Building and Funding Growth Teams, with Panobi CEO Merci Grace

Ep 23

Feb 07, 2024 • 56 min
Merci Grace, CEO and co-founder of Panobi, and former partner at Lightspeed Ventures and first Head of Growth at Slack, shares lessons about growth as a discipline, pitfalls of fundraising and her “Marauder’s Map” to raising capital, best practices for starting and scaling growth teams, and her vision for making metrics and growth tooling far better.

Allen: Welcome to It Shipped That Way, where we talk to product leaders about the lessons they’ve learned helping build great products and teams. I’m Allen Pike and today’s interview is with Merci Grace. Merci is the co-founder and CEO of Panobi, and previously was a partner at Lightspeed Ventures and the first head of product at Slack where she ran the growth team. Welcome, Mercy.

Merci: Hi, great to be here.

Allen: I’m so excited to have you on the show. Obviously you’ve learned so much building products, fundraising, growth as a discipline. I feel like we’re going to run out of time, but first, I think it’s really valuable. Give people a bit of context. How do you like to summarize your story so far? The Merci story?

Merci: Yeah, it changes sort of at each epoch of my career, but lately I’ve really been reflecting on the fact that I’ve had the opportunity to play really every position on team startup, and I’m a startup junkie. I just love it. It’s so much fun to work with small groups of people, invent new things. I am on my second venture-backed company now, but the first one where I’m a CEO, which is as cool as I thought it would be. I really love it. It’s fun, and it’s been my curiosity and my desire to win, has really been what’s driven this sort of multi-class career that I’ve been really lucky to have. Leading up to Panobi, if we sort of go in reverse, before this, I was a partner at a Sandhill Road firm called Lightspeed Venture Partners. We had something like, I want to say, eight billion AUM or assets under management, so a large firm with practices in China and India, multi-stage investing, and I learned so much there, and it was … As someone who had raised venture capital, by the time I got into that position and having been at these different levels, it was incredible to be backstage, backstage Silicon Valley where acquisitions happen, CEOs get hired and fired. Yeah, it was great, and I earned the opportunity to have that role because of my work at Slack, where I was about the 50th full-time hire. I joined with a remit from the founder, Stewart Butterfield, who I had, in classic Silicon Valley story-time, known for 10 years because we had shared investors in previous companies where we were both founders. I took the company Slack from 500,000 daily active users to over six million in less than three years, and by the time I left, my growth team was 50 people, whereas I joined the company at 50 people. A real rocket ship, and those experiences, founder, PM, game designer, venture capital investor, and board member really afforded me this unique vantage point, which is how I have ended up here as the CEO of Panobi, a platform that’s really built to help people understand really how to turn those tactics into strategy and how to continue to level up how you’re thinking about growth and product and marketing, and how everything comes together for the customer.

Allen: I love that you mentioned having done some game design. I’m biased because I also did some game design in a previous life and occasionally dabble in it. It’s a thread I find in product leaders over time. Stewart, who, as you mentioned, Slack was trying to make a game, and then when that didn’t work out, they were like, “Well, maybe we should try this chat thing.”

Merci: Yeah, twice.

Allen: Yeah, right? Yeah, twice, because Flickr was that too, and I have this pet theory that it’s a nice practice field for learning a lot of product skills.

Merci: I think that’s right. Yeah, and games really has a focus. Part of what’s so incredible about making games is that it’s a focus just on the fact that feelings are what drive our action. “Oh, I feel scared of this boss. I’m going to run.” “I feel prepared for this puzzle.” “I feel excited about this world. I’m going to go explore it.” It’s just about having fun and really engaging someone’s imagination and seeing them lean into the screen and see their eyes light up when they’re having fun. It’s kind of product at its most pure, in a lot of ways.

Allen: Yeah, and especially the growth part of product or what I would call product led growth, where people remember how they felt about the thing when they tried it, and that’s going to be, even though it’s difficult to measure, we don’t have the EKG leads to try to detect emotional state, but that’s a huge input, right, in whether or not people stick with your product.

Merci: Yes. Yeah.

Allen: Let’s dig into that growth topic. A theme through your career, a theme through tech itself has been the rise of growth teams. You mentioned in 2015, you joined Slack, starting with a size 50-person company, which, compared to its size now or even when you left, small, and then through that time, at that time in 2015, as far as I know, most startups didn’t have an explicit growth team. Growth was obviously an important thing we all wanted, but of course, aren’t we all part of the growth team? We’re all trying to grow the business. Why would we be doing things at a startup if we’re not trying to grow the business? Now it’s a common model, especially in startups, especially once you’ve hit product market fit. For those in the audience who haven’t worked with kind of a modern growth team yet, how do you describe and outline kind of the typical mission and structure that startups use for growth teams today?

