how could you nothave like raised the flag?
Yeah, we could have solved thisproblem, we could have fixed it
.
And he just like I just didn'tfeel like I had anybody to talk
(12:47):
to, I didn't feel like I couldtell anybody and they'd enjoy
the work.
We pride ourselves.
In addition to the three areasthat we teach the founders,
we're also that confidant.
Like you both know, as founders, there's conversations you need
to have.
You can't have with yourco-founder, you can't have with
your family and friends.
You can't tell your board.
We're often the first phonecall and that's kind of what's
(13:09):
different now in my role thanwhen I was an investor board
member.
Monica Enand (13:13):
I think that's critically important because
even as I listen to you say that, thinking about myself in the
CEO chair thinking I needed toraise a Series C, I don't think
I'd be looking for problems.
I mean, I might have an inklingthey were there, but I wouldn't
be trying to dig them up andsurface them.
I'd be trying to package thecompany.
Ed Renzi (13:31):
That's right.
It's like, hey, we got ninemonths of cash.
I need to get this fundraisedone, then I'll fix it later.
Then I'll fix it later yeahthat's right, that's right.
Sejal Pietrzak (13:41):
That's really important.
You know something you said Nedearlier was the CEO may tell
you oh, certain people that Ihired were not the right people.
I understand that you have aninteresting methodology you use
for hiring and to get the rightpeople.
I know a lot of our listeners,whether they're in startups or
(14:05):
any kind of company, who aremanagers and are looking to hire
people would love to hear aboutsome best practices.
Can you tell us a little bitabout it?
Ed Renzi (14:15):
Sure, absolutely.
It's a process called topgrading and I beg borrow and
stole it from a book called who,which is a pretty famous book
in the Valley about hiring, andwe just sort of made some tweaks
to it.
You know, as we implement it,we found what works most of the
time for our companies and not.
The focus is on defining theoutcomes and competencies needed
(14:39):
to succeed in a role, which isvery different than a job
description.
Right, because it's much moreresults focused.
Right, most of the people Italk to feel like they're really
good at hiring, but the datashows it's a 50-50 proposition
at best, especially if you'reusing traditional techniques.
And what top grading does is itforces a rigor and a process
(15:02):
that gets you to the rightperson more like around 90% of
the time, so it's a much higherhit rate.
And so when you start workingon the outcomes, you want to
interview for those outcomesthat define what success looks
like 12 months out, 24 monthsout, et cetera.
And as the interviewer, we sortof force you to say what does
great look like in this role, onthis outcome, what does good
(15:25):
look like, what does poor looklike?
And it's a lot of work up front.
It's time consuming andworthwhile.
But I liken it to the old adageis if I have six hours to saw a
log, I spend three to fourhours sharpening the saw, and
that's what sort of putting thisscorecard together feels like.
Then on the competencies,there's a list of about 50
(15:47):
competencies the top gradingprocess identifies.
We advocate picking the topfive or six that are needed to
succeed in that particular roleand interview specifically for
those competencies.
And these aren't competencies.
You make up it's a defined listof 50 or so and you pick the
ones that most apply.
And, as you know, nocandidate's perfect right.
(16:09):
So you're gonna be interviewingthese candidates and they're
gonna fall short in some areas.
Right, they're gonna be good,not great, or they're gonna be
poor and they need to improve.
And so what I have myexecutives do is have three
buckets right, not great, orthey're going to be poor and
they need to improve.
So what I have my executives dois have three buckets right.
There's a bucket of easy tochange things, medium to change
things and hard to change things.
And so, for example, if youreally like a candidate but
(16:30):
they're not good at somethinglike oral communications or
written communications, that'sin the easy to change bucket
right.
They have the intellectualcapacity and if they have the
willingness to change and put inthe work, that's an easy thing
to learn in 30, 60, 90 days,whatever right.
I'd say to the far right.
There's the hard to changethings right.
That could be like they don'thave the intellectual horsepower
(16:53):
to solve problems that you needsolved in that particular role
or you identify a potentialtrust or integrity issue and
those are just red flagshowstoppers.
We just sort of send thosepeople out the process.
Then you'll find a lot that arein the middle, somewhere
between easy, medium and mediumhard to change.
You have to make the decision ofyou know one.
(17:15):
Are they worth it?
You think they could generatethe outcomes and they're willing
to put in the work to make thechange and they commit to it,
then yeah, go ahead and hirethat person.
