← Lenny's Podcast: Product | Career | Growth
Lenny's Podcast: Product | Career | Growth
How a great founder becomes a great CEO | Jonathan Lowenhar (co-founder of Enjoy The Work)
01:34:36
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- [00:00]
Lenny
You basically spend all your time working with founders and through that studying, you create frameworks and training and you use that in your work. I think that's what many, many founders are looking for is how do I avoid pain.
- [00:11]
Jonathan Loewenhar
To be a founder is a state of being. It's an attitude. To be a CEO is a craft. The more founders who can accept that those are two separate things and they're both equally important to build an ascendant startup, the better all of us will be.
- [00:26]
Lenny
I'm kind of tired of talking about founder mode, but it feels like what you're describing is founder mode and manager mode.
- [00:31]
Jonathan Loewenhar
Founder mode gets me ang. That article just got me hot. It really felt like an excuse. We were giving founders a permission to not learn the job. It's not Manager mode is bad. Is the greatest. CEOs know when to calibrate which one is needed.
- [00:46]
Lenny
Something you talk about are kind of these two phases to a startup journey. And most people focus on the first phase.
- [00:52]
Jonathan Loewenhar
Phase one is build something people want to buy. Phase two, the one we don't talk about is now you have to build a company around that thing people want to buy. Building a company is always the same. I don't care if it's medtech or fintech or hardware consumer.
- [01:04]
Lenny
You've come up with this methodology that you call the magic box paradigm that helps founders think about how to lead to a successful exit long term.
- [01:11]
Jonathan Loewenhar
This is a traditional sales process. You build a list of the companies that might want to acquire you, you ping them and you hope you get a deal. MagicBox argues that the best outcomes for early stage startups don't happen that way. You're never for sale. In fact, you have seduced a buyer. They see the fantasy, they fall in love. Foreign.
- [01:36]
Lenny
Loewenhar Jonathan runs a firm called Enjoy the Work, which I've heard amazing things about from so many people over the years. Their firm has a singular mission to help founders become great CEOs. They do this through a blend of mentoring and advising services which are rooted in their study of how the best startups operate. And they take these lessons and fold them into frameworks and advice and training that they offer their CEOs. Their insight, which you'll hear in our conversation, is that most founders don't come into the job knowing how to be a CEO, which includes learning how to do hiring, how to manage financials, figure out growth strategy, roadmapping, planning, people management, and so many other skills that nobody teaches a founder. In our conversation, Jonathan shares the most common CEO failure modes that he and his team have seen. The magic box paradigm for successfully selling your startup. A bunch of advice for finding and hiring the best talent. A framework for building a repeatable go to Market Motion. Why and how you should learn to trust your intuition more as a founder and so much more. We could have gone on for so many more hours. Maybe he'll be back to share more advice. If you're a founder or hope to be a founder one day, this episode is for you. If you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube. It's the best way to avoid missing future episodes and it helps the podcast tremendously. With that, I bring you Jonathan Loewenhar. Jonathan, thank you so much for being here. Welcome to the podcast, Lenny.
- [03:03]
Jonathan Loewenhar
I am damn excited.
- [03:05]
Lenny
So am I. The reason I'm excited to have you on this podcast is that you basically spend all your time working with founders and through that studying what causes them pain, what causes them to fail, what causes them to struggle. And then you take that and you create frameworks and training and you use that in your work with founders. And I think that's what many, many founders are looking for is how do I avoid pain, how do I avoid these things that I'm going to probably run into? So to kind of build on that briefly, can you just help people understand what it is you do, what it is your organization does with founders, how you work with founders?
- [03:38]
Jonathan Loewenhar
Yeah. Thank you. I'll tell a bit of origin story that I think ends up answering that question.
- [03:43]
Lenny
Let's do it.
- [03:45]
Jonathan Loewenhar
I had run a bunch of different types of companies and they were really different ones. So I ran a big division for a public company, then I was a private equity CEO. Then I did back to back startups and the first one didn't get very far, but we sold it. And the second one got really far. And when I left the second one, I was like many founders, grossly unhealthy, 25 pounds overweight, wasn't sleeping enough, all the things. And it took a few months to get healthy and then reflect on those parts of my career. And one of the things that I noticed at the time was all of those companies, when they got to a good place, when they started to run well, they were all run well in the same way. How could this be? How could public company, private equity startups, early stage growth stage, when they were run well, they were all run well the same way. So I started to obsess about this question and what it led me to realize is that every well run company has a rhythm. It's unmistakable. You can't miss it, you can't not see it. You just spend a couple of days through a spy cam watching a business, you'll see the pattern. So how come some startups get there and some don't? How does a founder learn the rhythm? How do they learn how to run a company? Well? So I started to ask investors kind of obsessively and I asked them, Lenny. I asked them all three questions, same three, over and over and over again. First question was, well, describe to me your ideal founder. What's a great founder? And the answers universally were the same. Investors would use words that meant grit and tenacity and courage and insight. And I'd say, great. Question number two, describe to me a great startup CEO. And they use none of those words. How can that possibly be true? Instead, they describe skills. This is a person who knows how to build stuff and sell stuff and recruit people and raise capital and organize humans and financially plan. Question number three, my final one, well, how does a founder learn those skills while doing the job? And I got blank fucking stares over and over again. So it led me down this path that I'm now 10 years into with my colleagues of, well, how do we help founders learn those skills so that their venture investors don't fire them, so that they can actually go build whatever company they want to build and stay in the job for as long as they want to stay in the job. So that's origin. That's what got me going.
- [06:27]
Lenny
This episode is brought to you by Pendo, the only all in one product experience platform for any type of application. Tired of bouncing around multiple tools to uncover what's really happening inside your product? With all the tools you need in one simple to use platform, Pendo makes it easy to answer critical questions about how users are engaging with your product and then turn those insights into action. All so you can get your users to do what you actually want them to do. First, Pendo is built around product analytics, seeing what your users are actually doing in your apps so that you can optimize their experience. Next, Pendo lets you deploy in app guides that lead users through the actions that matter most. Then Pendo integrates user feedback so that you can capture and analyze what people actually want. And the new thing in session replays, a very cool way to visualize user sessions. I am not surprised at all that over 10,000 companies use it today. Visit Pendo IO Lenny to create your free Pendo account today and start building better experiences across every corner of your product. P.S. you want to take your product led know how a step further, check out Pendo's lineup of free certification courses led by top product experts and designed to help you grow and advance in your career. Learn more and experience the power of the Pendo platform today at Pendo IO. Lenny, I'm excited to chat with Christina Gilbert, the founder of One Schema, one of our longtime podcast sponsors. Hi Christina.
- [07:57]
Christina Gilbert
Yes, thank you for having me on. Lenny.
- [07:59]
Lenny
What is the latest with One Schema? I know you now work with some of my favorite companies like Ramp, Vanta, Scale and Watershed. I heard that you just launched a new product to help product teams import scheme CSVs from especially tricky systems like ERPS.
- [08:15]
Christina Gilbert
Yes, so we just launched one scheme of file feeds which allows you to build an integration with any system in 15 minutes as long as you can export a CSV to an SFTP folder. We see our customers all the time getting stuck with hacks and workarounds and the product teams that we work with don't have to turn down prospects because their systems are too hard to integrate with. We allow our customers to offer thousands of integrations without involving their engineering team at all.
- [08:37]
Lenny
I can tell you that if my team had to build integrations like this, how nice would it be to be able to take this off my roadmap and instead use something like One Schema and not just to build it, but also to maintain it forever?
- [08:48]
Christina Gilbert
Absolutely Lenny. We've heard so many horror stories of multi day outages from even just a handful of bad records. We are laser focused on integration reliability to help teams end all of those distractions that come up with integrations. We have a built in validation layer that stops any bad data from entering your system and One Schema will notify your team immediately of any data that looks incorrect.
- [09:08]
Lenny
I know that importing incorrect data can cause all kinds of pain for your customers and quickly lose their trust. Christina, thank you for joining us. And if you want to learn more, head on over to OneSchema co. That's OneSchema co. There's obviously this new meme of Founder mode. I'm kind of tired of talking about Founder mode, but it feels like what you're describing is Founder mode and Manager mode. You basically have to be good at both. This latter part is almost Manager mode. Is that my way to think about it?
- [09:34]
Jonathan Loewenhar
Yes. Founder mode gets me angry. That article just got me hot.
- [09:39]
Lenny
Do share.
