20VC: From Unsexy Startup to $1.8BN Acquisition | Why VCs and Founders are Fundamentally Misaligned | Why Valuations and Fundraising are BS | Lessons from Josh Kushner and Marc Andreesen | Zac Bookman, OpenGov

Summary

Podcast Summary: The Twenty Minute VC (20VC) Episode featuring Zach Buchman, OpenGov

Title: 20VC: From Unsexy Startup to $1.8BN Acquisition with $150M in ARR | Why VCs and Founders are Fundamentally Misaligned | Why Valuations and Fundraising are BS | Lessons from Josh Kushner and Marc Andreessen | Zac Buchman, OpenGov
Release Date: December 6, 2024
Host: Harry Stebbings
Guest: Zach Buchman, Co-founder and CEO of OpenGov

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1. Introduction

Harry Stebbings welcomes Zach Buchman, the Co-founder and CEO of OpenGov, a GovTech Cloud software leader recently acquired for $1.8 billion. Prior to the acquisition, Zach had successfully raised over $180 million from prominent investors such as Marc Andreessen, Josh Kushner, Joe Lonsdale, and Founder Collective. Beyond his entrepreneurial ventures, Zach is also an active angel investor with stakes in companies like Flexport and FL Safety.

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2. Company Creation and Initial Challenges

Zach shares the early struggles of OpenGov, highlighting a common misconception among entrepreneurs and investors about the time it takes to build a successful venture.

Zach Buchman [00:00]: “People think these Companies take like 5, 7, 9, 10 years. Not true. They take like 15 to 20.”

He explains that venture funds typically require 15 to 20 years to distribute capital due to the power law dynamics of the business, where finding a breakout company like Coinbase or Uber is essential for substantial returns. OpenGov, while successful, aimed for a $1.8 billion exit, which, according to Zach, doesn’t significantly impact large venture firms.

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3. Revenue Models and Customer Metrics

Zach delves into the complexities of enterprise SaaS sales, particularly in the $5K to $25K contract range, which he describes as a challenging segment for SaaS companies.

Zach Buchman [05:34]: “When you're selling enterprise software, you're basically breaking into organizations. Alignment is the most important thing you can get for execution.”

He emphasizes the necessity of higher Average Selling Prices (ASP) to justify the costs of sales and marketing, especially when dealing with enterprise clients. Zach cites insights from Marc Andreessen, who advocates for charging based on the size of the company and the value delivered, stating there’s no upper limit to software pricing.

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4. Investor and Founder Misalignment

A significant portion of the discussion centers around the fundamental misalignment between Venture Capitalists (VCs) and founders. Zach argues that while VC firms like Andreessen Horowitz seek to invest in the top 1% of companies to achieve massive returns, founders may prioritize smaller, yet impactful, exits.

Zach Buchman [13:19]: “Your business runs on a power law. Your business is about finding the next Coinbase or the next Uber... It's really hard for an entrepreneur to understand that when you're starting out from zero... You're living on ramen.”

He highlights the conflicting incentives where VCs aim for monumental successes that may not align with a founder’s vision or the achievable impact of their company.

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5. Fundraising and Management Strategies

Zach shares his experiences with fundraising, including the emotional and strategic challenges faced during downturns.

Zach Buchman [32:20]: “It's a huge time suck. It's definitely not. It's not fun to get said no to, but that's fine.”

He discusses the importance of managing expenditures, particularly in sales and marketing, to ensure sustainable growth. Zach regrets overspending in the initial stages, which nearly jeopardized the company.

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6. Acquisition by Cox Enterprises

The podcast details the acquisition process of OpenGov by Cox Enterprises. Zach narrates the negotiation challenges and his decision to hold out for a higher valuation.

Zach Buchman [36:42]: “We sold the company in February for $1.8 billion to Cox Enterprises... It was pouring down right at the time we were doing the price negotiation, we were probably 110, 115, something like that.”

The acquisition structure allowed Zach to retain a significant stake while aligning with Cox’s strategic vision, ensuring the continued growth and mission of OpenGov under new leadership.

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7. Insights on Venture Capital as an Asset Class

As an LP (Limited Partner) in legitimate funds, Zach critiques the current state of the venture capital asset class.

Zach Buchman [45:24]: “I think the venture asset class is not particularly impressive. Privates as a whole are probably not particularly impressive.”

He expresses skepticism about the sustainability of high valuations and the long timelines required for venture returns, suggesting that the industry might face challenging years ahead.

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8. Rapid-Fire Questions

In a quick-fire segment, Zach shares candid responses about his experiences and philosophies:

• Worst Investor Meetings: Pitching to Peter Thiel early on, where his appearance was mocked, and a dismissive encounter with Mike Moritz.

• Valuing Investors vs. Personal Needs: Zach values having the autonomy to steer his company without external pressures, advocating for founder-led decisions over investor expectations.

• Product-Market Fit: Defined as the ability to make customers successful repeatedly and profitably. Emphasizes the importance of narrowing the Ideal Customer Profile (ICP) to enhance growth and efficiency.

• Board Management: Views boards primarily for governance, ensuring no fraud and aligning with stockholder interests. Advises CEOs to use independent judgment amidst conflicting board opinions.

• Personal Reflections: Discusses the personal toll of entrepreneurship, including balancing grief and maintaining morale. Emphasizes the importance of mission-driven work over financial gain alone.

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9. Closing Thoughts

Zach concludes by reflecting on the personal and professional growth experienced through building OpenGov. He acknowledges the relentless nature of entrepreneurship but remains committed to his mission of enhancing government effectiveness and accountability.

Zach Buchman [62:01]: “Having a little like a touch of security and peace is like, helpful.”

Harry Stebbings wraps up the episode by expressing gratitude for the insightful conversation and the budding friendship formed through the podcast.

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Notable Quotes with Timestamps

• Zach Buchman [00:00]: “People think these Companies take like 5, 7, 9, 10 years. Not true. They take like 15 to 20.”

• Zach Buchman [05:34]: “When you're selling enterprise software, you're basically breaking into organizations. Alignment is the most important thing you can get for execution.”

• Zach Buchman [13:19]: “Your business runs on a power law. Your business is about finding the next Coinbase or the next Uber... It's really hard for an entrepreneur to understand that when you're starting out from zero... You're living on ramen.”

• Zach Buchman [36:42]: “We sold the company in February for $1.8 billion to Cox Enterprises...”

• Zach Buchman [45:24]: “I think the venture asset class is not particularly impressive. Privates as a whole are probably not particularly impressive.”

• Zach Buchman [62:01]: “Having a little like a touch of security and peace is like, helpful.”

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Conclusion

This episode of The Twenty Minute VC provides an in-depth look into the entrepreneurial journey of Zach Buchman and OpenGov, highlighting the intricate balance between founder aspirations and venture capital expectations. Zach’s candid insights offer valuable lessons on sustainable growth, the importance of alignment with investors, and the personal challenges faced by startup leaders. For aspiring entrepreneurs and venture enthusiasts, this episode underscores the reality of building a lasting company in the complex landscape of enterprise software and GovTech.

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Additional Resources:
To explore more about The Twenty Minute VC, visit www.20vc.com for podcast episodes, show notes, resources, and more.

Transcript

[Zach Buchman]

I'm an LP in legit funds. Where's the money? Where's the money? How many years has to go by? People think these Companies take like 5, 7, 9, 10 years. Not true. They take like 15 to 20. That means your venture fund takes 15 to 20 years to distribute the money. Your business runs on a power law. Your business is about finding the next Coinbase. OpenGov's been quite successful, but it doesn't move the needle. It's a couple billion dollar type exit. That's not what you're in the game for.

[Harry Stubbings]

This is 20 VC with me Harry Stubbings. Now today on the show we have Zach Buchman.

[Narrator]

Zach is the Co founder and CEO of OpenGov, the GovTech Cloud software leader that was acquired for a staggering $1.8 billion earlier this year. And they've since blown past the 150.

[Harry Stubbings]

Million ARR revenue mark.

[Narrator]

Prior to the acquisition, Zack raised over $180 million from some of the best of the best including Mark Andreessen, Josh Kushner, Joe Lonsdale and Founder Collective to name a few. Zack is also a very successful angel.

[Harry Stubbings]

Investor with investments in the likes of.

[Narrator]

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[Harry Stubbings]

You have now arrived at your destination. Zach, Dude, I am so excited for this. Listen, when we first had our call, it's quite rare to have the rapport that we did straight off. So first, thank you so much for joining me today, man.

