How Running Out of Money Made DocSend a $165M Success

Russ Heddleston, founder of DocSend, shares how nearly going bankrupt forced them to rethink everything—turning a failing startup into a product-led rocket ship that Dropbox bought for $165M. From spreadsheets of startup ideas, to the painful lessons of chasing enterprise sales, to doubling their prices and watching conversions skyrocket, Russ breaks down the hard truths behind building a breakout SaaS company. Plus: why he wishes he hadn’t sold, and what he’s doing differently with his next startup.

Episode Transcript

(00:04):
So I'm super excited today to have RussHedleston, who's the founder of Docsend, tell
his story about starting the company, buildingthe company, then ultimately exiting the
company to Dropbox.
And this story is a special one to me becauseRuss and I actually go way back.
Russ was an early intern at Truly the companythat I started back when we were, I don't know,

(00:30):
probably like less than a dozen people and wemet when he was a student at Stanford.
So but maybe we start there, Russ.
Like, firstly, thanks for coming on.
Like, kind of, you know, I'm curious.
I mean, we had a great experience workingtogether that time.
Like, did you always think you were gonna be afounder?

(00:50):
I had no idea if I would be a founder or not.
I was just being curious and seeing what wasout there.
And, in undergrad and grad school at Stanford,I did engineering, and it was really fun to see
a bunch of examples.
Big companies, small companies.
I did decide that startups were more fun to methan, you know, working at a big public

(01:12):
company.
So I love the internship I had at Trulia.
And, I mean, in in retrospect, like, I it wouldhave been great to have stayed.
I wanted to go try other things.
So as one does, I went off and tried otherthings.
But, yeah, I really appreciated just experienceI had at Trulia and seeing what you guys built
and how you built it and being a part of thatwas really fun.
So, you know, I think after seeing a fewthings, I was like, you know what?

(01:34):
Yeah.
I need to go try this myself.
So Docs was actually my second company.
And the first one, we ran for not that long,but, yeah, I love startups.
They're great.
You know, one of the piece of advice I givekind of people early on their career is just to
sort of a a b test your your life.
And so doing internships are a great way to dothat to kind of try different things and see if

(01:56):
it's a fit or not.
And it I guess it's sort of that startup lifefelt like a fit.
What did you what did you do after Trulia?
I actually worked at a hardware company calledMaru Networks for the summer.
Another internship is part of this MayfieldFellows program that I did at Stanford, which
was awesome.
Really fun.
Nine month work study program just focused onlearning about startups.

(02:16):
And so yeah.
My takeaway from working at a hardware companywas that I like software more.
It's just more straightforward.
It's more fun to work with user interfaces.
It's it's just a lot more fun for me.
So that was but I learned a lot the the summerafterwards.
I also had an internship at Microsoft afterthat before ultimately deciding.
I actually really love the the size that thatTrulia was when I joined.

(02:40):
It's just like because I was still in school.
It wasn't a summer internship.
I was just working for you guys, you know,during the year.
And so when I left Stanford, I actually joinedanother startup that was only nine people at
the time.
And then what was the what was the inspirationbehind Docsend?
The inter inspiration behind Docsend was itwasn't a problem where I knew I wanted to solve

(03:00):
it.
Sometimes I hear a founding story, and someonewill say, I've been wanting to solve this since
the age of four or, you know, they have some,you know, really deep backstory.
And it's not like since the age of four, I'vebeen trying to get rid of attachments in email.
That hasn't been a life passion.
But the idea came from just being at Dropbox,another internship I had while I was in

(03:20):
business school.
And they were also pretty small.
They were, like, 15 people at the time.
And I remember thinking with Dropbox that itwas great.
You didn't have to email yourself attachments.
You know, this is in, you know, 2010 while Iwas in business school.
And I noticed that people kept sendingattachments externally.
Like, people are still sending lot ofattachments.
So I had my other startup.

(03:42):
We sold to Facebook as more of a talentacquisition, and then I left Facebook and
joined up with two other friends of mine fromStanford, Dave and Tony.
And we went through a few different ideas andjust really kicked the tires on them.
My one of my learnings from the first startupwas that it's it's good to look before you leap
And before you start writing code, really tryto dig into the idea.
So we went through a few different ideas.

(04:03):
We didn't write any code for, like, fourmonths.
And, the idea for Docsun, we just kept comingback to.
And then when we dug into it, we couldn't finda reason it wasn't gonna work.
It just seemed like something smart thatsomeone should do.
And the concept was very simple, which wasdon't send an attachment.
Send a link to the document, and we need tomake that very easy to do, and we need to add

(04:25):
enough value to the sender that they're gonnachange their behavior.
So that was the thread we were pulling on.
And then as we just listened to a lot of usersand a lot of people, we just kinda followed the
thread and turned into, you know, what is nowDocsent.
I'm curious just the sort of ideation phase.
Was that you know, I I'm curious how thatprocess was.
Was was that somewhat kind of methodical, orwas it sort of a random walk?

(04:48):
Kinda did you sort of put a bunch of ideas onthe board and then sort of critique them all
and then prioritize them?
Curious if how that process was.
Yeah.
It's a great question because I'm like, I don'tthink I have the right answer to it, and it
seems very personal how people approach it.
It kinda seems like depending on if the startupwas successful, people look back and say, like,

(05:10):
oh, that was the right way to go through theidea of Mays or not.
Although that's not necessarily clear to me.
The way we did it was more methodical, and it'snot very romantic.
It was like we had this spreadsheet, and then,you know, we'd all put up our ideas, and then
we'd review, you know, every day and or everyfew days.
And when someone's like, I like this idea.

(05:31):
It's like, well, how much?
And so we'd have a point system.
We have a 100 points.
We had to treat them amongst, you know, theideas that we're looking at.
And so we kinda divide and do research on thedifferent things.
We looked at selling software to cardealerships because Tony loves cars.
And so we actually went off and talked to somecar dealerships, and we're like, no.
No.
We're definitely not gonna go after this.

(05:52):
So, you know, we just kinda, like, followedthrough and got rid of ideas and then for for
docs.
And when we got to that idea, you know, we justkept at it and kept asking questions around
like, hey.
Why is this gonna fail?
Why is this a bad idea?
And and so that was it was more methodical, Ithink, in that sense, but it's hard to know if
it's optimal.
I think it's just that the other ideas, we wereable to be pretty certain, like, it wasn't

(06:16):
gonna make it in that incarnation that we werethinking of it as.
And then it is a little bit emotional to belike, I don't know.
Okay.
We'll look at the next one.
And then, you know, we were our excitementabout the concept for Docsend, we could not
dissuade ourselves from it.
And so at a certain point, you just have to gobuild the thing.
Yeah.
Yeah.
This sort of often, like, I can't not not dothis.

(06:37):
It's like once this sort of an idea sort ofstarts to infect you and you start thinking
about it, it's like, okay.
This is kinda clear that this is the kind ofthing I wanna spend, you know, the next chapter
of my life doing and the next, you know, thenext sort of spending sixty, seventy, eighty
hours a week.
If you're not kind of affected by it, then it'sit's clearly not gonna succeed.

(06:58):
So so and, you know, and I'm you know, I'd loveto you know, I know there's a few chapters to
the story.
Like, what I'd love what are some of the kindof pivotal things that you kind of figured out
in that journey and the sort of the theinflection points of of that startup?
Yeah.
I feel like I got a three startups for theprice of one.

(07:19):
Trulia was what it was at the beginning all theway through, so a lot of credit to you and
props around, like, having a sticking to yourguns around the vision.
Maybe it felt differently from yourperspective.
I think that's I think that may be the externalview, but internally, that was very different.
Believe me.
There's there are many inside stories, butthat's that's that's another time.

