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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Founders Felgate. Founders Field Guide is a series of conversations with founders, CEOs and operators building great businesses. I believe we are all builders in our own way, and this series is dedicated to stories and lessons from builders of all types. You can find more episodes at Investor Field Guide dot com.

Patrick O'Shaughnessy is the CEO of O'Shannassy Asset Management, all opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shannassy asset management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shannassy Asset Management may maintain positions and the securities discussed in this podcast. My guest today is Zach Bookman, Zach is the founder and CEO of Open Gov, a budgeting and financial management software for local governments.

Before he founded Open, Gov. Zach was an adviser to U.S. Army Gen.. H.R. McMaster in Afghanistan, a law clerk and a Fulbright fellow studying corruption in the Mexican government. This conversation is one of the most unique and wide-ranging of any I've had on the show. We cover how Zach built a world class sales organization, why you should build momentum in your business, and the role that capital efficiency still plays in building great companies. We also dive into the details on how local government works from mayors down to school board meetings.

Please enjoy my conversation with Zach. So, Zach, I always try to think of an interesting place to begin these conversations, but I don't know how hard I need to work for this one, because we're going to talk about a topic that I've never covered before, which is how the government works and why software businesses maybe interesting to build in this sector. Everyone always wants big markets. I don't know if there's a market bigger than government. Maybe you can begin by explaining the origin stories here, both for you and for open govt.

Why what you did prior to open govt brought you to that point and kind of what the point of origin was for the business itself.

Thanks for having me, Patrick. Really excited to be here. I grew up near government. I grew up in the Washington, D.C. area. My father was a civil servant in D.C. Everyone knows someone who works in government. It's an industry town. When it came out to the valley and we actually started raising money for opened up. It's kind of funny, but a lot of investors said, this is crazy. I came to the valley to get away from government.

I don't want anything to do with this. I studied government. I went to law school. I did a master's degree in public administration. And then I went down to Mexico and studied corruption in the Mexican government on a Fulbright Fellowship. I had a brief law career as a law clerk for a federal judge and then a trial litigator and then went overseas to Afghanistan. I served as an advisor to U.S. Army Gen. H.R. McMaster on the anti-corruption task force, and we started opening four of us.

I was living in half a shipping container with two soldiers in Kabul in 2012 when we got this off the ground. Our chairman and co-founder, Joe Landsdale, who who's a co-founder of Volunteer and two really bright young technologists from Stanford, got it going back in the valley basically for the prior couple of years. This is like nine, ten, eleven. We've been studying the California budget crisis, post recession. All these governments about to hit the wall.

Three in California actually went bankrupt. Twelve were predicted to go bankrupt. And we were coming of age wondering, like, wow, how is this possible? These bedrock institutions aren't on bedrock at all. And as we dug in, we saw they're using like thirty forty year old green screen ERP systems, back office stuff using COBOL and DOS. And we were like, this is crazy. And we started talking with local governments, budget directors, and we were like, hey, give us your budget data.

And they'd be like, how do we do that? And I'm like, You're the budget director. What do you mean? And they said, Well, come sit with us and look what we're dealing with. City of Palo Alto, it paid ten million bucks to German software conglomerate for an ERP system that was delivered on twenty disks and had green screens. We were a little naive, little courageous, lot of credit to Joe, just, hey, when the world's supposed to be operating up here and it's actually operating here, that's a lot of white space for a company.

And we just dove in and built a product strategy and fought our way to building categories.

We're going to come back to what the original product was and how you built it and sort of what that whole state and government federal level government systems look like. But I want to go back to prior to open govt, starting your experience in Afghanistan, how did you get there? What exactly were you doing there and what lessons? Looking back on it, Paul, from that experience.

So a guy I know helped author the surge in Iraq and was one of the brain trust of General Petraeus. And I was talking with him.

This is while I was practicing law. He said, wait a second, you studied corruption in Mexico and your trial litigated criminal experience. These guys would kill for your experience. I'm going to call the general right now. And General McMaster was leading the task force. General Petraeus had set it up. And General Master wrote me and said, I want you on my strategy. Teams on it took a year to get the contract. They sent me to Blackwater to shoot guns.

And then I went over and it was a surreal experience. I mean, I showed up in a sport jacket. Everybody's in fatigues and they're like, who's this guy? And there was a lot of, I'd say civil military friction that had to be worked out, ended up helping to run a rule of law team that was one of about half a dozen different teams on this anti-corruption task force, which was at the International Security Assistance Forces headquarters, which is next to the embassy.