[Zach Buchman]

I'm really happy to be here. Thanks for having me. Harry.

[Harry Stubbings]

Listen, not at all, but I want to dive right in and I want to start at kind of the company creation point. You said before when it comes to starting a company that it takes too long. I want to start with what did you mean by it takes too long in that respect?

[Zach Buchman]

There's like a wilderness period. And look, some companies come out of the gate and these entrepreneurs, they get the kudos rightfully if they just shoot off. And there's a lot of companies that just bobble along in the wilderness. We were one of them. As I look back on our first few years, I don't know what we were doing. It was a learning period. It was confusing because we actually came out of the gate selling about a year in, but we were selling $5,000 software, $10,000 software, transparency reporting. It was kind of a political sale. Governments would buy it to show off the data in their 3040 year old ERP green screen systems. And I got tricked into thinking it was 1999, sell it for a loss and make it up on volume. And I realized the year end, oh my God, we've got to broaden the suite, we've got to get average selling prices higher. And it wasn't really until probably five years into the company that things started working.

[Harry Stubbings]

You mentioned 5 to 10k contracts there in terms of the sizes. You also said to me before that like 5 to 25k is kind of where like SaaS companies go to die. Or it's like the hardest segment. Why is it such a shit range to have customers in the 5 to 25 second?

[Zach Buchman]

So when you're selling enterprise software, you're basically breaking into organizations. Organizations are filled with people and people disagree with each other. When you're building a business, alignment is the most important thing you can get for execution. And when you're looking at a customer, how do you get them aligned on buying your product? Well, you have salespeople, you have marketing, you might have customer success or professional services. You're breaking down the walls, you're trying to create alignment. And that's expensive. People are super expensive. And you're not going to make up the cost of sales and marketing by selling 10k software unless you're like a Dropbox where you can, you know, or some product led growth phenomenon. And there are a few of those. And I think we all wish we'd had a company like that. If you can do that, more power to you. But even when they get to a certain size, they start trying to break down the enterprise. And that means you got to have an enterprise motion, which means salespeople, which means expensive, which means sales cycles and the ASPs have to go up.

[Harry Stubbings]

How much do you have to get per customer to really justify that spend? To have the full sales cycle, the outbound motion, is it 50k? Is it 100k?

[Zach Buchman]

10 years ago, 25, 50, 75. It used to be like, all right, get to 100k. Now. I think kind of big league enterprise salespeople think 100k deals is like tic tacs and we need to be targeting seven figure deals. Marc Andreessen said to me something along the lines of, you want a big company, charge high prices. You want a medium sized company, charge medium prices. You want a small company, charge small prices. There's a lot to that. He actually said there is no upper limit on the price of software. It's just the quantity of software and the pain that you're discovering and the value you're creating. It's an interesting business from that perspective.

[Harry Stubbings]

Do you agree with him then? Always raise prices if you can.

[Zach Buchman]

Yeah, I look at, like, Tanium. I remember when they were like, in their major growth curve, they were charging massive prices, you know, 5, 10, $20 million prices. Look at Palantir, for instance. I remember Michael Ovitz talking about the first deal they did with J.P. morgan. They went into the room, supposedly I wasn't there, and they discovered a huge amount of pain on a big kind of mortgage program that they were working on in combating fraud. And they said, we think we can save you $100 million. And JP Morgan was like, we want it. And they're like, great, we'll take 10% of what we can save you. And JP Morgan was like, no, no, we'll pay you a few million bucks for the software. And they were like, no. And they got to a stalemate and they walked out of the room and they didn't answer the calls for like six months. And then JP Morgan was like, fine, fine, fine. And apparently it was like $100 million deal.

[Harry Stubbings]

You also have, like, the dogiest market. No offense. Yeah, we said that we'd be totally honest. You sell to governments like, this is where investors run away. Your sales cycles must have been horrible, am I right?

[Zach Buchman]

Yes, basically. But look, I've been laughed at since we started the company in 2012. And when we were raising money, the number of times people said, basically you were more artful. But government, no thanks. I came to Silicon Valley to get away from government or good luck with that, or it's all waste, fraud and abuse. No thanks. And that was a little contrarian on our part. We're very, very mission driven. Our mission is to power more effective and accountable government. We're probably naive and a little, little thick in the head, as you would say, but the customers will partner with you for life if you make them happy. And that's called stickiness. And the whole game in enterprise SaaS is high gross retention. Let's just be clear. The whole game is high gross retention. You look at a lot of companies, if they're in the, you know, 70s, 80s, good luck. I don't want that business. I'll take ours in the, in the mid to high 90s. And so there are a lot of attractive things actually about this little corner of the world. And we were growing steady while everyone was in ZIRP, absolutely smashing it with 70, 80, 100% growth rates. And now those same companies are growing 10, 15, 20%, and we're growing faster than them. And I'm kind of like, hey, just little, little, little engine that could.

[Harry Stubbings]

For those that don't know what is gross retention and how does that compare to net retention?

[Zach Buchman]

A customer is paying you a dollar for the software or a cohort of customers a year later, how much are they paying you? That's gross retention of the same amount of software and net retention is overall increase in dollars, including from upsells and cross sells. A lot of companies think 80, 85, 90 is good. And there's companies in GovTech with 97, 98, 99% gross retention. So it's almost an annuity if you can really get screwed in and do it right. But yeah, we won't have the growth rates at, you know, 50, 70, 90%.

[Harry Stubbings]

Does that matter? Like when you think about compounding over a 10, 12 year period, does that matter? And I guess the honest question that I'm actually really going at, it's like truth be told, Zach Venture today with the fund sizes we have, we need $10 billion companies.

[Zach Buchman]

There's two areas to take this conversation. I love it. One is durability of growth. The reason I think Cox was so interested in us and a lot of other kind of private equity firms are drooling over this Govtech space is the sustainability and durability of the growth. A lot of venture backed companies, they get to 50, 70, 100 million, maybe 200, and they kind of crap out and you see them orphaned as public companies, you know, in the post IPO land and they're growing at 15% or they're literally bobbling along, not growing because they're selling new business to make up for the churn. And you see a company like Tyler Technologies, which you probably haven't heard of and most of your listeners probably have never heard of, it's the vertical incumbent, if you will, in Govtech. They do about 2 billion a year in revenue for state and local government software and they trade at $25 billion on the S&P 500 on the new York Stock Exchange. It's been a Wall street darling. Supposedly it's the 10th best performing stock of the last like 20 years and few people have heard of it. And they print cash and it's an extremely well managed and impressive company. We compete against them. And that's an example of what can happen with growth durability. You know, if you're growing at 25, 24, 23 and you're decreasing at that kind of rate versus you're growing at 50, 60, 70, but then one year, oops, we're growing at 15, and the next year we're growing at 8, and then we're not growing. And so that's one area to explore. And your mouth is open and you're like, wait, I want to know more about that company. The other is the dynamics in your business, Harry, which are totally different than the dynamics in my business. And I'm not here to convince you to invest in OpenGov. I'm not even here to convince you invest in Govtech. I'm not really. I think some of these verticalized markets are winner take all. I do think there's a lot of room to build big vertical software companies, but not many great companies in single verticals. Your business is so different from my business and something I feel pretty strongly about because a lot of entrepreneurs and founders want to just love their venture investors and let's be friends and let's go to dinner and you're going to be my mentor and all this, and there's definitely room for that. But we are conflicted severely. Your business runs on a power law. Your business is about finding the next Coinbase or the next Uber, maybe the next Pinterest. The reality is OpenGov's been quite successful, but it doesn't move the needle. It's a couple billion dollar type exit. That's not what you're in the game for. And it's really hard for an entrepreneur to understand that when you're starting out from zero, you're worth nothing. You're living on ramen. There's no nothing in your bank account. And you're like, gosh, if I could get to 100 million in revenue or 200 million in revenue, if I could get a multibillion dollar exit, or even $1 billion exit, or even a $500 million exit, that's powerful for the entrepreneur. It might be powerful for the company. Even the industry is in. It doesn't do much for 20 VC. It doesn't do much for Andreessen Horowitz. And that's a really tough pill to swallow. You are incentivized to not care about me.

[Harry Stubbings]

Did you see that in your interactions with.

