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A
I haven't been able to find any other analogies where the acquired company that's a fraction of the size, the CEO comes in and takes it over.
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B
Welcome back to another episode of Builders. As always, this show is brought to you by Frontlines IO, Silicon Valley's leading B2B podcast production studio. If you're bringing technology to market and want to learn from your peers, we have a library of more than 1200 interviews with Venture backed founders and marketers. Where they talk, all things go to market. Of course, if you want to launch your own podcast, we offer podcasts as a service to more than 80 tech startups. The idea there is very simple. You show up and host and we do everything else. Now with all that said, let's jump into today's episode. Today our guest is David de Wolfe, CEO of 2X. David, welcome back to the show. Thanks Brett.
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A
It's great to be here. How are you today?
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B
I'm good and excited to chat with you and excited to chat about the big news. You got acquired. What happened? How did it happen? Take us behind the scenes.
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A
You know, it's crazy and it was kind of a very fast process, to be honest with you. I've done a lot of M and A in my career and I will say that this is probably the fastest and the smoothest process that I've had. And here's the story behind it. We have been building knownwell as a commercial operating system since, well, a couple of years ago. We were on the show talking about it and what we're doing and what we're seeing and why. What we saw was that the world continues to change. There are a couple of realities that were changing. The realities of AI that we see is that the silos in business are falling down and specialization is disappearing. The agents themselves are being relied upon more for the specialization and more and more functions are coming together as we're able to remove the overhead from managing the disparate silos. They come together and that's where a lot of the impact comes from. So in the commercial world, where we were focused on the net revenue retention, on the post sales world and those types of things, we saw that happening and our work getting closer and closer to the marketing department, the sales department, and all of these commercial go to market functions really quickly colliding. The other trend that we saw, Brett, was that more and more we were a software platform, right? An agentic platform. More and more the reality of forward deployed engineers and fronting that software and the change management required with those engineers in actually the hard work of integrating it into the target environment was becoming a reality. And so we were being pulled into the services world right at the exact same time that that was happening. I have for the last three years sat on a board and that board was of a go to market services company that focused on marketing and sales and was a human services business. And you can see where this is leading. That board was 2x. And we came to the realization that these businesses were colliding very quickly. And the former CEO before I took over and the lead investors came to me and said, hey, what do you think about putting these businesses together? And the rationale just made a whole lot of sense because the trends we were seeing at KnownWell without any of us ever expecting it, collided with the trends we were seeing at 2x. And the businesses were growing together very quickly. And it was a point in time when the CEO actually was ready to. He's a founder that kind of had gotten past where he was loving the work, didn't want to be a scaled CEO, was really a builder and an entrepreneur and loves making markets not necessarily operating. And they said, hey, why don't you come over, take over 2x the combined entity and we'll put knownwell and 2x together and we'll build the world's first human agentic go to market operating system where we are allowing the human beings to provide the, the ingenuity, the creativity, the judgment, the wisdom. But we're relying on the agents and the software to actually do the mechanical work that accelerates us and helps us go faster. And so that's what we're now building. And it's really exciting because we have a phenomenal 2X has just been a rocket ship. Seven years of consecutive growth, growing 50% year over year. Just last year brought in new investment from Insight Partners. Really positioned well to make this change and have set that up for living in this agentic world, but just needed that little push over the edge to bring that engineering and agentic talent to the table. And the platform that we built at knownwell happens to be the perfect fit for that platform.
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B
And so now we're sprinting forward team sizes. How big was the knownwell team and then how big was the 2x team?
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A
Yeah, so knownwell team was 17 people, still very much startup mode. And the 2x team is about 1200 people. So very different and a little bit of a unique situation. I haven't been able to find any other analogies where the acquired company that's a fraction of the size, the CEO comes in and takes it over. So Dom and I have been having a great time doing this transition. What's great is he is staying in the business even though he's not going to be the CEO, he's moving into an active founder role and he'll continue to be in the market with us and helping us to really make this market and paint a vision of the future. And so it's been an exciting transition and one, we're, we're both learning a lot as we go along.
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B
What have been some of the major learnings as you've gone through this integration so far? And I know it's only a couple months in.
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A
Yeah, I mean we're very early. We're in week four right now, so not even a couple months yet. We're about to hit a couple months in five days.
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B
Here.