Merci: Growth teams, they’re actually pretty similar I think to the product management practice at tech companies, because they really form to fill the shape that you need based on the technology and the customer and the acquisition channels that you’re using, and what the cadence of buying or growing that product is like. That is part of what’s challenging and fun about building products for them, is that the first person to work on growth at a company, in my case was a former game designer, product manager, and at another company it’s likely to be a marketer who’s really great at even performance demand gen, which is basically buying ads at an ROI positive basis on the internet. So much about growth really is the shared responsibility of everyone. I mean, if you really go all the way up, it’s the point of capitalism. It’s definitely the point of venture-backed companies, is to grow and to exit the atmosphere at a certain speed. When Stewart Butterfield and I, the CEO of Slack, were talking about, “Hey, we have this one team,” and in that team, we called ourselves actually at first the new user experience team or new XP, and that was my title when I joined. I came in and I got some light instrumentation going on our front end to understand the funnel, and then I started redesigning our onboarding alongside some incredible people there, including Stewart himself, who’s very involved in that process. We were thinking about it as a way to, “Hey, this is the entry point of the product.” It’s actually the only part of the product that every one of your customers will see, and it’s a funny and kind of revealing way to think about it, that way. Our setup was very much focused on the activation of those teams and taking them through the product discovery to the point of paying. Then, a lot of people who don’t even think of themselves as a member of a growth team are members of the marketing team. It’s that handoff, and this is why they’re so cross-functional. It’s that handoff between, “Hey, is your positioning and the channels that you’re using to reach people and how you’re measuring what a valuable user is, does that square up with the value that your product produces for its customers?” Really who your ICP or ideal customer profile is, and the metrics that are going to drive revenue. If you’re trying to get in a bunch of 14-year-olds on iOS, you’re driving that traffic, but your actual buyer is a 30-year-old woman who lives in an urban environment, right, you’ve done the wrong thing for growth. They are sort of these custom teams, but there I think are a lot of best practices about the way to get some base rate understanding of the type of growth team your product and company need. The fact, too, that everything leads to growth. It’s the most cross-functional. No matter where it starts, it ends up being the most cross-functional team and absolutely a shared responsibility across every org at the company.

Allen: That’s part of why I find it interesting from an organizational design standpoint. It’s similar to product. A common question I’ll ask for folks who have been, either build product management orgs or been senior in product management, or founders, how they think of that when they’re designing your organization, because obviously you get coached when you’re talking about organizational design and how you set up your teams. You want to give accountability to orgs and you want to make sure it’s clear who owns what, and things like that, but then you have … Which is straightforward for, say, engineering, and then maybe not so straightforward for something like growth or product. I find this sometimes, growth, or similarly product management, sometimes growth might report to the CEO, maybe to product, maybe to marketing. In your mind, is the correct structure for setting up these teams … As someone who, for Panobi I assume, have been interviewing many people who have been working on these growth teams, you’ve been seeing a lot of different ways that … Some of the ways it’s working, some of the ways it’s not working, for people building these teams out. Is there good and bad ways of setting these teams up, or is it kind of like you say, based on the strengths and weaknesses of the company, where it is today, the right solution for doing that, the right structure just evolves depending on every single org and it’s kind of just bespoke?

Merci: I think that there are sort of right and wrong ways to set up orgs based on their stage. A common failure point that I’ll see with an early stage startup, so let’s say there are 25 people. Maybe you’ve raised a series A, you have a sense of product market fit and the channels that are working for you. That is a great time to hire a product manager, and it’s an even better time to promote someone who already works at the company. Deeply knowing your customer, caring about them, and actually, also this kind of unknowable thing until you’ve been through it is having great relationships with other people who you work with, because of that cross-functional responsibility. A failure mode that I’ll see is, a 20% company will hire a product manager from Instagram, and that’s not a slag on Instagram at all. Obviously, iconic company, great growth and continuing to innovate and get into new markets and find new customers, but the job of a product manager who’s working on growth at Instagram is to stand in front of these time and scale tested incredible internal tools, reach quietly toward a small knob, and just turn it a little bit. Right? I mean, that’s its own practice, that’s its own skillset, and probably its own background, but you don’t have anything like that at a 20% startup. You’re doing both yourselves and frankly that PM from Instagram a disservice to take them. Then, to speak from my own experience at Slack, I was that PM. No one was working on growth. My first week at the company, I ask, “Hey, so how’s the funnel looking? Who’s doing any work on it now?” They were like, “The what?” I’m like, “The front end. You know what? It’s cool. That’s my job.” Because I’m so used to startups, so I literally just went and bought Mixpanel, had an engineer install it on the site, and we had our first funnel from that. Someone who has been at an at-scale company, even though their resume is so attractive because you look at Instagram and you’re like, “Yeah, I want that,” as the founder, it actually is the wrong choice, versus an engineer, a data scientist, a marketer, or a PM, it can be really anyone, who is an impact obsessed individual and scrappy as hell. They are the person who is just going to go buy Mixpanel. They’re not going to sit there complaining about not having data. They’re going to go find that data and start using it to great effect. Then, of course, that person will either scale up over time or move back into something like a core product role once you are at the point where you have this sort of machine for growth, and it is about these small iterations and less about big bets.