(07:40):
That's another conversation.
Well, maybe we have more in common on thatfront then because from the outside, it does
look like Dachshund was a very smooth straightshot and like, ah, just got lucky with that
one.
But the inflection points the first let's say,the the three start ups for the price on.
The first start up was a product led self servegrowth, like, document analytics company.

(08:01):
And so we launched a TechCrunch disrupt.
There was it was just free.
It was a free beta, and we're like, oh, it'sgonna go viral.
It'll, like, take over everything.
And they've told me I all kinda like theStanford design school thinking, and so we
wanted to build something that was usable,built for the end user.
And we're just, like, follow follow the threadand see what people are doing with it because

(08:21):
people liked it.
They they were using it and creative indifferent ways.
And, yeah, we did that for the first coupleyears.
We raised the seed round for for the company.
And, at a certain point, I think the saying issomething like, no business plan provides
contact with revenue or something like that,where when you try to start making money,

(08:42):
things can become hard.
So when we did that for Docsend, we found a fewearly deals where we sold 50 k deals to sales
teams.
And one of our investors are like, hey.
Maybe go sell up market to sales.
And in retrospect, I didn't know enough toknow, like, really how big of a shift that
would be.
So we started sell and marketing to salesenablement.

(09:04):
We changed our marketing site from documentanalytics to sales enablement, and that was,
like, the second startup I got.
We raised 8,000,000 for a series a from HowardHartenbaum, who is amazing as an investor and
was awesome to be someone I got to work with.
And we so, like, in his his view was like,maybe this isn't it for you, but I think you'll

(09:24):
figure it out, which I thought was funny at thetime, but he was totally correct.
That wasn't it for us.
I learned a lot about enterprise and aboutoutbound sales, and I got a whole education
around that.
We hired up a sales team and a VP of sales andstarted selling at market, And that lasted for
a few years, and we we burned through most ofthe at that point, 10,000,000 we'd raised, the

(09:46):
2,000,000 seed and then 8,000,000 series abefore we realized that it wasn't really what
we set out to do.
We weren't really in it for enterprise sales,and the way we've been building our product was
more for the end user than the economic buyer.
So we had some upmarket competitors that raiseda ton of money, kinda boxed us out, and it was

(10:08):
it was brutal.
And so
Is is what happened in the second phase?
We almost went out of business in the sensethat we were not growing revenue fast enough,
and it was very expensive to acquire thatrevenue.
So we ended up pivoting back to self serve andfiguring out our messaging.
You know, if you're you're using the businessschool stuff, it's like pricing, packaging,

(10:28):
positioning.
We changed all those things, but we didn'tchange the product.
It's really funny.
And so the third company we got was back toproduct led but with different messaging.
And just just going back to the sales thing,I'm just I'm just curious, like, the failure
the sort of failure points there.
Was that you know, and often, you know, whenyou know, it it seems natural kind of like I

(10:49):
know venture investors, they love the idea ofkind of going after sales team because there's
more of an incremental ROI.
You've got if you can increase productivity ofan expensive sales org, then it's kind of a no
brainer to invest again invest against it.
Was it was it just that the willingness to payand the kind of ROI for that team was was low,

(11:10):
or was it kinda sales process was low?
What what was the sort of what was therealization that you had in in failing in to go
after that market?
There are a few realizations.
I'd say the biggest one is that the personwho's, like, signed the check for us was, like,
not the same as the person who was using ourproduct day to day.

(11:33):
And so, you know, your VP of sales, your headof sales op, maybe sometimes it's a CMO.
So it's complicated as a sale because our buyerwould be somewhat different at the company
depending on how the company is structured.
And so a CMO is gonna want these aggregatedashboards.
They're gonna want, like, other things thatwill make them look good.
There's a sales and marketing rift that canhappen at companies.

(11:53):
When the sales leader is trying to buy a tool,they care more about, like, onboarding and
training of the salespeople.
They care about, like, hitting their number.
They also kinda want analytics.
They're not, like, as concerned as you mightthink they should be with the productivity of
an individual sales rep.
They also get sold to a lot because of what youmentioned.
Everyone's like, oh, yeah.
Sell sales team.
It should be easy.
So it's just really crowded.

(12:14):
And it's hard for them to differentiate betweenproducts.
And my view coming from the outside was, youknow, if I was gonna be, like, just trying to
help the sales team, usually, it wasn't likethe documents weren't their biggest problem.
It was, you know, education.
It was training, onboarding.
It was, like, market segmentation.
Who are you targeting?

(12:34):
There are all these other problems that I'mlike, yeah.
No.
These are bigger problems than, like, trackingthe proposals you're sending and finding the
right white paper and, you know, kinda like thedocument, content management problems and
tracking problems.
So we weren't something urgent for them.
And when we sold, it was sticky, and they likedit, but ended being a high cost of sale, ended
being a long sales cycle, and then it endedbeing competitive sales.

(12:56):
So we had some other competitors that weren'tas good as Dachshund.
Like, you would never use them over Dachshund,but they had more features for that CMO.
And if you squinted at it, you're like, that'sgood enough.
So for me as a product founder, that was hardto see people choose what I thought was the
worst product over our product for reasons thatwere, like, unrelated to, like, what our

(13:17):
product was really good at.
So those learnings were were tough.
I learned a lot about how to do enterprisesales and what that looks like.
But, ultimately, for us, we're like, the selfserve thing actually finally was doing better,
and I'm very happy we went back to our roots.
So you went back and sort of changed yourproduct, changed your packaging, changed your
pricing.
Like, kind of what was was that as you know,was that a sort of last ditch attempt to kinda

(13:45):
to figure it out?
Or kind of what was, you know, what was thesort of catalyst to drive that pivot?
The the catalyst was we're running out ofmoney.
So it wasn't something I talked about with ourteam.
But, you know, we you know, kinda watching ourbank account come down.
And I went to our existing investors, andthey're like, this doesn't look great.
We had about well, we were at 4,000,000 ARR.

(14:07):
We had about 2,000,000 from self serve.
It was growing very slowly, like $10 a usermonth.
And we had 2,000,000 from this, like, outboundkinda, like, sales use case where the average,
you know, deal size was maybe 20 k a year typeof thing.
And so it's, like, split half and half, but Icouldn't find anyone to give us more money.
Like, no one wanted to invest because it waskind of weird in terms of, like, the go to

(14:28):
market.
It was expensive from the go to market.
I didn't have a good story about why we weregonna win against the competition.
So we couldn't find investors, and then also noone wanted to buy the company.
I went around and was like, would anyone buyit?
People were like, no.
So we were like, uh-oh.
And it was the last ditch effort to basically,what was the responsible thing to do?

(14:49):
The responsible thing to do is probably to justinvest in what was working easily, optimize it,
and we didn't change the product.
We actually just changed pricing, thepackaging, the positioning, what it said on our
website.
And we were just trying to, like, make surethat we could be responsible and just cash flow
the business, run it at breakeven if we if weneeded to because, you know, that was, like,

(15:13):
kind of the only option we had.
In the process of optimizing that self servebusiness, we learned that we were just leaving
so much money on the table in terms of how wewere going after all these other segments and
all these other users.
And so that's really where we had this moment,but we wouldn't have hit that moment if we
weren't forced to go back and, like, relook atall of our usage.
So I panicked in a panic, kinda interviewed afew 100 of the Docs End users back in 2018, and

(15:40):
it kinda came up with the positioning that wehad all the way through the acquisition of the
company.
And that just ended up working a lot better andbeing a much better business.
And I and just doing my research for this, youwere you know, I think you called it sort of
horizontal product that was marketedvertically, which, you know, I think is quite
quite common these days, but it's you know, Iguess, how did you kind of identify those

(16:04):
segments you were going after?
Was that was that just through these interviewsthat you were you were doing with your users?
Like, what were the specific use cases theywere using it for?
Yeah.
A lot of it was just looking at our users andjust asking them what are you doing with it and
why.
And so the the it is it was a horizontalproduct.
It is just sending instead of sendingattachments, you're sending links.