[Zach Buchman]

Yes, of course I saw it. And as soon as I got to understanding their business and where they're coming from, it all made a lot more sense and it got a little bit easier. You know, Andreessen Horowitz is managing many billions of dollars. Lonsdale is managing many billions of dollars. They're in a different game. It's about the very, very top 1% of 1% companies. It's probably like less than that. I'm an investor as well, and I understand this is like, I can't literally spend time on all these investments. It doesn't make sense. It's literally a bad use of time.

[Harry Stubbings]

Should we be different? Like you as a founder, advising me, your friend as an investor, should we do anything differently or that is just the rational product of the mechanism that we operate in.

[Zach Buchman]

Look, there's a class of investors who almost against. Maybe they want to. I would. I was going to say against their interest. Want to love on and coach and mentor all their founders and take them to dinner and get them together and all this stuff. And there's another class of investors who are like, I don't have the time of day. Like, I wrote you a check, but I barely remember your name. I think the best thing to do is probably just be open, honest and authentic about it. If you're trying to build a brand as founder friendly, then sure, loving on everyone, maybe that's in your financial interest. I have this. I didn't raise from, you know, Sequoia, but I have kind of a, like a respect in the sense that I don't. Look, if you're crushing it, they're going to spend a lot of time on you. And if you're not crushing it, wouldn't surprise me if they don't remember your name. That's not a personal commentary, it's just a sense. I did get an anecdote from a friend who was. He had term sheets from Sequoia and Benchmark and he was talking to somebody about which one to take. It was kind of like, do you prefer to be front stabbed or backstabbed? And he was like, oh, I'd rather be stabbed in the front. And he's like, okay, go with Sequoia.

[Harry Stubbings]

I think there's actually a joy in being unloved, which is, I think a lot of investors take your time. You go for dinner, you don't always want to go for dinner, you don't always want to chat as much as they do. You get great freedom from being the unloved one that can shine in the darkness, so to speak. Do the best founders need help?

[Zach Buchman]

I'm not sure I'd categorize myself in that rank, but from my perspective, the moral support was what mattered a lot. I don't need to go to your house and spend all Sunday afternoon doing strategy sessions on the business, which mostly consists of reminding you what products we have. When I'd Get a note from, like, Josh Kushner just saying, we're honored to be in business with you. I just walk off, and I'm like, gosh, I love that guy. Thank you, Josh. And when I got a book at Christmas with a handwritten note from Joe saying, I admire what you're doing, Zach. It's like, that means a lot. And, yes, I'd have lots of strategy sessions with Joe, who's a co founder and chairman, but it's that moral support that just means a ton versus the group that's like, hey, we'd like to come to your office next Tuesday and spend 90 minutes reviewing X, Y, and Z. And I'm like, I can tell him no and, like, damage the relationship, or I can suck it up and waste a bunch of my time on it. It just starts to be a bad kind of trade.

[Harry Stubbings]

Something that's challenging for me, by the way. Josh, I think, is just one of the greatest humans ever. So one thing that's challenging for me is so many young founders are so magnetized to the big brands and really just see stars and kind of Hollywood, so to speak. What would you say to them, knowing all that you do?

[Zach Buchman]

I don't think it's irrational. The brand. Look, are the Sequoia guys like amazing investors? They probably are, but it's probably also an incredible flywheel or network effect where if they invest in your company, it simply helps you recruit better talent and better executives. Maybe it helps you a little bit, get some more press. And if you're selling into commercial or enterprise, maybe it's a stamp of approval for early adopters, but I actually think it's just helpful. So I do think brand name matters. However, for those who can, like bootstrap, that's the ultimate, in my opinion, to avoid all of the conflicts that come from raising venture capital and to own much more of the company yourself. That's when I'm like, tip of the cap and, like, very jealous. I don't know if you follow the founder collective guys at all.

[Harry Stubbings]

David Frankel is, like, one of my.

[Zach Buchman]

Biggest buddies, first class, and they were in opengov early. I got into a bunch of trouble in 2019, so I'd overspent the whole way, and I'd raised too much money. I almost lost the company a few times. I'm happy to cry on your shoulder about it. It was 19. I couldn't raise. Got one term sheet after 30 no's, and it was onerous pound of flesh. I went through the deal, I said, I'm not going to raise any more money. I'm going to get religion. I'm going to change everything. And I started reading all their blogs. They're very much on the raise less, own more of your own company. We want to be not conflicted as seed investors. So they want to go in at the seat. And I just was like, they get it and they're right and I know it's marketing for them, but they're actually just right. And very fortunately, before COVID hit or before people got with the program in 21, we started cutting. You saw the law at work. Cut more, grow faster. It was just amazing.

[Harry Stubbings]

Talk to me. One term sheet, 30 no's. Who was the term sheet from?

[Zach Buchman]

A group in Tampa, Weatherford Capital. It was at 210 pre, Harry, just five years ago. We just got marked, you know, in February at 1.8.

[Harry Stubbings]

What were you doing revenue wise at 210?

[Zach Buchman]

I was probably in the 20s and I was burning cash like a drunken sailor.

[Harry Stubbings]

Okay, why were you burning cash like a drunken sailor? And what are some lessons from that?

[Zach Buchman]

Spend less, grow faster. It's a weird law. Is probably my net out. We were single product, essentially. And in that August 2019 round, we bought a company in the permitting and licensing space and we did probably $90 million of transactions in like 45 days. That worked very well. And as we broadened our product suite, things started to work. The economics of the business started to work. Basically, you're paying all this money to market and sell. You're even paying a bunch of money to deploy. And if you have more product, more arrows in the quiver, you get higher ASPs for the same essentially cost. Everything started unfolding there. We ended up doing an acquisition one each year. Basically, as we've broadened our portfolio suite, and I learned this a little bit from John Chambers. M and A can be innovation. It's not just buying for customers or revenue. We don't even do that. We buy for product quality and adjacency and it jumpstarts the innovation.

[Harry Stubbings]

How is M and A for innovation? M and A is traditionally seen in the eyes of basically run out of all fucking ideas. And that's why you're buying in companies and you're buying in growth.

[Zach Buchman]

I get it. It takes years to discover exactly what the product needs to do, particularly for highly verticalized, highly specialized use cases. So we sell software to departments of public works and building and planning and finance and budgeting and procurement. If you're not asleep, Harry, wake up. These are very specialized, complex use cases. With governmental accounting and like 12 bureaucratic processes that all have to be done and they're regulated and other things. If you just want to think up these use cases or just unleash AI and think you're going to build the perfect product, you're wrong. You're going to have to go through months, months, if not quarters, or years of interactive work with the customers. So getting the first million, 2, 3, 4, 5 of revenue can take as long as going from 5 to 25. And if you can catch a company that's managed to get some semblance of product market fit with a beautiful kind of fully multitenant stack that has done the years of discovery about what the customer needs and what the product needs to have, you've saved years worth of work and you've captured tremendous subject matter expertise. And now you can pour engineering or R and D into the product, which is exactly what we've done. So we build organically, but also if we come across a company that we admire, we'll buy it and we'll double the investment in R and D on it.

[Harry Stubbings]

I just want to go back to the investor base before we move on from that we mentioned.

[Zach Buchman]

By the way, I think. I think the guys at Rippling are doing something slightly similar. They're gathering founders. Some of these have subject matter expertise, some don't. They're acquiring and we're doing product acquisition.

[Harry Stubbings]

When did you and your investor base disagree most, Zach?

[Zach Buchman]

I've had a lot of disagreements. I'll tell you a few anecdotes. One, very early on, I had this boneheaded idea that we were going to create a network of governments across the country, and we'll have the largest repository of public performance and financial data. And all the governments will learn and share from each other and they'll benchmark and they'll cut waste and improve efficiency. The problem was we didn't have many products. And you come for the tool and stay for the network. You don't come for the network, stay for the tool. So I was putting our metrics up at our board meeting saying, we're going to get all these logos. The logos will just magically produce value over time. And Mark Andreessen was like, do you want to be a real company? And I was like, yeah, yeah, I do. I'm like a young entrepreneur. And he's like, because real companies measure revenue, not logos. And I was like, ah, got it. So I came back to the next board meeting and I'm like, here's our two key metrics logos and revenue gave me the same speech. He's like, real companies measure revenue. And I'm like, ah, that was a fairly, it was coaching. Two was hard times in kind of 15 and 16. We were, we were overspending, growth was slowing, we were learning about our vertical. We're not a horizontal SaaS company. We've got to go deeper. And I could see I was kind of losing the faith of my board as in this company has revenue but this is not going to be the next Pinterest. That was not a good feeling. And I don't know if I characterized that as a disagreement as much as.

