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Yes, it is very appropriate to be on here, on Zoom with you, recording these before going into the interview with Eric. If only we had our notes on Viva. Although I think it's a little bit out of our strike zone in terms of like perfect market. We would be the only podcasters in the world using Viva. Peter is very focused on clear and correct target markets. Yes. Welcome to this special episode of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert and I'm the co-founder and managing director of Seattle based Pioneer Square Labs and our venture fund PSL Ventures. And I'm David Rosenthal and I am an angel investor based in San Francisco. And we are your hosts. Today we have something very unique to share with you all. It is common for top venture capital firms in Silicon Valley to get all their CEOs together once a year in one room for a CEO summit and speak frankly with them. It is uncommon, however, to allow anything discussed to be shared publicly. Well today we are doing just that. The good people at Emergence Capital in particular friend of the show Jake Safer invited David and I to interview two very heavy hitters at their CEO summit last week. Eric Yuan, the founder and CEO of Zoom and Peter Gasner, the founder and CEO of Viva systems. I think this is the first time that any content from any venture firm CEO summit has been specifically created for podcast public consumption. It's so cool. I think Peter has never done a podcast before. I think that's right. And he's built a $20 billion company? Yeah, the Viva system story is amazing as you all. Here we talk about they raised $4 million that's four, like one after three. And on just that $4 million that they didn't even consume all of that capital, they've now built a $2 billion revenue business with incredible margins. It's such a cool story. And Peter is on the board of Zoom. And so as you'll hear, he and Eric know each other very well. And it's a super different company that we normally talk about too. It's vertical specific. So it's just in the life sciences industry. They sell high dollar software to pharmaceutical companies. And I think biotech as well, right, David? Yep. Yep. So the topic that we discussed with both of them is capital efficient growth. And that's something we felt would be super valuable for all the CEOs in the room. And obviously that means that we think it's going to be really great for everyone to be thinking about right now. So rapid scaling on very little capital is something they obviously both know a lot about. David mentioned the $4 million total funding that Viva raised before going public. As you remember from our Zoom episode with board member, Santi Subitowski, also an emergence capital partner, Zoom raised $30 million from emergence and another $100 million from Sequoia afterwards. And they never touched the vast majority. If not all of those funds, I think they didn't touch any of that $130 million. Eric had raised the way as you'll hear about it. He'd raised some money from angels along the way and that funded product development. But none of the venture money was consumed. It's crazy. So if you're excited to learn about how these companies managed to pull off enormous impact with very little capital to do so, you are in the right place. And if you want to discuss these topics with us after you listen, you should come join the rest of the acquired community. I think we're 12,000 strong now, David at acquired.fm slash slack. You should join us. It is always a riot. This will be a great one to discuss in there with the community and other founders, including Jake Saber himself from emergence who's active in the slack. It's true. As many of you know, we are excited that these special episodes are brought to you by the Solana Foundation as our presenting sponsor. Now, Solana is a global state machine and the world's most performant blockchain. What does that mean? It means developers can build applications with super low transaction fees, low latency, and not compromise composability since it is all on a single chain with one global state. And many of you have heard this. Solana is capable of processing tens of thousands of smart contracts at once. Today we are talking with Frank, the co-founder and CEO of Genesis Go. All right, Frank, welcome to acquired. Thank you so much for being here. My first question. Can you tell us what is Genesis Go? Thanks so much for having me. Super excited to be here. So Genesis Go at its heart is an infrastructure project building primarily on the Solana blockchain. We've been bringing decentralized networks to a piece of the Solana network stack that's traditionally been very centralized. And by utilizing our native token, the shadow token, we effectively have been able to take very centralized network architecture, decentralized that in a way where anybody can step in, contribute, compute power, storage power, and receive emissions in exchange for that. And what that's provided software developers on the Solana blockchain is the ability to get highly perform an infrastructure at zero cost, thus lowering the barrier for entry for new developers who wanted to come online and need a stable platform to build on. And how exactly are they able to get zero cost infrastructure and how does the decentralization element play into it? That's kind of like the magic of Web 3. We took a page from all these NFT projects out there, we're issuing NFTs and basically used our NFT as a mechanism by which we decentralize our network. Whenever an NFT is traded, there's what's called NFT royalty that gets paid and that pays for our network architecture. And that's kind of looked at back bone, right? The foundational aspect of it. But over time, a network becomes more and more decentralized. The costs associated with running that network, right? The operational costs are spread out further and further. As more and more operators start to come online and those operators, they carry those costs because they're earning emissions. It's very similar to, if you think about the Bitcoin network, right, the actual Bitcoin blockchain, people contribute compute. They're paying for the hardware and the electricity and everything in order to contribute that compute, but they're doing so because they believe that the emissions in the token, which in our case is in shadow tokens, they believe that their shadow token emissions are going to be more than enough to offset their own costs. That's awesome. Frank, thank you so much. Thank you very much. Our thanks to Solana. If you are considering developing on Solana, head on over to Solana.com slash developers, or click the link in the show notes. Now as always, this is not investment advice. Please do your own research. David and I may hold positions in things we discuss on this show. And this is certainly not investment advice from anybody that we had on the show today. So now onto our interview at the Emergent CEO Summit with Eric Yuan and Peter Gasner. So, to set the stage, I thought maybe could each of you please give us a brief overview of your fundraising history up to and including Vivaan Zoom's IPOs, which ordinarily that would take like an hour. This is going to be pretty short. This is going to be very short. I knew it financing history. Thank you. Go ahead. Thank you. Our was a simple angel investors when we just started and then Emergence about 15 months in. Angel investors, I think that was 3 million and Emergence was 4 million. We never actually used the Emergence 4 million, but I thought we might at the time and we got to him within about 100,000 of using it and then we went public. So, that's it. Sorry. Okay. The timeframe we started in 2007 in February and we raised in about 2008 maybe March or so that was the environment at the time. Another very simple time to be fundraising and company building in. Yeah. It was hard to even open a bank account because it was the whole know your customer thing and financial crisis so everything was hard. And I think you'd have probably most people here know this but for folks listening on the podcast today you're doing about 2 billion in revenue at Viva. Yeah. We're doing about 2 billion, about 30% profit or so. Yeah. Amazing. Eric, could you share your fundraising journey with us? Sure. I started company 2011. The first thing I did I opened up a West Faggo Bank Account. I started it. It's very easy for me to reach the capital. That's why I