(16:26):
You're seeing what happens to them.
It's really smart.
The controls you can put on top of it becauseit's easy as a recipient to get into it, but
you as the sender still have control.
And so control kept coming up again and againas, like, the the brand value.
Like, I like the control.
It wasn't the analytics.
It was I like the control.
And the different use cases of it would usedifferent language to describe the value they

(16:47):
got out of it.
So in just going and talking to people usingDocsend, they talked about it differently.
If you're an investment banker, if you're asalesperson, if you're fundraising, they just
these different use cases had differentlanguage to describe the same exact product.
So it wasn't a product problem.
It was why don't we do the obvious thing andjust put up on our website all the things that

(17:11):
people say about it by use case so that wedon't have to tell them they can just read
about what everyone else is saying.
And it just was stuff we'd observed in the userbase because it was like a freemium product,
$10 a month, so it was cheap.
And those stories were, like, really fun tohear.
And for me, like, listening to them, it waspainful because you're hearing things that, you
know, you're like I'm like, no.

(17:31):
That's not how you should think about it.
And it's just, no.
We're just gonna give up on that.
Like, how do you think about it?
And once we put that messaging back on thewebsite and made it vertically kinda marketed,
our conversion rate went way up.
We were also charging too little, a concept Ididn't even know was possible.
But when we went from $15 a month to $250 amonth, conversion went up.

(17:54):
Because for important situations, you're aninvestment banker.
You don't trust the tool that's too cheap.
You're like, are you selling my data?
Is this safe?
Like, you can't be making the business out ofthis, so I don't I don't trust it.
And so we were often competing against dataroom products like Intralinks for situations
where control was important.
And relative to an expensive data room, we hadto charge more.

(18:15):
Otherwise, they just wouldn't trust us at all.
So it was a few different things that cameback, and I agree it's more common now.
But at the time, it was really just observingour user base and being like, what do we do
about this?
Are we picking one?
It's like, I don't think we're picking one.
I think we're just kind of documenting them andthen putting them up so other people who are
less creative can see how people like them areusing the product.
And I'm curious just in that kind of pricinganalysis.

(18:40):
Was that was there an analysis there or, likeor is it just a case of, like, you know, I've
I've, you know, heard some advice from folksjust to, like, double price until people
object.
And and, you know, as a as a very simplemethodology.
Did you kind of do some kind of econ supplydemand price elasticity thing, or is it just

(19:00):
like just try it and see what happens?
We didn't do the try it and see what happensbecause the it's hard to a b test it if you're
kind of a self serve product Sure.
At least the end that we had.
And it's hard to run a, like, a statisticallyvalid kinda econ approach, but I did learn

(19:21):
enough about how it works to, like, try to dothat.
And so we would we went through and askedpeople, you know, how much would be, like, too
much you wouldn't pay it for at all?
How much would be, like, way too little?
What would be fair?
Not surprisingly, everyone just told us theywanted to be way cheaper.
But when we started to ask them what they wouldcompare it against, we kinda realized that
there's this big range where people werecomparing us against, like, you know, Dropbox

(19:42):
on the low end or Google Drive or something.
But then on the higher end, they were comparingus against Intralinks, Datasite, like, these
kind of clunkier, older, really expensivetools.
And so the the range was quite large in termsof what people would expect to pay for it and
also their expectations of what they wanted toget out of the software.

(20:02):
So it wasn't perfect.
It could have been a higher price.
They were really cheap relative to thealternatives for data rooms, but we're also
kinda, like, capped at how much we could chargerelative to, like, really cheap consumer
products.
So it was, like, kind of our finger in the air.
But if we just done the doubling it thing, thatwouldn't that wouldn't have been enough.

(20:22):
We would have to keep doubling it.
So we decided to do $250 a month, month tomonth, and have three seats included.
We we primarily put that up so that we wouldsell our middle plan that was $45 a month, but
it was more like the sales the sales plan.
And we left the $10 a month one, $10.50 bucks amonth because I'm like, I think those people
just aren't gonna pay more than that.

(20:44):
But what I was really surprised was how manypeople paid for the $250 a month plan.
That was the the shocking thing because we wereputting up messaging around what people wanted
with it.
And so they were just paying for it withouteven knowing what features were behind it.
So a lot of the features that we added afterthat were things that we figured out when we
put up that plan, which is fascinating.
To your point about, like, doubling the pricein our kind of manually sold deals before we

(21:08):
put up pricing program, like, just anyone couldcould do it because we had a $10 a month plan
or, like, call us pricing.
Our prices varied from, like, 20 to 200 and,like, $50 a month per seat on sales teams.
Enterprise sales teams, if you're paying a fewthousand dollars per salesperson per year, but
this is really important, that was fine.
But other people are very price sensitive.

(21:30):
So what we arrived at was got rid of free, andthen it was $15.45 $2.50 a month when you're
paying month to month.
And so that looked like a reasonable spread.
We thought people would pay for the middleplan.
80 plus percent of the revenue ended up beingfrom the advanced plan at $250 a month.
Amazing.
It's so interesting, the psychology around sortof you know, for these kind of these very

(21:54):
important sales conversations, confidence iskey.
And it's marginal.
Right?
If you're raising money, raising $5,000,000,then, like, 250 is is is marginal on the whole
scheme of things if it improves yourconfidence.
And so that's
100%.
Yeah.
Fascinating psychology.
You changed packaging.

(22:14):
You changed pricing.
Like, how did it grow from there?
I I remember some some, like, reports you putout just, like, analyzing kind of user
behavior.
Like and, obviously, the product itself isviral.
Like, what was the what was the kind of growthmechanics you employed?
I'm sure it wasn't just accidental.
Some of it was accidental, and some of it wasnot understood.

(22:38):
Like, we weren't wrong at the beginning aboutit being viral, but it was actually less viral
than it was just word-of-mouth, like, being themechanism it spread.
People who receive documents don't often sendthem.
It's not always the case.
It's not like a perfect symmetry, like, youknow, Hotmail or, you know, email use case.
So what would happen is that, you know,founders would use it for sending a pitch deck.

(23:00):
VCs don't raise money very often, so theydidn't use it for, like, the first four or five
years, but they eventually did.
But they would tell all their other foundersabout it.
Like, at first, they would complain.
Like, I don't like this thing.
Give me the PDF.
I don't wanna be tracked.
And that's reasonable psychology, but it's alsoreasonable for the founder to be like, it's
really important to me.
Can I please see if you opened it or not?
You know?
So both sides have a point here.
But the VCs would not like getting the links,but then they turn around and tell their other

(23:23):
founders to use DocsZen because they wantedthem to have an advantage when they raise.
And so the word-of-mouth and virality spreadhappened slowly, but it did compound.
So while we were off selling to sales teams,that just kept compounding over time.
We did do some content marketing, like what youmentioned, the fundraising research.

(23:43):
It's really data driven.
We tried a bunch of marketing stuff.
Nothing stuck.
Nothing mattered.
No one cared except for this data drivencontent marketing around fundraising because
founders were just very insecure about whatshould go in my pitch deck.
What do other people put in their pitch deck?
What works?
What doesn't work?
It's really hard to get anything that's not aVC's opinion.

(24:04):
And no offense, Pete, but, you know, it's likeeveryone has their own opinion on what they
wanna see from a founder, but it's thoseopinions can vary a lot.
Right?
So the content we put out was trying to be somesemblance of, like, I don't know, a little more
objective, and people love that.
That content stood on its own.
Didn't need Docsend as a product, but the thecontent obviously spread awareness of Docsend.

(24:25):
We also saw this knock on effect where peoplewould use Docsend for fundraising, and then
they'd be done with fundraising.
They're like, cool.
I don't need the tool anymore.
But then they'd, like, hire a sales team orthey'd use your recruiting or they'd be sending
their SOC two report.
They would just have other documents they'dwanna send in situations where it was important
to understand what happens to it or to havecontrol over it, even your investor reporting
after that.