Allen: I love that, but I’m also biased towards liking that story because many times over the years I’ve been the person that have been asked some question and people are like, “What do you mean?” I’m like, “This is ridiculous,” and I’m pulling in Mixpanel or whatever the tool is. Of course I think that is a good thing to do, but that’s one of the things I think we both probably love about startups, is that there’s big opportunities for impact there, that you can come and turn those dials. Some growth teams and maybe people who are not on the growth teams’ view of how growth teams think about the world as sometimes being … Well, certainly as very data-centric, but then sometimes there’s this idea that, “Oh, are they too data-centric? Are they turning knobs, or are they pushing … “ If there’s this focus on onboarding or maybe engagement or churn or whatever, they pick two or three metrics and then they can focus overly on a number, but then lose sight of what it is, as we were talking about, the feeling of using the product. Yeah, some number goes up for now, but people are starting to resent it or whatever. Does that resonate with you or is it just a misconception? Yeah.

Merci: No, that’s the reputation. Yeah, and I think the term growth hacker became first, “Ooh, growth hackers,” and then it was like, “Ugh, growth hackers.”

Allen: “Great. I’m getting growth hacked, more emails inbound.” Right? Are there any sort of approaches or mindsets or tricks that you have seen growth teams use to try and keep a damper on that, in terms of … Obviously trying to have that impact, but you want to have of course a whole company scale impact and not just turning the numbers. Is there any other approaches that help with aligning those?

Merci: Yeah, so actually, speaking to the data, making sure that you’re not over-fixated on kind of the knob that you’re turning. A classic kind of failure mode is, you have a marketer and a product manager. The marketer owns the website and his job is to drive traffic and get them to click on one button to sign up. Then, the product manager, her job is to take those people who clicked on that button and get them through the signup funnel and to realize the value of the product. In growth parlance, we call that activation. In an org structure, the head of marketing or the head of growth who’s setting these two people up typically will be setting them up to fail and to miss the forest for the trees when the marketer is only focused on the rate of landing page conversion and the PM is only focused on the rate of activation. You have to continue to check in with the rest of the lifecycle of your user and the performance of the rest of the product, like features, or the number of people who are converting from what we call a product qualified lead or PQL, so someone who’s using the product and has sort of hit the trip-wire of, hey, they seem like they’re getting it and they’re using it and they’re engaged with the product, over into converting them to paid. I’m a huge fan of giving people, giving teams like that a single goal, and ideally one that’s further down the funnel, that represents, hey, and you’re still adding dollars to revenue, or you’re still focused on retention, and not just 30-day retention, but six-month retention and 12-month retention. That’s one thing, right, is to make sure that you’re giving people shared goals, that you’re not kind of divide-and-conquering so that people suffer further down the funnel, if, hey, you’re sending much of garbage leads. How am I going to convert those? Then, the other thing is to keep people sort of radically in touch with the fact that you’re building a product for human beings, to the extent that you are, and that’s your customers, not parrots with iPhones or something. It’s a person on the other end of that, and so bringing in qualitative aspects, so making sure to consistently do usability studies, and the thing that everyone pretends that they do and most people don’t, which is talk to a customer, have a live conversation with them, and talk to sales and people on go-to-market, like customer success, because they are the people who are hearing from people who are a great fit, companies that are a great fit for your product, who have decided, “No, I reject you.” They often have concrete reasons to share with you as well, and that’s the thing that can be so challenging about growth, is, while at the same time you do need to execute flawlessly on these small things like experiments, you still need to be able to gain elevation and make sure that six-month retention isn’t dropping and you’re processing product feedback from the sales team, and it’s making it either into usability changes that the growth team owns or new features that core product is working on.

Allen: Yeah, I like that idea of … I think there’s a bit of a, I don’t want to call it a meme, but this idea that usability and growth hacking are in tension with one another, and that you have some team going and doing usability improvements, and then there’s the growth hacker who’s making it worse by popping up more stuff. People put these jokes, screenshots on social media, where their first-time user experience has 18 different popups all begging you for different things, and stuff like that. If you’re focusing, keeping the growth team aligned with your six-month retention, then all of that garbage on the screen and all of these usability problems are probably, assuming that they actually are in fact usability problems, should impact negatively that metric. I like the idea of creating that loop, where usability and growth are part of the same mindset rather than opposing teams. Another metric that’s one of the ones that are close to my heart, so I like the idea of kind of poking on a little bit and seeing if you have any thoughts on it, is application performance. Obviously, retention and activation of new users is classic metrics. You don’t need to have a growth team before you’re looking at those numbers, but one of the things that I think there’s been maybe a resurgence of in our industry is a bit of cultural debate, I guess, about how obsessed we should be about performance. You have these studies from 10, 20, 30 years ago saying that if you load your product and it loads in 100 milliseconds instead of 1000, that can have a huge impact on how people feel about the product, and that can show up in your conversion rates and all of your metrics and long-term satisfaction, and yet we have these things where websites are megabytes large and it takes forever to even load, and stuff like that. How do you see performance? Do you see that as kind of an engineering owned thing? I’m getting way into the weeds here, it’s just my own personal interest.

Merci: I like it, yeah.

Allen: Do you see that as an engineering owned thing, or is that part of a growth team … Growth team is running well, or are they also kind of part of that conversation of pushing on things like that?

