SPEAKER_04: Running a good business never really goes out of style. So, I would focus less on what investors care about and a lot more on what your customers care about and how do you serve them? Paying particularly close attention to can you do it in a profitable way? And if you can't, that ultimately is not a long term, very sustainable business. So, pay attention to your costs, pay attention to where you got opportunity and spend money accordingly. Of course, to the extent you can get to cash flow positive, then the question of what the markets look like becomes somewhat irrelevant to you.
SPEAKER_00: Welcome to Same Same But Different, the show that brings together two startup founders to discuss a similar decision they made on their journey to building a growth stage company. But like every journey, the path getting there and the results are unique to that startup.
SPEAKER_02: My name is Anu Hariharan and I'm a Managing Director at Y Combinator, where I work with our growth stage companies. I'm excited today because we have two amazing guests, Christina Cacioppo, the co-founder and CEO of Vanta and Wade Foster, the co-founder and CEO of Zapier. Vanta automates security and compliance for startups and was part of YC's winter 2018 batch. Zapier automates work by connecting with over 5000 apps and was part of YC's summer 2012 batch. Welcome, Christina and Wade. Thank you. Thank you so much for having us.
SPEAKER_03: Before I go dial in, where are you guys joining us from?
SPEAKER_02: Central Missouri.
SPEAKER_04: San Francisco. Awesome. Well, both Christina and Wade made the great
SPEAKER_02: decision early on in their company to actually take a disciplined approach to fundraising. I think both of them flipped the equation of a typical startup founder, instead of raising money to enable a certain amount of growth. They just eliminated the idea of fundraising, control the spend and decided how to grow the business. I remember this vividly because I actually know both your journeys from the early days. I remember the idea of fundraising, which was really important. I remember Zapier Wade. Even though you moved from Missouri to Mountain View, you decided not to fundraise, built the company entirely remote, even before remote was cool. And Christina, you went through YC almost six years after Zapier did. But even though your batch and a lot of your peers were focused on raising money, a lot of money from the firm, you were able to just build the company and you're going to be very disciplined and focused on building the company. And so, both of you bootstrapped for a while. It's sort of taken a different journey. Vanta pretty much bootstrapped almost I would call until your first probably the growth stage. But then you decided to fundraise and now you're valued at 1.6 billion. So Christina, why did you wait so long? Can you talk us through your journey from 2018? For how long did you decide to bootstrap? And why did you pursue that path?
SPEAKER_03: Yeah, and Anu, I'm sorry, I broke up a little bit on my side. But that was a question for me about waiting so long before fundraising.
SPEAKER_02: Yeah, so you went through winter 2018. You probably raised some money in MRA, but you didn't fundraise for a while. So can you walk through the journey? Why did you decide to wait? And when did you raise? Yeah, absolutely. So okay, so as Anu mentioned, went through
SPEAKER_03: YC and did seed round after that. And then just very much tried to build Vanta into, you know, what we jokingly and also jokingly and also seriously call a proper business, but at least a business that could stand on its own. And this was really important to me because I actually graduated like finished school and kind of graduated into the 2008 recession, basically, and was really fortunate to get a get a job generally and then get a job at an early stage VC fund. And it was just really clear that not just the folks I worked for, but generally, investors really wanted to fund businesses that did not actually need funding. And kind of conversely, if you want to be funded, the best way to do that or achieve that is to actually not need funding. And so there's a little bit of like that, that I think just got kind of baked into me very early in my career. And so when we finished YC, we, you know, I did have that seed round. And we're kind of operating toward cash flow breakeven, not profitably, but breakeven. And the idea was we just, you know, again, really wanted to build an actual business that in some ways didn't need to be funded such that we could get it funded more easily. And honestly, we wanted to make sure we were truly building something that people wanted. And I say this because also kind of we're having that neat experience of working in early stage VC, you see a lot of folks working on things that people may or may not want. But when you, you know, have a bunch of money, or you're kind of not, you're not as forced to confront that reality. And so this was another way of just kind of that check on are we building toward product market fit? Do we think we have it at this stage? And so that that was also really helpful and really important too, because I think there's, you know, for founders in particular, like a very pernicious failure mode here where you can work on something for years. And if no one kind of actually ends up wanting it, if you don't get to product market fit, that's just really frustrating. You've spent all this time on something that ultimately kind of people don't want and doesn't really go anywhere and certainly doesn't achieve the like goals you probably had when you founded the company. And having done that several times in my earlier career, right, having built things that I thought people wanted, but they actually didn't. That's just really frustrating. And so very much almost trying to orient early Vanta around that not happening. And by that, I mean, you know, really confirming to us that we were building something people wanted, and using, you know, their willingness to pay and their willingness to pay up front as a proxy for that. So that's not how we thought about it.