opened up a bank account. Unfortunately it took me for several months. No visits wanted to invest me. Unfortunately I do not know my brother, Sandy and Emergence Capital otherwise life would be much easier. And finally, and the talk is some of friends and it is the three meetings, say the funding. That's how it started. And for 80, 80 on, I try to talk VC again and again nobody wanted to invest us either. And we talk to the friends and get another six meetings and that's how we started. Yeah. It's very hard. And nobody wanted to talk to you at that point because most people assumed video conferencing was either a settled frontier or a race to the bottom. Am I thinking about that right? Absolutely right. That's a thing. I mentioned Eric, you are crazy, the world does not need to have another video conference solution. And another VC friend, you know, even this is great friend. He told me that Eric, I have a check for you as long as you do something else. Good news, I didn't know a listen. I was very stubborn. I'll show you every story. And once I was told by a big VC, I do not want to mention the name. I for sure you guys do not like them. And he told me that Eric, I do not think your story works. You know, look at it sky. Look at the Google Hub, look at the web, it's dominating right? And I debit with him a little bit. I failed and I cannot convince him. On the way back, I told myself, I'm going to change my windows screen server. Back in the last few years, windows were machine. I changed the windows screen server. You are wrong. For several years. And just to make sure I have my facts straight, I believe you raised a $30 million around led by emergence and then another $100 million around after that. And similar to Peter, you did not dip into any of that $130 million. Is that correct? To build the business? For me actually offered a automated, you know, format emerging in the capital. I think, yeah, we are on the right track. To be honest, we do actually, we even do non-linear research, actually. Because at that time, you know, I think of, is that a certain meeting? I think the company completely, I feel like a different game. So, yeah. Wow. That's one thing we wanted to ask is a difference between your two companies. Peter, you obviously, once you got the cash flow profitability, which was immediately, basically, you never raised another round. Or you did make the decision to raise some more capital even after you were generating cash. And Peter, you were on Eric's board when that process happened. Why did you make that decision? Well, for Viva, I didn't raise more just because I thought, I don't need it. You know, it's just that simple, right? So, and then as far as for Eric, right, when you're on the board, right, that's really Eric's decision. So, you know, so, yeah, I mentioned earlier. I thought I'd raise a certain meeting from a, a million capital, at that time, seriously, we had a new plan, or the same ever, to raise another round of capital. And the reason why we still move forward to have a series of digs, because I thought our economy will win, we will go down automatically. So, this was 2017-17, high-frame. I was completed along, so by any way. So, it had been the seven-year bull run. Of course, the end was near, right? Yeah. And, a long story, baby. So, yeah. I think that raising that money at the time, I thought, man, maybe we don't need to do it, but also, I thought, it doesn't matter, right? What matters for Zoom is the great product and the customers. Whether you take some more money, you don't take some more money, right, it's all fine. It would all work out. That's what, yeah. So, as we were preparing for this interview, our first thought was if we just had one of you up here, and we were interviewing you about capital efficiency, it'd be easy to chalk it up to business model and cash flow cycle. You know, multi-million dollar contracts up front, in the case of Viva, or in Zoom, customers flocking with their credit cards for a self-serve experience. These are two completely different models. And so, I think one of the things that it illustrated to David and I is capital efficiency is a mindset and culture thing more than a business model thing. And I'm curious to hear both of your reactions to that, but also what are the things that enabled you uniquely more so than 99% of startups to be so capital efficient? I could take that one. I guess I've seen a little bit of Zoom and a little bit of Viva. I would say probably it starts with a mindset, you know, just run a profitable lemonade stand. And at the same point of view for me, it was their safety in that cash journey, earning businesses always going to be valuable to somebody. At some point, a business is not cash generating, it's going to be valuable to nobody. You might be able to sell it before it becomes it, you know, not valuable, but you can only, there's security in long-term, you know, so it starts with a mindset, I think Eric, share that and then you have to have product excellence too, right? And that's something I think Eric and I share with both product people. I think also we both worked really hard, you know, we worked really hard now. I think especially Eric probably in the first five years I worked really hard and I saw, you didn't see me working really hard, but I saw you working really hard. So work really hard, work really focused, anything that wasn't related to the product or the customer was just BS, you know, and just don't do it. Like, first five years I was not that a conference like this, for example, right? I was just maniacally focused and then the market really helps too. And that's something you just have to get lucky on, right? You have to, it was the right timing for VIVA, it was the right timing for Zoom, maybe if you started Zoom five years earlier or five years later it would have been hard. So product excellence, real focus, mindset, and then you have to have some luck in your market. I'm sure there are some things that I could have tried to do or Eric could have tried to do and it was, we might have picked a bad market and then it just wouldn't work. And that's, I think you have to, so we're outlier, right? And so is Eric, you have to pick something that most people think is going to fail to be an outlier. Otherwise, by definition, you're picking something that most people think is going to work and therefore a lot of people are picking it, therefore you're not an outlier. So just like Eric, you know, most VCs, all VCs, except for emergence, all VCs of any kind of note, except for emergence turned us down, right? And ours is really simple. Vertical specific software, that's a small market and it doesn't work, right? That's what they would say. And I was encouraged by that because I thought, well, it has an opportunity to be really good because it's something non-obvious. Well, one thing that I want to double click on that we were talking about beforehand. Yes, like you need to be non-obvious to have a chance of a great outlier outcome, but you also need to be correct. But I think what you did, what you both did was not, hey, I'm going to pick some random idea that other people think is crazy. You know, I know Viva has one of your core values, clear and correct target markets that you have like written on the wall. What did each of you do ahead of time that led to you to really genuinely believe, yes, the world thinks this is crazy, but I really think this is going to work. Of course, it's really easy. I talked to three or four potential customers for our first product and they all said, we don't need that. You know, that's not interesting. It's not a good thing to do. But I wasn't listening for that. I was listening. Are they emotionally attached to where they're getting their product now? Are they emotionally attached to those people? Do I feel like they're getting value out of that thing? And I could tell them their responses that they weren't attached and they weren't getting value. So yeah, all four customers said it's a bad idea. All right. So let me go. All customers now, though. Let me understand the Peter formula that I built a business. As a customer, if they want your product, they say no. You dig deeper and say, what are you using now? And they say, yeah, because I have a solution for this, but they just don't love it. So you build for them anyway on the bet that you can be better than their current. Yeah, you have to listen to what they feel, not what they