Merci: Yeah, I mean, we’re back to pulling a strand on the interconnected web of growth, because performance is absolutely the domain of the engineering team. They are responsible for it, and also they know how to improve it, but the growth team should be collaborating with them and making sure to keep an eye on things like load time, and to do even regression analysis to understand, are there areas of the world where we know that we’re slower? Do we think that that is a reason why activation or expansion is lower there? It’s funny, because the studies are are old, but throughout the course of the last 30 years, we have DDOSed our attention spans, right? Man, if you thought lag killed when it was modems …

Allen: Yeah, it took a minute to even connect to the internet.

Merci: Exactly. In the era of TikTok and everything is 10 seconds, it’s I think even more important.

Allen: 100 milliseconds matters even more now.

Merci: Yeah, exactly.

Allen: Yeah, I’d be curious if you could find that effect. Maybe that’s something worth searching, but my instinct is the same as yours. I bet it’s measurable.

Merci: Yeah, and I wonder, you might even have to take it into a lab environment, because part of the problem with lag is sometimes it’s caused by the instrumentation that you put into the site, right? You’re loading yet another thing. The API from Google Analytics is stalled out or you’ve been rate limited or something like that, and then you’re actually blind and you’re not even getting any data from it, because that didn’t load, right? I think it is a little bit more of something that maybe you would have to measure qualitatively, but I think it is something that we do know is true.

Allen: There’s a bit of a fiendish problem where you get growth teams, whether or not they’re called that, but people focused on growth have a bit of a tendency to want to install more and more tools, more and more analyzers and trackers and things, to better understand the impacts of the work that they’re doing and run experiments, which tend to have performance consequences, which tend to slow things down, but slow things down after they start recording data, because necessarily … Right? I’m not sure what the solution to that is, than rather just having a good critical eye to that.

Merci: It is talking to people. It’s funny because we call data collection and aggregating, anonymizing data, we call it quantitative analysis, and then we call user research and customer development qualitative analysis, but we’re sort of alighting over the fact that your body is a sensor and your brain is a computer. We have evolved to understand the meaning of a slight movement of a facial muscle or a small change in a tone of voice, and so actually, the cumulative outcome that you get from a conversation with a person and understanding whether they leaned back when they said something or crossed their arms or frowned a little bit or stopped making eye contact, those are all, that’s data. It’s just that you’re synthesizing it as you go and spitting out the outcome, which is, “They do not like me,” or, “Hey, they love it.”

Allen: Yeah, and then all those instincts then go into our interacting and how we’re feeling about other things such as your laggy product.

Merci: Yeah, exactly.

Allen: The topic of the show is building products and teams, and so my instinct always is to go in and ask a whole bunch of things about setting up teams for building products, but a prerequisite for building especially ambitious products is capital. You have an amazing perspective into this, having both led funded startups and been a VC yourself. I’m legally obligated to ask you some questions about this. At one of the top VC firms, no less. You’ve mentioned the idea when we were talking previously about a marauder’s map to venture, which I think is particularly interesting to people because when you’re on the outside, especially if you’ve never raised funding before, it can seem very mysterious. There’s lots of horror stories, and so you sort of dread the entire thing. Tell me about this map, and where can I buy a copy?

Merci: Yeah, exactly. Yeah. I hand out copies of this map to people all the time, because-

Allen: Excellent.

Merci: Yeah, I think people should know. It’s a lot more efficient, basically, if people really understand what they’re getting into. I’m a customer obsessed person, and when I’m in fundraising mode or another founder is in fundraising mode, they’re kind of your customer in the way that you’re kind of their customer, and you need to understand the vantage point that they see you from. You’re kind of mutually buying each other’s products even though the capital is going in one direction. Have been pretty motivated, too, especially because my first time raising venture capital was a pretty terrible experience. I mean, like a lot of people, and it’s like, of course it was. I had no idea what I was doing. I was 22 or 23, no business really getting the opportunity that I had. It’s amazing that I was able to raise a seed and a series A, and even though I wasn’t the CEO, I was in all of those conversations and it was a shared effort. It was tough in part, because I just didn’t understand the things that I understand now, having been a VC, and so I have some quick tips if you want to-

Allen: Please hit us.

Merci: Rattle through a few.

Allen: Save us from your pitfalls.

Merci: I think one of the starting points for a fundraising process is to understand your position as the founder, and typically the CEO or the CEO and the CTO, so that is the fact that the founder is in control. You have control of who you talk to. You have control of the timing, and even though you are nervous and you want Kleiner to invest, you want Sequoia to invest, inhabiting the confidence of knowing that you have something really valuable is this crazy unlock, and it sort of puts them in a position that they’re actually quite comfortable with, which is a clear understanding of, when are you going out to raise money? What milestones did you use to sort of get to that decision? It can’t be because we’re out of cash in three months. It’s like, you’ve already … Honestly, don’t bother going out for money. Start talking to people about winding down the company, if it’s three months, or trying to find a soft landing for your team, but always run a process, and it is a process that you should control, and approach it like you would any sort of other program. When I was at Lightspeed, I had the opportunity to invest in Andrew Lee, who had been one of the founders of Firebase. He was the CTO, which sold to Google and became the Firebase that everyone knows, and he’s an engineer. It was as if his fundraising process, because he was an old hand at that point, as if he had written a program and he was executing it. I was trying to interrupt it to get ahead of other people and to short circuit things, and he was just running his process. It was awesome to see. Also, it gives you confidence as an investor, because that’s the CEO. They should have a lot of executive function and be able to take something as amorphous as fundraising and really grapple it and run with it. It starts with doing research on funds, so going to their websites, and if more people did this, I wouldn’t have to include it in the marauder’s map, but you may be surprised. Going to the venture capital websites, looking at specific partners, looking at their LinkedIn, understanding, okay, this is someone who has blogged about the section that I’m building in. They seem like, oh, they were at Amazon working on AWS, and I’m an infra founder. This is good. That is the person who would be both interested in me, they would have a prepared mind about the segment that I’m building in, and they’ll be leaned in, because what you’re looking for, oddly, is not to convince people that what you’re building has legs or is interesting, but it is actually to find the people who already are interested.