[Harry Stubbings]

I was like, what stage of revenue were you at there? And what was the indications that actually it wasn't going to be at pinterest.

[Zach Buchman]

Between like 8 and 20 million growth rates. We went from like 200k in revenue to 2 million and it was like, okay, like something's happening here. And I could go out and be like, oh, we 10x this year or something. But then it went like two to four and a half, four and a half to eight and a half, eight and a half to like 14 and a half. And I was like, something. This is not. I'm spending way too much money to add 6 million in ARR.

[Harry Stubbings]

How much were you spending to add 6? Because I'm listening to this and that is not bad actually. Zach.

[Zach Buchman]

We had very high expectations, Harry. I was, I, we'd managed to recruit, you know, star studded board and we'd raise real money.

[Harry Stubbings]

I'm, I'm really worried though because bluntly, you know, I had this argument, stay in the investment committee that I'm in 1 million AR SaaS company raising 25 on a hunt, another raising it 7.

[Zach Buchman]

They have AI in their name.

[Harry Stubbings]

No, no, no, but that's what's ridiculous. Vertical SaaS companies, we do boring shit like Open Governor fans. And I said to my team, this is rich. And they're like, it's not, it's market.

[Zach Buchman]

Well, that doesn't mean it's not rich. Look, your business is very difficult too, Harry. It requires judgment and decisions. How are you going to get a 50x if you're raising at 100 million? You got to have a big company. And by the way, most people don't understand 155 billion, not how it works. They're clearly going to have to raise more money, which is massively dilutive. And by the way, it costs a lot of money to run these companies. It costs equity to run these companies. Public companies are diluting multiple percentage points a year. What do you think some of these startups are diluting? And so it's amazing how much it adds up. So I'm like you on the other hand, somebody offered me the chance to put some money in Xai and I'm like, it's raising at 18 billion as a seed round. Well, now they're at 50 and it's like, this is a tough game. Some of the hot companies deserve it and their multiples aren't coming down.

[Harry Stubbings]

I want to go back to that earlier stage you said, the 202. There we kind of get the feeling that we have product market fit. We've chatted before about it because there is like a lot of ambiguity around how people define product market fit for you. What's your like? Yes, this is product market fit.

[Zach Buchman]

Product market fit is when you can make a customer successful, comma, repeatedly and profitably. A lot of people have different definitions. Mark's is great. That's when they call you. It's when your prospects call you. I love that. But we got deceived. We signed up our first hundred customers. These were the 5 or 10k deals and the company was upside down and I hadn't switched into a multi product. Understanding that sweet. At least in our vertical, sweet beats best of breed. So it's a classic dialectic and enterprise software. If you want to build a zoom, you got a 10x better product. If you have a big enough market, great. You can build an IPO scale company. But in a lot of these verticals you've got to get to like workday level product or rippling compound multi product company to get the ASPs working. And that's actually how you increase your at least strategic or total addressable market. I got totally deceived. Wow, something's happening here. I think this is going to work. But very quickly I felt it in my body. This isn't working. We're going to be totally upside down. How do I reposition the company? And repositioning is just brutal.

[Harry Stubbings]

How do you think? How do you respond? I say this a lot to fans. I go, listen, the five to 25 game match, that doesn't work. And they go, no, no, that's our entry point. That's just for the state of Florida. When we expand to the other 10, it's going to be 50 or 100 or whatever it is. And I'm like. And then three years later, it's most often not.

[Zach Buchman]

Yeah.

[Harry Stubbings]

How do you think about that challenge?

[Zach Buchman]

Occasionally it works. You have to build Product furiously and I, in my opinion, getting to a suite or a suite of suites is the way to do it. At least in vertical software. It requires the proverbial pat your head and rub your belly. Like literally. You now have a customer base on this 10k, 20k, 30k product and you got to keep selling it or you're not going to raise your next round. You're not going to have any momentum. The employees are going to know something's wrong and you have to do that while building a new product and a third product. That's the entrepreneurial hack, that's the magic.

[Harry Stubbings]

Before we go to that multi product element, which I really want to discuss actually, because it's so important. But in terms of like finding that product market fit, what are your biggest pieces of advice to founders in terms of ways they can increase the chances of finding it?

[Zach Buchman]

Go crazy. So we're the type of company, sell like mad, get in front of your customers and prospects. We sing and dance in the aisles of the vendor hall. Most of our competition, they sit back in their chair and they're looking at their phone, watching the prospects walk by and just waiting for someone to come up to them. And we are like maniacal clowns. Like, come look at what we're doing. We're open gov, we're smiling, we're enthusiastic. So it sounds a little funny, it sounds a little hokey, but we bring the energy, we bring the passion. We engage with our prospects and customers like crazy. Number two is iterate, iterate, iterate with the customers. This is discovery. You can read about this in the books, but it's just true. It takes time.

[Harry Stubbings]

For me, it's like narrow your icp. Most often people don't mean enough to enough people. And I'm like, hey, make it so tight for a small segment of customers. Make it really resonate. You can always expand from there, but make it really fucking hit.

[Zach Buchman]

I agree. That's advice I tend to give around growth. Believe it or not, I shrink your cam so guys like you, sorry, I'll pay it back to you. Since you think our industry is so boring, guys like you want tam tam tam. Like show me the large market so I know you can be a big company. And entrepreneurs actually need to get crazy focused. I wasted one of the many mistakes I made, was, okay, we've got a little product market fit on transparency. Let's go to the uk, let's go to Australia. And I got on planes. I wasted so much time. I went to dinners and I didn't understand My business, my business was state and local government in the United States. I gotta shrink the TAM and then even shrink it further, get to budget sizes under this and over that and every step we took to shrink the product market fit segmentation and to get more focused on the icp, the ideal customer profile, our growth rate ticked up. And so we literally, we get an inbound. If you, if you gave me an inbound from the central office of the uk, we're not responding. And our sellers, they can't prospect outside the ICP segmentation. And so having real discipline and knowing the only thing you have is time. You have 40, 60, 80, 100 hours a week. That's it. So how much ROI can you deliver on every hour of your time? It goes up if you shrink the TAM and the shrink the PMF segmentation.

[Harry Stubbings]

One way to increase not the tam, but the spend in TAM is what you said, which is expand product line. The challenge is knowing when the right time is. What's your biggest lessons on when's the right time to add secondary, third, fourth, fifth products?

[Zach Buchman]

The earlier the better. You've got to manage to keep the cart on the tracks. That requires management and requires leadership. Creating new products is part of the magic and pulling the trigger on bold bets, whether that's a new direct, a new product direction for the company, and sometimes people are crying in the streets like, no, I thought we were a budgeting company. Well, we still are a budgeting company, but we're becoming a permitting company as well. It's amazing the internal resistance you'll get, but you got to bake it into the DNA and the culture of the company Again, that's just like leadership and execution. And some people get left behind. It's all for service of the company and the customers and the mission.

[Harry Stubbings]

How do you think about maintaining that morale internally when things do feel a little bit flatter? You mentioned kind of feeling a little bit flatter there in the growth from like 200 to 2, but then growing 80% a year or 60% a year. How do you maintain morale when people feel it's flattering? Was there ever a time when it felt really fucking flat?

[Zach Buchman]

Yeah, there's been many. And the CEO has to give the energy. It's one of the hardest parts of the job. It's literally how much do you have to give and you drag yourself out of bed. How do you give to your employees, your teammates, your customers, and just give your energy? There have been times where, like, you know, my mother died eight years ago in the middle of very hard times at the company. And it was absolutely brutal. And I'm having to come to work every day and kind of grieve while also telling people the company, it's going to be okay. It's that juggle that people have hard things going on in their lives all the time. And so Ben Horowitz talks about this. And the hard thing about hard things, I remember, like, cradling that book and reading it like it was a bible.

[Harry Stubbings]

Did you ever doubt whether it would work?

[Zach Buchman]

The short answer is yes, all the time. I don't know how I kept going because I felt for years like I destroyed my career. I'd made the worst set of decisions. I came back from Afghanistan in the summer of 2012. I was like, wow, I used to be somebody, you know, I was, I was a lawyer and I was in foreign policy and I was doing things. And now I'm like, in this, like, dank, three bedroom apartment style office, hiring and firing and making, like a total mess out of everything. And I was like, what have I done? But it's a burn the boats kind of thing. I've already made the mess. So why don't we, why don't we keep going?