And it's a military base. But we were advising the Afghan attorney general's office on investigations and prosecutions of high level corruption cases. You might remember, like the Kabul Bank scandal, that kind of thing.

What do you take away from that time that you think has applied or helped you in building open government? Anything else that you've done in life sense?

A lot of lessons. Thematically, open govt. We build and sell back office systems to power more effective and accountable government. A lot of the work I've done, my passion is to have an impact helped people at a scale that really can make a big difference. So there's some thematic thread around transparency, openness and anti-corruption, even budgeting. A budget is anti-corruption tootling, but really it's about how to get large groups of people to align and. And that's the name of the game, whether you're building a company or whether you're running a government or a task force or nonprofit, it's so difficult in Afghanistan.

I saw General McMaster and General Allen and many others working its incredible deployment hours, as they call it, 18, 20 hours a day, six and a half days a week. And you're bringing together not just four or five different services, but the entire inter-agency bureaucracy and then the foreign consulting community and contractors and then locals and warlords and government. And it's just like, how do you organize that? How do you align that? And I can't say we succeeded every which way from Sunday, but I can't say that it was an incredible learning experience for me.

And frankly, a lot of the folks that were there who developed a lot of respect, not just for the coalition, but for all the partners and of course, the Afghans who fought heroically for like 40 years.

So if you're trying to align a large group on a big mission, what is step one?

I think you have to have a strategy that actually makes sense. And that might sound obvious, but I've executed on strategies that were just wrong. It's a little tougher to align people and communicate when it's the wrong strategy. And even if you can't alignment communicating, you're kind of running off in the wrong direction down the field. I think you've got to have clarity of that mission. I saw a lot of different missions being executed on in Afghanistan. It's extremely confusing and I don't want to over lawyer it.

But if the mission is to stop any and all terrorism, that's not achievable on its face. So how do you set up a mission that is both bold and ambitious, but it also makes sense and people can align by and at least has the possibility of being achievable. And then I think you've got to inspire people. That's one of the hardest things for a leader to do, and it's one of the most important. But you've got to communicate clearly and also just speak to people's hearts, guts, as well as their minds at the start of open government.

What did that step one look like there? I'm assuming it's not an easy task to go build vertical success in the space that as you said previously, the solution is delivered on 20 disk drives and green screen format. What did that original alignment look like? What did the vision look like that allowed you to get a foothold?

We've been fairly consistent mission wise, and it's obviously a very broad mission to power more effective and accountable government. But I found since early it was very attractive. People are selling ads. They're building widgets. Most of these companies have a great story about how they're changing the world. And it doesn't fully ring true for a lot of people. We've had many problems. I've made tons of mistakes. But the mission and inspiring people on it has been one that has worked out fairly well.

And I think it speaks for itself. I mean, I hope and holler like most other founders and have a good time while doing it. But I think people really want to have an impact. They want to come home at night, tell their parents, tell their kids, look what we did for the world. Look what we can do over the next five or ten years for our communities and our society. In most jobs. You don't get to do that.

And I think in some you do. And that gets very special, very fast.

There was a really interesting charter table in an article that I read on Open Govt that sort of shows the status quo of like a government system. I want to really lay the groundwork for people here because I think most people understand government. They vote in elections. They understand probably services that they consume. But it's a pretty opaque system overall. Like I couldn't really tell you much about how Mayer's job looks like. What does a mayor do with their time or what is a major elected official do with their time, a city manager or something like that?

So maybe you can sort of paint the picture for us in as much detail as possible, kind of what the levels are that matter, maybe starting from hyper local all the way up to federal. Just give us kind of the background of what the system look like when you arrived at it.

A general purpose government is like a holding company. No one would go pitch you or Bill Gurley for an investment on a startup idea and say, hey, I want to pave roads, educate kids, process sewage and generate electric power. Patrick, you want to invest in my company? That's pretty much what a general purpose city or town is and does. We collect for profit and nonprofit business lines into an incorporated entity. The shareholders are the residents or citizens.

Those are stockholders, if you will, just trying to paint a picture. They elect a board and those boards are called councils or boards or twenty other names. The board appoints a CEO, the chief executive or administrative officer. They often have diminutive titles, which is kind of confusing for a lot of folks who are just going about their lives. It's called the town manager or the city manager or the city administrator or there's 20 other names. That person appoints an executive.