SPEAKER_02: Great. I think the biggest takeaway here for the audience is what you exactly said, Christina, which is investors want to fund businesses that don't need money, which is so true. In fact, we often tell founders the best time to fund raise is when you have a lot of cash on the balance sheet. Now, let me double click Can you double click a little more Christine on the exact journey, which is how much did you raise at seed? And then how long did you wait before you raised the next round? What was the scale of went roughly? And why did you decide to raise especially if you were breakeven at that time or cash flow positive? Yeah, so we it's okay. So this YCC round was about $3 million,
SPEAKER_03: which in 2018 felt like, you know, I think was probably the least upper half of post YCC rounds. So we did that. And then we, and that was again, call it April 2018. And then we mostly didn't touch that money, it kind of went up, up and down a little bit months, months fluctuations, but mostly was still in the bank, when we went out in early 2021 to raise a series A. So that round closed in I think, April of 2021. So April of last year, and about three years after our seed round. At that point, we were $10 million in revenue. And so while it's you know, a series A, it's the first round, it kind of looked more like a B or a C round almost. We were at $10
SPEAKER_03: million in revenue. It was a $50 million raise. And, you know, honestly, one of the big questions I got from a lot of investors was, it looks like you've gotten to $10 million on kind of not a lot of money. In some ways, I'd like, you know, we'd like to give you more, but are you just going to have it sit there? Right? Like, are you actually going to start spending it? And the answer was like, we're definitely going to start spending it because if I if we weren't, I would not be here and I would not be, you know, trying to dilute, you know, the company and all the people who banter that's, that's kind of not fun. But it felt, you know, we had kind of true signs of product market fit. All of our kind of sales and marketing metrics sort of implied that, you know, if you if you spent more money on kind of customer acquisition, you would actually, you know, sort of like put $1 into the machine, get more than $1 out. So in some ways, we sort of foolish to not being doing that. And then the other part very specific to Vanta that factored in was, we had such good product market fit, I think because we had created the product and created the category and we're the only one doing what we did. And it was hugely resonant with the market. And that was wonderful. But others were starting to catch on. And so they were the first signs of like, people basically copying Vanta and it was Vanta but you know, different name and kind of worth product, but they were going out and getting funding because investors were like, well, you know, I don't feel be able to invest in Vanta so I'll invest in knockoff Vanta. And, you know, as much as they can, you know, kind of joke about knockoff Vanta, there's a part of this is just very much execution based. And, you know, I really didn't want to be one of those Silicon Valley stories where you're like, Oh, yeah, that company, you know, did the innovation and created the product, but ultimately lost the market. And so, you know, winning the market we created was was very much the goal and very much part of why we raised when we did and why it was kind of so such a quote unquote, big raise that we did.
SPEAKER_02: It's so funny, you say that knockoff Vanta is an example, I can say, for every YC company that are so many knockoffs. So but what I'm hearing is, Christina, you're saying, hey, you had such strong product market fit, that you said, if I had more cash, I can grow this thing much faster. And I know it works, because we have enough points, and we're already at 10 million revenue. But let me push you a little bit, because three years, for three years at YC, well, all your peers were raising left, right and center. And I know that a lot of people preempted, tried to preempt. They were like, why you held
SPEAKER_02: black back with a lot of discipline, which I think is actually harder to do. So tell walk us through what was the mental model? It was not that you were not able to raise people who are giving you money saying, Christina, you don't need to fundraise. What was your mental model on saying, No, I'm not ready now. I don't want the cash now. And why was April was April 2021 the right moment? And how did you say no to all those prior investors?
SPEAKER_03: Yeah, so the thing I told investors, and it was mostly true, it's honestly a little bit of posturing. But was, again, I can, if I take that money and put it in the bank account, you know, we'll and we'll, you know, series A from whatever firm and whatever valuation, like, everyone at Banta will feel very good. And then we will wake up and realize, oh, we don't actually know how to spend that money, or we can't spend it. And so now we just deluded ourselves, you know, 10-20% for sort of like a couple days of feeling good like that, that's not a good trade. Anyway, kind of jokey, but there's actually kind of a real point there, which was, we, in theory, sort of knew you're like, okay, well, what do you do with the money, you hire people, you spend more on marketing, you know, whatever. Sure, we were hiring as quickly as we could. And, you know, I would, I would also say early Banta wasn't the best at hiring either. But we were hiring as quickly as we could. And so it's like, well, will more money help us hire more people? Not really, right? Because we're almost trying to, you know, bankrupt ourselves right now by hiring. And it's still still not going fast enough. And so similar with marketing, you're like, well, yes, we should do more marketing. But like, when we need a couple, we need a marketing person, we have no marketing people. It's kind of a point of pride in the early days and also tremendous embarrassment. And so I think there was just a very pragmatic piece to it for me, which was, again, we can take this money and feel really good for a couple days, but then then we'll just, you know, have dilution and kind of be in the same place. So let's not take that money until we know we can actually use it, right. So we reset recruiting or, you know, find a few tremendous early marketing people, which we did, you know, things like that. So I think it's that sort of pragmatism, coupled with the confidence and again, I think, so the HVC experience of truly, you know, to the unless something unless we go horribly off the rails ourselves, investors will still want to fund us. And virtually waiting longer just makes them want to fund us more, and kind of puts us in a stronger negotiating position. And so, you know, in some ways, it's just kind of good if you can wait and justify it to the business that way. So that was the thought process.
SPEAKER_02: Great, yeah, two things there, which I think actually probably your US suite, the VC experience really helped. One, you touched on dilution quite a bit. And I've often seen founders sometimes miss that. Like, it's really cool to keep raising grounds, but actually you're diluting yourself and causing more dilution for your employees. And then the second one you touched on was, hey, if you don't know what you're going to do with that extra cash, then why are you diluting yourself? Right? Which which makes more sense to? I'm going to turn it away to you, Wade, your journey started off similar to Vanta. But you never raise. So and I know every time I meet you and I talk about this, you say I don't know what to do with the money on the balance sheet. So why will I raise more? So why would you talk to me, Wade, about your experience, especially go back to 2012, when you went through YC, how much money did you raise at the seed? And then kind of why did you not raise what has the journey of ZPL be?