Allen: I’ve heard this advice before, which was kind of a mind blown moment, but then also in some ways freeing. It’s like, wouldn’t it be so much more pleasant to just go through a process trying to identify people who are already bought in on your thesis? Which, if you’re a founder, you believe strongly enough that you’ve already jumped into yourself. You’re probably not just going to 180 because some investor’s like, “Oh, well, I don’t think AI has any merit,” or whatever. Yeah, I like that.

Merci: Yeah, yeah, and that’s really important, and that’s free. That’s you and a spreadsheet and hours of your time, for sure, but the best probably 10 hours that you’ll ever spend. If you are lucky enough to be in a community of people who have also raised money, take the other founders out to a coffee or a drink and get the tea on, “Okay, who insisted on these last minute ridiculous terms? Which firms should I look out for?” Because you absolutely want the culture of your company and the values of you and your co-founders to be shared by the firm. I think it could be an uncomfortable fit if that isn’t the case, because there’s all kinds of kind of different outcomes that happen from venture that you won’t have any sort of insight into. Really owning and running that process. There’s a lot about what it’s like to be a VC that you’re totally blind to unless you’ve been one or unless you’ve been an EIR and you’ve had the opportunity, and that’s an entrepreneur in residence. You often get to hang out for three to six months and work on an idea. As part of that, you get to meet other founders and sit in on partner meetings, and that’s where a lot of things get … Investment decisions are decided, updates from the portfolio company are shared. It’s really fascinating. I think, when I was of course 22, 23 years old, they all seemed the same to me. All of these venture capital firms seemed the same. There’s a saying, I don’t know where it comes from, but, the ax forgets and the tree remembers. I remember, I was pitching some guy when I’m 23, and he was on his, God, it must’ve been a Trio, on his Trio the whole time. It was our second or third meeting, and he came in and he didn’t even seem to recognize us. I was like, “Dude, F this guy, he sucks.” Then later, I have this kind of flashback and I am in my eighth meeting of the day.

Allen: This is before you were a founder, and now you’re a VC.

Merci: Yeah, so now I’m a VC. 12 years later, I’m a VC sitting on the other side of the table, realizing, “Oh, I have met this person before and I totally forgot.” I’m like, yeah. I see and meet so many founders, and when you’re really doing the job of an investor, you’re meeting people constantly. You’re researching things constantly, and you are always having these kind of pretty transactional first dates with a huge number of people, and you just really don’t retain, and it’s not special to you in the way that it is to them, because they’re going to remember when they pitched Sequoia, but for you, it was Tuesday and they may have honestly been the eighth or fifth or 12th company that you met with that day. Knowing that it is a numbers game is huge, and I think it just can really take a weight off of the mind of the founder to understand. It’s as if, imagine that you’re a mid-level engineer again, and you’re trying to get a job at one of these 15 companies. You’re going to double your chances of getting a job if it’s 30 companies and not 15. Right? It is just numbers, and it’s trying to make sure that you’re meeting with the people who are the most likely to like you, to have that sort of prepared mind about the area that you’re building in, but that there are a lot of reasons that someone won’t invest that you have no access to know, and you would never know. They signed a series A last week and they’re kind of only allowed to do one of those a quarter.

Allen: Yeah, and there’s a huge amount of parallels in between those two cases of, you’re an individual contributor applying for a job, and you’re a founder trying to get investment, because in both those cases, the person who is interviewing you and maybe the ax that’s rejecting the vast majority of people will see patterns that you don’t see. You hear so many stories both of founders that couldn’t raise an investment or they had a bad experience trying to raise, or people trying to get a job and have a bad experience, that are caused by the lack of visibility or lack of context for what is the experience on the other side. Someone will be like, “I applied to four places and none of them hired me, but don’t they understand I have this experience, which is really good experience?” Then, what they don’t see is, oh, the way the market is right now, 120 people applied that have equivalent to that experience, and there was only one role. It’s like, they didn’t even blink at that.

Merci: Companies keep jobs up to maintain the freshness of their pipeline, and there might not even be a job.

Allen: Well, investors do too.

Merci: Yeah, exactly.

Allen: Right? Investors take meetings and people … You should be the one saying this rather than me, but investors take meetings too. They call it deal flow. They meet people that are founders, potential future founders. They want to have an understanding of where the good deals are going to come from, and just because someone talked to you does not mean they’re like, “Okay, I have some money. Just say the magic word or hit this bar and here it is.”