- [09:42]
Jonathan Loewenhar
It really felt like an excuse. We were giving founders a permission to not learn the job. If we think about an ascending startup, there's this phase of I have to invent something. I now have to figure out how to get my customer in front of this invention and see if it works. And then I have to build a business model around that to see if there's some repeatable way to attract, win, deploy my customer and thrill them with whatever the solution is. Okay, now I have to go build an enormous amount of demand and then I have to build up an operation that can handle all that demand. Oh, and by the way, at some point figure out how to turn positive revenues into positive cash flows. The idea that the founder who's writing code by themselves doesn't have to advance their skills to learn how to do all those things, and that in fact what the article even implies is learning how to do those other things is a negative is bananas to me. The things required to launch a company are not the same as grow a company, as scale a company, as exit a company. And the best startup CEOs learn them all along the way. There are lots of ways to learn them. I'm not suggesting there's only one path, but founder mode was almost an excuse not to. I do think what's unique about a founder that felt perhaps where that article was trying to go is that unlike the professional mercenary CEO that gets dropped in, the founder knows everything about what built this company. And they can drop in at the most granular level and play anywhere. And they can drop into a product feature, they can drop into a customer conversation or a partner conversation or with a longtime employee that's still in IC and be impactful and then rise back up if they've gone the training and get back into a cockpit to run the company again. And that's to me the distinction. It's not manager mode is bad is the greatest. CEOs know when to calibrate which one is needed.
- [11:57]
Lenny
I love that. I'm glad we got there. I wasn't planning to talk about founder mode, but I think this is really helpful for folks to hear that are founders and people working for founders too. Along these same lines, you have a really helpful and really funny also kind of mental model for how to think about common failure modes of founders. You kind of have these labels that I love and this is actually the first thing I heard about Enjoy the Work is like these labels that you guys use. And you also have a similar mental model for failure modes for a startup. Can you just share these modes that you've come up with?
- [12:30]
Jonathan Loewenhar
Yeah, we do take a bit of a comical approach to some of this. As I've shared with you previously, the name of our company is not an accident. If we can't be playful, we can take the work seriously and not ourselves. So we do fuck around quite a bit. I think if I would separate failure modes for companies versus CEOs for a minute. The company ones are not quite as comedic, but they are ones we see all the time. One is you chose the wrong market. I don't think we need to belabor that one. Lots of your prior guests have talked about the importance of getting that part right or nothing else really matters. Second, back to what we were discussing a minute ago, like build something people want to want to buy. Got to go build the right thing. Cool. Third one, founder dysfunction. We like to joke that more companies die from suicide than homicide and it's grim. But also, if the two or three people in charge of the business can't get along, nothing else matters. It's all going to break apart. And then fourth, execution. And execution now leads back to CEO. Okay, so now we have a bunch of playful ones here. We have the robot CEO who believes emotions should not ever exist at a startup, at which point we train them on a very simple formula. Emotions are messy, humans have emotions. Startups need humans. Therefore startups are messy.
- [13:57]
Lenny
I love how engineering oriented that advice is, which makes sense for robots.
- [14:02]
Jonathan Loewenhar
Yeah, I also a little bit more graceful of an answer there is also our CEOs want urgency and passion and excitement from their teams. They want them working enormously hard for below market comp more often than not with this promise of equity that might return value five or 10 or 12 years later. They want them to bring all of that emotion, but they're supposed to figure out how to surgically cut off the emotions that are inconvenient. That's the robot CEO who believes that we can just have sterile robots working for us and you just press a button and they do a thing. Second one's a pleaser CEO. This is the person who is far more concerned with being liked than running a business. So they can't tell anyone hard news, they can't break ties, they want a consensus on everything. And that's not possible if you have a group of thoughtful people working for you. They're going to fight, they're going to debate and you want them to. And then at some point you have to call it and say, no, we're going left, not right, or the two of you need to go get in a room. And deal with something or hey, the way you just showed up is not the way I want you to show up. The pleaser CEO won't do any of that. They will simply hide and pray it goes away. And it won't go away. Next one's a perfectionist CEO. I like to say that these are the CEOs with the most beautiful product to be delivered minutes before they file for bankruptcy. This is the person who is far more concerned with being right and believing that there's always a right answer than just moving forward. It creates two problems in a business. One is you're just slow. And the other one is you'll never take any bets because you will build a team that realizes the CEO is not allowed to be wrong. So you can't disagree, you can't use intuition, you can't use gut. Everything has to be utterly factual and that is simply not possible in early stage startups. You have more questions than you do answers. Everything is circumstantial. It's not like watching CSI entrepreneurship and you get to see a video to say, oh, look, the guy did it. No, we have a bunch of little data points, you have to come to a conclusion. The next one's the angry CEO. I had a founder of mine a bunch of years ago and we were seeing a pattern across the leadership team and he and I get on the phone one morning and I said, I have a theory for you. Might be a story, I might be wrong, but I want to share. He said, okay. I said, I think you wake up in the morning angry and you don't know it. And then you get to the office and you beat the crap out of the first employee that crosses paths with you over something utterly unrelated because you're angry. You realize that a few hours later and you apologize. And your team hasn't quit yet because they believe you're a good human who doesn't have good self control. And then I shared with them and you just had your first child. So my guess is because I'm not a psychologist, I'm not a therapist, that you are modeling something that's happened in your life. Is this something you want to change? And his answer is yes. And I said, great, I have good news and bad news. The good news is because you said, yes, we can do something about it. And the bad news is I don't know what the fuck and do, that's not my job. The point being, no one wants to work for the angry person. I don't care what the equity potential is worth no one wants to work for that person. And the moment they see greener pastures elsewhere, they're leaving. The next one is the one that drives me particularly crazy. It's a laissez faire CEO who insanely believes that I can just hire great people and utterly ignore them and let markets take care of themselves and they will do all the right things. I have never met anyone, Lenny, that didn't benefit from good management. And the laissez Faire CEO believes that management's not required. And so what they ultimately find is they have really, really good people doing utterly disconnected things and goals are not achieved. So every CEO we can reductively reduce to one of two characters. They're either comfortable with the brake or comfortable with the accelerator. The challenge with those who are comfortable with the break. What I mean by that is they don't want to spend any money. So they're driving this beautiful sports car and they're just leaning on the brake the whole time. So yes, they won't run any money and yes, they will also get lapped by everyone else and miss the opportunity. And so where their opportunity is is where can you take bets? Where can you actually downshift that car in such a way where you give yourself a chance in the market. Separate those who ride the accelerator. We've all met this one. They're going to run out of money really fast. And this kind of connects to one of our other challenging CEO types. The ready, fire, aim. Most CEOs are really bad at planning. And that's because there's this little known secret in the bay area. Most CEOs never owned a business before. Planning doesn't have to be some heavy bureaucratic multi month exercise that begins in August and ends in February. But a little bit of bottoms up planning to say, what are we trying to achieve? How do we quantify what resources are required, what humans are going to do? What, how do we shorten feedback loops so we know in a week, in a month and two months whether we're on the right trajectory? The ready, fire, aim CEO says I don't want to do any of that because they're improvisational and they just want to take bets and they want to take shots and that's what got the company started. And that's also will have the company go bankrupt. The micromanager one is the opposite of laissez faire. They believe that no matter how many employees they have, they can do the job better. The challenge with this one is it is massively disrespectful. To those who work for you. And we think that, and this is a bit insulting, that everyone that works for a founder can be fit into one of two chunks. They're either an adult or a child. I have a three year old, my little girl's amazing, I'm utterly in love. And if she doesn't have a lot of structure and a lot of supervision, she's going to run into things, man, into things, off things, through things. But adults don't need to be given utter instruction and watched all the time. In fact, it needs to be the opposite. We agree on what success is, what resources are, and you let them go and they'll come back to you when they have questions. The micromanager CEO doesn't see the difference between those two humans. They don't trust anybody. And that's actually the thing under the thing under the thing. So they want to do everyone's work and that will succeed right up into the point everyone quits.
- [20:39]
Lenny
This is amazing. Okay, so let me recap the these labels that you have just for folks. I have them written down here. So there's the robot co perfectionist, CEO pleaser CEO, micromanager, laissez faire, ready, fire, aim, riding the brake and then riding the gas. And as you said, the ever popular, angry CEO, you got them all. And as people hear this, they're not. I imagine people identify, self identify a few of these. Like, I have some of this, I have some of that. And it's not like black or white, right? No one's like, I'm 100% robot CEO and I need to fix that.
- [21:16]
Jonathan Loewenhar
Right?
- [21:16]
Lenny
It's like a pie chart kind of. I don't know what's the visual of this? Everyone's got a little bit of this, basically.
- [21:24]
Jonathan Loewenhar
That's right. I enjoyed giving this talk on stage and watching different founders in the audience cringe at different moments. But it doesn't mean that they're all one or the other. If they were all one of these and then didn't want to even accept the possibility that there's a little bit of a lot of these that they could work on, they're probably not coachable and they're not going to be in the talk anyway.
- [21:45]
Lenny
So like, I imagine each of these is very particular and it's this journey you go on to, you know, work on yourself. So let me just ask, what's the most common issue that you found across these labels of type cos? What's the most common one? And what do you often recommend someone work on Specifically to help them through that.