[Harry Stubbings]

What was the easiest round to raise for you, Zach? When were you, like, I feel this is super easy round to raise.

[Zach Buchman]

Honestly, it got harder all along the way. The easiest rounds were early. You know, Joe had come out of Palantir tremendous network and credibility. So I'd say the first, the first few rounds kind of came easy. That was a blessing and a curse. It was a curse because we overspent. Like, one of the many mistakes I made was to overspend on sales and marketing before we had the product. And you'll probably, you probably see this in some of your companies. Uh, it's very dangerous. If we didn't have some of these unfair advantages, we would have been dead pretty early, like in 2014 or 15. As we got further along, I think we got more attractive in terms of raising money, but I also got way less interested in raising money. Like, I wanted to literally stop raising money for the past five years.

[Harry Stubbings]

But just because you hated it. So much for the rejection state. Like, why?

[Zach Buchman]

Well, it's a huge time suck. It's definitely not. It's not fun to get said no to, but that's fine. I said, I'm, you know, I sell every day and that's no big deal. It's just, it doesn't actually create that much value. A lot of people talk, oh, I raised this much hundreds of millions or at these valuations, it's literally irrelevant. You will be, you will be judged and weighed by your exit and by the liquidity that you can provide to people. And so there's these tremendous roller coasters that go on between the time you take the money in and the time you got to give it back. And I think a lot of people lose sight of that. You over capitalize the company. I mean, it's just more. You got to. That's a higher pref stack and it's more dangerous for the common stock, which is management and employees. So I just found it was kind of like not a great deal in many respects. And the tighter we got, the better we did. So we started to get to cashflow positive and EBITDA positive. And it was like, great, like, let's keep this going. I don't, I don't want to return to those days.

[Harry Stubbings]

What did you not do in the journey that you wish you'd done?

[Zach Buchman]

I would move faster. I'd be more decisive. If I knew now what I didn't know then, I'd probably have saved three years and I would move at a tempo that is a different tempo than I was moving for the first five years. It's removing people that aren't working. Product decisions, the sales machine, the enablement machine, the hiring machine. Enterprise software rewards intensity and focus. The Amp it up article from Slootman and his book, it just feels spot on. It's not, it's not one philosophy. It feels like it's kind of like the way these companies are supposed to work.

[Harry Stubbings]

You mentioned the gray hair that that's kind of what a board's for in many respects and what they often proclaim to be. What's your biggest lessons and advice on how to manage boards effectively?

[Zach Buchman]

I think a lot of experienced CEOs really understand this and a lot of founders and folks that are new to it, which is where I was for many years, I didn't understand. The board is for governance. The board is for governance, there to make sure that there's no fraud. And it's a real company primarily to hire and fire the CEO. They represent the stockholders in the sales process, that is fundraising, which goes both ways. A hot company is being sold to by investors. It's easy to get confused and think, oh, these are just my mentors and coaches and friends and we're in this together and we're partners. One thing I learned from Mark and even Joe in the later years is we have natural conflicts. My job is to grow the share price. I need to a, deliver on the mission and win for our employees and customers, but I need to win for our stockholders. That's my principal job. When you go into the board meeting, you're the chairperson. Whether you think that or you have that actual title. The CEO needs to run that meeting. The CEO needs to explain the direction. Sure. Gather input. But boy, there are times, Harry, where Mark would be like, I've seen this 10 times. You got to go right. And Lonsdale or somebody else be like, nope, I've seen it 10 times. You gotta go left. And I'd walk out and I'd be like, what do I do? These are both like people I look up to. And it was through this process I said, form your own opinion. Become a real leader and a CEO. Use your independent judgment. You've got more facts than they do. Make the call.

[Harry Stubbings]

Unfair question. You have another company and you can only have one investor. Which investor do you have?

[Zach Buchman]

Me. No, I'm serious. If I was going to do something again, I'm enamored by the bootstrap idea. You just, you reduce a lot of conflicts, you own way more of it.

[Harry Stubbings]

Could OpenGov have been bootstrapped?

[Zach Buchman]

No, no, no, no. Even the M and A. The reason I executed the transaction we did earlier this year was I looked out and said we could get ready for an IPO in a couple years, maybe less. And then what happens? We could raise a bunch of money. But to truly live the destiny of this company, we're going to want to buy other companies. So you could do secondary offerings and it just starts. But then you're like, you're on the quarterly game and I'm like a long term owner with very deep pockets. That's super mission aligned. This is how we're going to build the biggest company that's going to live its mission. No, probably not is the short answer. So if I had to pick one investor, definitely be partner specific, I would go for kind of name brand, you know, as good an investor as I could get based on the returns of that investor. But I'd have a very serious chat and say, I'm running the company. Are you comfortable with that?

[Harry Stubbings]

So take me to that deal itself. This is when suddenly OpenGov got sexy as well. How much was it for and how did it come about?

[Zach Buchman]

We sold the company in February for 1.8 billion to Cox Enterprises. This is a large family business in Georgia. They own the largest private cable company in the United States. They own the largest automotive company outside of the car manufacturers, and they're diversifying their 125 year old family business. They understand growth, durability, they understand customer acquisition costs, they understand regulated businesses, they understand services. I called them last August, I guess it's almost a year and a quarter ago now. And I said, hey, you've been rubbing my thigh and whispering in my neck. If you'd like to put a term sheet down for 2 billion, I think this board would take it seriously. They produced a term sheet for 1.5. I rode my bike home that night and I got really nervous and I said, I might have made a big mistake here. I don't want to sell the company for 1.5. And yet I think this board is probably tired. They've been in for a long time, they might want this. I called a board meeting the next day and they said, what do you want to do, Zach? I said, I'm a no. And they were like, whoa, really? And I said, yeah, shall we end the meeting? And then they were like, this is pretty serious valuation. A lot of deals aren't getting done right now and this is a good irr. And da, da, da, da, da. And I said, look, we've talked about going to become a multi, multibillion dollar company for a long time. Like you and I seem conflicted. You've also incentivized me with a performance plan in 21 to pursue $4 billion type valuations. So I agreed to study the issue. We set up a whole, we hired Wachtel, we set up a whole process. We spent like five months working on the deal. We got the board aligned and we did price negotiation. We did a management incentive plan and we put together what I think at the time was the third or fourth largest private software transaction of the last few years.

[Harry Stubbings]

What revenues was the company out at that stage?

[Zach Buchman]

I mean, when we did the price negotiation, we were probably 110, 115, something like that. Very quickly we've surpassed 150 near 15x at the time. And we're burning it down now is an interesting deal in that I left a majority of my stake in the company. I'll tell you about this. It's a supposedly common ish structure in kind of telecom and media, and I think it's a little innovative in your classic kind of software or tech ecosystem. So I basically went. We as management went into business with the Cox organization with a new investor. All the existing investors were swept out and cashed out. At the 1.8 valuation, the board was shrunk from 8 to 4. It's me plus the Cox team employees. Vested equity was cashed out. So it was essentially a large secondary for employees. But all equity plans remain in place. We got a large RSU pool to continue to attract great talent and compensate people. And we have defined liquidity at years 3, 4 and 5. So essentially it's a put right. You can sell a third at year three, two thirds at year four, and three thirds at year five. And Cox has a call right in the out years so that if they want, they could eventually obtain 100% ownership of the company. I'm in very deep on the company.

[Harry Stubbings]

I got to ask, dude, do you not just want the, like, cash? I mean, this in the nicest way, but like, you know, I interviewed Ryan from Qualtrics and he's like, yep, I remember when the cash just went thud.

[Zach Buchman]

You know, I did participate in the secondary. So I took out 49% of my vested equity.

[Harry Stubbings]

How much was that?

[Zach Buchman]

Did look, these companies, the investors at growth stage, kind of maturity end up owning like 80% of the company, 75 to 85% of the company, and management and employees and founders own the remainder. So my family's safe. I'm in good position. I can tell you. It has changed my anxiety levels. Those who knew me, I would come in some days tweaking and like, grouchy and like, very fearful because 98% of my net worth is locked up in the company. The last 5 or 10% of that anxiety is like, I can sleep most nights. I don't wake up at 4am like a pit in my stomach and like, you know, like, I'm dead. Like, we're dead. That mostly has. Has gone away, but I'm still kind of obsessed. And that was the deal. Cox doesn't want to buy a company and not be in bed with the founder. And this was not just sell it to Oracle, cash out and buzz off after 12 months. This was a different type of deal. This was going into business with a new owner.