And that executive team typically consists of some executives, but also general manager. Of those business lines that we talk about, police and fire and a library and then someone to recruit businesses and run economic development, what have you. So the first thing to debunk is most people think the mayor is like the chief executive of a government. That's only the case in about less than one percent of our nation's local governments. Our nation's local governments are run by a manager, the mayors, the titular chairman of the board, and it's often just a rotating position.

So they get to wear the purple crown for a year and then they cut a few ribbons and move on. That's the design of like the standard city or town probably where you grew up. And I'm speaking about the mind run of our, say, nineteen thousand cities and towns in the United States. There's another sixteen thousand townships, by the way. And I'll talk about counties. There's three thousand counties, there's thirteen thousand school districts. There's twenty thousand special districts.

I'll bore you with that in a second. And then there's probably twenty twenty five thousand state agencies. So we live in a massive amount of democracy. Counties are subdivision of states. They run roughly similar. Most are general-purpose special purpose. Governments are like a mosquito abatement district or like a sewage plant or sometimes an electric power utility or even the Golden Gate Bridge. And they're organized somewhat similarly. But they have one purpose and that, say, to run the Golden Gate Bridge.

So you drive across, you pay a tax, they collect revenue, then they determine how to spend it on paint or suicide nets or maintenance and kind of run that government that way so that your local governments, special districts, states are, I suppose, big general purpose governments. But that's the essence of our federal system. You've got a federal government and a state government. And states are, as we just saw in the past week, fairly autonomous.

And we truly have a federal system and contrary to many other countries that we're friends with and admire. And then you've got this sprawling federal bureaucracy. Most people think government, they think federal and probably half the total tax dollars in revenue roughly goes to and is spent by our state and local governments. So it's really where the government rubber hits the resident or citizen road, and it's where most of us will interact with government most of the time.

Such an interesting, like Russian nesting doll all the way down. I really like the idea of it being like a holding company, like this strange collection of services, many of which kind of are unrelated to each other. But we all sort of have come to expect as citizens of whatever town or municipality you're talking about, say, more than about the role of budget in all of this. Like it's hard enough to imagine being someone sitting on top of all these disparate services and generating tax revenue and allocating it appropriately.

And I think probably the approval ratings for a lot of government surveys are quite low. Just talk through like how money flows through the system and why it's a mess and why I think it's hard to get things done.

So the budget is the heart of a government in some sense. I mean, it's kind of why we have a government. Basically, we set up these entities. They have a coercive authority to raise revenue and that's your taxes. But I mean, a huge long tail of fees and fines and and other revenue generating activities. They often run businesses. They may run them as nonprofits, but they sell electric power, do inspections, permit fees, whatever, get a bunch of revenue and then have a big pie fight about how to spend.

What we've set up in the United States is to bring that pie fight pretty close to the people whose money is being spent. And so interesting lands is actually through selling stuff to governments. They say that it's the closest you go to the people. So school districts are really close to the people. Everyone, like parents go, people fight, they shout at each other. And people who sell technology to school districts are often in a lot of pain because everybody's got an opinion.

It's really hard to make decisions. They kind of want consensus for the decision. You never get consensus. It's too hard.

And then you move up towns and counties and states and federal and you get increasing distance from the people and a little more authority to operate and move it speed. So the budget itself is an anticorruption device. I think it came from like the Napoleonic Wars or something where the European nations were spending money so rapidly that they eventually realized, you know what, we might actually have to, like, plan out how we're going to spend this money. You don't probably live your life saying I'm going to do forty seven restaurant dinners during weeknights this year and we don't live our lives like that individually.

And yet at government, it's amazing the level of depth most people think. Most people I talk to or many think that there's like a line item in a government budget that says like fraud. And there's another one that says waste and one says abuse and corruption. And they're like, if I was running that government, I would snip that right out. Turns out it's not that easy. It might be a three hundred thousand row Excel spreadsheet with seventy seven tabs all interlinked, wheeling down like.

Literally, we're going to buy three refrigerators, four machine shops at the Parks Department, it runs down to a high level of detail. And the reason we do that is so that we can actually track the taxpayers dollars spending. Well, in my personal opinion, it's darn near overkill because the amount of back office work going on in these governments is extraordinary. It's Byzantine. It's extremely complicated. There are large numbers of people doing accounting and figuring out where the money goes, and it's all run in different funds.