But if you get the sense thatit's going to be too much work,
you can't oversee or take onthat project Because startups
cannot just always be in thisemployee training mode, right?
So people kind of have to dothis on their own.
(17:35):
If you don't think they'regoing to make it, then we don't
hire Right code If you don'tthink they're going to make it,
then we don't hire them, right.
But it's really implementingthat process with that rigor and
discipline has really increasedthe hit rates with our
executive hires.
Sejal Pietrzak (17:48):
That's really interesting.
Yeah, you know, I think you cando that every time you're
hiring, which is to think aboutthe outcomes, think about the
tangible results and then alsowhether someone can learn it.
I'm always hiring at differentcompanies and have done so much
(18:08):
in my life and I think a lot oftimes maybe our gut instinct
takes us to those questions.
But it's really great to havethat methodology so that you can
actually, you know, clearlyhave some kind of ranking system
or something written down, andit's sort of sometimes you fall
in love with candidates becauseof their personality or because
(18:30):
of something or another, Um, butmaybe they're not the right fit
for for the role at the time.
Ed Renzi (18:36):
Yeah, and again I just focused on like the 30,000 foot
view of what separates thatfrom other hiring methods that
the book really gets into detail.
On screening interviews,because, like one of the things
when I start working with acompany, one of the things a lot
of direct reports to the CEOcomplain about is they spend too
much time in interviews thatwere just a waste of time.
(18:57):
That person should have nevergotten to me, right.
And so we're really rigid aboutputting in like rigorous
screening processes and onlymaking sure the candidates like
there's ways to screen out a lotof the B and C candidates and
just sort of a 20 minute phonecall.
So it's only like the sort of Bplus and A's that sort of make
it through to the interviewprocess and then it gets into.
(19:20):
Also, like, how do you do properreference calls?
Like most reference calls areperfunctory or people skip them
and different things like that.
And what we found is there'sways and tricks to sort of learn
useful things in referencecalls.
And so one of my Birchmerecompanies right now is a pre-IPO
company.
We're interviewing for cro.
We've been looking for thisrole for like 15 months and we
(19:43):
finally got the person andsomething turned up in the
reference check, which nobodyexpected.
It's kind of like you know, um,you know we're not starting
over again, because part of thisprocess is also you just kind
of keep the final live untilthat person actually starts.
Even when they accept an offer,it's not guaranteed, right.
You got to make sure they showup and stuff and so yeah, but
(20:05):
you know we have to restart withsome candidates.
Monica Enand (20:08):
I've actually spent energy on reference
calling and the questions that Iask and that the way you can
ask a question and put somebodyin a moment and then ask them
can really elicit a completelydifferent response and you can
learn things about theirinteractions with the candidate.
It's just really in thephrasing of the question
(20:30):
actually.
Ed Renzi (20:31):
Do you have a favorite question that's worked for you?
I do, let me hear it.
I could tell.
I could tell I do.
I always I'll flip theinterview.
Monica Enand (20:40):
Okay, yeah, you're not supposed to be interviewing
me, but okay, well, I do alwaysask, and so I'm wondering, now
that you've studied referencecalling, tell me if this is a
good one, but it has worked forme.
So I always ask if I called yousix months from now and told
you that we had hired thisperson but that we fired them
you heard it six months from nowwhat would you guess would be
(21:01):
the reason?
And 90% of the time the personwill go oh, because they pissed
somebody off, or oh, you know,they just blurted it out, like
if you guessed why would theyget fired, why would it be?
They blurt out the reason andthen you're like, wow, okay, you
didn't.
You said all these glowingthings during this reference
call.
You never even failed tomention, you know you didn't
(21:24):
even mention that.
Sejal Pietrzak (21:26):
That's a really good one.
I don't think I've ever askedthat.
Ed Renzi (21:29):
It's the gold star, right, because we that that is
what we call a pre-mortemquestion, right?
So, like when I talked aboutthe when something doesn't work
and we do the post-mortemanalysis, the pre-mortem is hey,
if I hire this person in six or12 months from now, they don't
(21:49):
work out.
What are the most likely?
Two or three reasons, right,and that pre-mortem is an
effective framework we useacross the company, right?
So if you're setting financialgoals and you say, hey, if a
year from now, at the end of theyear, we don't hit our goals,
what are the most likely reasonswhy?