SPEAKER_04: 12, we raised 1.3 million, you know, right around demo day post YC. And in hindsight, if I could go do it again, I would have tried to do about half that. Knowing sort of what I know now, now, the mindset that we were in at the time was, we were going to sort of do a seed round. And we were going to see how long we can make that last is like treat this like the last money we were ever going to get. And the main reason we did it was, you know, we just moved to California, and the rent was pretty freakin high. So just to like pay for things, we needed a little bit of cushion in the in the bank account, I think we were making 6k of MRR a month at the time. So like a nice little start, but by no means, were we, you know, sort of, at the trajectory that we thought we could be at. Now, the sort of like rationale we had around fundraising was, I think, sort of split focus. At the time, you know, the prior company, myself and my co-founders that worked out was a fairly large, fast growing company here in the Midwest that was owned by two brothers 5050 had never raised a dime. And I was employee 500 there in 10 months later, when I left, there was over 1000 people there. And so I'd seen sort of upfront like this story around how, you know, bootstrap companies could grow quickly. And as a result, like I was already just a little bit skeptical for a lot of the advice you'd get, you'd hear these lines, like, you know, big company could ever be built without doing x or y or z. And I had this upfront example of that just not being true. And so, you know, you hear that, and then you combine that with a lot of the sort of stories you hear about, you know, investors sort of messing up these little seedlings of companies. And you start to go what you know, whether that's true or not, like some of it, I think is, you know, rightfully earned by investors, and some of it I don't think is fair at this point in time. But as a result, you can sort of get into the mindset of where we were at, where it was like, hey, we want to, you know, sort of maintain control over this thing. And we really want to be able to sort of, you know, do it on our own. And so that was the mindset that we were in. And there was another thing along the way that I think we figured out, which was how to grow our business in a very cost effective way, you know, we figured out how to generate customers at a very low customer acquisition cost, in fact, almost zero. And as a result, folks would convert through sort of this like product like growth motion. And, you know, as soon as they start paying that was, you know, profits for us, not just revenue, but actual profits, like within a month or two. And so that meant that not only, you know, we're sort of just like philosophically, like oriented more towards this, like bootstrapper mindset, but we also have a business that structurally could pull that off, which I think is one of the things that folks often miss when they sort of look at this model, they think, Hey, I philosophically would like it this to do it this way. But they're also not in a sort of business that allows them to do that. And so it's just really tricky to do. And then, you know, a lot of the stuff that Christina shared, you know, I would echo, like, at a certain point, you know, we were hiring and pushing and growing and investing as fast as we could. In fact, if I think back through our headcount growth, it looks something like this, it was, you know, three, started with three founders, and then it was team of seven, the next year, team of 16, the year after that team of 35, I want to say the year after that 75, the year after that 160 the year after that. So you know, we're pushing headcount up doubling it year over year over year, sometimes more than doubling it, which, for us, like that was aggressive. We're first time founders, we're learning how to manage a team, we're learning how to, you know, hire executives, we're learning how to do all this stuff. And it sort of felt like we were just on the edge of the wheels coming off the bus so often than not. And we're just fortunate that the revenue was coming in that we didn't have to worry about funding being the blocker for us to continue growing, it felt like there was these other constraints in the business that we always had to address first. And so, you know, when we sort of think about like, hey, would
SPEAKER_04: would we do more with more capital? Oftentimes, we just look internally at like, what's the constraint, what's holding us back? And if the answer to that question isn't money, we don't really think about funding, we just think about what are the things that we got to do to address the current constraint that we have today. And that's sort of been a good story for us. And it's allowed us to avoid, you know, dilution, keep control, all these other things that I think have had been really effective and helpful for us along the way.
SPEAKER_02: That's great examples, Swetha, and I actually I loved how you started, which is said if you had to go back, you will raise half your seat. I just want everyone to hear that. So he waited saying he would have raised 600k and not 1.3. But I think there are lots of benefits that you have of the Zapier model. And so I want to, you know, unravel that here, how much of that was deliberate by you versus how much of that was the business model itself lent to it. So first, let me ask you, did you always want to build a bootstrap company where you just like, I really need this to be bootstrapped, and we're gonna find product tax? And is that how you landed on this idea? And can you touch a little bit on when did you know Zapier had product market trade? And when did you know it was a business model that can that could be supported in a bootstrap way? Probably predisposed to that just because of growing up in
SPEAKER_04: Central Missouri, like just didn't know like, you know, venture funding wasn't really a thing. So you sort of are just exposed to a lot more classic business, where, you know, you sort of, you make a buck, and then you can spend a buck, you don't get to spend a buck before you have one. And so that sort of orientation was just sort of like, I guess, in the DNA and the bones of the company. I don't know that we are like opposed to this other thing. It was just more of an unknown. It was just sort of like, how do you do that? That sort of feels like a hard thing to learn how to do. Whereas the other thing just sort of felt very, like, natural, I guess. And so that was sort of the mindset. In terms of then, like, you know, when we felt product market fit, I think, you know, we felt it pretty early on. You know, I'd worked at a smaller company before Zapier that never got the product market fit. And so I remember, you know, being on the go to market side of that business and trying to do, you know, a lot of the things that I was trying to do anything I could to get like, to sell the product. And, you know, I tried like direct sales, I tried BD deals, I tried like paid marketing, and email marketing, and SEO, and like all these different things. And just none of it worked. It was like, it's just grueling. And with Zapier, I don't want to say it was easy. But you know, the first person I got on phone call was just like, great, how much do I pay you? When do I sign up? And I was just like, Oh, I guess when you make something people care about, it's just easier. Like, people just want it. And so we felt it pretty early on, even before like revenue was coming in the door, even before, like we had, you know, a sort of really strong go to market engine around it, we sort of felt like, okay, like, people want this thing, this is going to help them out. And so that was useful. And then the second piece was, we had figured out like a repeatable go to market motion very, very early on. So we knew how to use search and partnerships and content in a that could grow the customer base without a ton of capital. And so figuring that out early, early on was a huge advantage to us. And then there was other structural things that, you know, I think just gave us a little bit of an edge. So for example, we had this philosophy of don't hire till it hurts. And so as a result, that instilled some discipline around spending money, because the biggest expense you have as a company is the headcount. And so just by saying we're not gonna we're not gonna hire sort of like, in a speculative way, we're gonna hire in a very, like, you know, known way where it's like this problem, we have it, we feel it, and we know we have it. Because like, we're doing the work, and we feel it every single day, that meant that when we hired someone, we knew exactly the job they were going to do and be exactly where that money was going to go. So we did things like that, you know, the remote work bottle, you know, at the time, it was because one, we sort of didn't have a network in Silicon Valley. So we just like, we don't really know any people here. But two, it ended up being a way that a tiny little company could get like strong talent and not have to go toe to toe with Google and Facebook and Netflix and all these other folks who were paying, you know, just exorbitant salaries. Whereas in, you know, the Midwest and other areas, you could, you know, pay really good salaries, and folks would, you know, be thrilled to work for a company like Zapier in, you know, 2012. Obviously, that's changed a lot now. So I don't think you could do that same, you know, playbook over again. But, you know, there was just little things like that where we were just looking for places where we could get an edge, we could get we just sort of could take advantage of something that most other companies weren't really paying all that close attention to. And as a result, like I think it helped us, in addition to some of the like structural advantages the business just had.