Another thing that people think they get that gas tax, why can't they lower this fee or something? All this stuff is in different bank accounts. And there's actually rules and regulations that you typically can't spend, like electric power fees on, like somebody's pet project over there. It's very complicated. It's highly regulated. And the problem is we did it to ourselves. We make the rules. We are the people. But I'd say the budget is the planning device that's extremely important in the accounting system is where you track every dollar and where it goes and every government's doing this.

How do you think technology can help shake up the system and the effectiveness of all of this? Because if you think of local governments and all governments as sort of like this interesting bundle of services that we can kind of opt into based on where we live, I guess there's not a ton of variance like everywhere as a police department, I guess. But there's a range of the quality of the services. If you think about this from the citizens standpoint or the citizen is the customer is how I'll frame it.

How do you think technology can enter this picture and potentially make government better and that bundle that we receive better for all of us?

So there's a bunch of ways I'll start from maybe the things that are mundane and move to a little more ethereal, I suppose. But the less people are doing hammer and tongs in Excel and access and building budgets with bubble gum and toothpicks and string wrapped around it, the more they might be getting strategic and planning on behalf of the community. So there's just a huge amount of manual labor that can be saved. And this is going on in all sorts of verticals, all sorts of industries.

You know that story, that's the promise of vertical software. It's really the promise of the cloud as well. Number two, and this might speak to your point, bringing the people closer to their governments is generally a good thing in terms of alignment, trust, getting things done. One city manager I talk to, you put it to me this way. He said, trust is the coin of the realm. If you have it, you get things done.

If you don't, you get nothing done. And we see that in companies. We see that all over the place. And technology can help you publish the budget, engage with your citizens, open up, operate. They have to operate in a glass house. But how many soccer moms and dads who are working late can go to the city council meeting at six p.m. on a Tuesday and stay till midnight and so on? Put it online. It's twenty twenty.

And there's a lot of things in areas that technology is helping to kind of get citizen sentiment, including even A.I. and mapping all social media and so on. But even mundane stuff like publishing the numbers in a way that people can digest it and putting meetings online. I'd say three, you can kind of get normative in the technology and actually change how people work. So rather than just mapping business processes and putting that stuff in the cloud, you can build processes and say this is the way it's supposed to be done.

Contractor is getting plans approved to renovate your house, Patrick. They should only have three steps, not thirty seven, and they should be able to pay online. So this is the way our technology works. And there's a lot of really exciting frontiers there to make people's lives better and frankly generate even more revenue or or better capabilities for the governments themselves.

Do you think there's a chance that technology can enable an explosion in how we perceive the interaction that we have with local governments and the like? I'll use permitting or something like that. It seems like we sort of have Stockholm syndrome, like we're just so used to it being a terrible experience. It's hard to imagine the rest of my life and not being a terrible experience every time people say technology fixes these problems, but in government seems to be far behind a lot of other industries.

Are there just structural issues with government that will make it stick that way? So 20 years from now, if I build a house, I'm still going to have a nightmare of a time getting permits. Or do you think that we might be facing a seismic change in that world?

So yes and no. I think government is going to be persistently ten to 15 years behind where you would want it to be. And that's a structural issue. We actually design these organizations. Patrick basically did not make decisions. You don't design an organization like this if you want to be. I sell software to state and local governments. Many of our purchases have to be approved by the board. How many company boards need to approve software purchase? It's kind of crazy, even an expensive one you typically don't take to the board.

And yet, I mean. Over twenty five or 50 or 100 k you've got the baseball coach is like weighing in on it and approving the nation's city. Managers know this. They're not dumb. They sit there frequently chairing a meeting or helping to run things. And they take it so much flak from the public, but they know what they're operating in. And they're like, you voted on these rules. I'm playing in your system. There's a lot of procurement rules designed to be deliberative.

It's designed to think not quarterly, like, say, a public company is designed to think out decades. We want governments to protect us from criminals, to think about natural disasters, to build 20 year plans, even 50 year plans sometimes.

So this is about how to take a community across generations. For a lot of these local governments, it's not about the number one goal is not to operate efficiently. I would say the number one goal is to act with the will of the people as efficiently as possible. And that's very different. That said, look, I think this covid crisis is accelerating local government in a way that we haven't seen in twenty, twenty five years, maybe even since the advent of public administration schools or like McNamara in the era of great leaders, going into government is a noble duty.

There's something really powerful happening. Every government getting laptops, getting online, getting video conferencing, getting cloud technology. I'd say the cloud revolution is needing local government. It's happening fast and furious.