- [22:02]
Jonathan Loewenhar
I think Ready Fire Aim is the most common that we've seen, and that has been an affliction that's been growing in the last number of years. It wasn't long ago that CEOs could paper over poor execution with easy access to capital. And suddenly, over the last number of years, we're expecting founders to be better operators. Better operators means eventually being on a path when more cash comes into the business than out of the business. That doesn't happen by accident. The Ready Fire Aim CEO has probably suffered this pain where they took lots and lots of bets. Maybe they measured the outcome after the fact. And they were wrong. And they were wrong, and they were wrong in ways that were expensive. And they've raised their hand to say, I see it, I want to get better at this. Basic, basic business design and business planning is not some corporate effort. It's some thoughtful exercise that starts with, what are we working backwards from? Because at any given time, Lenny, companies are working backwards from one of four things, whether they like it or not. I am working backwards from an exit, I'm working backwards from my next fundraise, working backwards from profitability, or I'm working backwards from winding down. We don't talk about the fourth one that much, but I got to choose one. I got to choose the top of the mountain. More often than not, they're choosing a fundraise. So then we'll ask that founder, you know your market, you know your investors, you know the next set of investors. We've done some intel what has to be true to unlock the next fundraise. And that's a qualitative and quantitative answer. But we write it down. We need to get better at go to market, we need to land our first partner, we need to launch next iteration of the product and show this level of efficacy, engagement, what have you. Can we codify that? Yes. Can we talk through what actions would be required, on what cadence to unlock that quantified set of results? Yes. Do we understand what resources would be required to do those things? Recognize we might have to squint through some of it. But again, the answer is yes. We've now aimed if we have a culture that has some accountability, that has a communication architecture, so there's some rituals about how we meet and how we share information and how we talk through problems and how we work through bottlenecks. Well, now we have a plan and now we have accountability. I now no longer have to just guess all the time. And this only works for the CEO who says, my improvisational efforts got me here, but I don't think they'll get me there. There's a guy I worked for a long time ago and he had this phrase, he had like seven or eight phrases. He would use them over and over and over again. It was hard not to commit them all to memory. And one of them was if you keep doing what you' keep getting what you're getting. And for the ready, fire, aim folks who realize the weakness of that at scale, the way to counteract that is to start with good planning.
- [25:12]
Lenny
It's interesting. That's the most common type of CEO. When with founder mode, it feels like it just accelerates that further. The whole meme of founder mode, which is. Which are what makes you upset my sense of great. Okay, so I love that you talked about exiting as basically one of the one of these four working backwards paths, because that's where I wanted to go next. I want to talk about some of these specific frameworks and skills and methodologies that you teach. And one of them, and it's kind of like from the. I want to almost go to the end of selling your company. And the reason I'm excited to talk about this is if you think about and tell me if I'm wrong, but it feels like most startups that succeed end up selling their company. That's the most likely success, right?
- [25:58]
Jonathan Loewenhar
Yes, by far.
- [26:01]
Lenny
Great. Yeah. Because the other option is IPO or just like run this privately forever or fail basically and fold. So of the successful options, the most common is selling at the same time. Founders have never done this before. They don't know what they're doing. They don't. The other side often has done it many times. And so it's a pretty treacherous and scary and high stakes thing to do and to learn on the spot. And you've come up with this methodology that you call the Magic Box paradigm that I love that helps founders think about how to lead to a successful exit long term. Can you talk about what this is?
- [26:35]
Jonathan Loewenhar
I can and I want to give credit where it's due. So there's a book by this name, it's called Magic Box Paradigm, written by an independent banker named Ezra Roizen. And the book's fantastic. And Ezra's fantastic. What we've done is we've operationalized it so that we could teach founders over and over and over again. If the founder wants to hire a banker for this particular process, because we're not bankers, we're not bd, we don't get paid that Way, we're teachers, but if they wanted to hire a banker, go hire Ezra. But the methodology itself is a inversion for how venture and venture boards have thought about startups being ready for sale for a long, long time. It's utterly counter to so much advice that founders have heard. There are two ways you can get acquired. This is purposely reductive. One is you put up a for sale sign. This is a traditional sales process. You build a list of the companies that might want to acquire you. You figure out the categories of buyers, the companies there, the contact list within that. You ping them and say, we're open to a transaction or some euphemism. The like, you contact them and say, I'll give you some information now sign an NDA, give me an indication of interest by this date. And you work through a process. And you pray you have more than one person at the end of the game. Try and ratchet them up, sign a term sheet. They will then retrade along the way right up until the point you die and you hope you get a deal done.
- [28:05]
Lenny
Sounds very familiar.
- [28:08]
Jonathan Loewenhar
And it's one that often will just hit the nervous system of any founder that's been through it a couple of times because, man, is it a fraught exercise. What MagicBox argues is that the best outcomes for early stage startups don't happen that way. You're never for sale. In fact, you have seduced a buyer, you have brought someone in. And there are three stages to magic box work. There is learn the fantasy, there is prove the fantasy, and there is quantify the fantasy. All right, so what the hell do I mean by a fantasy? You're an early stage startup and you meet a company that is in your space, in your vertical, what have you, and they're much more advanced than you. It's a large business, generally speaking. Another oversimplification here. Large companies are interested in small companies because they're technology, and small companies are interested in large companies because they're distribution. And there's someone at the large company who becomes fascinated with you. What's the fascination? What they see in their head is, oh, interesting, if I buy your company, this thing happens. The classic example of this is Instagram. Like, this is the number one example of this. Lenny, do you remember how much revenue they had when they got acquired by now?
- [29:32]
Lenny
Meta, I think it was zero.
- [29:34]
Jonathan Loewenhar
I think it was zero.
- [29:36]
Lenny
Okay.
- [29:36]
Jonathan Loewenhar
Do you remember the acquisition price?
- [29:38]
Lenny
A billion dollars, which was absurd at that point.
- [29:41]
Jonathan Loewenhar
There was no math Facebook could use, historically speaking, that would justify a billion dollars. It had to be a model on the Future. This is MagicBox to a T. They had a fantasy that adding Instagram would expand ad revenue. They figured out some way to prove it. I'll explain more on what I mean by proof. And then their quantification was based on the future. And that's the difference between a Magic Box approach and traditional approaches. Traditional approaches are based on the past. Magic Box is on the future. Let me tell a story. One of our companies in construction tech, their technology was able to suck in video camera data from construction sites for project planning. No one was doing this yet. The business was doing pretty well. I helped the founders, we helped the founders launch the company. We got first product in market. We raised a couple of rounds of capital. The product mostly worked, but we weren't sure it was venturescale as we were going along. And we had some large construction tech companies and real estate companies and development companies leaning into us. And one particular company then said, huh, we're really good at construction planning and we've collected all of this video data that we don't use at all. And the champion on the other side in the product org, he has a fantasy. Oh, shit. We take your video analytics platform and plug it into what we do and this is what happens to my business now. The person on the other side is a person. And the reason I'm being specific about that is because you don't sell to a company. Magic Box is about finding the person. You're finding the champion on the other side, the person who has motivated for their own reasons, career, money, reputation, what have you. They see the fantasy, they fall in love. And this person says, I'm in love with this idea. If I can grab security data into my product org, now I have to prove the fantasy. What's different about a champion in this kind of process is they want to find a way to say yes. They're not looking for a way to say no. And this brings us to the four characters you're going to meet along the path of MagicBox. There might be a fifth. You're going to meet your champion. You're going to meet your advocates. You're going to meet your blockers, and you're going to meet your buyer. You might meet corp dev along the way. Let me talk about each of those folks. The champion is one who's fallen in love. They're the ones with the fantasy. They're the ones who are arguing on your behalf. They're the ones fighting for you when you're not in the room. They are texting you. They're telling you things about the business that they. They're probably not supposed to tell you the buyer. All they care about is math. It might be a committee, it might be a group, the ic, the ec, the investment group, what have you. They're the ones who actually can sign off on a deal. They care about business case advocates. Lenny, do you play chess?
- [32:49]
Lenny
I have played chess, yes.