say. They would say, yes, we're very happy with this solution. But then you dig, oh, tell me more. Why is that? What is it that you get out of it? And it's like, oh, and that's when you know that that sounds like the video conferencing market circa about 2015, 2016. So for me, it's very straightforward because I was a regional funding team member of WebEx. So the year, the two years before I started company, I know actually WebEx really sucks, right? So. And did you, did you try and tell us this go that? I, I tell my team. I do not dare dare to tell others. So anyway, so Skype was not reliable, right? Google, how to download work. I know it's been a lot of time talking to every customer. I know if I can build a better solution, I think at least I can survive. I never thought about everyone is going to standardize on Zoom platform. But at least I know for sure is if a customer did not like something, if it can build something better, you have a chance. Eric, did you think from the outset that you were trying to build Zoom as a big company or did you just think that you wanted to build a profitable company to survive and then you would sort of see where it went from there? I think two things, first of all, as every time my passion was very straightforward, of course, WebEx, more like my baby, right? I feel like I worked so hard for so many years. I let the customer down. I really wanted to, wanted to fix that problem. But Cisco does not want me to start over. And I had no choice, you know, but to live to build a Zoom. That's the number and reason. And after I started company, I realized, wow, it's so hard to raise capital, right? And by living with the money, they give it to you, don't think about that as money. That's a trust. Every dollar matters, right? That's why every day I was thinking about how to survive, how to survive, how to survive. Even today, seriously, I still think about a week off at night, how to survive. You mentioned people in your team, when you started Zoom, you were a solo founder, but you brought a large number of people with you. One of the first sort of operational topics we wanted to dig into around this topic of capital efficient growth is hiring and people. That feels like such an important part of the culture and DNA of having people who are going to get on board with, yeah, there's not going to be the spiritual equivalent of kind bars and exposed brick in our office here. Maybe both you, but Eric to start because you brought so many people with you from WebEx. How did you select for the people that you brought? So all of them are very good engineers, right? It's a better for me. So I didn't know right any code. And on Devam, we had around 25. Where soon we get another 15, 20 or 40 people and myself included. All the certain people, all kinds of code. And this was all funded with AngelMoney. Yes, exactly. But I know actually we can, we can run it probably less than two years. That's my lead home, I had a series of A. But we only have engineers to get a protocol down and I'm going to model a protocol manager, UI designer and also the facility guy, everything else, seriously, on Devam. I bought it used the furniture, you know, assemble everything by myself and also write it on the company culture and value. That's pretty much what I did. So I would say is, and even for the first several years, after product ready and some investor mission, hey, you already have money in the bank now, why not build a marketing team, look at your competitors, they spend a lot of money on the build board and one on one. As I time I say no. For the first four years, we do not have any marketing team. Only until 2015, we started building up a marketing team. So I have to be very disciplined. Just highlight this. So you started the company with 25 quickly growing to 40 people, but those were 39 engineers and you, no product managers, no marketing, no sales. Yeah, yeah. Lesson's reason why I know how to use a cricket books, I never know how to use that. So seriously, I had to learn how to use that. So it sounds very easy to say don't buy billboards. You got to eat your customers somehow. How did you get the snowball going? A little bit lucky, because seriously, and luck doesn't clear it out because the several weeks before we launched a product, seriously we had no idea how to get a first customer. Really when the very few members reported the most, the more the most bug, he valued our service and we were so nervous, he was very straightforward. And good news, he did write down a very nice article published in Worsley Journal and also he personally recorded a video. And overnight we got 50,000 users from that article. Most of them left, you know, half of the several weeks. But those who stayed, I imagine now it's the kernel of the virality of telling their friends, who told their friends, who told their friends. And then he knew very good personal relationship with either VIP or Khan or San Adam a small gift. And someone they canceled back then when he was 99, I personally sent him an email. Why you cancel our service? What ever can do different? And yeah, obviously maintain a relationship today, even today. We had one of the CEOs wrote in and asked us about different metrics to track. Did you have a North Star, after you had those 50,000 people where you realized, okay, I'm holding something in my hand and the sand could slip through my fingers. But is there something I can measure to see if this 50,000 can turn into something? What were you paying attention to? To those of very early, very loyal early adopters, you know, even 100 good enough. A lot of the other early, you know, I would say is most loyal users, top and down to make sure they are happy. If they are very happy, guess what? Net-refect. They are going to bring a lot of new users. So that's why even 49,000 users left. As long as 100 is good state, we top it all on that. So yeah, that's a strategy to better. For Peter on the hiring and people in organizational front, you had a very, very different type of business. Your customers don't buy with credit cards. They buy multi-million dollar deals cash up front in a year for a year deal. You need a sales force to sell that, which usually means you need a lot of cash comp to compensate that sales force. How did you think about the right people to hire as you were building and how to compensate them? Yeah. I think one thing Eric and I have in common art. In the early days, there's no wasted people, like no optional people, no wasted people, because it just adds, hey, it'll burn through your money and it'll just make your decision making smaller. Sorry, more complicated. It's like sand and machines. So no wasted people. And for us, yeah, we needed, because a long sales cycle. So we needed sales right away, right? So yeah, I was the first salesperson. I started selling before I signed the articles of incorporation, show up at the customer, hey, I think she'd buy something for me, this thing that I'm going to make. Well, have you hired anybody? No. Well, okay, well, can you show us a demo you're going to do? No. How about a PowerPoint? No. Okay, and then come back a month later. I got a PowerPoint now. Have you hired anybody? No, not yet. And then just keep selling, because the relationship-based business, funny story, the first customer bought, small customer, we actually somehow, through a relationship with my co-founder, we got to this guy, he was a CEO. He wanted to buy some software for the small department, just because he was really peeved with his IT team. So this guy had no idea what we're selling. He's like, I know that my IT team doesn't want you, so I'm going to make a point and show them that I'm actually in charge here. So that's how we got our first sale. And you could barely log into the system at that time. Could you do that? I didn't know that. But then you got a hustle, right? Then just like Eric, right? Then you got a hustle. Oh my God, this customer wants to buy something and then you're working super hard to make them successful. And Eric, I'm not sure I never asked you about this, but we never had customer satisfaction surveys for even the beginning. I always thought, if I talk to those early adopter people, I will know, I will get the feeling. And if I have some survey, maybe I won't get the feeling. Totally. You are right. I agree with you. You can hide behind when it's small. You can hide behind metrics sometimes and it doesn't work. But if you actually