New product, new, real and thenwhat you do is you identify the
top three or four risks and youbuild risk mitigation plans.
Hey, we're launching a productSeptember 1st.
(22:11):
What are the top three reasonsIf the launch doesn't go as
planned?
What are the most likelyreasons why?
Maybe it's scalablearchitecture, or you're having
an issue with the database, ormaybe it's like a channel
partner you use whatever andthen you build risk mitigation
plans, and so what you did istook that and applied it to
interviewing, which, you'reright, that is the best question
and that framework works acrossthe company.
Monica Enand (22:34):
Oh, wow, okay, I didn't even know.
When you said premortem, Ithought that was interesting and
I've, of course, have donepostmortems or retrospectives.
I actually sometimes, when welaunch new products, people want
to call them postmortems and Iwould always say I call them
postpartums because I feel likewe did something new.
But anyway, whatever you callthem, but I I had never actually
(22:55):
thought about you the wayyou're saying pre-mo.
Is that something, sejal,you've ever done?
Sejal Pietrzak (22:59):
I've never heard of that either and I think it's
fascinating.
I've never actually asked thequestion because you know it's
kind of a negative thing that oh, what if we fail.
But it's a great question toask which is any initiative
you're doing, whether you knowyou talked about it in the
hiring concept, but it couldalso be in any kind of product
launch or initiative or newstrategy.
(23:21):
What would be the reason why wefailed at this?
Ed Renzi (23:26):
That's right, sejal, and one of the most effective
scenarios to ask it isfundraising and so not like in,
say, the first or second meeting.
But now you have an investorstarting to lean in and you sort
of have built enough trust andconfidence and to sit down with
that investor and say, hey, look, we're coming up to the
investment committee in twoweeks.
If, for some reason, you getpushed back in the investment
(23:48):
committee and this is notapproved, what's the most likely
two or three reasons why?
And what that will uncover isbehind the scenes, when they're
having these hallwayconversations about your company
and your deal.
It's going to identify thepushback your, your champion, is
getting internally and then itgives you a chance to sort of
say, ok, this is what I get infront of that partnership and
(24:10):
that investment committee.
Here's what I need to emphasize, because this is the questions
he's getting.
Monica Enand (24:15):
Yeah, you know, actually I did do that in
fundraising and it's interesting, I never thought about it that
way.
But I have to tell you thatwhen I first started fundraising
, I never did that.
I that took me a while becauseand it was probably this, and I
will tell you that my body gothot, my face probably got red
and cause I will tell you thatit took up some nerve.
(24:38):
It was the working with stupidinvestors and sorry, working
with stupid investors for a longtime and then not passing, not
then having it fall apart andfeeling like I wasted so much
time that finally got me tostart asking that question.
Um, but it was such a scaryquestion.
It's like why is my baby ugly?
(25:00):
Like, if you like, you know itreally is a like, tell me why
this would fail.
I think Sejal's right.
Like it's a hard, it's sort ofa negative question.
Sejal Pietrzak (25:09):
I'm literally writing this down right now
because I want to remember itfor you know.
Monica Enand (25:15):
For example, going you can listen to our podcast.
Sejal Pietrzak (25:19):
I know, but I want to write it down to that
Even today, when I'm in meetings, I'm I'm asking that question
because it's such an importantthing to think about that.
I don't know that I've everphrased it that way.
It's even in life, when youlook at it and you know you're,
you're saying, hey, when I goand do this and it's not
successful, for whatever it isI'm speaking at an event or your
(25:41):
son's having a test coming up.
If it's not successful, whatare the reasons why it might not
be successful?
And then you know, you canimagine even you know your son
and he's has a big exam and hecan list out all the reasons why
.
Well, I didn't spend enoughtime studying, or I didn't do
this and I didn't do that, andmaybe he can get even more
specific.
(26:01):
And then that maybe can guidethe decisions today because you
know what could cause thefailure tomorrow.
I wanted to ask specificallyabout the VC world right now.
Ed Renzi (26:21):
Sure.
Sejal Pietrzak (26:21):
Are VCs having trouble raising funds and, if so
, why?
What's going on in the macroeconomy right now that's
affecting venture capital?
Ed Renzi (26:31):
So I'd say, you know, the venture industry is in flux.
It's gone through several boomand bust cycles in my career and
it's still looking for a newequilibrium.
So you know, venture works onthese 10 to 15-year cycles.