(24:45):
So we did see this, like, kinda, like, churnbecause it's an episodic use case, but then
everyone reactivated.
So when you looked at the cohorts, it'sfascinating.
It took years to see it, but it would kinda,like, drop off and then kinda grow again.
And so we would acquire sales teams that way,but it was much more effective to just see
where it would shake out rather than trying tobang on doors and get them to adopt it.

(25:06):
So when we went back to the the self serve fromthe, like, sales enablement stuff, it was
really just looking at some of this stuff andjust saying, hey.
What's working, and what do we double down on?
So we just really leaned in to the fundraisinguse case.
We did more content around it.
We put up more on our website, and then wereally started catering to the control, like,
promise that we had in the product.
So a lot of it after we made that change wasjust us capturing the demand we were already

(25:30):
creating because of the word-of-mouth becausepeople really like the product.
It just was slow.
So we weren't wrong at the beginning.
It would just took a while to to see that,like, start to compound over time.
Okay.
So you you figured out the growth.
I imagine you kind of, like, either sort of,like, let go or kinda paused more the outbound
enterprise sales motion, and then the businesswas growing.

(25:52):
And so and with you know, as you tell me aboutthe kind of process of thinking about a sale.
Was that inbound, or was that a kind ofconscious decision?
And and what and just give me dimensionalizethe company at that time, like like revenue,
headcount, profitability, etcetera.
Sure.
So I'd already been through this in, you know,2018.
We're five years into the company.

(26:13):
I'm like, will you buy my company?
And everyone's like, no.
We will not buy your company for any amount ofmoney.
I said, dang.
And so then we went back, did this stuff.
And then when our revenue passed 10,000,000ARR, my investors or one of them was like, you
know, you should probably tell people thatyou're, like, not dead and actually doing
pretty well now because we got it to breakeven.
We raised we we didn't let anyone go, but wejust kinda let revenue catch up, which it did

(26:36):
really quickly.
Like, it was really fast.
I could see the numbers being like, oh my god.
This is gonna be great.
You know?
So we could see the numbers.
It took a while.
We got to breakeven, didn't let anyone go, andwe started adding more engineers as we could
afford it.
But when we passed 10,000,000 in ARR,investors, people don't know that you're doing
well.
Maybe tell them.
So I got a banker who wasn't running a processfor us.

(27:00):
He's more of, like, just a coach to me.
And then that was really helpful.
This guy, Mike Marquez, was wonderful.
He's not in it anymore, but he was very helpfulto me.
And then the way the acquisition came about wasone of the CEOs I talked to at this point years
before, because this is the end of twentytwenty, came back to me and he's like, Russ, my
board says I have to do something different.

(27:21):
And so I thought about your company, and Ireally want that technology because that could
be something different we could do.
And it's just kind of funny to me because it'syears later, and, you know, it's like, oh,
okay.
I guess that is a rationale.
I was like, but we're actually doing prettywell now.
So I, like, gave him our numbers.
I've been I'm always, like, very transparentwith things.
And his reaction was, dang.
You are gonna be more expensive.
So I went to Dropbox where I had internedbefore.

(27:45):
And, yeah, Drew looked at it and came back andsaid, like, yeah.
This makes sense for us.
Like, understand your good market motion.
Seems like it's aligned with how we do things.
And so they came back with an offer.
This is all in, like, a month period.
The banker I had said we probably shouldn't runa process because, you know, we should decide
if we wanna take one of these two offers, whichhappened very fast, or ignore them and kinda,

(28:11):
you know, wait till later.
And I went around to our board members just asmy fiduciary obligation, you know, go, you
know, like, go tell them what's going on, toldtheir cofounders.
But then the whole thing happened prettyquickly within, like, a month that, you know,
diligence our company's really squeaky clean.
It's a 100% inbound.
It's 95% self serve.

(28:31):
So there weren't any skeletons in the closet.
There's, like, nothing weird about the company.
It's like, it is exactly as it was represented.
Like, the problem some people had with it waswas, like, oh, you've spent no money to get to
where you're at.
Like, how do we know it's not gonna fall off acliff tomorrow?
And PLG is more common now.
But with any product led growth company, theanswer is always, you don't know that it will

(28:53):
fall.
But if if you look at the cohorts and look atthe stickiness, it's like, it's not.
It's just not.
The the company is pretty buttoned up aroundhow we report on things and how we track
things, and so there wasn't a lot to do indiligence.
And it happened pretty fast.
And how just just and just for your I mean,like, you spent five years at least kind of,

(29:14):
like, you know, really pushing this idea,really building a team and and culture.
Like, the the decision to sell, like and yousound very kind of rational about it now, but
I'm sure it was kinda non you know, you're youdon't it sounded like you don't need it to you
didn't need to sell in the sense that you werekind of you're about to go bankrupt.

(29:35):
You were growing, break even.
Like, what what was going through your mind atthat point?
Well, to answer your early question, where werewe when we sold?
Dropbox shared the numbers because they wereproud of them, but we were 15,000,000 ARR
profitable.
We were growing revenue faster than we wantedto add engineers to the team because that was

(29:56):
the primary lever we had is just improving theproduct.
And we were finally kinda hitting this hockeystick.
And and so, you know, it was it looked the bestthat it ever looked.
In terms of, you know, how I thought about itand, you know, how my co founders, Dave and
Tony, thought about it, it's like, well, youknow, we've been at it for eight years.
We almost died five years in, which is reallystressful when you think about, like, the

(30:20):
commitment to your employees, to yourinvestors, just your own time.
Like, you know, that was that was really scaryto have kinda that near miss kind of
experience.
And so we were, like, very excited that it wasworking well.
And I did run around to get advice from peoplelike, what do you do?
And then one school of thought was like, well,how certain are you that you're gonna get to,
you know, public company level revenue?

(30:41):
And at 15,000,000 in ARR, even growing quickly,the answer is like, not that certain.
We're gonna have to do a couple more smartthings here for this to, like, get to that
scale.
I got a big range of opinions.
I will say at the time, I was quite rational,not dissimilar from how I'm describing it now,
but, emotionally, I did not wanna sell.
It was finally working.

(31:02):
We've been at it for a long time.
Was like, it was working.
It was very exciting, and it very much feltlike giving up or letting go.
We could have raised money at two x what wesold for.
Like, if we the the hockey stick continuedafterwards.
So, you know, there's the in retrospect view.
But even at the time, it was sad for me, but itfelt reasonable.

(31:25):
Like, it was a fair amount of money.
We hadn't raised that much money.
Raised $15,000,000.
We sold it for a $165,000,000.
It was a great deal for Dropbox.
Like, our lawyers, as we're going through, werelike, ugh.
They're getting it for so cheap.
And I'm like, I mean, I think so.
We they they bought us for 11 x ARR, which, youknow, it was the kind of the median public
multiple at the time.
You get a haircut for being a private company,which a lot of people don't realize.

(31:48):
You can raise money at a higher valuation thanyou can sell at typically.
But we were also profitable and growing quicklywith this, like, you know, great business
model.
So you could argue it either way.
But because of our position not having raised alot, it was a very reasonable thing to do to
say yes to the deal, but it was it wasconflicting for me.
It there's real pros and cons on on both sides.

(32:11):
And what and just the you know, you've gotthese stakeholders.
Right?
You've got your investors.
You've got your, you know, your cofounders andthen your employees.
Like, was there was there alignment between youand your investors around the the path forward?
And, like, how were those discussions?
Those discussions are gonna vary, I think, fromcompany to company.
Like, in my case, our investors from the seedround, they invested eight years ago, and then

(32:37):
they thought this thing was gonna be a zero.
And then the thing is alive, and it's stillgoing.
I had one of our seed investors at one pointsend me an email.
He's like, wanna catch up?
And I was like, sure.
And so we're catching up to call.
He's like, I've just never seen anyone, like,putter along and then suddenly take off later,
which it wasn't suddenly.
It was, like, compounding, but that's just howcompounding looks.
He's like, can we give you more money?