- [32:51]
Jonathan Loewenhar
You have played chess. So advocates are pawns. They don't matter at all until they matter enormously. These are folks that like, you're the CEO doing a meeting with your potential buyer, and There are somehow 12 people on the Zoom call, but only two do the talking. The other 10 might be advocates. They're rooting for you, but they will take no political risk. Their value is in give you intel blocker. This is the person who can't say yes, but they can say no. This is opsec. This is procurement. This is legal. You're going to meet all these characters during the magic box dance. Your champion just wants you to get the deal done because they're so in love. So what happens is they've come up with a fantasy, and you as a CEO need to lean into it. This isn't enterprise selling. I'm not trying to sell you this thing that I have. I'm just trying to find ways to say yes. So when in my story the person says, could we provide you all of our video data that we've collected forever and you now could enhance our ability to predict whether large scale construction projects are on time. I don't want the CEO saying anything other than we can do that. Now, phase two, I need to prove it. Okay? Because I have a champion who wants to say yes. Proof can be really easy. And the reason the proof is so important is not to convince the champion they're in love with the fantasy. They're already convinced. It's because in almost all cases, big companies buying little company, and your champion doesn't have unilateral authority. They're going to socialize the deal. They have to get buy in from who? The aforementioned buyer. They have to be able to survive the aforementioned blockers. So eventually, when they pitch this to whatever committee is in charge, that committee is going to say, what proof do we have that it works? And we just want to be able to provide the champion with enough evidence that it works. So in this case, we said to the champion, well, give us video data and we will provide you the evidence that you need. But because we're dealing with a Champion who's not a cynic, because champions aren't. We could tell them and provide us the data in this way, in this fashion. And here's what we'll send you after. Are we in agreement? We know we're already going to win the proof and it's critically important in these dances. Number three, quantify. At this point, we're not up for sale, but we're spending a lot of calories on somebody and they know it. So we have our CEO say the following phrase to them. My board's asking questions. They're wondering why we're spending so many calories on this when it's not really core. We're not selling you our product. I'm convinced of how exciting this could be together, but I think we need to do some math so I can explain to my board why this might matter. So let's imagine all this works because it's going to work and it's a year from now or five years from now, what changes about your business. And the champion will tell you, retention does this, or deal size goes like this or market share goes like this. And you'll say to them, fantastic, look, I'm going to build some shitty verse version of the model. You tell me what I got right, what I got wrong, but I have a board meeting in 16 days and I need to be able to walk them through that to justify why I'm spending so many calories on this exercise. You build the model, you hand it to them. If they in any way respond to your model, you've won because you have now divorced history from future and you are now playing in future. You are playing the Instagram game. In this case, the ending of the story for the company that I was describing, it was a business sub 2 million in revenue. Our prospects of raising Series B felt low. We were not yet profitable. And that was an exit. That was generational wealth for the co founders and their families. The CEO went on and spent two plus years with the now public company that did this acquisition. The technology did get integrated, but it took a long time and they had to do a lot of changes to it, certainly beyond what was envisioned during the diligence process. But all parties are happy and if we hadn't done it this way and we had just been up for sale, we get a dollar for that company. A couple of other side points that are really important here. For any of you founders out there that are thinking about working backwards from an exit, there are two things that I really want to stress. One is the fantasy is beyond just what is the business change you can have. The fantasy is your books are in order. Your fantasy is all of your investors will sign off on the deal and you will have unanimous consent that the key members of your team are going to stick around, that you're a joy to work with. Please God, founder, please God, do not puncture the fantasy at any time. So whatever is starting to shape in your buyer's mind, get to know it live that everybody wins from that game. Second, corp dev, they will probably show up in this dance. Corp dev make deals. They are not deal sponsors. They are not a champion. They are not a buyer. They are an expert negotiator. Their job is to facilitate deals and get deals done. The most important things to understand is that they can be a leverage point to have a deal move with some process and some pace and some urgency. Because either deals have momentum or they die. And corp dev can help there. Second, they are way better at negotiating than you. So anytime dealing with a superior negotiator, the only thing you can do to try and even the scales is move the negotiation. Async. So founders, repeat after me. I'm talking to you directly now. You will say to corp dev, you know I am not alone in this decision. I love what you just said and I'm excited about this opportunity once I see it in writing. I can socialize it with advisors, lawyers, co founders, whoever. But don't negotiate. Live. You will lose.
- [39:39]
Lenny
Let me just say that was extremely delightful to listen to. I've never heard like a M and a strategy be this fun and it makes me want to sell a company. Okay, let's do this. I'm hyped. I think you got it all. I have a few questions. Interestingly, the middle part is it feels a lot like enterprise sales, which a lot of founders are used to understand the stakeholders move things forward. Here's your champion, here's your blockers. Here's the buyer. Is there anything there you want to say? Just like, how maybe what's like maybe most different from enterprise sales, which I think a lot of founders are maybe used to? Or is it like pretty similar?
- [40:14]
Jonathan Loewenhar
Yeah, I think three things. One is there are a lot of moments in enterprise sales where we're trying to push for a compelling event that doesn't work. In seduction, the playful metaphor that we'll often use is, you've been dating for a while, this person could be the person, but they're not quite convinced yet that like, it should be a life together and you're sitting at dinner. And in enterprise sales, you're eager to get, you're eager to get it done. You're eager to like move the relationship forward and move in and get engaged, what have you. And so you might be inclined to say, hey, either we move this relationship the next step or there are a whole bunch of people eyeing me and I'm going to go date someone else. That conversation never goes well. And in MagicBox, founders are eager to do the same thing, thinking that competition will improve their deal size, when in fact I think more often than not that is a negative signal until the very end of the dance. So instead in enterprise selling, where I'm pushing in Magic Box, I'm always trying to entice. I'm never ever trying to push. So instead I might say things like, hey, I'm going to raise my next round in Q1 because I've been intending to do this business independently. Now all I really want to do is win. I just want my product in as many customers hands as possible. Whether I do that on my own as I was planning in partnership with someone or under someone else's roof, honestly I don't care. But I have a company to run. I'm going to go raise my next round in Q1 and if I do that, we're probably too expensive for this deal to make sense anymore and my board will want me to move on anyway. I'm enticing. I'm never trying to push this episode.
- [42:16]
Lenny
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- [43:29]
Jonathan Loewenhar
Ezra does this really well in the book. Again, it has to be not solicitous. So one of our companies, we had maybe 20 months of capital left and the two co founders and our team were convinced this isn't a venture business. We thought it might be a venture business, not a venture business. It takes too long to do a deal that's not that interesting. With each of our enterprise customers. It was disappointing, but at least we were honest about it. Okay, so who are we going to sell to? Let's go play this game. So we start with categories. Categories of buyers. It could be for this particular example that was in my head, ERP companies could be a buyer. Large banks could be a buyer. The big software companies like Microsoft could be a buyer. There were a few different categories and we said, great. Who are the companies within those categories that make sense? They're acquisitive, they have the balance sheet for it. There's a corp dev department. So we know that they actually know what they're talking about here. Ideally there's an existing relationship with core team or advisors or board members. Make a list. Now how do we meet them in a way without selling them? So one of the examples in the book, which I love is small startup wants to meet the luminaries in a space and they have their PR agency set up a panel where they contact the CEOs of the potential buyers and say we're putting together a panel of the world's foremost experts in X. We're going to put four people on the panel and it's going to be you and famous person number two and famous person number three and this fourth person that is a luminary to us and it's our startup CEO and suddenly you're at the table as a peer. It's a completely different conversation. The second one, and this is going to sound a little silly, but I am not exaggerating, it works if you are a CEO founder and you have that title on LinkedIn. It's amazing the responses you get. So we made this list and we just started to send connection requests to the CEOs or CPOs or CFOs on our target list and said something as simple as this, you're doing something really cool. So are we. You game? Just for a 30 minute chat because I don't know where it'll go, but I think it'll be fun. Keep it that informal. It's peer to peer. I'm not selling you anything. If you can draw a line to like some post that they had or some speech they gave even better. But we found without fail there would be math that would show up one out of four, one out of five, or one out of six. Yeah, that sounds fun because a lot of those CEOs never talk to startups and that's fascinating to them, especially when presented with the energy of I just want to have a fun intellectual discussion. What you're looking for in that first conversation, and this is what we ask our CEOs to do, is to ask questions like what do you care most about the next year? What's the mandate? What about for your department? What are the things that keep you up at night? What's the break? What's the thing that could actually kill everything if you had a pre mortem for the next year? Those kind of open ended questions. Because what we're one our CEO listening for is the fantasy to see if there's some intersection between what they care about and what we might be able to squint and say we do.
- [47:07]
Lenny
It's interesting because it sounds a lot like there's like a jobs to be done framework here or just like what is the job they need done? What is the pain you're going to solve? And then create a fantasy around how amazing it'll be for them if you can solve that problem.
- [47:19]
Jonathan Loewenhar
And ideally they'll say it and you just reflect it back in active listening.
- [47:25]
Lenny
Chris Voss, negotiation style. Okay, so you're the kind of guest, Jonathan, where I could like the whole podcast could be about each one of these topics. And so I know there's so much more to talk about here. Let me just leave folks. Let me, I want to move to a different topic, but to leave folks with one is if they want to explore this methodology more. There's a book you mentioned called Magic Box Paradigm by Ezra Roizen. Right. If companies want to, like, are in this process starting to think about, does it make sense for them to come to you and like, hey, help me through this process. I know you said like, go to investment banker. When does it make sense to like, hey, let's bring on Jonathan or someone from your team to help them?