Merci: Exactly. Yeah. That sort of brings us, I think, to another thing that will often kind of blow the mind of a founder, is gauging, “What kind of a meeting did I just have?” Because, man, they’re the same. When you’re going out pitching, there’s between one and three people in that first meeting, and they do a little bit about their background and the firm, you do a little bit about yours, you pitch the idea. You go through your sort of basic thing, and what happens next is actually a huge fork in the road, where, if you’re actually out fundraising and it’s not just meeting people or that sort of socializing, if you’re actually running a fundraising process and you don’t hear back the next day, it’s a pass. If they’re interested in the space and in you seriously as the founder, they have probably already met with your competitors. That’s the other thing people should know. It’s like, if someone is looking at podcasting tools, they’re going to go meet with every podcasting tool that will take a meeting with them, not because they’re necessarily interested in investing, but also they might want to see, “Hey, do I think that there’s a market here, and can I find the best team?” Because that’s what venture is, the cover law. It’s not about investing in the second or third best company. It’s about finding an outlier who’s building something incredible that you want to get access to. Yeah, if you’ve met with them and they haven’t reached back out to you in a day, tops three days, it’s a pass, and they’re never going to actually pass. It’s very unlikely.

Allen: This is a sort of infamous dynamic with investors, is that they don’t want to pass. They will say, “Oh, it’s really interesting, but maybe get in touch again when this milestone happens,” or they’ll just ghost you, or, they don’t want to close a door just in case it turns out later down the road that you are a-

Merci: It wasn’t a serious meeting and they forgot. That really-

Allen: Yeah, because they had eight meetings and it wasn’t in the top four most important ones to them based on their-

Merci: Exactly, exactly.

Allen: Which is very much that ax and tree thing.

Merci: Then there’s the, “Oh, why did they meet with me?” Then, “Okay, well then, why did they meet with me a second time?” Or, “They seemed so interested and excited and then I didn’t hear from them.” I actually learned this from a VC while I was a VC. He was at a different firm, and he said that his firm’s mindset around those moments is that they want to earn the right to say no.

Allen: They want to earn the right to say no.

Merci: That really blew my mind. They are a firm that really, the whole firm comes together. They push to win the deal, because in venture, the only thing that matters is that you won, because it’s a transaction. You’re swiping your LP’s credit card and you’re buying 20% of this series A company at a certain price, and you could do nothing for the next eight years and make $500 million. It actually doesn’t matter if they helped you hire your CSO and your CFO and your CTO and scaled the board, and introduced you to an important company. Actually, for them to make money for their LPs, the only thing that matters, because you can’t retract on that deal, is that they won it in the first place. They want to be very leaned in, in order to have the right to have a choice about whether they say yes or no to you. It’s like earning the right to pass on you. First you have to be leaned back into them, so they’re going to turn up the charm as their sort of first foray into their win motion, and they win a lot because it works.

Allen: I would say something about capitalism, but capital is right in the name of venture capital, so …

Merci: Yeah, it’s not subtle.

Allen: It’s on the tin.

Merci: Yeah, and it’s a great and very specific tool. I think the specificity of that tool is the other thing that, especially as … The HBO show Silicon Valley is out there. Famous actors have actually well-performing venture funds. The Chainsmokers have actually-

Allen: Famously.

Merci: The EDM band. Yeah, actually made great investments. It’s like, “Oh, dang.” This has become part of the kind of popular knowledge, especially in the ascendance of tech, that people think of, “Oh, if you want to start a company, you should raise venture capital,” but the truth is that very few companies, markets, products are venture ready or a good fit for venture. That’s the other thing, is, hey, if you’re building something, let’s take a notes app. Is a notes app that you built a beautiful version of with your friends and you got it up to 500K revenue in 18 months, and it feels great because that’s a lot of money, and your burn is really low-

Allen: That’s impressive.

Merci: That’s actually probably not a venture backable product, even though, yes, you have seen notes apps raise venture capital, but you haven’t seen venture capital level big exits for a notes app.

Allen: That’s another one of those things where a lot of founders, especially early on, have a lot of frustration when they don’t yet understand the mental model or the mechanics of what VC’s job is, which I think is better understood now than it was five or 10 years ago, but this model gets simplified down to, and I wonder if this is on your map, of, the goal of the VC is to find billion dollar investments, obviously around … There’s some number variance in that number, whether it’s exactly 1.00 billion, but when you’re like, “Hey, this could be a 100 million dollar company,” at least my mental models of VCs are like, “Okay, cool, well, have fun with that.”

Merci: Yeah, exactly, and it’s like, that’s huge. If you build as a founder, and especially because you didn’t raise venture capital, that you own 90% of a 100 million dollar company, that is an incredible, life-changing amount, and honestly, so is a 10 million outcome, when you own nine million bucks or whatever. That’s huge, and so it’s also, it’s just the scale difference. They’re making money for the Church of England and Harvard. It’s very different than changing the life of 100 people.

Allen: Yeah, and so you have this frustrating …I don’t know if you have anything on the marauder’s map on this, but this valley of death that’s huge in between bootstrappable startups where one or two people can get the thing going and pay their own salaries and pursue those 10 million dollar companies, and then you have the billion dollar opportunities where it’s like, “Hey, we have a plausible path to build a billion dollar company,” and so you can make a path towards raising investment. There’s a really large gap between 10 million and one billion.