talk to the human and you figure it out, you'll know what's going on. How can you tell us also the story of landing your first big customer that I believe is probably the deal that really made the business? Yeah. There was a set, right? There was the first, the guy who was just peved at this IT team and then worked up to the next size deal and the next size deal and it was always a step function, right? So the first multi-million dollar annual deals were a big customer, a Pfizer and it was just hand-to-hand combat. There was a partner at the time, actually, salesforce.com, actually at the time, said, oh, send a note that Vivo will never win the deal and I replied back, I said, we will win the deal. They sent it to you during the bake-off? Yeah, they didn't want to even come into the meeting with us, right? They were like, oh, we're going to go with this other system integrator or something like that. So I sent an email back, I said, we will win the deal. Why? Because we have better people, little work harder and we're, Pfizer's only shot at greatness and I think they want to shoot for greatness. And so, and I remember there was this big meeting with Pfizer, there was a guy in there in charge of it and we had a certain amount of people in the meeting and the guy stood up and said, we have more people in this meeting room than you have in your company. Why should we buy anything from you? And I just said the same thing, we're your only shot. We're going to make something great and we have the best people. So it seems simple to me. And then we got lucky. And we won it. And then I remember after winning it thinking, oh my god, now what? Now how are we going to make them successful? So the whole company got a bonus when that customer was what we called live and happy, which didn't have a formulaic metric. It was based on interviews. So did you use the invoice from that customer to then go fund product development? Yeah. I thought, oh, we've just raised a $3 million round of capital here and it didn't cost us any delusion, right? The check came in. So that's exactly what happened. Yeah. Do you think that's still doable today? Like I imagine there's lots of folks out there that are like, well, I would love to go and voice a customer and get cash in the bank. And what situations is it possible to fund your product with customer revenue versus not? I think it's, first of all, you can't be wasteful. Every person has to matter. I would almost think that we're hiring that person. Let's say we have to pay them $100,000 a year. I came from, my father was in the business of metal working and machinery. And I remember him. He would like, oh, I got to buy that lathe. How much is that lathe going to cost? Is it worth it? So I would think of people like, I'm buying a million dollar machine because I got to pay him $100,000 a year. Is that million dollar machine worth it or not? So frugal and then make a really excellent product because that's the best way you can lower your cost of sales. So like Eric's product, you probably all notice it that it's easy to use, but he made it easy to consume the whole product. So he didn't have to convince a bunch of people. So that's how to do it. Excellent product, get a good price. Easy to consume. You don't have to spend your money on salespeople because you have a differentiated product. Salespeople, that's where it's really, really expensive. You did not have any sense of it. I read the Peter's S1 document many years ago. At that time, I still remember, wow, my god, this is being a model so awesome. But in our case, our first Peter customer, largest Peter customer, only 2000 a year. So we cannot use that to find a new product development because most of users pay us only for $99.99 a month. So that's really hard. But I do think, for all the founders, the business model is very, very, very important. If you can figure out if we do something similar as the word Peter and the river does, that's the best. Do spend time on that. Not only for product, but also the business model. As Peter mentioned, product excellence and how to sell the product and how to live with big enterprise customers, that's very important. Build a long-term sustainable company. In our case, I can tell you, today the biggest challenge is our online business. It's very profitable. However, it's very hard to predict. It's a common today, next two months, we might live, the cancel the service, that's not the good business. But enterprise portion is very good. That's why I learned a lot from Peter, how to manage a big enterprise customer. We met an emergency event. Wave back when that's how we first met Eric and I. Yeah, well. It was smaller. Hopefully, there'll be some more connections like that today. One thing I want to highlight on this topic of contracts and funding development, because I think it's really counterintuitive. Again, the topic is capital-efficient growth. You would think that what you would want to do with the Pfizer deal, for example, or Eric, when you started selling enterprise contracts, is multi-year deals. Let's make this contract number as big as possible. Let's get as much cash up front, let's lock people in for two, three, four years. That's not what you did at all, right? Yeah, we didn't do that because I was always optimizing for the long-term value, which is the annual value per customer. If I had to give the customer terms that would lock them in, I thought that's actually shrinking my market because they'll pay less if they're locked in. That's one thing. Then the other one, I didn't want us getting lazy. I wanted to start in the business every year. Just like that, the driver was really optimizing to the long-term value. Which makes so much sense now, thinking about it, that you would have had to have given a 30% annual discount or lock in the price, then raising prices is harder later. That's unique to us. I think we're selling in a very confined vertical. It's not really fair if there's two companies and one's paying 30% less than the other. They end up knowing about it and feeling bad about it. That's something specific to this confined market. To put some shape around it for folks that don't know, Viva's business as well, you've a couple of thousand customers of which there's a hundred or so that are really big customers. There's basically no one else out there who could be a customer without you expanding the market. We sell into a defined set of customers, life sciences industry. There's top 20 and then there's another thousand or so that are doing smaller things. We've just expanded our product footprint. When we sell to a customer, we might have 20 things that we can sell to them. They start in this area. They start in that area. Gordon calls it layering the cake. We have a lot of different layers of the cake that are all into the same customer. We leverage relationships. It's fine for us to spend a hundred thousand dollars a year maintaining free relationships. Just putting into developing relationship. That's not wasteful. Because we're showing up the door with a hundred million dollars worth of product. If you have a relationship, it's worth it. Like a bank, investment banking is worth it in this. It's a different type of business. For our second sponsor, just a company that is so special to us in the community mystery. I think at this point, probably everybody listening knows about mystery and their story. We've had these guys on the LP show back in the day. They've pivoted twice. It's been this incredible journey and they have landed on something that is just, it's just frankly incredible to watch. We know for a fact that a lot of the acquired community took the mystery folks up on their last offer from the last episode. We were excited to share more details on that. Certainly, many more of you are familiar with mystery than we're even a couple of months ago. I know. It's so cool. When mystery had originally started as a consumer facing magical recommendation platform to take care of it all night out for you and your significant other, your friends, make it magical. You don't have to do any planning. COVID hit that obviously was not a great business to be in during COVID. They pivoted to doing virtual and remote teams and office culture and man, God, those zoom happy hours that teams were doing and companies were doing were just terrible. Glad we're through that. Oh, I'm glad we're through that and I'm glad we have mystery because they take all