Each fund's a 10-yearpartnership, but it could take
15, 20 years, especially ifyou're an early stage investor,
to get out right.
And so what's happening isthere just hasn't been a whole
(26:54):
lot of exits and money gettingreturned to LPs, so those LPs
can, in turn, re-up in the funds, right.
And so what's that?
The industry, I'd say, from2015 to 2020 or so, had a
velocity where the successfulfunds were raising new funds
every two to three years, andnow it's kind of like every four
to five years, right, becausethe IPO markets are closed.
(27:16):
Washington is very unfavorableto big tech right now, so
there's fewer M&A transactionsgoing on, so it's harder to get
to liquidity, and so if there'sno liquidity, there's no money
going back to the LP, so there'sfewer funds getting created.
I think, on top of that, there'sa lot of funds that were raised
in 2018 to 2021 that deployedmoney really fast at really high
(27:39):
valuations, and the metrics thevaluations were out ahead of
the metrics, right, and somemost companies are not going to
grow into those and those fundsare not getting to exits, and so
there's a lot of walking deadamong the venture community.
Right now these funds areeffectively out of business.
They just kind of don't know ityet or they just need to let
the time play out, and it's veryopaque to founders, right.
(28:01):
So you know back to some ofthese questions you ask when
you're fundraising.
One of the questions we alwaysask is how many de novo
investments have you made in thelast 12 months?
So you want to find out arethey actively deploying capital
in new investments, not justfollow on and things like that?
You know my sense is it's goingto take a few more years to
play out.
Monica Enand (28:22):
So when you say walking dead, so some of the
funds are dead and actually Irecently got it.
I'm blanking on the name, butthere was a famous fund that
just went under their walkingdead companies as well as.
Ed Renzi (28:35):
Oh yeah, that's right.
So, like I can see I can see inmy portfolio we're sort of in
year nine of a 10-year fund,right, and we had some early
successes and obviously a lot ofearly failures, because we're
doing pre-seed and seed and sowe sort of have this portfolio
right now where there's three orfour companies that really have
legs.
We think they have IPO or bigexit potential and their numbers
(28:58):
reflect that right.
They're sort of 50 to 100million year revenue growing at
high rates that suggest futuresuccess.
But then you have that handfulof companies that didn't fail
but they didn't have good enoughmetrics to raise money and they
did what good founders do,right, you get to break even,
right.
And so now we have thesebusinesses that could be, you
(29:18):
know, two to 10 million revenuegrowing 10, 15 percent a year.
Not enough to get ventureexcited, not enough to to to
exit at a multiple the foundershappy with, and so they're
almost like somewhere between alifestyle business and something
that's going to take likeanother 10 years to get to an
exit that the founder wants.
And there are a lot ofcompanies out there like that
(29:41):
and for me that's the founder'schoice If the founder is
comfortable running a $30million business with good
EBITDA and that's what they wanttheir life to be.
You know that's great.
I do have other founders whohave certain ambitions that you
know they do want to keep takingbig swings right.
Sejal Pietrzak (30:02):
And right, wrong or indifferent ventures a young
person's game.
Talk to us a little bit, maybe,about the coaching side and how
(30:22):
you know you recommend anddoesn't have to necessarily be
just to CEOs or just to founders, but just in general about
coaching and the value of it andwhat are some of the things
that you know you wouldrecommend as people are
considering getting coached.
Ed Renzi (30:32):
Our model is a little bit different.
Like, our model is, like I'llsay, much more intensive than
any of those.
We meet with our founders on aweekly basis.
We know the business as well asanybody outside the company,
right, more than typicaladvisors and mentors, better
than board members, et ceteraAlmost any better than anybody
(30:53):
else on the team.
And the other thing enjoy thework does is we bring a team of
people to this.
So, like I said, we're all,we're 12X operators and, for
example, like, say, I wasworking with your company,
monica, you and I would havethese weekly calls what's most
important and what's urgent toyou and your business, and we
would work through those issues.
(31:14):
And all of a sudden, you comeup on something where one of my
partners has a superpower.
So, say, you're launching a newproduct, I would pull my
partner, mike, into a meeting,right?
Mike ran seven product teams atAirbnb and he could help you
with that product launch.
Or if you're doing ago-to-market as you scale up,
you just closed around and youwant to scale up sales, devin,
(31:35):
one of my partners, was chiefrevenue officer of three
different unicorns.