SPEAKER_02: That's such a fascinating journey. How many customers wait just for the audience? Can you share the scale of Zapier today? How many customers you've touched? How many Zaps or any scale that you're able to share?
SPEAKER_04: 100,000 customers, I think is the latest numbers we've maybe shared.
SPEAKER_02: Great. And let me ask you, so hiring, you touched on that. And I think one takeaway here is your philosophy was, we don't hire until it hurts. So that means really, there was a gap. And you're stretched or something is broken, and you need to hire. One of the biggest pushbacks founders will say is, hey, if I fundraise, and if I get, you know, if I'm able to raise money from a really good investor, it really helps accelerate hiring for me. And you never heard you. I mean, you still never raised money. And you did have some, you know, secondary rounds along the way, but it was much later, much, much later. So how did you manage hiring for the first five years when no one said, here's Zappio that raised series A from this Silicon Valley, you didn't get any press? So how are you able to hire so well?
SPEAKER_04: Well, so I think the biggest thing that we did well was, you know, we decided we were going to hire in a distributed remote way. So that already set us apart, because very few companies were doing that at the time. And two, we wrote about it. So we would write, you know, about like, hey, here's what we're learning about building this company this way. And that attracted the attention of folks, you know, throughout, you know, the United States and the world candidly, that we're just sort of like, hey, that model is interesting. That's intriguing. So that helped us get a little bit of attention to us. We also added like little we hire, we're hiring links to our main nav. And the user base that we had was a good recruiting pool for us. Because we had, you know, customers that were, you know, excited and passionate about seeing the product at advanced. And then we tried random stuff to like in 2016, we launched this thing called the de-location package, which was, hey, we'll, you know, pay you 10k to relocate from San Francisco to anywhere else in the world, which at the time was like, a pretty wild idea. And it like broke into mainstream news and was like a huge amount of attention and buzz at the time. So we tried random stuff like that. And all those things just raised the profile of Zapier as an employer.
SPEAKER_02: Yeah, I remember a lot of people applied to Zapier at the time because you were giving the option to be remote, and you were even willing to move people to different places. But let me let you know, I want to push you on that a little bit. Because I know it's not as easy as you made it out to be, even though the steps you laid out are pretty much what you did. There might be employees that you really wanted to hire, and they would have asked you, hey, does Zapier make money? It's a startup at the end of the day, it's risky. It's not a doesn't seem at least perception wise blessed by a VC. How did you handle those in, you know, especially if you thought the candidate was really good and you wanted them to accept the job? Like what was the hardest part of being of using this approach of being bootstrapped?
SPEAKER_04: Really wasn't an issue. When you're hiring outside the valley. That's very much a like valley centric point of view. But if you're hiring across the country, these folks were just thrilled to be getting to work for a modern, you know, company. I think the town I grew up in, there was two old school folks that hire developers, but there's a lot of good developers in town. And so just the fact that like Zapier was an interesting company working on like pure play software, it just made us stand out so much more than anyone else. And the comp we could pay was better than those local towns. And so they just didn't have that type of concern around, hey, you know, what's your VC, like, who's your name brand VC that's raised, that you've raised from? And we were already profitable. You know, we got to be profitable by 2014. And at that time, we'd had 10 people. So we weren't really hiring, like, you know, all that quickly. So it just never came up. The first time it really actually came up was as we were starting to get to scale, and we needed to hire executives and executives, definitely much more savvy, sort of group of folks that you're recruiting. You know, we're looking for folks who had experience doing that there definitely is much more density of executives in, you know, Silicon Valley, and, you know, bad exposure to those companies. And so that was the first time we really had to get a lot better at our sort of just growth pitch, I guess.
SPEAKER_02: Got it. And thank you for reminding us that that is a value centric view, which is very true. And I think that's very true. And I've heard this consistently from so many founders that, you know, hiring outside the Bay Area, especially for engineering, has proven to be a big net positive for a lot of companies. For this reason that you're highlighting, I want to switch gears, and I'll come back to you, but I want to switch gears to Christina, Christina, talk to us. So you heard vague journey of product, market fit and hiring. Can you highlight what was Vanta's journey to product market fit in those three years where you didn't raise right, but 10 million revenue? Like, of course, you had strong product market fit, but in those three years, what did product market fit look like? How do you actually measure it? And talk a little bit about hiring, you also didn't have any VC money, but arguably, you're based in San Francisco. So I don't know if you hire people in SF. And so talk about did you run into perception issues? Or how did you manage that with just the seed money?