of that over for your company. It's crazy. They work with Amazon, Microsoft, Apple, McKinsey, Uber, Twitter, Autodesk, all of these companies use mystery to completely take over the planning, the organizing, running all of the team experiences for their internal teams, oftentimes also for external facing customer events with their partners. And it is way, way, way better than the zoom happy hours. Yeah. Do you have to like not do the work that you would have had to do to plan it before, but they're just like way better too because the mystery team, I know there's a bunch of like former wedding event planners and the amazing performers. It's super cool. And this is what school what they built out. Like obviously there's this you know, a fantastic thing. They built out the software side of this too. So mystery now tracks employee engagement and customer and partner engagement, participant engagement with your events. And the impact on employee satisfaction, retention afterwards, you know, before mystery 90 plus percent of a company's morale budget was frankly misspent. And the reason why was there was no way to track whether, you know, going go-carding with your team or anything actually had any impact or move the needle. Mystery solves all of that not by not only taking care of the events, but then giving you full insights into what the actual impact was on your team and on your employees. So they have, you know, today executed thousands and thousands of these events. This scales up and down as big or small as you want. Modern Treasury uses them, Convoy uses them, so many other friends of the show. Mystery just raised a giant series A from Greylock to blow everything out further. Yeah. So, listeners, in case you missed it on the last episode, they have the greatest deal ever offered to the acquired audience. I looked it up and I was trying to do some quick math to figure out. Has anyone ever discounted this well or offered this great of a free, you know, early experience? No. So mystery is giving you three mysteries for the price of one, which means that the first event is just $25 per person regardless of the team size and the next two are free. And of course, because mystery is mystery and this is what they do, they sort of learn from that first event about you and your team and get tighter on how to tailor the next two experiences to sort of build on that and be even better. So you should totally, totally click the link in the show notes and take them up on this scream and deal to try this out with your team that is try mystery.com slash acquired for three mysteries for the price of one. Super great. Thank you, mystery. Thanks, mystery. Eric, for you, I'm curious, maybe you can talk to us both in the beginning days and then also now, it's you. How do you think about pricing and account strategy? Yeah, so, you know, our case is a little bit different. You know, ideally when you start a SaaS company, you're the folks on vertical market or folks on departments. That's probably the best business model. Unfortunately, you start from building up a horizontal collaboration solution is really hard, right? Because, you know, a lot of other competitors are there, right? So our strategy is freaking better. Exactly. Exactly. A lot of, you know, free solutions. So, our strategy, you know, more like, you know, open up a new restaurant business, right? So, and you have a better service, right? And a better price and a better food. That's pretty much even today. You know, we want to make sure our product is better than our competitors. Make sure we're in a constant pricing, also better. And they also make sure, you know, all for the best service. So you look at any time our product always, always, I've better price, you know, across the board, any product, compared to any competitors. So life is about trade-offs. And if you're telling a customer, oh, we're better, faster and cheaper, what has to give? Is it something organizationally? Is there something? Efficiency. Yeah, exactly. You know, see like a customer, they are probably going to spend a lot of money on marketing. You know, what we can do to live in network effects, right? You know, they hire like a 100-suse rep. What we can do to have a 50-suse rep, you know, can deliver a sim body, right? So that's why it is very important to have, you know, internal, you know, the efficiency. Yeah. Which is, you know, so funny that efficiency translates to capital efficiency, which translates to gross margin, it would not gross, but you'd have to operational margins, which translates to cashflow. Which is the whole point. Yeah, it gives you more flexibility, right? Yeah. But I would say the key also is just the product excellence, right? Yeah, and that comes from the core set of engineers you hired, I think. And then also the, you were, you were especially very focused in the early days, right? Totally. You were not thinking about something else, right? I was thinking about video processing. And I would say, you know, that's why I got to know Eric. I got to know Eric. I thought, that's a pretty focused guy. I bet his product is good. And then I tried out his product. I was, this is really good. I want to join its board. So I think that's so is the product excellence can make you more efficient. Your sales cycle is more efficient. Everything's better. If your product was, your product was twice as good as WebEx, right? If your product was only 10 times better. Oh, the 10 times is better. But I guess my point is if your product was only 20% better, it wouldn't have been enough. It wouldn't have been a bad. That's why I always like this restaurant analogy, right? You know, you're still buying a restaurant, a brand new restaurant, it's full of download work. Even for free, you do not want to stop by anymore, right? So, you know, again, you know, I think the back to the Peter's point is extremely important. Everything starts from one thing, the product. Product excellence, that's a foundation. You can open them up a lot of things. If your product on all work, forget it. Everything else. Just a double-don, triple-don on product. That's a number-wrenching, you know, Peter Wright on. And that's a lot about people, right, Eric, about which people you put on the product. Yes, both Eric was very particular about getting the best people. Yeah, so people, we can come back to that. You know, I remember when we talked about with Santi on the episode we did on Zoom's IPO years ago now. You know, your named executive officers in your S1 were not like, you think typical, oh, here's High Flying Sass Company, there's going to be VP of Sales from Sales Force, there's going to be a Chief Marketing Officer from HubSpot, you know, whatever, like, nothing wrong with those companies and those people. But I think at both of your companies, the people you brought in as leaders were up and comers. They weren't, you know, the established superstars. Yeah, I think you, I always wanted to have some people with some range, you know, they could get very hands on, but also grow into managing. I guess I've always thought to try to get people to do something that they haven't done before, you know, so they would have a little bit more mojo, have an opportunity to do something that they haven't done before. And the team is very important, the chemistry of the team is much more important than the skills of the individual players. In a lot of ways, that comment reminds me, there's a parallel between you not signing multi-year deals where you're forcing the product to earn the customers and you promoting internally where you're keeping people hungry and forcing them to do their best work to earn that job. Well, it's more thrilling when you can give somebody a chance to do something that they haven't done before for me and for them. There's more fulfillment. Otherwise, it's why you're doing the same thing you've done three times and what's the allure, well, I can get rich. A kid just at some point, that doesn't keep you going at the end of the day. Well, also come, I imagine there's an element of compensation to this strategy too, which translates to capital efficiency. No, not really, no. I always think of equity versus cash, but I don't think so. I never really made any kind of decision on people based on that. Are you going to get the right person and then pay the right compensation for the right person, but always the right person first and then figure out the compensation? The computer