(32:59):
What are you gonna do with the thing?
And I was like, oh, we don't need more money,and, like, we're gonna keep growing it.
Like you know?
So our seed investors, eight years in, theywanted liquidity from that fund.
Their LPs were coming to them being like, showme a win.
They had these big paper markups, but, youknow, very little liquidity.
And so Uncork had done our seed round, and it'svery exciting for them to get liquidity for

(33:21):
their LPs.
And so I think from, you know, theirperspective, it's like, oh, well, did we ride
this thing further or, like, this looks like agood win?
And then I think the scenario of, like, nothaving done well a few years before, having to
figure it out made everyone's confidence lessin what we're working on.
My view is that it's it's, can take a while,but I was like, if you looked at the numbers,

(33:41):
they were great.
But, yes, to your point, my fiduciaryobligation, seed investors want liquidity.
This was a way to give them a very clean deal,all cash, a great return on their initial
investment, win for their funds.
But they're also they're the employees that areat Doc's End.
We didn't consult them in this, but I wasthinking a lot about them.
And then there's, you know, me, my cofounders,I as well, like, what we were thinking about

(34:04):
and what what they wanted.
And and was there any sort of dissent in termsof, like, people wanting to some people wanting
to sell, some people want to carry on?
Like, you know, did you you know, was this,like, a deep dinner conversations you go
through to have these things, or was it kind ofbit a little bit more organic?
We Dave, Tony, and I talked about it a lot, andI got advice from a lot of different people who

(34:30):
had been through something before.
Probably the most common thing I heard was it'sa very personal decision to sell your company.
And that always struck me as, like, an oddanswer because it seems like the sort of thing
one could be rational about.
Do some math.
You know?
There's some fair market value, you know,fishermen markets and all that.
But I do think in retrospect, it is a verypersonal decision to sell.

(34:52):
So Dave Jung and I, we had various opinions,but we've all known each other for so long.
We went to undergrad together.
Like, we're still very good friends.
And selling was a way to cash out.
We thought about, like, hey.
Do we recap?
Do we do secondary if we raise it two x?
We talked about, like, how realistic is it thatDropbox would actually compete with us?

(35:13):
Like, that doesn't we've already done that.
We had, like, a bunch of other companies tryingto compete with us too.
Like, it's never worked.
We're doing great.
Like, is that a real threat?
And then it's like, yeah.
Well, how certain are we?
We're gonna get to public company later.
And if not this, then what are we gonna do infive years?
There's also the psychology of, like, hey.
Take a win now, and 80% chance that amount willtriple if you hold on to it for a few more

(35:34):
years, but 5% chance it goes to zero.
Suddenly, you're gambling with an amount ofmoney that you might not wanna gamble with when
you look at, like, you know, getting an exit.
And so there is no right answer to it, and wehad different opinions.
But because we've known each other for so long,we kinda, like, thought through it, talked
about it, and we're like, you know, this seemslike a reasonable thing to to sell.

(35:55):
But we certainly didn't need to, to your point.
But, yeah, we've been at it for a long time,and it was a great win.
And we're very proud of what we built, and itwas very smart at Dropbox to have bought it.
Yeah.
It's and, you know, it might reflect on my ownexperiences.
Like and and I guess Dropbox was public at thetime and so like and, you know, when I was when

(36:17):
Zillow and Trulieve were merging, it was, youknow, we were two public companies and so it
was like it was it was very sensitive to kindof have these conversations and and
know and
very kind of like you have to be very carefulkind of who you told and so there's just this
as a founder you're in this sort of like ohshit I've not you know I've not done this

(36:39):
before I don't know Kinda who to talk to andthen at the same time you you don't to actually
your inner circle, it's quite hard to talkabout some of this stuff because it's, you
know, you're dealing with public companies.
Yeah.
That's true.
And I think even when it's not a public companyin both both sides, like us just being a
private company, even people I talk to, mostpeople just don't have any ability to relate to

(37:02):
the situation.
You know?
And I still find it a little odd to, you know,explain why I was sad to have sold the company
because, you know, it's like, hey.
You made a lot of money.
And it's like, well, I didn't really get intostartups to, like, make money.
Like, it's nice.
I wanna make a living for myself and be able tosort a family and all that.
But, you know, I I like it.
I do it because it's fun to build software.

(37:24):
It's fun to solve problems for people.
And, you know, we were finally it was finallyworking.
And so, you know, there's that that's the sidethat's, like, harder for people to relate to.
And most people just grab on to the, oh my god.
You did well.
You made a bunch of money.
It's a win.
Like, that's binary in their minds, which isnot entirely how it felt to me.
I knew we had a winner.

(37:46):
Like, we were doing great.
Like, we were gonna do great if we sold, if wewent, say, private, like, if we just dividended
dividended the money later.
It's a very profitable business model that wehad.
So, yeah, opinions vary.
And to your point, I'm sure with Julia, like,you you you don't have people who have a
crystal ball for you.
It's it's a tough it's a tough decision, andyou can't talk to a lot of people about it.

(38:09):
So it it is hard.
You're not gonna get any sympathy for sellingyour money.
You're selling your company for a lot of moneyeven though you have this sense of loss at the
end of it.
So it's quite present.
Quite hard to talk about it.
Talking to other founders, I've heard itmentioned repeatedly that people who sell often
felt like they left money on the table.

(38:30):
You know?
It could have been bigger.
And as the founder, that's very understandable.
You're selling this huge vision.
And then, you know, to sell for something lessthan that, it feels like you're left on the
table.
Most companies, though, I I find, like, inretrospect, like, yeah, I'm happy I sold.
I think for for if I did it over again, itprobably wouldn't just because it was taking
off and and very profitable.

(38:51):
But, yeah, most founders, I think, feel likesome amount of sadness when they sell because
they are letting go of, like, what it couldhave been independently.
And so and so just if you reflect back, you youthink you wouldn't have sold at the time if you
kind of, you know, perfect twenty twentyhindsight?
I would not have sold.
No.

(39:11):
No.
It would have been if we had all just gone onvacation and just let the thing keep going, it
would have done much better than what we soldit for.
There is silver lining a silver lining to justbeing able to take a break to go off, traveled
for a year with my wife.
So I think about it similarly to going tobusiness school where I'm unable to run the

(39:31):
counterfactual because it's such a bigdecision.
It's a couple years of life.
You're like, what would it have been like if wedidn't go to business school?
Or, like, it's hard to say.
It's so it's so big.
So same with selling docs and a lot of reallygreat silver linings to take time off, to be
able to step back, to reflect on life.
But from a monetary perspective, I think I'vedefinitely gained an understanding of the

(39:55):
benefits of the product led growth strategywhen it's working and that some of the advice I
got was less relevant to, you know, like,worrying about the downside.
You know, if it's sticky, if it's growing, youknow, you just have a lot of flexibility when
you can if you want to print a ton of moneybecause you have no acquisition cost and it's
organic growth.