SPEAKER_03: For sure. Okay, so two things, the product market fit, and then also hiring. But do I have my, do I have that right? Go ahead. Cool. Okay. Yeah. So on the product market fit, so I think of a go through kind of tactical steps, but first, just like as an overarching frame, I think you can't raise your way into the right product. And that sounds obvious, but I actually think, again, to some of the questions, the conversation about 20 minutes or so, like, it's sometimes going to make it seem like you can, but I don't think you can. And so, you know, if you're thinking about raising, I think it's really important to think through what problems money can solve, and what problems it can't. And I think product market fit is one of those things that it can't money can't really solve. Right? Because if you can't get kind of people with an arm's reach, however you define that interested in your product, running all the Google ads in the world will probably not help. And so what we did was we started with kind of the our very first customers were honestly like other founder friends in San Francisco. And the advantage to that was these people were willing to take a bet on us as people. And it was basically a bit of like, Hey, Christina, I don't actually know how much you know about security and compliance. And I'm not sure your product is any good, because you know, it's early days and no one is using it. But I know you. And I know you kind of want to do this well and don't like to fail. So I think you will work very hard on this. And you know, I'm willing to take that sort of bet. And that was really like how we got the first people to try it out, which was kind of like the foot in the door, preferably. And then you actually have to build a good product, right? Because even your friends will be like, look, this is great. But you know, you should, you should do something else with your life, like it's not working out truly. And that's actually kind of helpful if they start saying that. All
SPEAKER_03: to say, though, you know, the very early versions of Vantower could have gone to those folks and for $0, because we didn't know if we had anything and basically trying to build a product with them. And it started in spreadsheets, and then eventually moved to code. And the reason even though we could code, the reason it started in spreadsheets was, because it's actually kind of hard to change the code you're writing, but it's a lot easier to change a spreadsheet. And so it's just easier prototyping. But anyway, we'd have this early product. And then, you know, you kind of go to people in a couple of months later, I'd call them up and sort of be like, Hey, step one, like, please be honest with me, like, the nicest thing you can do for me as my friend is to be honest, not tell me what you know, I think you should hear because like, if you tell me I should work on this, I'm going to go pour the next couple years of my life into it. And if you don't think I should do that, goodness, tell me now. Anyway, so you're like, step one, please be honest. Step two, it was, okay, I just, you know, gave you this product. And we spent the last couple months working on it. What is it? Like, you tell me what the product is. And that was a test for like, a little bit of like, what they thought I gave them. And again, when I built stuff in the past, and then this mostly when I'd ask this question, people would not say what I wanted them to say. And it was very sad, but it was also very clarifying. In the case of Manta, people would be like, Oh, it's a security and compliance advisor that told me what I need to do to sort of stand up security at my company and get a compliance certification like SOC 2. And
SPEAKER_03: somebody would tell me that and I'd be like, whoa, that's what I wanted you to say, but you actually said it. I've never, this has never happened before. So yeah, so there's that of like, can you play back what I want to hear? I think it's actually a high bar. And then it was like, okay, great. Baldi, you know, now that we have this, you know, security and compliance advisor that, you know, does these wonderful things for you. How much what's a reasonable price to pay for it? And in my head, I was like, please say more than $0.20 bucks would sound good right now, right? Oh, you know, and people would be like, Oh, you know, maybe $1,000 a month or $10,000 a year. What? I just gave you some spreadsheet. Anyway, but sort of go back and forth and be like, Okay, what you know, how much would you pay? What's an expensive price? What's a like prohibitively expensive price, right? If I charge you that you would just laugh at me. And you sort of get those numbers and anyway, ran this exercise like three or four times with different companies. And it was really helpful. Again, with the caveat of like, you got to get people to be honest with you. Especially people who like and care about you and sort of convince them again, the best thing they can do for you is, you know, tell you if you're running down a dark alley. But give them something, give them your product, and then ask them to, you know, describe what it is, see if that is what you want them to say, basically. And then ask them how much they think they would, you know, pay for it. And we did that in the early days, and there was some iteration, but you know, kind of by the time we got into YC, and this was actually part of what convinced us the right time to apply, is we had these early users, roughly understanding what we were building and roughly saying, Oh, yeah, I'd actually pay you. And then we went through YC. And then you know, then it was a lot of, you know, outreach to other YC founders, and things were actually moving, like, people were buying, they were signing contracts, they were paying, again, what seemed to like comically large amounts of money at the time. You know, my joke here, that's not a joke is Pirate Evanta, the last thing I sold with Girl Scout cookies, it's kind of true, you know, and so you're just like, the sales were working. And by all rights, they shouldn't, it just kind of felt I mean, you're still pushing boulders up the hill every day, to be clear. But it was some parts of it were easier than it seemed like rationally they should have been. So that's kind of the early product market tip piece. I can move over to the hiring, but positive.
SPEAKER_02: 2018, you went through YC, you did a great job walking through how you knew the early users really wanted it, which is test us the users to describe the value prop and see if it matches what you want them to say. But talk a little bit about post 2018 in those three years, which when did you know you had product market fit? Was it 12 months after YC 1824? And what were the signs like when did when were you super confident about? Okay, this thing is ready to scale?