- [48:04]
Jonathan Loewenhar
We meet two types of founders. Founder one says, fix this part of my business, totally transactional. I want to raise the next round or I'm hiring people badly or my founders aren't getting along or I want to sell my company. Lenny, to be honest, that's not interesting to us. That's not our work. Go find someone who is. And I don't mean this disparagingly, but Like a screwdriver. Like, fixes one thing, fix one thing. Then we meet second type of founder. And that founder says, most likely to themselves because it's the only safe audience. There's some gap between the CEO I am and the one my company needs me to be. There are a set of skills that I'm great at. And there are these things where I know if I'm really honest with myself, if I listen to the quiet voice, I'm soft at these things, or I'm not good enough at these things, or I have some imposter syndrome about these things, and if I don't get better at them, danger. That's the one we work with. And it's when they care that much about both the hard skill development and maybe the soft skill development in their path to become a great CEO. How to sell the company. It's one of the skills. We teach this to all of our founders, as well as hiring and management and planning. I don't care what the thing is. For every one of our founders, we audit them and say, here's what you're great at, here's what you're shitty at, and here's what you've never done before. Now, which of these do you want to work on next? Given where the company is in its cycle?
- [49:29]
Lenny
Great segue to where I wanted to go with this, which is hiring. So I hear all the time that a founder's core job is fundraising and hiring an amazing team. Basically, that's like their main goal. Just like, hire amazing people. The com. The people you hire make your company create the culture. You got to get that right. But similar to trying to sell your company, most founders have never really hired lots of people. They've never hired for all these different skill sets they're trying to hire for. And I know that you guys spent a lot of time helping founders hire and find amazing people. Can you just share some of the advice you share with founders for how to find and hire amazing people?
- [50:07]
Jonathan Loewenhar
Yeah. So we actually think the CEO has three jobs. We agree with two of the two that you said, but we think there's a third one is make sure everyone knows where we're going. The second one, pick the right people for the team. Third one, give those people the tools they need to win. And you can abstract from those what they all mean. But love that Most founders are really bad at hiring. They fall prey to all sorts of pretty common human biases. The lazy ones, back to laissez faire, think it's just gambling. Like, oh, Cool. They worked at Meta and Salesforce already, so hire them. Just gambling. There was work done by and then codified in a beautiful book. I'm going to make sure I get the names right. Jeffrey Smart and Randy Street. They had a consulting firm that dates back to the mid-90s, and they wrote a book in 2007 or 2008 called who the A Method for Hiring. We have operationalized that book and then expanded on it because there's some parts of it that we found a little dated, but it's really still as applicable today as it ever was. And I think there are three core mistakes that founders make all the time that can be really easily rectified. The first one is, you should hire people who have already done the thing you need to have done next. And I know that sounds simple, but founders don't think of hiring that way. They start with a job description. We've been taught that for a long time. Start with the job description. It's a fucking mistake. Start with, it's 12 months later you've hired the person. They started today. 12 months have gone by. You're clinking champagne because of how great it's been. What's changed about the business? What does Success look like 12 months later? Document it. And then when you interview people, look for people that have already done that stuff. Second, the notion of, does the person in front of you have a history of creating raving fans? They talk in the book about this idea of you been pulled or pushed in your career. If you were an outstanding performer in job A, it is a high likelihood that in job B, someone associated with you in job A is going to pull you into the next thing and then pull you into the next thing and pull you into the next thing. And you'll never do a job search because you were great. And if you see a history of that, ding, ding, ding, ding, ding. Really attractive candidate. Third, core values matter a lot. Culture is not an accident. Culture at scale is the codification of what matters to a business and the ritualization of living those values. It starts with whoever the founders are, and then it will emanate across as long as the founders are super consistent. That also means you need a methodology for evaluating the next human in front of you on whether they actually represent your values. We think of these interview stages in a way similar to the book. We use slightly different language, but we think that there is a culture interview, there is a functional interview, and there is a technical interview. But they're designed to get at these notions of have they actually done this kind of work before. Have they been pulled or pushed in their career? And are they your kind of human?
- [54:01]
Lenny
Funny on that split last detail, actually, I imagine you know this at Airbnb there was actually a core values interview team that was formed around studying what the founders, Brian and Joe Nate valued specifically. And then they codified them into core values of the business. And then there's this team that was like a very select handpicked team that at every interview loop interviewed the person for values.
- [54:23]
Jonathan Loewenhar
That is a beautiful example of how interviewing for values is independent of title. Because you'll find people in the company, at every stage of a company that are the best ambassadors, the best embodiments of those values. Please use them for interviewing. And in addition, they love it because they're protecting their castle. Like they love where they work, they want to keep it that way.
- [54:46]
Lenny
So true. That team was very real special team and it was really honored to be on the team. So let me summarize what you just shared, which I love. There's so much value here. It just keeps going and going. So when you're hiring, your advice is look for people, one, that have done it before, two, that have been pulled from job to job by someone else that loves their work and wants them to be with them at this new company. And then three, their values match the values of the founder and the business, essentially. Right?
- [55:11]
Jonathan Loewenhar
Yes. And if for the recruiters out there and a really simple way to kind of get rid of a lot of the crap that ends up showing it up at the top of the funnel is just to ask the simple question, even in the COVID letter of your last ex bosses, how many would get on the phone and say you're amazing? If there's any equivocation in the answer. Great. Move on.
- [55:35]
Lenny
So a couple follow up questions here. One is this point of hiring people that have done it. Obviously this implies don't hire kind of junior up and comers as much thoughts on Just like when it makes sense to hire someone more junior, that's like really ambitious, real smart. You think they can learn the job thoughts there.
- [55:53]
Jonathan Loewenhar
So one of our companies is hiring a team of reasonably junior account execs. We're looking for folks that have been out of school for two years now. That means they are highly unlikely to have had three years of quota achievements and a similar. You get the point. Okay, so how do you hire someone who's already done it? We know what success looks like 12 months later for that role. They've learned at a Hunt. They've been able to create pipeline of X and close y in business, etc. What we are looking for then in their history they have any sales chops of any kind. They could be selling girl Scout cookies or tickets to some event or they work for a non profit for a while. I don't care. But I want some evidence that they've sold. I want some evidence that they're comfortable getting on the phone or showing up at meetings or showing up at events so that they've done it before, should be reviewed or thought of creatively.
- [57:07]
Lenny
Got it?
- [57:07]
Jonathan Loewenhar
Now for more senior roles, I want it explicit. We think of for example for executives. Lenny. We think there are three types of executives that startups end up hiring over time. We call them the architect, the optimizer and the scaler. The architect. Let's use sales as an example. This is someone who has to build a playbook so they are going to uncomfortably stay close to the founder, watch and listen and listen to recordings and pick their brain to pull the magic from the founder of like oh, here's the dance that she or he goes through to actually close a deal. And they write first Playbook. And the goal of the codification of that is so you can bring on a first account exec and the next account exec. Because account execs, back to our language earlier in this adult children dynamic are children. You need to give them structure for them to win. That's the architect, the optimizer. This is someone who's now going from a few account Execs to maybe 10, 15. And we now have targets we have to hit. Like the business is now reaching a different level of professionalism and expectation and you have to optimize that earlier playbook to try and find more efficiency and performance out of it. The scaler is saying, okay, now how do I find leverage? How do I have 10x more account execs or how do I get other people to sell for me? They're all going to be called VP of Sales or Chief Revenue Officer. They're completely different archetypes and that same person exists in engineering and in product, et cetera. In those cases, I only would want to bring on an architect if they'd been an architect before. If they had only been an optimizer. They are going to fail because they've never written Playbook from scratch.
- [58:50]
Lenny
It touches on a conversation I had recently. It was a live podcast recording with Shreyas Doshi at my summit where he talks about a lot of people are really frustrated at Work because they're in the wrong one of those buckets. Essentially like you enjoy certain type of work and your job is not doing that type of work, whether it's in your case scaling or optimizing. And so it just reminds that if you're frustrated at work, you may be you're in the wrong job in terms of the type of output they're trying to expect from you.
- [59:19]
Jonathan Loewenhar
The story in my head is that talking to me and my colleagues sometimes can feel a little like death by frameworks. We have one for everything. And in this example, I think if you're going to be sustainably successful in any kind of job, I don't care what it is, three things have to be true. You have to be good at it, you have to like it, and the market has to give a shit about it. And if one of those is off, you're not staying in that job long.
- [59:41]
Lenny
Yeah, and this touches on the, the name of your firm. Enjoy the work. Got to enjoy the work to make it sustainable. Okay, one other thing. So one other follow up question real quick on the hiring and then I want to talk about one other bucket of work. And again, I think each of these could be like an hour, two hour long podcast conversation. I love that there's this recurring theme of working backwards to inform what you do today. So earlier you talked about working backwards from what the outcome you want next for your business, whether it's fundraising or exit or winding down. And for hiring you have the similar advice, work backwards from what you want this person to achieve in the first year, whether it's drive this sort of growth on in the product or drive sales. I guess anything else there just like the power of working backwards versus the typical approach for hiring. You talked about job descriptions.