[Harry Stubbings]

Do richer founders make better founders?

[Zach Buchman]

I don't know. There's an old school Silicon Valley mentality on, like, keep the founder poor, don't give them secondary. I had a board member who said I wanted to sell, I think like 400 grand to like. I mean, I was in my, like, mid-30s. I'm trying to like, paint my house and like, get something set up. I got the. If you're selling, I'm selling. And I'm like, that's pretty harsh. Like, I don't have much and you do. And that's a weird speech you just gave me.

[Harry Stubbings]

What did you say to him?

[Zach Buchman]

I mean, I did not say F you, but that's definitely a little bit how I felt.

[Harry Stubbings]

Would you say F you now?

[Zach Buchman]

Look, people are entitled to their views and that is like a common view. And I get the view. I just think I disagree at this point. I'm not less committed now. I'm honestly able to drop back and scan the field and throw passes in a way that I wasn't before. It's actually a decent way to encourage the entrepreneur to play small ball for somebody who grew up without a lot, you know, mowing lawns to go be able to make like X millions or tens of millions. It's like as soon as you get to a certain stage, there's a natural tendency, potentially. You're like encouraging the person to grip tight when actually what the VC wants more than anybody is for the person to go long and go really, really big.

[Harry Stubbings]

What is that number? I was, I was talking with my mother the other day about this and I was like, yeah, yeah, like five to feel like, like safe. Five pounds, like $8. Like that's. And then like 20 to be like, okay, I can really go long.

[Zach Buchman]

Sure, that sounds right. I think it depends on what kind of crowd you run with and what you care about and your values and other things. I mean, if you, you know, if you want like a two bedroom in the suburbs, fine. If you want the flat in Mayfair overlooking the park, you know, and you get caught up in it, there's always more, there's always something better or a different crowd.

[Harry Stubbings]

Do you fall victim to that?

[Zach Buchman]

As I. Yeah, of course. You know, I'm starting a family and there's all different levels. So keeping grounded, it's one of the reasons I love our company that, you know, you find the end market boring as hell. We find it fascinating. We're proud of what we do.

[Harry Stubbings]

And how did it feel when you signed? Everyone dreams of this for years and years and years. How does it actually feel?

[Zach Buchman]

Yeah, so it was really wild. I spent probably the better part of six months on this. It was exhausting and nerve wracking. In December of last year, I started breaking down. I was like breaking. I got sick three times in December. I got hand, foot and mouth disease. I didn't even have a child. I got some Victorian era virus. I'm like breaking out and things. And this is the middle of the price negotiation. I remember Chambers saying, zach, sometimes you gotta play hurt and I'm like propped up talking about big numbers. Well, I have 103 fever. That went on. We were supposed to close in January. I had had like a baby moon or a pre moon booked in Hawaii. I went on the trip. The deal got pushed by a month. And this is at a point where it's pushing and you're wondering if it's actually going to happen. These things do break and I'm in Hawaii. I'm on the phone like two thirds of the time. The rest of the time I'm literally like in the gym, like trying to manage my adrenaline. The deal ended up happening in February and Alex Taylor, the chairman and CEO of Cox, came out and we announced it to the employees. I was so amped up, exhausted at the same time, very excited. Felt like I was making a good decision, but like I wasn't present, if you will. Do you know what I mean? Like, I wasn't like living the moments. And in terms of the signing, it was is literally just execution. The number of deliverables and the number of variables and even at the end the amount of people that have to be aligned and the squirrely things that happen. It just became like tunnel vision, execution mode. I spend a fair amount of the year literally processing and digesting and trying to reset because you know what I mean, like, we're amped up for the next chapter, but like we got to turn the page.

[Harry Stubbings]

But it does return money to investors and it gives some a pretty great return and a great multiple. I'm pretty worried for venture as an asset class. I think 21 will be some pretty bad numbers and a really shitty vintage. And I think people are artificially keeping numbers high and I don't think LPs have quite the understanding of how bad it is. When you analyze the venture asset class today from your perspective, what summary do you come to?

[Zach Buchman]

I think overall the venture asset class and I don't have all the numbers you might, but I think the venture asset class is not particularly impressive. Privates as a whole are probably not particularly impressive. I know there's a lot of people who disagree with me are going to tell me I don't have the stats. You're totally wrong. I'm an LP in legit funds. Where's the money? Where's the money? How many years has to go by? People think these Companies take like five, seven, nine, 10 years. Not true, not true. They take like 15 to 20. That means your venture fund takes 15 to 20 years to distribute the money. Typically, unless you're selling kind of secondary stuff, in which case you're probably taking a discount. I think the asset class, you have a very, very tough job. It's hard to be a first class venture investor in terms of returns. I think the last few years have probably been pretty bad. And there were a lot of people that were like, I'm the best investor in the world and yours truly made lots of stupid investments. Like really stupid investments.

[Harry Stubbings]

What was your most stupid investment?

[Zach Buchman]

Oh man. I started writing bigger checks thinking of course I'm a genius, that the checks I wrote in 13, 15, 17, you know, fantastic companies Flock Safety and add a par and Qualia and Flexport and other things and it's like, oh look, I'm good. And then I write bigger checks into earlier stage companies and they go absolutely nowhere. Even some frauds, you know, just straight up frauds where it's like, wait, you said the numbers were this, they weren't, that you just lied about it.

[Harry Stubbings]

So I think there are many more frauds than we think.

[Zach Buchman]

Oh, I think there's loads of these. And a lot of entrepreneurs lose. They either didn't have the kind of morals and the anchor weights or they like lose it in the, you know, intense pursuit of success. Look, I think it's a really hard business and I'm an LP in some of these funds and I'm waiting for distributions and to me multiple on invested capital and distributions unpaid in seem like a lot more important than quote irr based on other funds marking things up to impress their LPs. I can tell you post transaction I'm getting hit up to invest in lots of companies or funds and it's like maybe I shouldn't be so overweighted on privates.

[Harry Stubbings]

You shouldn't be so overweighted on privates. How do you think about Publix now? Because when you look at the opportunities in Publix, they're there.

[Zach Buchman]

Well, I wish, I obviously wish I'd taken any liquidity I hadn't dumped it into the S&P 500 early this year. I didn't.

[Harry Stubbings]

What did you do with the money?

[Zach Buchman]

I put it in some money markets and tried to catch my breath mostly paid down my mortgage and got back to work. Just stick it in the indexes and go do something else. Extremely hard to beat the market over the very long term.

[Harry Stubbings]

The best advice for me came from Founders Fund who once told me like if you want to be in the next Anduril or you want to be in the next open AI, invest in Anduril or OpenAI don't try and be too smart. Which fund are you not in that you'd like to be in?

[Zach Buchman]

That's probably that. That would be one. I have tremendous respect for Brian and Trey and what they've built.

[Harry Stubbings]

Which fund are you in that you wish you weren't in?

[Zach Buchman]

Small checks into a few just to kind of support friends or investors in OpenGov. And that to me was overweighting on privates and just unnecessary. Making less investments is probably a good New Year's resolution.

[Harry Stubbings]

This is a fun round. Okay. You see these cards?

[Zach Buchman]

They look stylish.

[Harry Stubbings]

Yeah. Thank you very much. These cards are each worth a thousand dollars donation.

[Zach Buchman]

Wow.

[Harry Stubbings]

And so you can either answer the question and I don't know these questions. So these were submitted by friends of yours and mine.

[Zach Buchman]

Cool.

[Harry Stubbings]

But a thousand dollars donation or you answer it. Okay. Okay. And there's no skirting out of it. So question number one. What was the worst investor meeting you've ever had?

[Zach Buchman]

There are two to come to mind. One, I pitched Peter Thiel. I was so green and I'd just gotten back from Afghanistan and I literally would go to work in slacks and leather shoes like a business lawyer looking type person. The founders fund guys, at least in those days, did not respect people who wore button down shirts. Literally. I got laughed at. That hurt. Number two, I had a few meetings with Mike Moritz. I was very excited. I think they would have been great investors. I was on maybe the third or fourth meeting, went to kind of partner level meeting and I thought this was going to be the one. And I walked in, I could just see something on his face. And I go through my spiel, but I'm like, something's not right. And I just knew. He just decided against it. And he was like, what have I done scheduling this meeting? And he walked me out and shook my hand without looking me in the eyes and then just literally turned and walked off. And that brought out very bad feelings in me. Like high school fisticuffs level feelings. Those would be two.