right now, actually, back then, when we tried to make an offer to some executives, at that time, the feedback, why not hire someone very experienced in season leaders from all sides? It's not really not about a compactage because when it comes to hiring at a Zoom, we really like to hire those people with a self-motivision and a self-learning mentality. They're not getting the senior executives. They can't grow themselves along with the company growth. Plus, they are very low. I think that's our philosophy. I thought that's the best philosophy. After COVID, I think I was wrong, actually, there's a big flaw also. Because when it brings all the growth to your team, and guess what, the executives of your team, they are not ready. They are not going to use it like 15 times, 20 times more. The revenue like 7 times more. Our team, even not myself included, even not twice better. This is one challenge. I learned. That's a mistake. Another mistake is, if we think all those executives or KT members, they can learn along with the company growth. However, the pace is different. It's somewhere where it can learn quickly, somewhere very slow. That's why I also, that's another flaw. That's why looking back, I feel like we should have a mixed team structure. Someone, they have a potential. They can grow themselves. You have to hide some season leaders. You never know. In case your son and your business is going to take off, at that time, your team know already. That's a challenge we are facing today. So you need to have some members of the team who have experienced scale bigger than your company, but other people that you are developing. Exactly. You know, back then prior to the pandemic, I was seeing a two-starbine. I should learn more from Peter. I see everyone. You have to have a potential. You do not need to have a greater background. Actually, looking back, that's not right. Interesting. Maybe a mix would be better. Mix is much better. Do you think that applies, even? Do you think you should have done that, even in the early stages of the company? Not early stage. Right? You know, for the first or four years in the world, you already see the market fit, right? The product fit. You want a skillial being a Z-comp, you have a good chinial feeling. There's another, I just keep, these parallels keep popping up for me where Zoom is one of the greatest product-led growth companies of all time. And yet here you are talking about the beauty of predictable revenue that comes from enterprise contracts. And it's the same thing. It's not that experienced people are better or that in-house talent is better as that you need that mix. Totally. It helps it makes it very important. So the last, one of the last sort of disciplines within a software company that I want to talk about operationally in this context is marketing with both of you, but particularly with Eric, we were chatting with Saudi and with Peter. Anyway, so I asked this question, you scaled, once you get the product developed, you scaled with such beautiful capital efficiency, but you did spend money on marketing. I mean, you joked about the billboards, but there are Zoom billboards now. I asked them, how did Eric and Zoom think about spending money on marketing? And well, you tell the punchline, but how did you think about it? Yeah, that's, even today, every Tuesday, we have three hours, stuff in between. This morning, the first topic read about reviewing our marketing, competent marketing programs. Even today, still. I think it's very cheeky. The reason why is you do not have, I would say, sort of like a formula, right? When to spend more, when to spend less, it's not like that. As a founder, you have to spend time on marketing as well. Do not always function on product or the sales. Marketing also is very important. However, when to invest in marketing is very cheeky. Every business is different. In our case, we specifically made a decision, no marketing team for the first several years. Because this is not something new, right? This is a product or this is a very, very mature market, an event and a standard video conferencing. If your product works, you really don't have marketing team, right? We try to prove that point. After that, after we have paid a customer, a lot of customers, customer told us, Eric, and Eric were probably zoomed. But I tried to product, product works. Why is that? We received a very consistent feedback like that. I know that's a signal, right? Then we doubled on that. Then 2015, we created a marketing team. And also, even after that, we also made every marketing program spending. Early on, I spent a lot of time trying to extend, again, by example, like SEM, right? Every company, you spend money on SEM. First time, I sent a check, oh my god, this is a surprise, I paid a Google. Oh my god, this is the largest check, I'm making a sign. Do you remember how large that check was for a contract? That's more than 200,000, a month. A month, oh my goodness. It's crazy. That's why I wanted to debug and extend. By the way, marketing team is very, very educated by Google, right? In more than a talk about our right, you give me $1, I give $1.50 a sense of back. It's pretty cool, right? But I tell them, no, it should have $3 back. Why? Why? Well, particularly what I ask you about that. Exactly, it's been a lot of time. I wanted that money back. How to optimize that, right? And again, marketing team is very important, but quite often, very creative. If you do not know how to measure that, do not spend. That's the story. The stories we heard were, you know, most founders, CEOs, marketing teams think about cactl TV with marketing, you know, and there's more complexity to it than that, but I'm going to spend $1, I'll get $1.50 or I'll get $3 back. If that pays back within a year, I don't believe that. That's the mistake for all the SaaS companies. It's not a $1.50-sense of back, not a $3.64, right? It's to optimize. Just wait up in the last minute. That's a common mistake, I think, for most of the SaaS companies. And Eric, how fast should it pay back? As big as possible, right? Every thing is different, but you go to optimize. Keep it open, every day. Do not feel satisfied. Or give $1.00 to get $1.50 back. No, open the mice, go to get $1.00, $2, $3.00. You have to open the mice. Just to the buying example, right? For every marketing dollars. However, if it works, you'll have a double down. I remember, first time I had the billboard in one, many customers shared a very positive feedback with us. They feel like, early on, we decided to deploy Zoom. I saw the billboard. They feel like you guys are a bigger company. We've been right-decision, right? To better understand. Zoom is not validating a decision, then. Exactly. And the plus employees feel very happy. They say, oh my god, Zoom has a billboard now. After that, I realized, why not double down on that? I told our team, how many billboards have in one, I said, no, three. It works. So that's why you have to know when to double down, when to fix that back. If you know how to effectively measure that, that's very important. Well, we spent most of today talking about how to build the castle and how to have a profitable castle. I'm not sure if that really extends. But now let's talk about the defending the castle. I'm curious. Maybe let's start with Eric and then good at Peter, since we've been on a good Zoom streak. Where do you see the source of Zoom's defensibility as a business over the next 30 years? Yeah, so I think it's more like a sports, right? We need to focus on both offense and defense, right? It's both sides, right? So I think back to the Peter report, you still need to, even your product is works today, even better than other competitors. You have to be paranoid. You have to keep thinking about what you can do differently, keep innovating, keep innovating, either the new services or new features, that's the most important thing, right? By doing that, at the same time, you also need to think about what's next, right? For our perspective, we started from a unified communication. The next step will be not a unified communication, it's collaboration platform, right? At the same time, how do you build multiple new departmental applications? You also need to put it offensive as well. The better offensive play is probably for the defense as well, right? So that's our strategy. Here? Hi, I'm very similar. So product excellence is you can get there, but you also got to work hard to