- [60:26]
Jonathan Loewenhar
Hiring is never the goal. And it's often the first thing that we'll hear from a founder. I have to hire this person. One that is so dangerous for confirmation bias. Like the hiring manager is always the one most burdened by that particular bias. But it's also hiring is never the goal. So we will pull them back to over and over and over again. Which of the three milestones matter? Right? Fundraise, exit, profitability, what is the change about the business? For example, to get to that fundraise, how do we quantify that change some sort of goal setting framework, okrs, eos, I don't care. All goal setting frameworks have the same bones. There's some description of it, there's some quantification of it, there's some work that has to be done. There's some accountability rituals with clear owners and clear agreements. So once I actually have the quantification of here's what work needs to be done, I now know what resources I need to be able to pull that work forward. And therefore now I know what kind of humans I need, whether I'm hiring or renting. And that should drive the conversation, not the oh God, I need another pm. It's no here's the set of features that we've said matter most this year. Here's the gap in the resources we have and the resources we need. That's why we're hiring this role. And here's what success would look like 12 months from now or six months from now. So they're tying back to what would change about the business. And this is this recurring theme of our work with our founders. They're so in it, Lenny, that they rarely have time to sit above what they're working on. This notion of working in the business versus on the business. And so much of our work is to separate them from the day to day, which is enormously important, not in any way denigrating it. And I need to know where I'm headed and why and how I'm going to measure progress along the way. And so, so much of what we're doing with them is to say, I want to hear from you what you think success looks like. I'm going to push back and pressure test a bunch of things. Can we define that in a way? Can we agree on who needs to do the work along the way and how we're going to keep checking on it to keep feedback loops short. Now we can go back in the business and then we'll check again in a week or in a month.
- [62:54]
Lenny
I love that. It's actually a great segue to the final bucket I want to spend some time on, which is growth and go to market. Another area that many founders have never worked on before. A lot of founders like, hey, I have this awesome idea. I'm going to build this awesome product. I know how to do that. I know what market needs. But building a go to market motion to get it into people's hands is like a whole different skill. We spent a lot of time on this. On the podcast, you have a really cool, simple framework of just like how to think about go to market. There's always like, oh, you need a go to market strategy. Talk about how you talk to founders about thinking about what it takes to put together a go to market plan and how to make it a repeatable motion versus just I'm just going to go to people and try to sell them.
- [63:37]
Jonathan Loewenhar
Our founders, even the most capable of them find this topic pretty overwhelming because it branches into so many areas. So we do try and distill it to something that is in bite sized chunks. We think of it in four pieces. First piece is ideal customer profile. Who do we really want to sell to? What are their qualifications? What are the discovery questions we would use to get to those qualifications? What are the kill criteria to know that this is fool's goal? This really isn't the human second bucket loosely called marketing. But within that marketing is also positioning. So what is our uncommon denominator from the enemies? So who are we competing against? Is it actual companies or is it status quo in some sort? What are they great at? What are we great at? What are we great at that they're not? And then how do we represent that in the world? That's branding and artifacts and identity work, etc. Next is demand gen which will simplify to say how do we go find the humans we want? I've long loved the book Traction. Gabriel Weinberg I'm going to forget unfortunately the co author's name right now. Jason Maher Sorry where they talk about the 19 channels that all companies have availability to. They're the same ones now. The book has got a couple of years on it so there are a couple of new channels that have popped out since. But what we then try and expand the aperture for our founders is rather than just think about meeting your next customer through however you did at your last company availability bias instead. Which of these might make most sense next? A simple two by two matrix can work here. Like some experimentation, some brain writing. Love brainwriting, not brainstorming. I know you've talked about that on prior pods and then high impact, low effort. Can we think of the three or four experiments we want to run by channel? Let's go play. And then fourth sales. And this is the codification of a playbook. How are we having the conversation? How are we doing discovery? How are we handling objections? How are we doing demo? How are we moving to close? If we can get through those four then we can start to talk about deployment and customer success and upselling and account management, et cetera, et cetera. Those are good problems to have. Oh my God, my install base is so large I need to manage it. Great, great fricking problem. But we try and break this complexity of going from individually selling to building a machine into just these Four buckets. Who am I selling to? What do we want to say about ourselves? How do we reach them? How do we close them?
- [66:28]
Lenny
Amazing. I was going to summarize that you did an excellent job there. Before we follow up on this, you mentioned this term brain writing. What does that mean?
- [66:35]
Jonathan Loewenhar
Oh, first time I heard of this was Adam Grant. I don't know if he's the originator of the idea brainstorming. You talked about this a bit in your Annie Duke podcast as well, of how horribly coercive meetings can be.
- [66:55]
Lenny
For brainstorming especially.
- [66:56]
Jonathan Loewenhar
For brainstorming especially. And so what many of our founders don't recognize because they just see like hey, I'm just sitting around a table with a group of folks I respect so we can just debate things as peers. No you can't. You're a founder. Your voice has a megaphone attached to it, even if you can't hear it. So you have to turn down the megaphone if you actually want to learn what your people have to say. So brainwriting is I'm going to expose an idea and I want everyone to now write and weigh in on there offer. It could be in a survey, it could be in a shared doc, what have you. My preference is in. Through some sort of methodology. You are now sharing your opinions, comments, edits, dreams in an async way that no one else can see until it's all combined, maybe even ideally without authorship identified. Then when the founders weigh in, you don't know they're just a part of the mass. Let everyone read the thing. I even like the Amazon, like take the first 10 minutes of a meeting, let's just go read so we're all fully present and then have a debate. What it allows for is the dampening of the founder effect. In meetings.
- [68:19]
Lenny
You're just so full of golden nuggets. There's just like a random tangent that I think could be really transformative for a lot of teams. So the advice here is just when you're trying to ideate and brainstorm, don't go in a big room and put post its on a wall and talk throughout ideas and have a discussion. Instead, just everyone individually sits and thinks and shares their thoughts and the founder presents like here's a prompt, here's a question we're trying to tackle.
- [68:40]
Jonathan Loewenhar
What it also allows for is an evening of the evening of the playing field of between fast processors and slow processors, introverts and extroverts, because they're all equally potentially talented in your room. But if you do live Brainstorming, you have diminished all the folks that prefer to sit and chew on something first.
- [69:02]
Lenny
That's very much me. That's exactly how I operate. I need to think and process. I'm not like on the spot, quick thinker person, so 100% fan of this approach. Let me come back to your go to market framework. I have the notes pulled up here. So basically, if you're a founder or even a product builder and you're trying to think about how do I. People keep telling me I need to go to market, plan, I need to grow this thing, how do I think about this? You're basically saying there's these four buckets to think about. Who are you selling to? How are you going to motivate them and get them excited to buy your thing? How do you reach them and then how do you close them? Yes, luckily I have podcast and newsletter post on every single one of these buckets. And if folks want to pursue each one of these, I have templates for ICPs, marketing advice, all these things. So that's good news. There's a lot of content for people to read if they want to explore this stuff. Let me ask you, where do you often find the biggest bang for your buck? When you come to a founder or founder comes to you and they're like, I need to figure out go to market Motion. Is it just like start from the top and work your way down or is there like, here's where maybe you want to spend a lot of time.
- [70:10]
Jonathan Loewenhar
Early stage founders. And this is certainly more true for the first timers, Lenny, than the veterans because they learn this problem. The first timers are like 20 something year olds in a bar and they're being social for the first time in their lives and anyone that makes eye contact with them is enough for them to say, I want to go on a date with you. That's it. There's no discrimination of any kind. Like, oh my God, they like me, I'm in. That's the mistake that hounds first timers, the veterans and those we get our hands on. Instead we say, let's imagine you could build your perfect customer in a lab like petri dish. You grew them, what do they look like? And if you have any kind of install base, I'll ask the question. I just did this with the founder the other day. They are enterprise whale hunting business. They have four large customers.
- [71:15]
Lenny
Okay, Whale hunting in terms of large whale person or actual whales.
- [71:21]
Jonathan Loewenhar
The extreme of enterprise selling.
- [71:23]
Lenny
Okay, okay, got it. I want to see a whale hunting startup. Okay. Go on.