[Harry Stubbings]

Okay, tough one. How much in cash did you take out?

[Zach Buchman]

Thousand dollar donation.

[Harry Stubbings]

Boom. What is the worst thing about having Marc Andreessen on your board?

[Zach Buchman]

He's tough. He's out to ensure governance and investor interests. And I learned a lot from that. But it was not. I had a warm, loving relationship with John, with Catherine, with Mark is a lot of business. He took his role seriously. So it was a. It was a. I wouldn't say it was transactional, but I'll give you an example. I scheduled a two hour Board meeting. And the board was opening up a lot of give and take, big discussion going on some important issue. So I decided to let it run at, you know, maybe it was 10:00am to 12:00pm At 12:00pm mark literally just pulls his chair out, gets up, grabs his briefcase, walks out, slams the door, leaves the building and we see him drive off and everyone's just like, what just happened? And I text him afterward and he was like, you told me the board meeting ended at noon. And it was like a pretty stark message of like, manage the board meeting, stay on time, run it tight, be in control. These were the type of, I wouldn't call them avuncular lessons, but like, so it was tough, dude.

[Harry Stubbings]

I want to move into a quick fire. So I say a short statement, you give me your immediate thoughts. Does that sound okay?

[Zach Buchman]

Sounds great.

[Harry Stubbings]

So, dude, what do you believe that most around you? Disbelieve?

[Zach Buchman]

Snap judgments are very valuable. A lot of people tell you you gotta be thoughtful, you gotta be balanced. You do. Especially when as the organization gets larger. But you've gotta listen to your stomach and your gut. I often advise our execs or others when they've got a big decision, whether it's personnel or something else. Go sit in the woods, go sit on the hill, look at the ocean. And what is your body telling you? It usually is telling you an answer and you got to listen to it. And sometimes it's telling you that really fast, like when you meet somebody or when you walk out of a meeting.

[Harry Stubbings]

You know, what do you know now that you wish you'd known before you had your child.

[Zach Buchman]

Everyone tells you that it's a life changer and you want to pick the right partner and you got to be in the right zone and all of that. And it's washing over me like I've changed my life materially, I've changed it materially. I wanted to go, I think I told you I wanted to go on that trip in November. Like, nope, not happening. We have a five month old baby and we're not dragging the baby around the globe. So yeah, my life has changed dramatically and like I'm just coming to accept the new reality that I don't think I really understood. And a lot of learning is like that it's got to be experiential because at least for me, you know, people just tell it to you, it doesn't, doesn't really sink in.

[Harry Stubbings]

The heaviest things in life are not iron or gold, but unmade decisions. What unmade decision rests on your mind most?

[Zach Buchman]

You Know, if we hadn't sold the company, what would life look and feel like if we were pursuing ipo? I still feel convicted that we made a great decision and I'm very excited about the future and the vision and mission and the alignment and all of this. But that would be one.

[Harry Stubbings]

You mentioned that like, oh, go, go, like not sell. Why does any Stripe databricks, Starlink, you name it, go public when there is so much money in privates?

[Zach Buchman]

Look, I think they have to. I'm a little surprised this has gone on the way it's gone on. Databricks supposedly raising the largest private round ever. I think, I guess that's your, that's really the point you're making. But you know, my read is. And what, what motivated me a little bit is, look, at some point the money, you've got to deliver the money back to investors. They're raising. Databricks is raising most of that to deliver secondary to employees, including to deal with some tax issues. And I know that's what Stripe did and Josh I think is doing most of these. Look, I think that can continue. But no, I don't see how these companies don't go public. I'm sorry. They've raised a ton of money. At some point, people need liquidity. That's going to come. I don't know whether it's in 25, 26 or 27. If I'm guessing, it's probably 26. I think the markets open up and all these companies end up going public.

[Harry Stubbings]

What have you changed your mind on in the last 12 months?

[Zach Buchman]

I've changed my mind on up and comers. I spent a lot of time hiring, been there, done that. I've grown a little tired of it. And I see the value of promoting from within. I see the value of hiring people that are geniuses and want to work like all the time and grow their careers and learn and have kind of the growth mindset versus the hey, here's how I did it at my prior companies. And hey, look, I'm an exec and I've got a playbook. I'm excited about growing and learning and promoting from within and like hiring like fresh talent that wants to get after it versus the been there, done that.

[Harry Stubbings]

If you could be CEO of any other company for a day, what company would you be CEO of?

[Zach Buchman]

I would understand a company like workday.

[Harry Stubbings]

What day?

[Zach Buchman]

No, look, I'm in enterprise software. I'm, I sell ERP software. We're almost like a verticalized workday where I'm going With this, Harry is like, to run like a Microsoft, like I would, it would take me a lot of time to even understand their business. They have so many business lines and so many disrespectful revenue. I think what Satya has done there is like, it's kind of incredible because I don't have a clear understanding of that business and how it works and how I would, what growth levers I would pull and how to carry it on.

[Harry Stubbings]

OpenAI at 160, XAI at 50, which is what it's supposedly raising at now, or anthropic at 40. Which one do you invest in? If you can only do one, tend.

[Zach Buchman]

To not invest against Elon. And if I sat down with him and talked with him and said, are you like, is this real and are you all in? And he's. I think he clearly is. I think that's probably a perfectly good investment. I think it's similar to the OpenAI investment. I was at an event and Mary Meeker was there and I talked with her and I said, man, what around that open AI? I said, would you, would you do it at 150? And she said, to be clear, I'm not, I'm not in the round, but yeah, I would do that, no question. I said, tell me about it. And she said, look, I don't remember exactly, but she said 60% chance that company crushes it and becomes, you know, a world changing trillion dollar company. 20% chance it goes sideways and you get the pref stack back or you get 80, you know, 70, 80 cents on the dollar and then, yeah, 10, 20% chance it's a big goose egg. And she's like, that's a nice bet.

[Harry Stubbings]

So I'm totally with her, except I don't actually think there's actually any chance that it's a goose egg. I mean, maybe it's like a 1 or a 2%. I think the chance that Microsoft actually takes something with it and you get the pref stat back at least. By the way, people like you've never seen a $50 billion acquisition. Yes, actually you will do. When Companies are worth 3 trillion as a percent of market cap, it's absolutely aligned to what traditional acquisitions were. So. But I think that's like an 80% chance. And then I think you stroke the check.

[Zach Buchman]

You know this better than probably most Harry or anybody, certainly. I mean, but when you stroke the check or when you're writing your own money, it's different. I'm writing a check with real money at $150 billion valuation. So I find the investing game fascinating because if you were writing a billion.

[Harry Stubbings]

Dollar check like Josh, there's very few places where you can see a 3 to 4 to 5x on that bigger check.

[Zach Buchman]

Yeah, yeah, fair. And he's going long on that and data bricks and others. And yeah, I'm in, I'm in the fun. And so it's exciting and nerve wracking and I mostly just want to watch and admire what they're doing.

[Harry Stubbings]

Final one for you, dude. What question have I not asked today that I should have asked?

[Zach Buchman]

I thought you were going to ask more about the struggles, like the super pain and we did touch on some of those, but I thought you were going to get a little more personal with me about how I grew up or my mother or, you know, this kind of stuff. And I've listened to so many of your episodes and heard her about some of your background. So I'm not begging you to do that. I'm just kind of being, I was a little prepared to get like vulnerable and have a cry out with you.

[Harry Stubbings]

Is there a tortured child within you, Zach?

[Zach Buchman]

Yeah, for sure. I grew up, you know, I had a difficult home life. My mother was severe alcoholic and parents got divorced after kind of years of home war zone. I think there's probably something like this in a lot of entrepreneurs. You would have more experience in it than me talking to so many entrepreneurs as you do. But there's the, you know, wanting to prove that, you know, I'm good enough or I'm worthy. That kind of is part of the drive in some of these companies. This is not just a mercenary activity. This is mission plus that personal pursuit.

[Harry Stubbings]

Selling help you feel more worthy.