SPEAKER_03: Yeah, okay, sorry about that. Let me take my headphones out. Hopefully, this is better. Um, okay, so went through so felt, I mean, I think reasonably good going into YC, I think you sort of have to. So went through the winter YC, you know, got spit out in the end of March, April 2018. I think we felt pretty good because we'd like hit the demo day goal, we'd raised the seed round, everything was great. In some ways, we felt like everything was so great, that I stopped selling for six months. Because it was just the two founders. And we had this thing we wanted to build, but we're building very slowly, just the two of us. And so spent the next six months recruiting engineers. And it was probably the right thing to do, but I distinctly remember kind of end of 2018 was like, Okay, cool. Now we have this team now start selling again, everything is coming up roses, actually going to the YC office and meeting with a partner who very crisply was like, you guys are off track. It has been six months, you have no revenue growth, you know, you should be on track to, you know, have whatever quadrupled your revenue such that you can raise a series A and you guys haven't. So you should get on that. So you don't fail. And I walked out of said, that meeting and the YC office and was like, Well, shoot, I guess I'm not so great at everything here. And that was definitely a low point. But sort of, you know, walk back and was like, Okay, well, we got to you know, get back on track. And you know, that means customer traction and selling and I think it'll work. But you know, I guess proof is in the pudding. And so just spent kind of all my time and mental energy on on selling Vanta. And about six months after that, we were you know, kind of, I don't know, back on track, whatever that means, but you know, it's going so well, it was like, Okay, now let's go hire a salesperson, this feels better. But it definitely wasn't a linear path. There was there's definitely a kind of potential stall out trough in there that was not not not the highest moment.
SPEAKER_02: That's so helpful, because, and thank you for sharing that a lot of people read stories in the press and think everything went up into the right. And I can imagine how the YC office would have gone. But hey, here you are. Now, can you touch a little bit on hiring? So talk about those three years? How many people did you hire each of those three? And how are you able to do that without having raised a CDA?
SPEAKER_03: Yeah, so this is okay, so this is funny. Um, so in the early days, like in 2018, we hired four people, I think mostly engineers. And that pitch was like, hey, come sit like on the floor of this office that kind of smells funny and like build stuff with us and wanted to be fun. And again, I'm being a little loose and jokey here. But that was that was roughly the pitch. In 2019, we hired maybe 10 people, and mostly in the back half of that year, and then the pitch was, hey, we're a seed company, but we actually have product market fit and like, look at the customer graph and look at the sale, like the error graph. And you know, sort of you can arbitrage this, right, like come join a small team that actually has product market fit. And so you get the benefits of a small team, but you don't have to go wander in the desert for a while. 2020, we probably hired 30 or so people. And then it was kind of that the prior pitch, but more it was like, hey, we have kind of millions of dollars in ARR, but are still valued like a seed company. So again, arbitrage for you come in and get sort of cheap equity, but actually much more certainty. That was hard, honestly, because as you know, good as that pitch sounds, a lot of people were like, oh, it's a seed company. It's super risky. And we'd be like, No, no, no, we have like $6 million in revenue. And they're like, Oh, well, you're not a seed company, then. And you're like, well, you know, technically, yes, but also, anyway, there was just a lot of or like, Oh, well, this all is too good to be true. Like, there must be a catch in here. Because no one is a seed company with, you know, $6 million in revenue. And we'd be like, but, but we are we promise, like, here's some spreadsheets that prove it. Anyway, there was just a lot of back and forth there. And I think we also just lost a lot of people in the front who are like, Oh, I don't want to seed company, this one can't be it, you know. Anyway, and so then the next year in 2021, we raised the A. And recruiting got a lot easier in a way that I find painful, and you can maybe hear in my voice. But it was just because people were like, Oh, it's way more de-risked, you know, Sequoia backed them, clearly, they'll be successful now or like, whatever. And from my perspective, it was like, hey, we're the same company before the day before the day after the Sequoia round, whatever, you just get less equity, right? You just get much less than a much higher price. And so it's actually a worse deal. But that is, you know, again, that was my like, hyper-rational take on it. And the reality is, the series did, in fact, help us recruit, both in terms of attracting candidates, like kind of top of the funnel, and then also closing candidates, even though again, worse financial outcome, say it joins like a month prior. But anyway, the, you know, kind of arguing with candidates about their rational economic decisions is not a winning recruiting strategy, I can, I can confirm now having tried it. So Christina, what you said, that's so interesting that it
SPEAKER_02: got a lot easier after that series, say people said, hey, Sequoia led the round should be a lot more de-risked. But that like almost conflicts with what Wade said, right? Wade said, hey, I didn't see any issue as long as I was hiring people outside the valley. So where you primarily, was went up primarily building its team in SF and where most of your engineers from SF?
SPEAKER_03: Yes. So prior to COVID, we were all SF. And then during COVID, did you know, kind of spread out much more as still team by team. There's some nuance, but yes, these were all folks in SF. Yep. So how big is your team today? And how distributed are
SPEAKER_02: you? Like what percentages in the Bay Area versus outside?
SPEAKER_03: Yeah, so we are about 250 people today. The, I don't actually have these exact numbers, which sort of tells you how we think about them as a company, but call it a quarter in the Bay Area broadly. And almost a quarter in like New York City. So we have kind of hubs there. Everyone else is spread out across the country. Although geographically, probably looks like you'd expect like bigger pockets in Seattle and Austin and Atlanta and Boston and you know, cities like that. Got it. And did you say issues, so you said all those
SPEAKER_02: complaints or issues that you heard about associated with fundraising and hiring was primarily Bay Area, but not for 75% of your group. Basically, caveat in that pre-pandemic. Yes. Post pandemic,
SPEAKER_03: I think it's a little different because like Bay Area people moved to it. Just one example, right? Or New Yorkers moved to Atlanta. And so there's, I think, my guess, you know, relative to 2019, actually a lot more started in 2019. And then it's kind of savvy people in Atlanta. And so really still get that too.
SPEAKER_02: Got it. So wait, tell me if you're seeing something different. Was it easier the first seven years at Zapier versus 2020 hit and everyone went remote? How has your hiring changed? Has it become harder?