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A
Here's the big thing, number one, the reality of human agentic services. When we talk about. Right that, right. The industry is talking about software as services and there are a lot of these words that got thrown out, but what it actually means and what it's going to look like, very few people have a vision for what that really looks like. And so it has been really critical for us to be able to paint that vision for employees and to be able to share just the brutal reality of where we are on that journey. Like, the reality is we are four weeks in to having a professional services company and having an agentix software business and putting them together and starting to stitch them together. So we're early in that journey and just admitting that being upfront with that and starting to actively paint that vision has been really important. I think the other lesson learned has really been about what everybody's talking about in this market, which is change management. You know, the agentic world is so different from the world we're coming from that most people don't even have a vision of how their own life is going to change, how their own work is going to change. And, and what we're finding is that the biggest way to describe it, or the best way to describe it is that instead of inserting AI into a process or inserting it into an existing workflow, the most productive way to use the artificial intelligence is to actually reinvent the entire workflow and do things fundamentally different. And oftentimes that takes us getting out of the day to day and elevating to a different altar. Right. And one of the reasons why that is so important is because one of the things AI is bringing to the table is deep, deep specialization that prior we couldn't have had. And so people now have access to be able to scale their own work, leveraging deep expertise that in the past they would have had to go to other people for. And when that happens, specialization disappears and, and the generalist emerges. But that generalist has to have really good judgment, a really good understanding of the business and to be able to manage all of those work streams that agents are performing and integrate them together. When that happens, it totally disrupts the existing processes and systems in businesses. And so being deliberate about that change management process, being deliberate about that's what's happening. And this is how our work's going to change, I think is a very important part of the equation as leaders drive this type of transformation.
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B
And at 2x, is it a standard kind of marketing agency retainer model right now? What's the core business made up of?
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A
Yeah, it's actually a recurring revenue business that you can think of it as. Most agencies thrive in the creative and the strategic work. 2x actually thrives in the operating work, in executing. And so building the marketing machine that produces the reliable results and so really integrates in as the chassis that works for the CMO and helps them actually create a scalable operating model that is very different from what you can get from stitching together different agencies and different specialists. Instead, you can think of it as an analogy of what we've seen the IT outsourcing world go through. The product development world where I come out of, went through this entire transformation. 2x is really pioneering that in the go to market space and started that journey serving CMOs and now has moved into the CRO space doing the, you know, rev ops, go to market engineering. We're the largest provider of clay services in the world, for example, so those types of things, but building the operating cadences around it. Not just doing the project work or the strategic and the creative and the design, but building that operating model.
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B
This show is brought to you by Frontlines Media, a podcast production studio that helps B2B founders launch, manage and grow their own podcast. Now, if you're a founder, you may be thinking, I don't have time to host a podcast. I've got a company to build. Well, that's exactly what we built our service to do. You show up and host and we handle literally everything else. To set up a call to discuss launching your own podcast, visit Frontlines I.O. podcast. Now back to today's episode. I was talking with a founder the other day and he's in the design Space as a very successful company. But what they really nailed first off was, you know, they productized the design side of things. So they weren't just, you know, creative agency kind of doing everything. It was very productized, very standardized. And he said what he's trying to do now is how can I take, you know, one designer and sell them 10 times or 20 times, how can I supercharge them with AI? Is that how you're thinking about it? Or how are you thinking about arming the existing team with AI and then how will that change how you price, how you bill, how you structure engagements?
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A
Yeah. So number one, yes, that is the world we're going through is there's no doubt that productivity is through the roof. Right. What we're able to do now when we equip people and equipping isn't just giving them a license, it's actually enabling them to use it and reinvent these workflows. It absolutely can take productivity to the next level. That's a given. I think the second half of your question is where the world is actually grappling with right now is we hear all this conversation about the movement to outcome based pricing and those types of things. So that's a reality. The interesting thing about that is even when people talk about that, a lot of times they're talking about token pricing and those types of things, that's not outcomes. Right. And what I see is the world is moving to a place where we're trying to push that envelope and get to, hey, what is the pipeline impact of the work that we're doing? What is the bookings impact of the work that we're doing? Those types of conversations are starting to emerge for sure. But. But where the market really is right now is moving from inputs to outputs, not all the way to outcomes. And the outputs are those intermediate things of where it's not necessarily a business result yet, but it is a capability that is fully delivered and answered. And it's those intermediate KPIs that we're
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B
able to move the needle on who's doing this. Well, do you think from an outcome based pricing perspective, and obviously not, you know, anyone that you compete with, but outside of your world, is there anyone that you see and you're like, okay, that's not who we're going to copy, but we'll be inspired by how they're pricing things and approaching this?