- [71:29]
Jonathan Loewenhar
I said, so which of your four customers is your favorite? Which one? If I got them on the phone, they would rave about you. They would be salivating openly with a chance to evangelize what you're doing for them. And they was like, oh, that's clear. It's this one of the four. Great. Tell me about them. And what you start to see and pull apart from that is the founder does have an ideal profile. They do have a dream. Now, there are all sorts of risks about is the world too small? Is it not a big enough market if they get too tight? And founders get so caught up in that? And it's a mistake because all we're looking for in the beginning is a white hot center of opportunity. A small population that is an enormous fan is getting enormous impact. We can worry about adjacencies and expansion later. I like to remind them that Amazon just sold books. We can start with one thing and be great at it. So where the founders often get hung up on for us is that they've moved towards selling without contemplating ideal customer profile, without contemplating qualifications, without contemplating discovery questions to get to that and most importantly, kill criteria of if this is true, do not sign them even if they want to go out on a date with you.
- [72:48]
Lenny
I'm glad you said that because that's exactly what I believe and I hear often on this podcast, is how underappreciated picking your customers and early leads are. And if you think about this funnel you described, figure out who you're selling to, how do you motivate them, find them and then sell them. All this trickles down from who are you going after? Like you know you will know how to motivate them if you know who you're talking to versus the opposite if you're talking about it's the most expensive.
- [73:12]
Jonathan Loewenhar
Mistake of those four.
- [73:15]
Lenny
Okay, is there anything else on go to market or growth that you think might be helpful? Just to touch on before we close up our conversation, the one thing I'll.
- [73:26]
Jonathan Loewenhar
Share, kind of this goes back to the ready, fire, aim that we talked about earlier, is that there's implicitly a funnel, mathematical funnel to what we just described. And founders often make the mistake when planning for the year ahead of I need to be at this revenue to justify this multiple. And then all of the funnel math is a plug. And that's just, that's death as opposed to here's what's been true for the last three months, six months, nine months, 12 months. And then what assumptions can I reasonably make with Ways I'm going to influence that funnel going forward to go build up to where I think I'll be a year from now. And it just lowers the bias that your planning process operates with. But when a founder starts from a place of I have to get to 3 million or we're dead, you're already dead. As opposed to what do I really believe I can do to get there? Changing top of the funnel, changing conversion rates along the way, changing deal size or deal length, et cetera, based on my recent history. And then have a conversation about the gap between where I think the business reasonably can get with some ambition and where I think I need to be financially. Because that's the more mature conversation. And that's the one the Ready, Fire, AIM CEO doesn't have. That's the one most founders have only started to learn to have over the last few years when capital dried up.
- [74:56]
Lenny
I love that. I love just how practical and real talk your advice always ends up being. Speaking of that, I emailed the founder that you work with and asked him, what should I ask? What should I ask Jonathan when he comes on the podcast? And he said something that was really great. It was really unexpected what he said. He said that the biggest lesson he learned from you is to, as a founder, to trust his intuition more throughout the journey of his startup. Can you just talk about that as something you've learned, something you've seen that maybe founders underappreciate.
- [75:31]
Jonathan Loewenhar
It's impossible not to be a startup CEO and not face many existential moments. Is my company going to survive? Did I make a mistake? Will I ever be hired again? Should I sell the company now? Should I break up with a co founder? Should I fire this critical employee? They happen to all of us. And fear is not a good decision maker. Our lizard brain is a really bad decision maker in those moments. And so what we'll often share with the founder who's facing one of these scenarios. And I know the CEO you're describing and he's. He was facing one of these scenarios. We'll say to them, do you know that little voice when you get really still the quiet one that says, you should marry this person, you should take this job, you should start this company, watch out for that human. They're a bad one. And most of the time, Lenny, when I frame it that way, the person across me says, yep, I know that voice. And I'll ask, how do you hear it? And there's usually some version of I have to get really alone, really still, really quiet walk on the beach, listen to music, work out, play with my pet. I said, that voice is who you are. It's not your brain. Your brain is a tool. It's. It's our hands, it's our feet. Just a tool. It's a pattern recognition machine. But who you are, if you can watch your brain, you know what you're thinking like, oh, look what my brain's doing. That means you're not your brain. It's something else. And that's the little voice. And that little voice is going to be right. And where we get screwed up in life is when we stop listening to that voice. When the mania of our chaos of our lives get in the way of that voice. And so whenever our founders face one of those moments, it's not a framework, it's not a playbook, it's not or even a directed piece of advice from us to say, you should just go left. I've seen this before. Go left. Nope. I trust founder intuition. If the founder says this business is still going to work, or this CEO, this co founder is the wrong person, or yes, it's time to sell, I'm in. We're just here to support them and we try and be the only person in their life that is fully on their team because we're not on the preferred side of the caps table. We're not fiduciary, we're not board members, not a co founder, none of those things. And so in those moments, we'll just say, can you get really quiet? And the founder you're talking about, I have a story in my head. He was facing a breakup moment with his co founder and I asked him because he's good at getting quiet, what did the voice say to you way back when? And the voice said to him, this is the wrong fit. This isn't going to work. He believes in different things than I do, and that's going to go badly. The lizard brain didn't want to believe that, and so it took another year.
- [78:59]
Lenny
Wow, that tingles throughout that entire piece of advice. I love how it's also very applicable to just life, not even just being a founder. It's a good reminder to trust that voice more. It's interesting that this also connects to founder mode a little bit. And I'm curious how you think about that. Where a lot of the founder mode advice is like, you know, trust. Trust your. Trust your judgment. Don't hire people to take to delegate things away. Do you see kind of a difference in like the core idea founder mode and just like, oh, you should, but you should actually trust your intuition more.
- [79:36]
Jonathan Loewenhar
Intuition comes from, in my point of view, a deep understanding of self and the capacity to get quiet and be well resourced. Meaning you've slept well and you've eaten well and you have enough love in your world. And I think what Founder Mode can confuse is my intuition says I should just do this job for them and fire these three people. That's not intuition, that's reaction. That's a fear response. And when the founder says, I sat with this, I felt it out, I can see it. I need to terminate my whole go to market team and start over. This isn't working. And I have data that supports it, but I know this isn't working. I'm like, let's go with that. I'm in, let's do it.
- [80:36]
Lenny
And I think you described a lot of times people feel this and it takes like a year, two years, three years, many years to actually realize that. And your advice here is try to listen to that more and trust it more. Yeah. Wow. Okay. Well, Jonathan, to pivot our energy, is there anything else you want to leave listeners with? Last piece of advice. Anything that you think might be helpful before we get to a very exciting late round?
- [81:05]
Jonathan Loewenhar
To be a founder is a state of being. It's an attitude. It's courage, it's instinct. It's a capacity to push through. Despite all sorts of evidence suggesting you're wasting your time, to be a CEO is a craft. The more founders who can accept that those are two separate things and they're both equally important to build an ascendant startup, the better all of us will be. And so what? I would encourage every founder out there that wants to go build something substantial. Go work on your craft. In addition to working on the business, be honest with yourself about here's the shit I'm bad at. I don't know how to read a financial statement. My board meetings suck. Half my meetings that I have with my leadership team, we all walk out of there saying, what did we just accomplish right now? Or I get to the end of my workday and I'm like, I didn't get anything done. Those are all examples of just not taking the craft seriously enough.
- [82:17]
Lenny
I'll leave it that I love that. And I think I've made the mistake during our conversation of confusing founder and CEO and assuming they're the same thing. And I really appreciate you just again, pointing out to folks that that's kind of the big distinction you got to start making is there's the founder and there's the CEO. Often they're the same person but different parts of your, of your brain and different skill sets.
- [82:36]
Jonathan Loewenhar
And I'm now fully off the very awkward soapbox I've been sitting on for a long time. So we can go to Lightning round whenever you're ready.
- [82:44]
Lenny
With that, we've reached our very exciting lightning round. Jonathan, are you ready?
- [82:48]
Jonathan Loewenhar
I'm ready. I'm ready.
- [82:50]
Lenny
What are two or three books that you have recommended most to other people?
- [82:54]
Jonathan Loewenhar
My number one business book that I've recommended would be Five Dysfunctions of a Team by Patrick Lencioni. I do think it always comes back to team. The right team can solve all the things. And that book is a beautiful distillation of the most common problematic archetypes that show up in a leadership group. So that's, that's the number one amazing.
- [83:17]
Lenny
Anything else you'd recommend?
- [83:19]
Jonathan Loewenhar
The second one, it goes more personal. It's a book called Untethered Soul by Michael Singer. It's. This was, at least for me, the first introduction to this idea that I am not my brain and that my brain can be a tool that serves me well and at times doesn't. So that would be number two.
- [83:38]
Lenny
I started to read that book and then I never finished it. So that's a good reminder to give it another shot. Second question, do you have a favorite recent movie or TV show you've really enjoyed?
- [83:50]
Jonathan Loewenhar
I just watched and really enjoyed by the way. I have a three year old at home so the amount of content I now consume is reduced tremendously. But my wife and I just watched Will and Harper. This is the documentary between Will Ferrell and his very dear friend who just recently transitioned and they road trip across the country together and it was freaking delightful. It was sweet and endearing and one of the better things I've watched in a while. TV show Slow Horses. I, I'm utterly addicted. I'm only in midway through season two, but I've been voraciously sleeping less and watching more.