SPEAKER_04: Yeah, I will confirm, you know, Christina's story about trying to convince candidates on sort of the like, you know, their rational economic choices is like, definitely a, that's a real thing for these types of companies where they just don't understand, like, the mechanics of like, 409As and public valuations and investor prices, and, you know, all the strike prices, all that sort of stuff. Like, that's a whole thing that just is just not very well understood. So I'll confirm that. In terms of the pandemic and its impact on recruiting, it definitely changed things. You know, I think we had, you know, sort of a huge competitive advantage up until the pandemic, because just very few companies were doing that. And, you know, most companies said, hey, we're actually going to compete in a remote environment, at least in 2020. And you know, I'd say a ton of those companies still are doing so. And so the pool of people hiring across, you know, the country, and certainly the globe has changed a lot, we see a lot more competitive offers in, you know, against companies that we just never saw before.
SPEAKER_04: So that has definitely happened. I think you also saw a huge influx in capital into a ton of these companies. And so the demand for certain types of talent went through the roof, you know, recruiters in particular, you know, are difficult to recruit for. And so you just saw this, like really frothy recruiting environment where, you know, people were getting, you know, amazing offers from various companies and, you know, sort of money was changing hands left and right. So that definitely changed the dynamic. Though, candidly, that's also started to shift again, in the last, you know, three, six months, and with sort of the softening and inflation and interest rates and all that sort of stuff, you know, you've seen companies starting to doing a lot of layoffs and things like that. So it's, it's kind of like, okay, now we kind of have the same competitive edge we've always had. So definitely there for, you know, two years or so it was a much different environment for us to recruit from.
SPEAKER_02: That's interesting, you know, I, so of course, inflation is really sexy and everyone talks about it. But I think if you look at engineering salary inflation in the last two years, it's probably, you know, a factor of two to three x more than the rest of the inflation. So I'm sure every startup felt that. Let me ask you, Wade, because you still didn't fundraise, do any equity fundraise for Zapier, was as Christina Atlanta did, right? And there were good reasons for her to do that. What was your mental model? And I know, like every year, like that, I often joke, the number one investor request we get is can we get an introduction to Wade, please? So I know there's a lot of people who have asked you, will you raise will you take money, but you just have been very disciplined about it. So what is your advice for the group here or for founders? What was your mental model on? Will you fundraise or not? And why did you how did you choose not to fundraise versus when were you even remotely tempted? And what's the framework you use?
SPEAKER_04: Yeah, I think it comes back to that, like, where are the constraints in the business? Like, what is the things that you're trying to get done? And what's holding you back from getting those things done? And, you know, figuring out how to address those for a longest time, it's been like, how quickly can we hire an onboard folks? And, and, you know, that and that wasn't really a money problem, we had the money to do it, it was just sort of getting our recruiting apparatus to hum along at that rate. You know, it's understanding, like, do we have, you know, what opportunities are we placing bets on? And do we feel like, you know, we can do the dollar end, you know, $2 out thing that Christina was talking about, it's trying to figure out like, what problems can money solve versus what they can't solve, like Christina mentioned. And so, you know, those are the mental models we were thinking through. And is when we sort of just did the calculus on our side. We were like, we have the revenue, we have the balance sheet, to go like chase after these problems, we have other problems that we got to figure out how to address that are more you know, competency oriented. And so that's where our focus was, you know, I think there's the times that, you know, we would be tempted would be because of things like, hey, maybe there's some like M&A type thing that we want to go pursue. And, you know, that requires a big chunk of capital that maybe we don't have access to right now. You know, so those are the types of things that would sort of get our years to perk up. But otherwise, like, you know, it's, it's nice, it's flattering to have folks interested in the company, but it never felt like that was in the interest of the business or us to take on that delusion at the time.
SPEAKER_02: And one other question for you, Wade. So there's a big debate right now, which is remote courses in person. And, you know, there's one school of thought that says, hey, especially the first two, three years of a company, like, remote doesn't work, and they feel people need to be in person to crack and find product market fit. And then you are an exception. You and GitLab, I would say Zapier and GitLab pretty much built it remote first from day one. And so can you talk a little bit on your early days, how were you able to pull that off by being remote and still get to product market fit? Because it's really rare, right? Very few companies have done that. Well, so the first year of Zapier, the three
SPEAKER_04: founders, we're, we're mostly in person on stuff. So that might confirm the rationale or not, I'm not sure. So, you know, we were in Columbia, Missouri, doing like nights and weekends stuff together, you know, working out of each other's apartments and things like that. And then when we went through YC, we all live together. It was post YC, where, you know, we started to sort of move about. And so that was about a year into the company. And at that point in time, you know, we had like clear signs of product market fit, we had clear roadmaps to execute on. And so, you know, I think there could be merit to that, like, hey, pre product market fit innovation stage, like maybe it is advantageous to be in person, like, it's that that could have some, you know, truth to it. And then once you sort of understand like what it is you need to get to get done, and it really just becomes a laundry list of tasks that you got to execute on, maybe it is a little bit easier to do that in a distributed way. So that certainly is how it played out for Zapier. And I don't know that I know the answer to that. I do think that, you know, as you're thinking through building a company, I would probably, you know, pick a lane, I would probably pick and decide to be all remote or pick and decide to be all in office. I think the hybrid approach is probably the most challenging of the three options. Though Christina might have a different opinion on that hearing her like hubbins, a hub model that she's got going on. But I do think it's advantageous to say this is who we are, this is the culture we're going to build. And then you could orient all of your rituals, all of your practices around that way of working instead of trying to juggle two different modes of operating.
SPEAKER_01: Got it. Christina, what would your advice be for a founder
SPEAKER_02: starting right now? Would you recommend in person? Or do you recommend remote or hybrid?