(40:15):
And so I think those are some of the learningsthat are only in hindsight, you know, apparent
to me, and I still don't think it was aterrible decision to sell at the time given
what I knew.
But, yeah, that is that is a learning for me.
I mean, just to sort of think about in terms ofkind of framework advice for founders.
I mean, you're you're growing profitable, youknow, category leader in in the niche that

(40:38):
you're in.
You know, that that sort of field, like, okay.
If the if the rules of the game haven'tchanged, then keep going.
But there's clearly some sort of terminal valueto the business.
Like, if you were to if you were to do it againdifferently, would you have explored some sort

(40:58):
of secondary opportunity for for the investors?
Or or kinda how would you how what would youhave done if you had perfect hindsight now?
I probably would have done a recap to, like,buy people out.
Just early investors if they need liquidity andan up round.
And then we would have just kept going if, youknow, we needed to have some people change out

(41:24):
on the team, try to get them liquidity as well,or even structures like just like debt if we're
gonna be doing payouts.
But I think if we followed the thread, it wouldjust even the trajectory was on without anyone
adding anything to it, We would have able toprint a lot of money.
That free cash flow is worth, like, a fairamount if you wanted to go to a PE buyer or,
like, anyone.

(41:44):
Don't don't even look at what the product does.
We don't care about the product.
Just look at the financial statement.
You're like, oh my god.
This is just printing money.
I think you have a lot of flexibility if you'reyou've created something that can print money.
So if I did it over again, maybe recap, yeah,for existing investors if they want liquidity
and then be patient.
But being honest, there's also so much Ilearned in the process of the company.

(42:08):
I would just do so much stuff differently that,you know, it's in I'm on my third company now,
which has been fun.
I get to apply a lot of those learnings to yourcap table to you know, Truly, if you if you did
it over again, like, you know, it ended inspectacularly well.
I'm sure you had a lot of lessons and might dosome things differently if you were to go

(42:28):
through it again and kinda same for me thistime around.
Yeah.
I think that, you know, I kind of, like,reflect back on the kind of you know, we were
kind of public profitable.
I think the you know, part of the decision tokind of demerge truly in Zillow were kind of I
kind of reflect back and think of it kind of asort of a number of different buckets.

(42:52):
The the big thing was really the rules of thegame changed.
It went from a product battle to a marketingbattle.
So Truly and Zillow were kind of like we werespending like a $150,000,000 on marketing a
year together.
And so it was and because the products werebasically almost identical.
You know, we had the same features.
We had the same functionality with the samelistings.

(43:14):
And so it became a sort of, like, marketingbattle as opposed to a product battle.
And then, you know, as a public company, it'ssort of fair price today for future execution.
And so we could you know, it was sort of apurchase price somewhere between 2 and a half
and 3 and a half billion.
So it's like, okay.
This is a big it's kind of a big number.

(43:35):
But I think there's I don't know.
There's there's also this sort of experience ofgoing through the journey, which I think is
worth a lot because you you know, that thatexperience, that journey is is super valuable
and interesting and, you know, enough you know,the the money is important, but it's it's not

(43:55):
because it's singular singular.
There's there's an element of, like, goingthrough the journey and seeing kind of what
this what this can be and what this should be.
Yeah.
That's a great insight for you with the trulyat Zillow.
I remember when I was an intern, we're sittingaround looking at Zillow who hadn't launched
yet being like, why do they have so manyexecutives?
And when they finally did launch, yeah, thesimilarities were were striking, and it makes

(44:16):
sense to combine when it became the marketingbattle.
And being a public company, you had, like, acomparable.
I think for, you know, docs end at much smalleramount, 165,000,000, but it's hard to get
comparables when you're a private company.
And I think, yeah, to your point, the journeyis worth so much.
So I am incredibly proud of, like, the productwe built.
You know, we did well by all of our investors.

(44:38):
We did well by all of our employees.
Dropbox had a great asset that they were ableto learn from within the company.
So all those things were were great.
I just don't think it that, like, I learnedsomething about, like, how to run the process.
But, yeah, on the whole, when I zoomed out,just very happy it went well and that I got
such unique and interesting learnings out ofthe whole experience.

(45:01):
And did you stay on afterwards?
Did you and, obviously, you knew Drew.
So, like, I mean, it's a kind of amazing sortof round round trip from being an early intern
at Dropbox.
Like, was was that did you stay on, and wasthat or did you okay.
This is my time to depart post acquisition.
They had a holdback period.

(45:22):
And so we all joined.
The whole all of Dachshund joined.
I think the experience being an employee ofDachshund is probably a little weird in the
sense that, hey.
This just happened.
I was like, okay.
One thing I thought was funny was some of theDachshund employees didn't really understand
equity, and they're like, woah.
That's great.
You know?
I was like, yeah.
It is great.

(45:42):
So we all joined Dropbox.
It was gonna be a multiyear period for it.
After about a year, it was a good time for meto transition.
So I caught up with Drew and was just I movedinto an adviser role for a year and went and
traveled and then just kinda took a couple ofyears off afterwards.

(46:02):
But we left it in a good spot there.
So, I mean, after we got there and kinda took alay of the land and kinda figured out, like,
how to set the thing up for for success, itdidn't take as long as we thought.
And I could have found another thing atDropbox, but I don't know if I feel more drawn
to, like, well, one, take off time and then,you know, two, go go try something different
after having worked on the same thing for solong.

(46:24):
What was the employee reaction?
How many people were you at the acquisition?
And, like, just imagine that's, like, there'scertain conversations you have with your team,
and that was one of the probably the biggestones ever.
Yeah.
We had because of that period of time where weweren't doing well, we'd already kinda gotten
off the train of having employees that areexpecting us to be, like, a rocket ship.

(46:47):
And, like, if you're on a rocket shipping, I'mout.
So we didn't have those expectations.
We were, you know, 60 something people, halfremote.
During the pandemic, we started hiring a bunchand kinda found people wherever we found them.
And and so, yeah, people's expectationsweren't, like, super high because the whole
team was going along with it.

(47:07):
I think people were like, oh, that's weird.
What does this mean?
And then once we told them, like, it doesn'tactually mean that much different for you other
than, like, this is how much your equity isworth, and then here's the, you know, amount
that you'll get paid to drop by.
It was, like, financially good for everyone.
So everyone's like, oh, this is this isstrictly better.
Like, I don't no one had, like, an expectationof being like, you should have been 10 x this.
So from the employee perspective, I thinkthey're all excited.

(47:29):
They liked it.
You know, they went along with it.
It's a great name brand to go to.
It's a good story to be part of.
So it wasn't hard news to break to people.
People were uncertain about what it meant forthem personally, and we went through that with
everyone.
But it wasn't, you know, huge team being being60 something.
So we were able to get through that all.
And then mostly people were just kind ofcurious, excited, wanted to learn a lot, meet

(47:50):
new people.
So all those all those things came came true.
So it didn't it didn't feel that actually, frommy perspective, that hard to to go and talk
talk to the team.
It's a it's a great positive story unlike, youknow, selling your company to be shuttered or
shut down or so you know?
And Dropbox is a kind of incredible brand, andeveryone knows it.

(48:13):
So it's a it's a great story.
Yeah.
Those those aspects were all were all true, andso made it definitely easier as as news to
break.
So post acquisition, you took a year off, andthen kind of what was the what was that like,
and how did you how did you think about yournext chapter?
Yeah.
I'd be I'd be curious, like, how you thoughtabout it too.
But for for me, it was you know, we decided todo this thing.

(48:37):
We've been at it for eight years.
Like, Dave, Tony, and I talked to with eachother.
Like, how much are we drinking our own Kool Aidwith this startup?
Is it really gonna do that well?
Have we just convinced ourselves it's gonna dothat well?
So deciding to sell, like, it's done.
It's over.
It is out of our hands.
Like, you know, we work at Dropbox now.
It is, like, their asset.
We are not on, like, the executive team at atDropbox.

(48:57):
And so, you know, being able to kinda step backand have some kinda, like, perspective on
things is is quite helpful.
I will say that it wasn't actually thatstressful running Docsend at the end.
It wasn't for me, like, oh my god.
You know?
Thankfully, I don't have to keep working thishard.
After we figured out the pricing andpositioning, it's a 100% inbound.