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A
I don't know. The way I would put this is I don't know if anybody's cracked the nut. What I see is A lot of people experimenting and I admire a lot of the experimentation.
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B
Right.
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A
I really don't know that the world has settled into the new way of pricing. I see a lot of experimentation with subscriptions, I see a lot of experimentation with tokens or some way of measuring the work itself. And then I see people that are truly trying to go all the way into what is the pipeline impact. You know, we can take any other domain. You know, in the finance and accounting space, that's a really interesting space where we've seen organizations really start to outsource their finops in a new way. For example, those types of things, again, not necessarily measuring bottom line dollars, that's true. Outcome pricing, but what are those intermediate things? And so I think these bets are being placed and the market as a whole hasn't picked one. Think the market has said, hey, we're going to try and experiment with all these and we'll see where it settles down.
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B
This brings me back to like, you know, PTSD from when I was first starting my company in 2014. You know, we kind of were, we're nobody at all. And we just had to do results based work. So we were a PR firm doing results based work and it worked. You know, we got a bunch of clients. But I remember it was a brutal, brutal process because at the end of the day there was some stuff in our control, a lot of things that were outside of our control. You could have, you know, clients making mistakes and all these issues and like being held to outcomes when you don't have 100% control. To this day, when I hear people talk about outcome based pricing, it makes me stressed, makes my heart race a little bit. How do you think about that?
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A
I mean, let's be really honest. You just talked about your experience doing that. The industry as a whole has been trying to do this forever. And we go through these ways where we talk about it more.
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B
Right.
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A
I think a lot of times we're not intellectually honest about it. Right. Like all the buzz right now is everybody's doing it, but like I said, nobody's really doing it and it's because of what you talked about. So my Last firm at 3 Pillar Building, Product Engineering and Digital Engineering Services was the exact same conversation for 16 years. And what we found was everybody wanted us to build products that drove revenue and growth. But two situations happened. Either we'd say, yeah, we will totally go in and revenue share with you and if we had the confidence to sign up for it, the company we were partnering with probably had a really strong sales and marketing organization. And they were like, no, if you're that confident, we don't want to give you a share of our revenue. And so they'd say no. And then we had the exact opposite people that would come to us and they would want us to rev show and we're like, you don't know how to sell or market. That's not our gig. We know how to build great products that people use, so we're not going to sign up for it. And that dance happens all the time. And that's what's happening right now. What has changed is that now I truly believe that businesses are becoming more composable. So think about, I just talked about the finance and accounting space. We have seen this in go to market 2x is a great example of this where others are outsourcing their marketing chassis or their go to market chassis. We have seen it in product engineering, we've seen it in it all over. What's happening is because of the need to go fast in this economy, right? Speed and precision matter more and are your competitive differentiation more than they've ever been before? In order to go that fast and to operate with that level of precision, you have to be an expert in what you do. So anything where you don't uniquely differentiate, it's a no brainer to pull in somebody who actually is and is the expert. And you compose your business by plugging in these different components, right? That's where the world is coming to. And it's because of this specialization that we get from agents that trend is happening. So now organizations are owning more. They're not just discrete projects that participate in a function. And a lot of times they are actually an entire function or a major component of the function. And so when you're measuring the performance of the piston of an engine, you can actually measure the performance of that piston. You can't measure the performance of the nut or bolt that exists within that piston. But you can measure the piston even if you can't measure the engine. Right? And even if you can't measure how fast the car is going. And so that's what's happening is that we're scoping it appropriate to where we are in the maturity life cycle of this composable reality coming to life. And I think that's the journey you're going to see everybody on and people are going to move from pistons to engines. We're never going to get to a point where it's cars because human nature comes in and the stories I Told about the confidence in one side or the other is just going to get in the way. Except in the perfect partnerships and those typically are called joint ventures, not, you know, a typical contract relationship.