stay there, right? And keep reinventing yourself. Also, you do want to expand to different areas because if critically, and I think something that people don't realize, if you get a high market share in an area, and you don't expand to another area, what will happen just because the nature of your company and the creative people, you'll do more stuff in your established area than you should, right? And that creates its own set of problems. If you do more stuff, if Eric is constantly rewriting his codec, unnecessarily, right? It's disruptive. So you got to expand to give yourself a creative outlet. And then this may be more particular to us, I don't know, but we also have a goal that we set out about five years ago to be the leader in light. That was our code name for it. Because if you get to be quite dominant, arrogance is your, there's a few things that will knock you off. Errogance, the customers will get turned off over that, and they'll naturally find an escape hatch. Also, we audit for integrity of the leadership team because when you're quite well established, that can throw you off. Integrity issues in the leadership team, so we audit myself and others, and also energy in the leadership team. Because these are things that you got to audit for them, because if you wait for the results to show those things, it's too late. So determined to have product excellence have a goal to be the leader in light, we actually tell our customers about that, and that holds us to a higher standard. So we want to be the leader in light, and then they bring that up sometimes, like, yeah, that's not the leader in light. Oh, God, why did I tell you that? But I mean, it's a way to be set yourself out there, right? Not only do we want to be the leader, we want to be liked, product innovation as an outlet, and then avoid that arrogance. You talked about that. I think as we did with this question, I want to share with you a conversation ahead of this Peter. I think probably can help some of the founders here as well. I think I've got a which quarter a year before we went public, and I look at our growth plan, I realize, wow, we wouldn't have one service. If we have another service, it also can monetize, the growths to protect it would be very different. At the time, Peter told me that Eric, that's sort of like the ideal case. But that decision should be made two years ago, or three years ago. If you wanted to have a new service, you cannot have a new service today. You need to think about trying to make this in two or three years before that. I clearly remember that a conversation. That's looking back, that's a big issue. Big issue. The reason why, because you have one service, at the same time, how do you think about what's the next service? Always plan ahead. This is probably the better way to back your question. Always a single head, build another service, another service. That's exactly what I was going to ask as a follow-up. Peter, I know you, Viva launched a second service after the first CRM service around CMS, counter management. When did you start planning for that second product, and then when did you launch it relative to your first product? That was, we started thinking about it the first part of 2010. I remember Gordon and I and others started thinking about it the first part of 2010, so we had 150 people in the company or something like that. That was four years into the company three, four years. So three and a half, yeah, and then we made our first hire in the fall of 2010, and that's when we started going. So I viewed that as critical. It was a turning point. I thought, hey, I could have a single product company do really well of that, maybe go public, but then it probably has to be sold to somebody or something like that, or I can try to make it a multi-product company. And the decision was to pick something that was clearly not an add-on to our first product. Like it was clearly so far away from our first product. I was worried that our second product would maybe become an add-on to our first product, and so I just picked something that was just way out here, just way, way different. Sold into the same company, but different buyer, different product, different code line, different everything. So I thought, this is a way to become a multi-product company and it'll either make us, or it'll break us, and I thought the odds were more likely that it was going to sink us. That's so counterintuitive, because normally you would think you'd want to give the same sales rep something that they could bundle in for an incrementally higher ticket price and leverage what assets you already have. But that you will do anyway. If you don't go out of business, gravity will take you there. As you go along, it's like, oh, maybe we should make an add-on product or not. Yeah, duh. But if you get confused, and you think that add-on product is really going to float your boat, it's not. If you have a chance, it should be way out here, and maybe have the potential to be bigger. So that's... What's the scale of the two revenue lines today? The second one is a bit bigger, but the second one has also quite a bit more potential. Maybe it's a 5X or 10X potential. But it was risky, right? We debated that at the board level, because that could have sunk the company, because our rocket ship on our first product was going up. And we had to take our eye, had to take my eye off that ball to start this thing. And it did cause that first thing to suffer. But overall, the trade-off was worth it. But it could have worked. It was risky. Our most recent episode was about Nvidia, which had a tiger by the tail with gaming, as everyone knows. They totally took their eye off that ball to start building for life sciences, for scientific computing, for what became neural networks and machine learning. And boy, was it a good thing they took their eye off that ball? You know the hidden thing that there? You need a CEO that was an engineering type that went to Oregon State University. Does that's what... Did he and Steve have a comment? I don't know him, but we both... We're very few of us Oregon State beavers at CEO's, let me tell you. That's amazing comedy. I know Jensen Wow actually. Look at Nvidia's stock price. It was flat at 10 years in a row. Yeah. It was. That's such an amazing story. The conviction really he had to persevere through that decade is amazing. It's hard work, right? He's a hard worker. He's very hard worker. He is focused. Yeah. There's no... I remember when starting Viva, the first time I started a company, I asked a friend who had started some other companies. Because I realized about three months in, God, this is really hard work. I'm working every day really hard, every hour. So I asked my friend, is there any way to do this without working that hard and he very quickly said, no. There's not. So, isn't that true? That's true. I do not think that's a work. Because we all enjoy that. This is a part of life. Otherwise, what can you do? Are you going to play golf? No. There's no short card. Exactly. No short card. All right, everyone. For our final sponsor of the episode, we have another of our favorite companies here to acquire. This is so fun. Modern Treasury. By this point, probably long time listeners have acquired know everything about modern Treasury, but they are, by far, the best way to manage your company's payment operations. Their platform allows you as a company and your developers to build right into your product the ability to move money. So you can imagine that is pretty important for probably just about anything your company does or any application or service these days. And you can do it using code, not manual, finance operations. It's literally a software layer on top of your bank account that connects with all of your users, customers, partners, everything. They have direct integrations with almost every major commercial bank at this point. And they allow you to move money using APIs and web apps versus managing, whoo, managing the complexity of banking rails yourself. I mean, I know, gosh, companies, I remember five, ten years ago, especially marketplaces, where you're moving money around, managing all of that complexity themselves was brutal. You're just building so much software and then you're thrusting your own internal software onto your finance team to its amass. Your finance team was doing so much of that manually. And now modern Treasury just takes over. All of that, it's been