I'd love to discuss for a while the lessons that you've learned building vertical SACE. And before we do that, I think we have to mention that this is a very regulated space that you're operating in. And so I'd love to generalize those lessons overall, but also with a mind towards working in a regulation framework that can be challenging, because I think what makes it probably harder to do it may also result in a business that's stickier and longer lasting and better for investors and founders and everything else.

So I think it's really interesting. Maybe you could begin by just telling us what vertical SACE means to you. What does that concept mean if you wanted to build a new vertical SaaS application and some space again, back to first principles. And step one, what would you do first? Like what are the early steps to building an effective vertical SAS program and system vertical?

SAS is basically trading off TAM total addressable market for market share and you get more market share essentially by having more features in your suite, features that are configured or even customized towards the needs of your vertical. So Open Up is a solid example. We focus just on state and local governments. They actually do have unique needs. First and foremost is multi fund accounting. I described all those bank accounts. Those are different funds in corporate accounting. You sell goods and services.

You get revenue in your bank account of governments totally different. You raise revenue in order mostly to give away goods and services. And you have all these different bank accounts that are actually have governance structures.

So your accounting system, budgeting system looks very different. Most businesses also don't need a permitting system. So there's tons of features and capabilities to sell to a government. If I can build those and build them well, I should be able to beat the horizontal cloud or service providers every day of the week. And that's why I'll win market share if I can't lose. But I should be workday selling to government because Workday takes its suite and sells it to pharma and insurance and retail and manufacturing and they've got to configure it and if they can configure it, spent millions of dollars in consulting fees doing so.

And we should be able to do that mostly out of the box with a lot more features. So that's the promise of vertical SACE. You're not going to get your hundred billion dollar companies typically, but you might get your five, 10, 20 billion dollar companies and they can be really good businesses. And I think that's why a lot of investors have move, get more yield, find the vertical SAS plays because industries are also transforming. I mean, whether it's construction or banking or government or insurance, there's a lot of really exciting companies being built and all sorts of crazy places, cert for profit education and car dealership software.

And I could name tons that I'm even friends with or invested in. And it's kind of exciting. And the main theory is trade off that market size to go really deep on the problems of a smaller group of buyers.

So what have you learned about effectively building for the right customers early on? Because I would imagine you mentioned the camera, the number, but tens of thousands of state and local governments, how do you decide who to build for first? Because I imagine that picking your customers in large part determines the features that your product carries and therefore adds value to subsequent customers.

Well, if we had you involved, Patrick, we would have saved about five years and we'd be six times the size basically made every mistake in the book. I studied government for fifteen plus years before we started this business. But you don't actually go to college or law school or your master's degree and focus on the local town. And the fact of the matter is, I mean, I had so many wrongheaded theories when we started this. I thought, you know what?

They all say they're different. They're all snowflakes, but they're really not. And we can run things like this and build it this way. And it's not that town. With the green and the guy in the floppy hat doing the town crier thing over in like Massachusetts really is quite different than the town in Arizona. Their needs are different, their counties different. Their workflows are different. Their citizens are different. Their wants are different. So we've made a lot of mistakes.

This is not a monolith. Even state and local government is probably a collection of sub verticals. We've gone through big exercise, I'd say, in the past year to focus in on that product market fit and then focus within your product market, fit on your ideal customer profile and selling to people, have high indicia buying propensity for your stuff growing, getting really good at that.

This may be an overly simple question, but I'm curious. I'll ask it anyway, which is when you're first building the product, what are you literally doing? Are you just trying to take stock of existing workflows and stick them into software systems? Is that basically it just replacing previously manual workflows with software and then training the people to do it better?

I would say that's a fabulous place to start. I would say I probably wish we started that way. We actually developed quite a different product strategy. We figured there's two ways to build this business. You could raise 50 million bucks higher, say, 50 engineers and lock yourself in a room for five years. These systems are really big on ERP system for government. I mean, thousands of screens of software. We thought that's really risky. You're going to lock yourself in a room for five years, try to come out big, a couple of customers for a year or two to work with you.

And then what if you missed the mark? What if you can raise again? So we developed a different product strategy. Our first product was transparency, as we call it, connecting these systems to the Web. Even just eight years ago was PDF printed budget books and that kind of thing. And we put all that online. You could go through every dollar and we became the leader fairly quickly in that. And then our next product was kind of internal reporting, same cloud based reporting, started to compete a little bit with Tableau and Power Buy and stuff like that, horizontal players.