I'd pull him in for a couple ofmeetings, right?
Our newest partner, sarah is anexpert in payments.
She's already met with a coupleof my companies.
How to, you know, increaserevenue from payments and also
decrease our strike costs, youknow.
So, things like that.
My partner, kristen, who I thinkyou met, kristen I mean Kristen
(31:56):
, I IPO'd company, right, so Ihave a company preparing for an
IPO, you know.
I have them start meeting withher.
Or she's also helped meinterview some VPs of marketing.
So you get the sense of like,if you're a founder considering
this, where are you on thatspectrum?
Are you looking for somethingmore on the self-help side?
Are you looking for this likeweekend immersion, or are you
(32:17):
looking at something that'sreally going to change your
trajectory long term?
Right, because I look at thesecompanies in three logarithmic
phases.
Right, there's a zero to onephase, where you create
something from nothing, andthere's a one to 10 phase where
you build repeatable, scalableprocesses, and then there's just
sort of blitz scaling.
Right, get, get big, no problem, no solution.
(32:39):
Higher position, manage thoseposition players and our goal is
to help the CEO keep their jobas long as they want to keep
their job.
And so, like, some coaches arereally good at the zero to one
phase, or some are really goodat the scale up phase and what
we try to do is help thefounders and we have these
playbooks and frameworks and ourexperience levels.
And what we try to do is helpthe founders and we have these
playbooks and frameworks and ourexperience levels.
(33:00):
And you know, monica, I meanI've invested in you know 50 or
100 seed stage companies but ahandful of them made it to IPO
once or twice a portfolio.
I've stayed with them to do theIPO.
So I've seen this movie a fewhundred times.
I joke with my founders thatthe best I could do is help them
make new mistakes right,because I can help them avoid a
lot of the big mistakes thatI've seen.
(33:22):
And I think it's up to foundersto decide what they're looking
for in that coach advisorrelationship.
Sejal Pietrzak (33:27):
That's really great.
Monica Enand (33:28):
It's great that you're talking about sort of the
job, sort of training you forthe job and keeping you trained
for the stage and what is stageappropriate for the business,
the magic here at Enjoy the Work.
It sounds like you're fusingboth those things and then
having partners around the tableand then playbooks and best
practices.
Ed Renzi (33:47):
That's right, because you're coaching and advising the
whole person, not just the CEOin that particular role.
Right, because if you'recoaching just the business stuff
and just the CEO things andthat person's not sleeping well
or their marriage is fallingapart or their kids won't talk
to them, they're not going to besuccessful in their CEO role.
And again, we are nottherapists.
(34:09):
You know we don't get into likeback issues that people are
dealing with from their past.
We recommend therapists or CEOsif, if, if, if they need them,
but we do coach the whole person.
Sejal Pietrzak (34:20):
You know, just in this conversation I've taken
two pages of notes.
Ed Renzi (34:23):
Isn't that funny.
Sejal Pietrzak (34:25):
Literally like think that I know that I can
improve and I want to use andnot forget and I'll listen to
the podcast too, but you know Iwant to remember it right now.
So this has been really great.
Ed Renzi (34:37):
Excellent.
Monica Enand (34:38):
Yeah, Sejal has multiple companies that she's
board chair for and on the boardof, and high-growth companies
and just some pretty spectacularthings that she's doing, so I'm
sure she'll use thateffectively.
Sejal Pietrzak (34:53):
Yeah, that's right.
That's right.
Well, ned, it has beenfantastic having you on the show
.
Thank you so much for your timeand for sharing so many
valuable lessons and interestingfacts about what's happening in
the macroeconomy as well, and Iwant to thank you so much for
and it was great to spend timewith you, great to meet you.
Ed Renzi (35:14):
Thanks for having me.
It's my pleasure.
I really enjoyed theconversation.
Thanks.
Monica Enand (35:19):
All right.
Well, that was another episodeof Masterstroke.
Thanks, sejal Ned, and thankyou to our executive producer,
georgiana Marland.
Georgianna Moreland (35:26):
Thank you for listening today.
We would love for you to followand subscribe.
Monica and Sejal would love tohear from you.
You can text us directly fromthe link in the show notes of
this episode.
You can also find us on theLinkedIn page at Masterstroke
Podcast with Monica Enid andSejo Petrzak.
Until next time.
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