(49:19):
It just kinda ran.
It was really fun.
So, like, for me, I was it wasn't like a, oh, Ican finally take a load off.
Was like, actually more stressful for meafterwards.
So in that year, I just wanted to I wanted toleave things in an okay state.
I've talked to other founders, and that'sgenerally a pretty stressful time if you're
running around stepping on toes to make surethat, like, value isn't destroyed.

(49:40):
So that year was pretty exhausting, and it wasvery nice of Drew to let me take off early
because he's really happy with how it performedand, you know, made them look great, and
they're learning from it.
And so everything was great.
Took off after a year and then just traveledwith my wife.
We just did a lot of bucket list traveling, ranaround, wrote a lot of sci fi, played a bunch
of video games.

(50:00):
It was great.
Didn't really do anything productive for ayear, and then I just started to get bored.
I went and did interviews.
You know, the way we ran to OXEN was suddenlypopular.
I'm like, oh my god.
You were growing fast and profitable.
How are both of those things true?
And we made a great business out of it.
But the CEO jobs I interviewed for all feltkinda like people asking me to turn this

(50:22):
PowerPoint into a real company, raise a ton ofmoney.
I was like, ugh.
And then I looked at DC and also decided that Idon't know if this is what I actually want to
do and then kinda loop back around to, whydon't I just go back and start playing with
kinda go back to that idea of May's phase?
So it took me a while to kinda come around tothat, but it was great to just take some time,

(50:44):
gain some perspective, think about what mattersto me.
Did I just wanna retire and, you know, go backfor a PhD in history, or, you know, do I wanna
work on something something else?
And so after all that thinking, I just likestartups.
They're fun.
I like working on software stuff, so that'swhat I came back to.
Yeah.
I I think the one of my piece of advice tofounders who kinda go through that exit process

(51:09):
is absolutely to take the year off.
And and it sort of and a year is not just akind of is not just twelve months and a period
of time.
It's actually I kind of feel that there's aresetting of your of your rhythm and your cycle
because that is the calendar year, you know,and I think you you know to go through any
major change whether that is change your lifeor someone passing away.

(51:31):
It just takes that time to just like see thethe sun the earth move around the sun that
distance which is which just kind of helps toreset things.
Because you I think you can very easily sort ofover over steer in that period.
You know, if you have a kind of tough exit,then you can sort of you go the other way to

(51:54):
perhaps a corporate job.
If you have a kind of glorious exit, then youkind of make it wrapped up into kind of some
sort of hobby that really is not what your isgonna be really fulfilling for you.
But that that period of time is just kind ofnecessary to to reground yourself.
I couldn't agree more.
I I didn't get that advice explicitly fromanyone.

(52:15):
I wish I had gotten it from you, Pete, but,thankfully, it's what I did anyway.
And so I'm I'm very happy.
And the the the other piece of advice Iremember speaking to Rich Barton who started
Expedia and then before he started Zillow andhe said like, okay, go and go and travel
because there's a bunch of people that willkind of like come and pick your brains and kind

(52:37):
of spend time with you and you'll get wrappedup and it's like this is a unique opportunity.
So so I actually had a I had a newborn at thetime, so I didn't quite do the bucket list
travel.
I was more changing diapers at home, but but Ithink the travel thing is also just like that's
just the perfect thing to do at that time.

(52:59):
What was I'm curious.
What was the one of the best trips?
I love just getting a rental car and drivingaround Greece.
There's so much history in Greece, and peopledon't talk about it as much as Italy.
It's just kinda like, I don't know, as popular.
People are so friendly.
People don't expect you to speak the languagebecause it's not as common, and that was great.

(53:23):
We spent, like, a month just driving around andjust going to all these historical sites.
I love history.
So that was really fun to just kinda be able tojust go go where we wanted to go, go explore,
read about stuff, show up.
We also went to New Zealand, did a bunch ofhiking there.
I've never been.
That was that was amazing.
Went to the Galapagos, went around Ecuador.
We we did a whole bunch of stuff in that yearthat, yeah, I think the the Greece stuff was

(53:47):
the surprise for me where it's just beautifulthere.
Yeah.
Yeah.
Thank you, Dropbox.
Deserved.
And and the how did you just know, what was thekind of process of kind of rethinking of
startup ideas?
You know, some founders are kind of burnt out.
They kind of, like, you know, they they losethat sort of creativity of thinking a kind of

(54:09):
new things.
So, you know, what was the process that youwent through to think about where you wanna
spend your your next chapter?
Was there was there an element like, okay.
To think about the next startup, I really wantit to be similar in this way, but different in
that way with the what what did you wanna bringto your next company from Doc's End, and and

(54:30):
what did you wanna kinda take out if if therewas anything there?
Yeah.
I asked that question a lot.
I also just asked the question, like, is itcrazy to start something else?
That was my process of elimination.
And then I also went through and asked people,like, hey.
For repeat founders, what goes wrong?
You know?
Like, what have you seen, like, people regretlater?
Like, what, like, what might my instincts bethat, like, I'm gonna regret later as my

(54:53):
instincts?
And the answers there were pretty helpfularound people will try to assume will assume
that they're really great in some other domain.
And so it's like, be aware that, you know,you're not great all the things.
Like, maybe it was 100% luck, but you learned alot about what you were doing.
I don't think it was a 100% luck in our case,but we didn't have to grind through it.
But those that knowledge doesn't transfer towhole things.

(55:14):
I didn't wanna start a a beauty brand orsomething.
Didn't really seem like, another cautionarytale was, like, starting something for the sake
of it.
Like like you mentioned earlier, make sure it'ssomething that there's intrinsic motivation
for.
Otherwise, you're just gonna lose interest inthe thing.
So I was my cofounders, Dave and Tony, werealso good friends.

(55:34):
They're still retired.
I think they'll get bored eventually, butthey're having a great time as, like, new
parents and and, you know, having a lot of fun.
I got bored first, so I started to, like,shopping around and looking at ideas and then
met up with my cofounder for this company, Tim.
It's also his third company.
And so, you know, our I ideating process wasmuch more like dating where we, like, had our

(55:58):
shared values we wrote down, and we kinda,like, got to know each other actually over the
course of a whole year because we just keptbuilding prototypes and testing out stuff.
So we took that idea, Maze, and we really said,like, let's leave this open ended and make sure
we wanna do whatever we pick and, you know, nothave a time limit on it and not pressure
ourselves.
So what we're working on distill is actuallyour fifth, like, prototype that we built out

(56:23):
and tested in a year.
But we love the process together.
It's just one where you have to ask a lot ofquestions, poke at things, why why is it wrong?
We stuck to our guns around.
We like building for the end user, not theeconomic buyer.
We like it to be b two b.
Like, there there are a bunch of factors thatwe wanted in the system that we were gonna
build, and there needed to be a why nowcomponent to it.

(56:44):
So I had some ideas from previous like, one ofthem was I wanted to start the inverse of docs
and doc get because I just thought that'd befunny.
But then as I dug more into LLMs, I'm like, no.
LLMs, this changes a lot of stuff.
So we just kinda got rid of everything we'vebeen thinking before and just really approached
what would be an interesting things to startnow that we don't think is gonna otherwise be

(57:06):
done by a big company.
We don't think it's gonna get steamrolled asLMs make progress, but, like, something that we
care about that's worth solving.
So, yeah, that took a while.
It was not the spreadsheet process that I usedbefore.
It was much more of, like, me and Tim justhaving a lot of conversations.
I did 300 plus, like, interviews with people,either, like, need finding or asking for advice

(57:27):
or, like, you started this and it failed.
Why?
Would you do it again?
Does this change anything?
You know?
It's really, really fun, but we would justkinda follow our interest until we got to the
point where, like and then we kinda, like,follow the evolution of it.
So, yeah, it took us about a year after westarted together to to settle on what we're
doing now.
But you but you were specific about definingand agreeing on values before you figured out

(57:50):
what product you were gonna build?
Yeah.
Yeah.
It was that that part, I had done done withDave and Tony, but I'd also known Dave and Tony
since undergrad.
You know?
Like, we were roommates, and we'd been takingclasses together.
We'd all worked at another startup together.
So we we knew each other very well.
With Tim, even though he also went to Stanford,he's about the same age.