SPEAKER_03: Well, okay. I feel like some of these questions, I feel like people always say, the thing that works for them is the thing that everyone should do. So I think I'm just gonna I just say that, because that's what I'm gonna do. So everyone should take it with like a massive block of salt. But I think for us, sitting in the same room initially was really helpful, because you could just look up and be like, yo, do you see that support request? Do you want to blah, blah, blah? Yeah. Okay. Okay, I got it. Awesome. Going. Right. And you could just do that all of that. I think one thing early Vanta was okay at. And today, we are still only okay at and I really admire about the distributed teams is just how good they are at documentation. And I think there's two parts of that you've got to write things down, which Vanta is pretty okay at. And then you've got to make sure other people can find your documents. And I think this is where Vanta honestly doesn't have the muscle that I think these like remote first companies have. GitLab is a canonical example here with your wiki, but there's other ways to do it. I think that's just extraordinarily valuable. Because when you are a you know, multi hundred person organization, you've just got to figure that out, or everyone will be running around confused. And these remote first companies sort of have to figure it out at five people because again, they don't have the like, you know, look up from your desk conversations. So all the same, being in the same room early on really worked for us. Just with all of these are our trade offs. And I think one thing I really admire about the remote first companies is how good they are at you know, getting people spun up a sink, writing documentation, finding it, you know, really letting people solve their own problems, or you know, figure out their own answers on their own and not need not needing to block on someone time zones away.
SPEAKER_02: Got it. And how long Christina in Vanta's experience do you think in person was super important? Was it till you had 30 employees 50? Like, or is it dependent on employee or is it some other lever?
SPEAKER_03: So some other I mean, we were in person till about like, low 20s of employees, and then it was COVID. And it was, you know, March 2020. So like, no one had any options. I do remember that summer, spring, summer, fall being rough. And it's kind of hard to be like, okay, was it rough? Because you went from, you know, 20 to 35 people was it rough? Because you went from, I don't know these numbers, but like 200 to 600 customers? Was it rough? Because there was also a pandemic. And you know, it's the early pandemic. So we all weren't leaving our houses, kind of sad pandas, you know, that was all hard. And I remember at the time distinctly being like, man, at least every other company is also going through this right now. But the coordination here is not great, and really dragging down things. And this is hard, distinctly remember that feeling and like, call it June 2020. And yeah, maybe just what it felt like was, you know, everyone was running around, really hard trying to do helpful things, but sort of just working at kind of cross purposes almost. And so there was a lot of effort, but not not the output that anyone wanted. And that was just frustrating for everyone.
SPEAKER_02: Yeah, that was a difficult period for everyone transitioning all of a sudden from in person to remote, but roughly till at least 2025 if the pandemic had not happened, you know, you were operating under the assumption that this is in person. Exactly. Yeah.
SPEAKER_03: Okay, I think we have time for one last question. So this is a
SPEAKER_01: question that I'm going to ask, which is top of mind for a lot of people. Christina, how are you thinking about fundraising today in this environment, economic downturn? And what
SPEAKER_02: advice do you have for funding? Yeah, so in some ways, it's the same advice just heightened. So
SPEAKER_03: we actually did fundraise at the end of April, round got announced with Series B. It was it was different. Can't confirm. In this environment, I mean, investors are just so focused on metrics and sort of a different set of metrics. And so we're just kind of a different set. So like 2021, if there are metrics, it was all kind of revenue growth, how quickly are you growing? Well, 2022, it was a lot of like, you burn multiple. So for every dollar that you're growing, how many how many dollars you have to spend to get it? Like, what is your, you know, path toward cash flow breakeven or password profitability or password unit economics or whatever it is. So just way more scrutiny on those metrics. Pretty unforgiving. If you're like, Oh, well, we have growth, but you know, we're spending $10 to earn $1. Like, then it's just like, No, sorry, next, please. swipe left. I think in general, this isn't. And then I guess with the like public markets crashing, you know, people have a lot of like, well, should I invest in, you know, Vans? Or should I invest in I don't know, a picture, you know, data dog at whatever price it's at, that actually looks relatively cheap. Those are just harder trade offs for investors to make. So I do think my kind of macro advice right now, having gone out and fundraised in this environment and successfully around is, if you can push your fundraising out would recommend doing that. And then if you can't, or if you're doing it, it is just all about kind of unit economics, burn multiple CAC to LTV ratios that makes sense. Like, it does this seem like a business where again, you put in $1 and you get $1 out in kind of a near term, because things where that's not true, just not getting funded.
SPEAKER_02: Yes, that's probably good advice, which is focusing on efficiency. And it's not very different from how you started off this episode, Christina, which is, hey, the best time to fundraise is actually when you don't need the money. And you're better off always, no matter what the market is, if you're focused on driving both, not just revenue, but also in an efficient way. Vaid, what's your thinking on fundraising and downturn or fund us reach out to you? What's your advice?
SPEAKER_04: You know, running a good business never really goes out of style. So you know, I would focus less on what investors care about, and a lot more on what your customers care about, and how do you serve them, you know, and paying particularly close attention to can you do it in a profitable way. And if you can't, that ultimately is not a long term, very sustainable business. So, you know, pay attention to your costs, pay attention to where you got opportunity and, you know, spend money accordingly. Of course, to the extent you can get to, you know, cash flow positive, then the question of, you know, what the markets look like, becomes somewhat irrelevant to you. Because you can just run your business as if you would. So that's sort of like the ultimate thing to get to. And if you can't, you know, I think you got to think a little bit long and hard about, you know, sort of how you get to the sort of place that investors do actually care to fund you, which certainly seems like right now it's all about unit economics and strength growth, you kind of have to check a whole bunch of boxes, whereas the last two years, you might have only needed to check a few. And so I think you got to be really honest about what that looks like, if you're not able to get to that cash flow positive market.
SPEAKER_02: Great advice. Well, thank you, Christina and Wade for being part of the inaugural episode of Same Same but Different. Everyone, please keep an eye out on our Twitter channel, where we'll soon announce the next episode of Same Same but Different. Thank you for joining us today. Thanks so much.