[Zach Buchman]

You know what's funny? Yes. On the one hand. And the other thing is, and you often ask guests like, you know, does money make you happy? It's helped a lot. And I don't mean that to sound trite and I don't, I hope this doesn't sound super pompous, but like I grew up, I never felt safe. I never felt safe. I didn't feel safe at home. I mowed lawns from the age of eight. I'd collect 20 bills and count them and go, you know, literally deposit them and like been pinching pennies in one way or another for like most of my life. There's a sense of security that's come from, from some of this that like, I often will walk around and just try to tell myself, like, you're okay, like it's safe. Yeah, I don't know, that's that I feel different than I did five or 10 years ago. And it's. No, it's not going to produce happiness. I still need to probably go to the Hoffman process and visit Esalen and do all the things that your other guests do. I need to get on some of those trains. Probably I'm not there yet. But like, having a little like a touch of security and peace is like, helpful.

[Harry Stubbings]

Why are you not there?

[Zach Buchman]

A maelstrom? Like, I'm still in the like, Like I'm living daily and hourly and like working like most of the weekends and nights and just like cranking to make this thing go to the next level. It's, it's, it sounds kind of sick, but yeah, it's a total treadmill. We're on it until we're not. I take my job super seriously and there's many hundreds of employees who are depending on me to do that as opposed to like buzz off and play golf in Ireland or something. And so, you know, while I'm here, I'm completely mission obsessed and I want to deliver for our customers, employees and shareholders.

[Harry Stubbings]

Well, Zach, as a vc, I now have to off to Ireland to go and play golf.

[Zach Buchman]

Are you serious or no?

[Harry Stubbings]

No, I'm totally messing with you, dude. I'm running a media, I'm running a media company. You have no time to do anything else. It is a knife fight.

[Zach Buchman]

You are, you have to be one of the hardest working guys in showbiz. Okay? That is abundantly clear. I, I can't even keep up with your content. I mean, it's insane how much you put out. And it's not as you cut it three ways from Sunday. It's because you're literally, you are at it all the time. And you've been doing this, Harry, now what, eight or ten years?

[Harry Stubbings]

Ten. Ten. But the cheat that no one tells.

[Narrator]

You, dude, is if you start so.

[Harry Stubbings]

Young that you've never experienced life, if.

[Zach Buchman]

You really leave this dark room ever, you don't know what's on the outside.

[Harry Stubbings]

Yeah, no, I'm being serious. I never ever travel. I haven't been on holiday in 10 years outside of this country. In 10 years, what are you going to do?

[Zach Buchman]

You're going to do this for another 30 years or are you going to like, step back 100%?

[Harry Stubbings]

I know one of my dear friends who runs Google Ventures. He's like, the thing I love about you, Harry, is like, you're the only person who thinks in like massive sun time horizons, which is like absolutely this is like a 40, 50 year game.

[Zach Buchman]

You're not going to the islands and you're not taking up golf and.

[Harry Stubbings]

No, because I was talking to mom about like, you know, life the other day and like, you know, I have more money than I used to and you know, I'm very grateful for that.

[Zach Buchman]

Do your guests ever ask you how much money you have?

[Harry Stubbings]

Fuck off. That's personal. So rude. No, but I was wondering, I'm like, well, you know, if it's not about the money, then like happiness, what is it about? And the summary that I came to was it was about doing great work with people that I loved.

[Zach Buchman]

It's the craft fraternity or whatever you want to call it.

[Harry Stubbings]

Yeah, I love that, feeling proud of the work that you do and the people that you do it with.

[Zach Buchman]

I was talking with my friend David Peterson. I was in New York late last week and I caught up with David and you know, Ryan I think probably pretty well. And David said his dad was a computer scientist, a programmer, when we were growing up up and his dad retired early and has been retired probably for like 20 years. And we were talking about people who don't and don't stop. And he said, you know what? I think some of these people who are cranking in their 80s actually have a higher quality of life. I said, tell me about that. He said, like, I went to on some trip with Nelson Peltz from Trian and this guy's like, still with it and he's still cranking and like people want to talk to him. He's like, there's something about the like stimulation, the relevance, the like being in it. He's like, it's, it's not just a need and it's not just vanity. He's like, I think they might have a higher quality of life than if you just buzzed off and like toot around in a golf cart. And I thought that was interesting. I, I, I want to look into it 100%.

[Harry Stubbings]

I think your mentally mental activity continues way stronger when you are continuously put through it.

[Zach Buchman]

It's like a social element too. It's, it's something we didn't talk about, the work for work, work from work stuff. But I made a mistake on that. I went remote virtual and distributed. In 2020. I'd been getting the crap beat out of me while we were, we were in Redwood City and struggling to hire and struggling to compete. And things started to break before COVID and Covid hit. I go, you know, move home with your folks or go to the beach. Keep your salary. We're remote, virtual and distributed and company fanned out. Katherine beat on me, by the way. She said, the companies that get back to the office first are going to win. And what are you doing? And I was like, oh, come on, You. There's been innovation in the world. You don't know what you're talking about. And the reality is, I was dead wrong. We're getting back into the office. The collaboration, the productivity, like, it's not even close. And it's very painful getting back into the office. And you know what is worse than that? It's not getting back in the office. It's the disaffection. It's the. I don't want to be paternalistic, but my colleague Thiago, who, one of our key leaders here, he said, look, people think they're happier sitting at home, and they're not. And they end up quitting like a week later. They say, no, no, I love working from home. And then they go, quit. Why? Because they're disconnected. They're not part of it. They're not with people. It's not natural just to sit in a room and, like, crank all day without collaborating and whiteboarding and talking. So I'm very excited about the track we're on, and I've had to literally stand up in front of the company and say, I was dead wrong. I'm sorry, I'm going to own it, but this is where. This is the direction we're going. I wish. Remote, virtual, and distributed on all of my competitors.

[Harry Stubbings]

Dude, listen, I've loved having you on. I'm so grateful for, like, the new friendship. Like, this is one of the reasons why I love doing this show so much, but thank you.

[Zach Buchman]

I. The feeling is completely mutual. I'm a fan, but honored to be a friend, too. And I'm really excited to be with you, Harry, and this is a lot of fun.

[Harry Stubbings]

I meant what I said, that one of the biggest joys of doing the show is building incredible friendships with incredibly inspiring people.

[Narrator]

Zach, I so appreciate the time.

[Harry Stubbings]

If you want to watch the full episode, you can find it on YouTube.

[Narrator]

By searching for 20VC. That's 20VC. But before we leave you today, today I want to talk about Brex, the financial stack founders can bank on. Brex knows that nearly 40% of startups fail because they run out of cash. So they built a banking experience that takes every dollar further. It's such a difference from traditional banking options that leave your cash sitting idle while chipping away at it with fees to help you protect your cash and extend your Runway. Brex Combine the best things about checking treasury and FDIC insurance in one powerhouse account. You can send and receive money worldwide at lightning speed. You can get 20x the standard FDIC protection through program banks and you can earn industry leading yield from your first dollar while still being able to access your funds anytime. Brex is a top choice for startups. In fact, hey, it's used by one in every three startups in the US. Just check them out now. Brex.com startups and talking about Building Trust Atio is the next generation of CRM. Setting up Atio takes less than a minute and in seconds of syncing your email and calendar, you'll see all of your relationships in one place, all enriched with very valuable data. Atio also lets you build zapier style automations, gives you powerful reports and works perfectly for any go to market motion from PLG to sales led. And Atio is designed for the next era of companies like yours. And companies like yours shouldn't have to deal with inflexible one size fits all CRMs. So join industry leaders like 11 Labs, replicate modal and more to scale your startup beyond the next level. Head over to attio.com 20vc and you'll get 15% off. That's 15% off your first year at atio.com 20vc and if Attio helps you stay ahead by streamlining your relationships and operations Today I want to talk about a venture fund making waves with its unusual model. I'm talking about the Fundrise Innovation Fund, which is democratizing venture capital as a public venture fund. For example, most of the AI revolution is being built and funded in the private markets. Companies like OpenAI, Anthropic Databricks. These are incredible multibillion dollar companies, but they're inaccessible to 99% of investors until they go public. Well, those days are finally over. Visit funrise.com 20VC to check out the Fundrise Innovation Fund's impressive $150 million portfolio for yourself. Carefully consider the investment material before investing, including objectives, risks, charges and expenses. This and other information can be found in the Innovation Funds [e-mail] Innovation this is a paid sponsorship.

[Harry Stubbings]

As always, I so appreciate all your.

[Narrator]

Support and stay tuned for a fantastic episode with Mark Benioff at Salesforce on Monday.