Merci: Yeah, yeah, exactly. You can get caught in … It’s funny, the term that I hear the most often for that valley of death, which I also like, is zombie companies. When you have, and especially during the ZIRP era, zero interest rate era, people have been able to fairly easily … I won’t offend the 95% of founders who have a hell of a time raising money, easily raise 100 million dollars, and then they’re at a million dollars in revenue, or even 25 million dollars in revenue, but their valuation is two billion dollars. It’s enough revenue that everyone is still kind of committed, and it seems like it’s working, because again, for normal people, 25 million dollars is a huge amount of money, but from the lens of these outlier scale, venture scale companies, it’s really not. In fact, especially in SaaS, a lot of companies really stall out between 20 and 50, and if you don’t kind of power through the 20 to 50 ARR range, you can be stuck there grinding it out between 35 and 45 for quite a while, and then you’ve closed off a bunch of exits because you raised too much money, a too high of evaluation, but it’s also kind of working, and it would be incredible if you had done the base camp model and you’re making that much money, but you didn’t. You raised venture capital, and so without the marauder’s map, how would you know? Because no one tells you this, and everyone of course thinks, if you have the self-confidence to start a company, not 100% of every day, but enough hours in the day you spend being, “Yeah, I’m going to win.” People don’t understand. I am an outlier, because it’s that confidence that leads you to starting a company in the first place.

Allen: Yeah, and well, it’s a really intuitive psychology. It’s not just understandable, but it’s totally appropriate to be excited about an idea as a founder, especially, you’re a first time founder, you haven’t had a big exit. You’re like, “I see a path to this being a company that could be worth tens or maybe even hundreds of millions of dollars, and I’ve founded it, and I’m seeing traction.” It’s just like, of course you’re excited. Of course you would think the world should … In an ideal, if we were to design capitalism from scratch again, then it would be possible to fund those kinds of companies without having to go to some of the more contorted measures that we do sometimes, to try to fund those kind of companies. Which, I would be kind of interested to click in on funding that kind of company, but I would rather use the time we have left to chat a little bit about Panobi, because we talked about growth teams and then we talked about the VC work. We’re actually going in your sort of career progress, and your current stage is your billions company, Panobi. I know it’s relatively early, it’s not a billion dollars yet, as far as I know.

Merci: But I am convinced.

Allen: But you’re convinced, and you convinced some VCs that this is the path and there’s an opportunity here. I find it really interesting, because it’s in this form of, there’s this need that didn’t exist 10 years ago, which is, we have these growth teams now, and it’s a model for building business and building products, and you’re building tools based on what you’ve learned and what we’re learning as an industry to kind of support this process. I’d be curious to hear a bit from you about sort of how you’re kind of approaching this space and kind of what you’ve been learning so far, digging into it.

Merci: I’m obviously so obsessed with this, and in part it is because I have had such so many lucky breaks and this incredible opportunity to be a VC, to be a founder, to be a head of growth, to be an ICPM, and a game designer. In my speed run of multi-classing the Silicon Valley RPG, I have gotten this vantage point from these moments of understanding that, okay, at the IC, individual contributor level, you have marketers and product managers who are trying to tell stories with data, trying to make decisions with data, and in order to do that, what they’re actually spending all their GD time doing is going over to a dashboard and taking a screenshot of it, and then going into a spreadsheet and copy-pasting some rows out of it, and bringing all of that together in a Google Doc or a Notion page or a slide somewhere. Then, that IC sends it to their lead, the head of growth, let’s say. The head of growth takes those from all of her PMs and marketers. I used to do this, and it took me a single day, an entire day in a work week, to do this process of taking this from this person and this from this person and this from this person, and then to go in and get some company level data and do that thing again. Then I pass it up to the CEO, and then him and his team are waving that into the board deck. Then, having speed run Silicon Valley, I now see, “Oh, man,” and it was not a long time ago for me, because it has been a speed run, but 15 years ago when I started my career, maybe even just 12 years ago, we were using Google Docs and slides and it was very similar tooling. The data sort of tooling landscape is even more fragmented now than it was then, and it’s even more important, especially in our new sort of macroeconomic reality, to do things efficiently and to be able to back up what you’re doing with data so that you can go to frankly the CFO and say, “Hey, dude, I can take the dollar that you give me and make us $1.50 on the other side of it.”

Allen: Not having seen the product gap, but one of the things that makes me curious about what you’re describing is this horrible process that anyone who’s worked at a company, at least in leadership, has probably seen, of people farming spreadsheets and trying to assemble data and it spreading into a pyramid and getting baked into decks and stuff, is that you have the dreaded … Once, a couple layers up, you have somebody being like, “How exactly is this number calculated? What exactly goes into it?”

Merci: Exactly.

Allen: Then it’s like, someone’s like, “I’ll get back to you on that.”