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B
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- [17:19]
A
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efficient growth, we help marketing leaders find, hire, vet and manage amazing marketing talent for 50 to 70% less than their US and European counterparts. To book a free consultation, visit globaltalent. Co like everyone, yeah, I got very much AI pilled, I think, or I was AI pilled, but Claude cowork, like really accelerated it and took it to the next level for me. And then I told my team like everyone like use it, got the first bill and I said okay guys, maybe let's hold back a little bit. Like I think it was like a $15,000 bill. And then we're small, like you know, 40 person company so getting a 15k bill. I was like, okay, like I need to think about cost a bit more. And I know every company's thinking about that. And you know, specifically like our team, you know, what we did early on was we built a hub in Argentina. A lot of the teams in Argentina and they're, they're paid very well in Argentina. But I'm looking at, you know, their salary now and with a lot of them I've added on a cost that can sometimes be like 50% of their salary. And then now it's a whole different kind of metric system that I have to build different KPIs I have to build around them. And I was telling them like, guys, it's not free. Like I'm not just giving these tools and like that your performance is going to stay the same and KPIs are going to stay the same. Like there's going to be an expectation that you're going to have a way higher output to get my money back on this cost, basically. Like how do you think about that combining services and tech? How do you not have it just become like insanely expensive?
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A
Yeah, well, I think there's a couple of things. The first one is what you said is you have to expect a return for it, right? This isn't replacing labor. I think the companies that are making a mistake are the ones that are trying to get rid of the humans and introduce the machine. And what they're finding is exactly what you said is the cost actually outtakes the human. Right. Where this really is playing out is where the human beings provide the judgment, the creativity, like Put the soul into the work. Right? There's truly human work out there. And when they do that, you can teach them to do it efficiently and effectively. And I'll just give you one really good example of true enablement. Okay. When you are prompting an LLM, a lot of people, as they start to do it, feed things in, they get great at prompting and they start realizing, oh, I can give it a lot of attachments and if I give it a PDF, it can read it for me, do a lot of really great work. But did you know that your token usage explodes when you do that? Because to analyze that PDF is a lot more intensive, just like it is for a human being, than to just get the data and even just copying and pasting the one page that you're trying to pull the data from, or even the full PDF of text and putting it into the prompt box instead of attaching a PDF that alone will save you tokens. Now, that's a simple example that I use. But if you are only giving people access to an LLM and you don't have the communities and the enablement that shares best practices and teaches each other how to make it more efficient, how to protect privacy, how to do things, then you're going to end up with those problems. And so I think the enablement, the change management, is really critical and it has to follow a true segregation of the work between what is truly human and an understanding of where can I actually get benefit. Right. If, for example, you use an LLM to try to make judgment calls or make a prudent decision, it's not going to work. Right. If you use it to do your research and to synthesize the information and data, to serve up more information than I can collect on my own so that I can make a judgment call, now I can make a prudent decision, and those nuances matter, and we have to train people on them and we have to equip them to enter this new scary world in a very different way, then I think, just by accident, we don't fall into.
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B
What else would you say would be the key pillars of your AI enablement approach that you're running now or you're going to be building?
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A
Yeah. So the first one is what we were just talking about. It's the humanistic aspect of it, making sure you have a strong anthropology of what is uniquely human. The second piece of it is not just the tooling, but making sure that there is enablement that goes on with it. And then number three is, I think you have to really push into what I call freedom and responsibility. Right. I see a lot of AI policies that get published that actually take away the ability for individuals to innovate, to actually use it in new creative ways and to explore. We have to put guardrails and guiding principles around things. But the technology is moving so quickly that if you try to make rules and rigid guidelines, you're going to end up backing yourself into a hole. And I've seen it over and over where individuals get scared, like, you know, it's just not worth it. I'm just not going to do it because I'm going to trip over a line. And you've got to be able to give them the space to try new things and to figure it out.
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B
I love it. David. So much fun. Always enjoy chatting with you. Always get the best energy from you, best vibes from you, and a lot of inspiration from you. So thank you for taking the time. Congrats on the acquisition and please come back. Let's do another episode in like a year or so and talk about all the progress and all the success. Well, that's all for today's episode of Builders, brought to you by the Frontlines. If you want more amazing content like this, visit Frontlines IO where you'll find the library of more than 1500 interviews with founders, marketers and other GTM leaders, where we unpack the tactical lessons from their journey. And of course, as always, if you do want to launch your own podcast, we'd love to have a conversation with you. Visit Frontlines IO/podcast as a service. Mention that you listen, mention you love the show, and we'll give you a 10% discount. Thanks for listening. We'll catch you on the next episode.