- [84:31]
Lenny
I've loved both those. I just watched Will and Harper and completely agree with your sentiment about it. I wasn't planning to watch it in my mother in law started watching. I'm like wow, this is really fun. It's like also funny, like meaningful funny.
- [84:44]
Jonathan Loewenhar
There's so many moments in it that are really sweet. As an Aside, this was 20, I don't know, April 2020 and a group of our very close friends said hey, how are we going to keep in touch? And so we started what we called movie Club and we routinely either pick a TV show or a movie we all watch separately. And every two weeks we get together on Zoom at night we talk about what we just watched.
- [85:06]
Lenny
I love that.
- [85:07]
Jonathan Loewenhar
And some have been great, some have been terrible. But Will and Harper was our most recent.
- [85:10]
Lenny
Oh, such a cool tradition. Okay, we'll keep going. You have a favorite product you've recently discovered that you really love. Could be an app, could be something physical.
- [85:21]
Jonathan Loewenhar
Two and one is I'm going to talk my own book but I still love it. The first one is Aura Frames. These are digital picture frames. They're amazing. The UX for them is incredible. The the quality of the. And the their pieces of artwork. So grandparents in laws, parents. We have multiple in our house. Just love it.
- [85:47]
Lenny
Just to clarify, it's like a frame that has picked digital photos and you can like give it to your mom. Your. Yeah your grand. Your mom. And show photos of your kid like whether wherever they live.
- [85:56]
Jonathan Loewenhar
And the combination of the ease of the software and the quality of the imagery is better than anything I've tried and I've tried a bunch of them. A RA frames and this is not an enjoy the work company. This is just one I'm a giant fan of. The second one is an enjoy the work company called Augie Studio. A U G I E Studio. This is canva for video. It can turn anyone with no engineering skills whatsoever, no code video creation with full editing tools. So suddenly you can create branded high fidelity, high quality commercial video in minutes with no effort. It's amazing. It was built by 2 Media Tech Co founders that were building this thing pre chatgpt and it's just growing like this and it's super fun and the guys are great.
- [86:48]
Lenny
So A U G I E Studio Sounds amazing. Augustudio I will I can use that. That sounds awesome. Two more questions. I feel like this one's going to be a good one. Do you have a favorite life motto that you often come back to find useful and worker in life?
- [87:04]
Jonathan Loewenhar
The first one and the one I probably most commonly refer to is that there is only one life. The quick backstory. And I know it's a lightning round but I'm guilty of these stories. I went for a walk with a girlfriend of mine a bunch of years ago and we did this once a month and she would. We would always have that pretty typical ritual of kind of giving each other life updates to begin the walk. And so I started the conversation with so you know there's the family update and then there's my Work life. And then there's my social life. She's like, no, no, no, no, no, stop. That's all bullshit. It's one life. Stop assuming that there are these pretend walls between them or among them. I've lived that ever since. So I try and show up. That phrase lets me show up the same way. No matter my setting, if you and I were having a beer or a meal when you're. If I'm sitting with one of my co founders or clients, it doesn't matter. I show up the same way everywhere. Part of the way I enjoy the work is by having a real friendship, a real intimacy with everyone at enjoy the work and including our clients as well. I want that level of conversation. I don't want the sterile stuff over here with my work environment versus my personal versus my family. It's just one version of me.
- [88:15]
Lenny
And the phrase is, it's just one life.
- [88:17]
Jonathan Loewenhar
Just one life.
- [88:18]
Lenny
It's just one life. Final question. So you ran a casino at one point, I believe, and it was like a Harrah's casino, is that right?
- [88:28]
Jonathan Loewenhar
My first career was in the casino business. Okay, but before I go on, what's the question?
- [88:32]
Lenny
The question is just, is there a fun story or experience or lesson from that time in your life that might be fun to share? Maybe a mobile involvement or cheating or something? Because I imagine that's a unique life experience.
- [88:48]
Jonathan Loewenhar
I'll tell one of my favorite family stories then, briefly. But yes, My family goes back in casino gambling one form or another, several generations. My great grandmother ran a illicit poker game. My grandfather ran numbers out of a gas station. My father's been in the casino industry since Atlantic city in the 70s. My sister is a prominent gaming attorney, and I worked in the industry for a dozen years. So, like, this is my family. And Lenny, I didn't know any of this was weird until I was like in my mid-20s. I turned 21 and I'm old. Yes, I'm going to just hide the year. I'm kidding. Anyway, I turned 21 and we take a family trip to Las Vegas because that was normal for us. My father was doing a lot of work out there, so he got his hotel rooms, et cetera. I'd never been there before and I was newly 21. And so my parents said, you have $300 to gamble with. We're going to be here for five days. This is a vacation. My grandparents are coming in, my uncle and I were coming in and they're encouraging me. This is all up to you, but try not to lose it all on night number one, which was good advice to give me. I was 21 and I was pretty much a schmuck at the time. But also part of my experience being there was to interview for a summer internship. This was. I was a college going to be junior. So we go and I immediately go sit at some table and start playing some games. And I turn $300 into a few thousand dollars in the very first evening. And that was exciting and it was crazy and it was wild, et cetera. On the third night, which happens to everyone who goes to Vegas for too long, we're all delirious because all of us is staying up all night and being silly and being stupid. And my parents ask me, by the way, this is pre cell phones. They ask me, hey, can you stay awake? Your uncle and aunt are going to arrive late tonight. They'll call the room. You can come down and just greet them and say hello. Sure. So I get the phone call like 11:30 at night. Go on downstairs. They're here. I go downstairs in the casino floor. We're staying at the Las Vegas Hilton. It's since been renamed. But I go downstairs and I can't find them anywhere. Like, okay, well, I have cash in my pocket and I'm now awake, so I might as well gamble. Shortly thereafter, Lenny I have an experience that happens. 1 in 369,000 occurrences, and I win $35,421. 90 for the trip. I ended up winning $40,000 that I turned $300 to. And I was just 21 years old, which has left me with one of my mantras that I've had for the rest of my life, which some people roll their eyes at, but that is gambling does pay.
- [91:20]
Lenny
I love that you remember the exact amount. What games did you end up playing that helps you win so much money?
- [91:27]
Jonathan Loewenhar
The primary game that I played was Caribbean stud poker, where there's no skill of any kind. You get five cards, a dealer gets five cards. Whoever wins, wins. And if you have particularly unusual hands, you get odds on the hand. And I got dealt three, four, five, six, seven of spades and five cards.
- [91:44]
Lenny
I thought you'd say like slots or something. I love that you're just sitting there playing poker and went from 300 to $40,000.
- [91:51]
Jonathan Loewenhar
It's not even real poker.
- [91:53]
Lenny
It was a great story. I'm glad I went there. Jonathan, this was incredible. I think we've helped a lot of founders through this conversation. Two final questions. Where can folks find you guys who would be a Good fit. What should people know about Enjoy the work. And finally, how can listeners be useful to you?
- [92:10]
Jonathan Loewenhar
Love that. So let me unpack those three. The first one is enjoythework.com or just find me on LinkedIn. I'm not hard to find. Send us a note. Who should ping us is very simple. If you're a founder out there or a CEO out there and you know in your heart that there's some gap between how you're running the business and how the company's going and how it could be going and how you could be running the business, there's some gap there. We're here to help. Now, our expertise, as we talked about in this call, is company building. So if you just have an idea on a napkin or you have a science experiment that you're not, sure, we're useless, like that's not us. But if you have some breadcrumbs worth following, like the business is starting to work your series A into B and beyond and you know that like there's better you can see it. That's where we help. Send us a note. Love to chat. How can listeners be useful to us? So we are voracious readers. All we try and do is study how do the best startups do X? From tiny things like how do they run all hands meetings or off sites to the big meta topics of what is going to repeatable, go to market, even mean, or what is financial planning in a way that's useful? Or how do you set goals that won't make you roll your eyes. We consistently learn from the ecosystem of podcasters and authors and journalists. Like go look at this material. So if your listeners have a favorite X on whatever topic in running a startup, send it my way. All we love to do is read and chew on that stuff.
- [93:54]
Lenny
Awesome. And the best way to send that is either through Enjoy the work or LinkedIn.
- [93:58]
Jonathan Loewenhar
That's right.
- [93:59]
Lenny
Awesome. Jonathan, thank you so much for being here.
- [94:02]
Jonathan Loewenhar
Lenny. This was so damn fun. Thanks for listening to my crazy casino stories.
- [94:07]
Lenny
I want to hear more, but we gotta go. Bye everyone. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify or your favorite podcast app. Also, please consider giving us a rating or leaving a review as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show@lennyspodcast.com See you in the next episode.