incredible to watch this company. They're just a few years old, two years ago, right after they started, they were reconciling about ten million dollars of payments every month, which, you know, like that's a lot, about ten million a month moving on the platform. Today, they are doing well over two billion dollars of payments every single month moving on the platform. And just so folks understand, modern Treasury is not only the workflow software that gets used by the product team and by the ops team and by the finance team. They're also the literal underlying money movement. So they have bank integrations to actually facilitate those movements for you. So you're not just clicking a button and then you also need to go do something with the bank. No, it is all actually integrated. It's so great. They are used by companies like Gusto. They're moving a lot of money at Gusto. Rekehta, Revolut, Pipe, Trip Actions, ClassPass, BlockFi, Ledger X, lots of crypto companies are now using them for ramps on and off and connections between Fiat and crypto and Web3. You can do so many use cases with modern Treasury automatic payouts, direct debits, incoming payment, reconciliation, digital wallets. So whether you're building a Fintech app, if you're building something in Fintech, you absolutely need modern Treasury. You for sure already know about them, but even if you're not in Fintech, if you're looking to add payments or any aspect of money and money movement to your software product, modern Treasury's APIs are super simple. Absolutely go check them out. You can go to moderntresory.com slash acquired to learn more and when you get in touch with them, just tell them Ben and David sent you. Thanks, modern Treasury. All right. Well, we got to wrap it. There's a quick way that we end every acquired episode, which is with grading and for companies that are in the middle of their journey, like both of yours. We like to ask it as a little bit of an open-ended question. What makes the future of Zoom and Viva an A+. What's the scenario where it goes incredibly well, paint that for us, and what's the failure case? Cool. Let's see. I don't think he's talking about the failure case, honestly. I just not wired that way. A+. We really help automate this big industry. It's a $2 trillion industry. If we can help to automate it and be that trusted partner that is essential to that industry and using that word very specifically essential and appreciate it. There's not been anything like that before where you're automating a whole industry in a meaningful way, right? Essential. You can be a life sciences company. You've got to use Viva. And man, you like that. So that would be a big success. And then we have a bit of a social mission to prove that you can be a good company, profitable et cetera, but also be a good contributor to society and the employees. So that would be success. You were the first public company to convert to a B corporation. To a public benefit corporation. But that's just the more the formality of it. The way we've operated the company is always like that. So that's success. Essential appreciated really automating this industry and contributing to a good, you know, being an example of a good employer so that other people could copy it. Love that. Yeah, so in your case, I would say that's a good question. A process scenario would be, you know, zoom would be a very successful platform company. We are going to introduce a multiple new services and people can come on zoom to achieve more. At the same time, we can also grow our revenue every year. That's probably a plus scenario for many years to come, right? In terms of a failure scenario, I would say maybe you go back to use WebEx, that's a failure scenario. And yeah, Peter, right. And I do not think about the failure scenario, but we just think about it be very optimistic thing about the future. Otherwise seriously, you know, we all founders, right, the CEO's, we all feel the huge failure. But sometimes you cannot be, you know, too paranoid. Otherwise, every day you think about too much about a failure case, failure case, guess what? You do not dare to move forward, right? That's why I say, do not think about that. So next time, do not ask of these questions. So, only the paranoid survive, but don't let it consume you. I think your paranoid about not doing your best, right? I think Eric, you put a ton of pressure on yourself. You don't feel good if you don't do your best, right? So I think that's, I see that in Eric. I love that. Right. All right. Thank you all. Thank you for being here in the room with us. And mostly thank you to both of you. Thank you to Emergence for facilitating this, making it happen. Yeah, but thank you Emerging Capital. Thank you, Sandy. Thank you all for your really appreciate. Thank you, my great mentor Peter. Yeah, thanks Peter. Thank you. Thank you. Thank you. Thank you. Thank you Peter. All right, listeners. Well, thank you so much for joining us for this. I actually cannot imagine a more useful topic right now than dissecting how to build great companies on little capital based on the era that we're going into. I think David and I don't need to debate this endlessly like you can hear the drumbeats on Twitter of how much the market is changing, but the reality is it is and where everyone has to play the game on the field. And Peter and Eric have just, it's just unbelievable and impressive what they have built on so little capital. They're two of the greatest of all time. Literally two of the goats at this, which is so funny. Now everybody thinks of Zoom as the pandemic, high-flier. I was just thinking every time for the last few years that people would talk about Zoom and whatever context. Do you people realize how much cash flow this company is generating? It's all because of this DNA and mindset and everything we talked about with them. After spending time with Eric, it feels to me like the amount of time that he spends thinking about, oh no, the stock was going crazy and oh no, now it's going down is like approximately zero. They're thinking about how do you build a great company and how do you generate happiness for customers, build a profitable enterprise and grow that profitable enterprise. And it was a nice refreshing viewpoint to get to spend time with him and Peter. Well, if you want to chat about this with us, we would love to do that with you. You should join the acquired community Slack at acquired.fm slash Slack, 12,000 smart, courteous and kind people have done so before you. So you would be in great company. We also have our limited partner show. And if you want more acquired between now and our next special, which we have recorded and is awesome and we are very excited to release, you can search acquired LP show in any podcast player, Spotify, overcast, Apple podcasts. Where you listen to podcasts and find that there. We have a job board acquired.fm slash jobs where we curate the most interesting jobs that we think we should make available to the acquired community. And with that, our huge thank you to the Solana Foundation to our friends at mystery. Go check it out. Try mystery.com slash acquired three for one. It's seriously insane. And our friends at modern treasury. That's modern treasury.com slash acquired. And we will see you next time. Wait, but you forgot one. Huge thanks as well to our friends and emergence for making this possible. That's so true. So happy I'm wearing my emergence capital fleece right now. You got to wrap the swag with pride. You got to wrap the swag. Seriously, I was thinking as you were saying that. I mean, no, we talk about the Slack at the beginning and end of every episode. It really is like, it's not just like, oh, you should join the Slack because you like acquired like, you know, if you're listening to this, you are probably a founder, an employee, an investor, you know, working at companies of any size where this is relevant. And so is everybody else. And people are like, this community is amazing. People are talking about this. And Slack, Jake from emergence is right there in Slack to talk about this. You know, people DM each other. There's so much vibrant discussion. You can't underline it enough. It's such a great part of the acquired community. And if you're not part of it, you should absolutely join. That you should. All right, listeners. We'll see you next time. We'll see you next time. Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Who got the truth now?