(58:11):
You know, we just hadn't we didn't know eachother even though we're in the same group.
So we did reference checks on each other, butthen we spent time together, and it did feel
more like the founder dating thing where itmakes sense to write things down.
Let's not, like, make assumptions if if we canavoid it.
And so it was it was a fun process just towrite things down and to see what each of us
cared about and just kinda settle on, like,criteria for for what we're looking for.

(58:37):
And so, yeah, so you define the values, thenyou also define the principles.
Kinda this is the kind of businesses that we'rereally good at, and this is what we wanna
pursue.
And then that created this sort of and out ofthat came all these the ideas that you narrowed
down.
Yeah.
Exactly.
Yeah.
He Tim had some ideas he brought to the table.
We explored those.
I had some ideas, and then we would just kinda,like, look at themes that we were hearing back

(59:00):
from people.
And then it's it's kinda following the thethread and kinda digging around.
And, like, one of the ideas we discarded rightbefore Distill was one we call Datapoint.
And as we were following thread around, like,LLMs doing data interrogations and, like,
making analysis better, and we've all entered acompany where you're like, oh, there's an
analyst.
There's all the engineers, but, like, we can'tmake sense of our numbers.

(59:23):
Digging into that problem, what we realized wasthe best incarnation of that, like, insight was
gonna be selling up market to CIOs, like, for,like, a data cleaning service.
And that was just clearly outside the boundsof, like, what we'd already talked about.
And we're like, we don't really wanna do anenterprise sale company that's an API to CIOs.
We're like, someone should start this business,but I don't think this is the business that
we're gonna be excited about in ten years,like, even if it's successful.

(59:46):
We actually got an acquisition offer for it,which I thought was really funny because it was
just a prototype.
But, yeah, we would follow things until it gotoutside the bounds or until we started to
question if it would actually work well or not.
Yeah.
This is sort of there's product market fit andthere's founder product fit and founder market
fit.
And you kinda gotta get the trifecta there tojust kind of to see the magic happen.

(01:00:10):
Mhmm.
And certainly for me and Tim to just make surethat we are enjoying working on what we're
working on.
It's something worth solving.
We'll be doing this for a decade and, you know,still be excited about it in a decade.
And, yeah, it takes a takes a while to findsomething like that.
So, yeah, the the idea is this time around.
I hope I'm better at it.
I still don't know what the ideal process isfor it.
But, certainly, talking to a lot of people andtrying to poke things to get, like, why no to

(01:00:36):
this, I still really like that that part of it.
And is that just, you know, some some foundersafter they have a successful exit have a, I
don't know, a kind of a chip on their shoulderor kind of like, you know, or something which
is like, okay.
I really I really okay, I I wanted or they justsay like this is great, I wanna do this again,

(01:00:58):
you know, if I can be acquired for a165,000,000, I'm there.
Is there any is there anything there that'skind of driving you as you think about the next
chapter?
That's a good question.
Like, where does intrinsic motivation comefrom?
And and, like, for for me and Tim working onthis, the year off was really helpful to make

(01:01:21):
sure it wasn't a chip on the shoulder, becauseI wouldn't be that confident that would stick
around as a motivation in five or ten years.
And, you know, I I wouldn't feel comfortablebuilding something that people rely on, that's
got employees if I don't think I'm gonna bearound for kind of the life of the figuring out
the hypothesis.

(01:01:42):
So, yeah, it's not a chip on the shoulder.
Although with, you know, Docsend, if I did itover again, like, maybe we wouldn't have sold
and just kept going.
It was a great company.
It was a great exit.
Like, we did really well.
Before that, had the company we sold to Meta,which was more just great timing.
They weren't public yet, and, like, we builtsomething for that as an acquisition.

(01:02:02):
But I'm in a great spot in life.
Feel really fortunate.
And so the motivation to work on this dealcomes much more from a place of, wow.
LLMs feel pretty different in the world.
This is a skill I've got, having gone throughit twice here to, like, try to find message
market fit, product market fit, build somethingthat people like a lot.
I'm much more aware of just how hard it is at abig company to innovate and to do things

(01:02:26):
differently.
So it's all positive motivation for me thatthis is something we wanna go work on.
You gotta spend your hours on something.
The year off was good to be like, okay.
How many sci fi books can I read?
And then, you know, like, am I, you know andyou've got a hard job.
Being a VC is not retirement as, you know, manypeople say it is.

(01:02:47):
You've got investors to answer to.
Like, you got that is that is a, you know, alot of work.
And so when I thought about what do I wannaspend my hours on, you know, then it kinda
comes back to the, this is fun to create.
It is really fun and rewarding to buildsomething that people get value out of and to
know that, you know, like, you know, no oneelse did it.
You happen to be the person to build thing, youknow, even if it's as small as Verdox and, like

(01:03:11):
like, giving you, the founder, like, some ideaof, like, are people reading it or not?
Where is it going?
What's happening to it?
You know, I love it whenever people say, like,oh, thanks for creating it or love the tool.
Been fun to see it kinda persist on.
And so, like, that if I can do that again withanother thing, that'll be really fun and worth
pursuing.
That's so good.
You know, it's I think it's the one of thegreatest privileges in life to be a founder

(01:03:32):
that you choose the problems you work on, youchoose the people you work with, and you choose
the environment that you work in, which islike, you know, so few people get that
privilege.
And so if you can do it again and be fulfilledby it, it's phenomenal.
What's the sort of elevator pitch for Distill?
Sure.
Well, I mentioned Datapoint before.
This came out of that, and the idea or theinsight I had was like, oh my god.

(01:03:56):
Companies are willing to pay more money for thedata they don't have than they're willing to
pay for the analysis of the data they alreadyhave.
And then I was thinking, oh my god.
There's already so much data out there.
People just can't make sense of any of it.
So we came back to an idea or, like, familiaridea with working at Meta around the graph of
people and companies.
And so the concept with Distill is like, hey.

(01:04:17):
Can we just remove the need to Google for aperson or a company?
There's so much data.
Like, if you're googling for a person or acompany, like, something has failed here
because Google is not meant for, like, peoplesearch.
It doesn't know who is this sort of differentperson and same for common company names.
So the concept is just like, oh, can we buildprofiles out of people and companies and just

(01:04:38):
tie it all together with LLMs?
Because we can say, this is the right PEEP.
It's the wrong PEEP.
And it's been tried before, but no one's doneit well.
People are still googling for people andcompanies.
So elevator pitch is like everything you couldfind out about someone on the Internet in a
single profile.
And then on top of that, the really interestingthings you wanna do searching for new people,

(01:04:59):
new companies based on kind of whatever it isthat you're interested in.
So, like, search is different now.
People and company search is different now thatwe have more information, now that we have new
ways of indexing it.
And, you know, so following that, that's thethread we're currently following.
And, mostly, it's great profiles.
It's this intuitive AI search, and then it'sthe staying updated about people and companies

(01:05:21):
that you care about.
But, otherwise, like, it's really hard to knowif a new blog post came out for you, Pete,
unless I see it on LinkedIn or somewhere else.
It's like Google alerts.
So we felt like there's a hole there.
Terrific.
Well, awesome.
Well, thank you so much, Russ.
Great conversation.
Great to catch up.
It's been, like, such a joy to to kinda seeyour evolution and kind of knowing each other

(01:05:46):
way back when we were kind of early on in ourcareers to see the evolution evolution to
today.
So thanks for coming on and sharing your story.
Terrific.
Yeah.
Thanks, Pete, for having me on.
It's been really fun to know you all theseyears and really fun to chat today.