Merci: No. That’s the death knell of the meeting. Oh my gosh. Exactly. Yeah, yeah, and even the sort of more positive version of the metrics fight, “Let’s define what the word is,” that happens in this level of meeting, is also just the lack of flexibility to lean into where the executive team is on that day that you’re presenting to them. When I was head of growth at Slack, I would work very closely with my head of data and with the head of growth marketing, Rachel Hepworth, who’s now the CMO at Notion.

Allen: Nice.

Merci: Which I just keep saying, because I’m so proud. She’s such a … The three of us would work together over the course of two weeks, putting together this report that we called the Growth Council. We were presenting to the Growth Council. We put together the slide deck, and some of it was like, “Here are top line metrics and what we’re doing against them,” but also, “Here’s something that we see coming in the future that we want to raise up to the executive level to sort of get around it.” We’re coming from down here and they’re coming from a more strategic layer in the company, and they have much more data and sort of levels of input, so they’ll have this sort of different point of view. It was unfortunately often the case that we’d walk into this and we would have an okay but not great meeting that wasn’t a great use of people’s time, because they wanted to go in some other direction. “Oh, I know you’re looking at the revenue forecasts that you put together for the PLG paid conversion focus that we have for next quarter, but we’re looking at X, Y, Z on marketing.” Then it’s like, “Oh, well, shit. What we have is all of this pre-computed data in a static thing that we spent a lot of time making. We don’t have the flexibility to just turn a page in a place where actually all of that data is live. When I tell people about Panobi, I often relay those stories and say, “Hey, if you could cut off that metrics definition fight by literally just opening up the metric that you’re looking at and showing them the SQL query,” because we are kind of a tool. Imagine if Notion, you could write SQL in it, and you could pull in data from Snowflake and Google Analytics as well as some pre-computed CSV that your data scientists work on, and you can sort of see what went into all of those, what the data source was, how fresh the data was, but then you can also see it next to all of the projects that not just your product team is shipping, but that your performance marketing team is shipping and your brand marketing team is shipping. It’s funny, it’s a new thing, and I know everyone … I mean, I’m like a basic founder in many ways. I’m convinced that this is some brilliant new thing that everyone will be using, and it’s a new category. I’ll just own the fact that this is typical as hell, to think that I’m special and that what we’re building is really incredible, but I do think that that’s the case, because we are bringing together all of these things that are hard to get access to, and it’s very hard to sort of create this source of truth, and we’re just sort of willing to do the unreasonable slog that it has taken us over the last 18 months, to build a product where we can really quickly build native integrations to all of these data sources and present it in a really intuitive and lovely product interface that people want to use.

Allen: Yeah, 10 years ago, if you’d asked me about building a startup as a founder, where there’s this big slog to build a difficult thing, I would be like, “Oh, yeah, maybe you don’t want to do that,” but I was convinced. I’ve heard this idea before, but I think it was Dennis Pilarinos, who I believe is an investor in Panobi. Is that true?

Merci: Yeah, and a friend.

Allen: And a friend.

Merci: He’s the best.

Allen: He flipped my mind on this, and working through Buddybuild, when we had an early conversation where he was like, “Oh, I think we should do this, and we’re going to orchestrate X in the cloud, design iPhone apps, and do other things.” I’m like, “That’s going to be horrible. It’s going to be so much work, and it’s going to be hard to keep running, and you’re going to have to have macs in the cloud, and you don’t want to do this.” Then, instead of being discouraged, he was energized, and he was just like, “Oh, it’s hard? Great. Then we’ll have a moat and it’s going to take a long time for anyone to catch up to us.” I was like, “All right, your funeral.” Then of course, he had this exit and it was great. He was right and I was wrong, and that’s flipped my mind now. I have a much different emotional relationship, when either in my own work or I hear a founder saying, “Okay, well there’s this opportunity, but it seems really hard to actually make it work in the first place.” It’s like, “Hmm, okay. I like it.”

Merci: Yeah, exactly. It’s funny, often young founders that are coming out of a program like YC or Y Combinator will approach angel investors like me, and of course they’re first time founders, and they’ll say something to the effect of, “Hey, the three of us built this in two months,” and they say that meaning, “We put so much effort into this. It was difficult, but we got it done. We’re so happy that we are able to do it so quickly. Isn’t that impressive?” What I hear is, “Any three people can build this in two months.” Two months is almost no time for something as hard as solving a technical problem or even figuring out how to build a really great product. It’s like, some things actually just take a lot more time and a lot more determination than the average bear is willing to put into a project.

Allen: Yeah. Well, and that’s why we have our marauder’s map and the ability to, sometimes if you’re lucky and you read it correctly, get the capital to go take the big swing and build the thing and find out if you’re right.

Merci: Yeah, exactly.

Allen: Awesome. Well, this has been a great conversation. I appreciate you so much for making the time. Where can people go to find out more about you and your work?

Merci: We are at Panobi, P-A-N-O-B-I, dot-com. Swing by. You can book a demo. The demos are with me. It’s a link to my Calendly, so if you want to talk, I’m just a click away.

Allen: Perfect. Thank you so much for being on the show. It Shipped That Way is brought to you by Steamclock Software. If you’re a growing business and your customers need a really nice mobile app, get in touch with Steamclock. That’s it for today. You can give us feedback, follow us on social media, rate the show by going to itshipped.fm/contact. Until next time, keep shipping.

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