And then we went right into the back office systems. We built up budgeting and planning systems, and then we moved into the core accounting and financial system and then moved into the permitting licensing code enforcement and all that citizen services stuff. We're expanding that way. And I guess if it works, we'll look smart and it's starting to work. So it's getting really fun. But a lot of these businesses are a long gestation period and it's really key to get close to the customers and work with them.

And the more you can rip and replace, I'd say the more success you're going to have.

What have you learned about doing this in a highly regulated space? Probably a lot more rules and regulations. Then I went to attack, I don't know, dentists or nail salons or something.

Actually, dentists might be regulated, too, but it's not the end of the world. And actually, as you pointed out, there can be some very nice barriers to entry once you really get up and running and establish yourself, including as a market leader, I'd say it's 20 percentage points harder than enterprise sales. A lot of your listeners, maybe enterprise software investors or enterprise service investors selling the enterprise is complicated. You got to find buyers and champions and coaches and you've got to navigate.

You've got to work on that. Approvals and all that. Governments about twenty percent harder. You've got to typically take to the board, as I said, and that's Tuesday night meeting. One of the things that's interesting on that is the more boring you are, doesn't matter how expensive you are, the more boring you are, the easier it is to pass. So visions of monorail, monorail, monorail, that is like not easy unless people get whipped up into a frenzy where it's like we're selling accounting and burning software.

Item forty seven, everyone's words like transparency. You can do great things for your community. They're like, I don't know, I wanted a bike lane. So there's the board and then there's procurement we have set up. In my own opinion, I don't think I'm attacking anyone here. It's just almost like legalized corruption. It benefits incumbents. There's all these games. You've got to be listed on this procurement vehicle. You've got to do it this way.

And it takes time. It takes money. Start ups have a big disadvantage. So when you get on those things, it's easier to cut through the procurement red tape. It's the way so much business is done in state and local government. And we've essentially incentivized that as a collection of politics. But those are the two things the board in the procurement practices that make it hard.

It seems like there's just, again, thinking about this like a really hard enterprise to crack that you have to become a very good salesperson. You've said to me before that you may be gone from being not so good to mediocre at relationships and sales. What are the lessons that have allowed you to catapult to mediocre? I like to sell.

I don't think selling is a bad word. I think it makes the world go round and it's just critical to building a software company or really any technology or startup company. A lot of people think of sales as the kind of like glad handing, cocktail partying, kind of real estate agent. And look, that can be a if you can build relationships, if you can laugh, you can have some fun and people like you, that's helpful. That is not.

The bulk of an enterprise sale enterprise selling is about process, it's about qualification, it's about being smart is what they're telling you. True is the person you're talking to have authority? Do they have money? Who do they need to go to? How do these organizations work? And so it takes on its almost intellectual element. And then to really do it right, you've got to scale it out across a team of salespeople and to do a good sale.

It's not just salespeople. You might need sales engineers. Those are the folks who would demonstrate the software. I can't barely demonstrate our own software in thousands of screens of software, deep accounting or other business process expertise.

So you've got to bring on subject matter experts and then you've got marketing and collateral. Then you've got scoping and then you've got procurement. It's like this huge process to do this effectively. And these enterprises are used to buying that way. So if you just rack up and a good looking jacket, you talk a big game. The whole enterprise is designed not to buy from you. When I talk about selling an enterprise selling, it's much more about how we build a machine to distribute software as opposed to how we shoot a bunch of finger guns and slap people in the back.

Are there any secrets to doing that? Well, building that machine that you've gleaned either from successes or failures as the scope has gotten bigger over the years. So if you were to go set up running the Enterprise Sales Division at some huge SAS company, like, what would be the things that you would deploy based on what you've learned about building that machine?

The chances are they probably wouldn't have gotten to be huge if they weren't really good at this. A great product is the name of the game. There's a lot of examples where great products have lost a great sales machines and you want both of them. I have more advice for, I'd say the zero to one hundred million group of kind of innovators, rather this and so on. They're very mature. One of the signs of their maturity is predictability. That's one of the things you're trying to do.

A public markets investor will say, look, if I put a dollar in this machine, how much am I getting out and when? I mean, that's what people want to know. And that machine, my brother's an investor. A lot of people don't want to go really deep in the machine and the sausage, it's kind of gross. It's like, oh, my God, everyone's on a quota and it's just brutal. And you're making calls all day.

It's like, I'd prefer to put the money in there and see if it comes out. Salesforce could probably predict four quarters from now within a penny what it's going to produce. And that's a very highly developed sales machine. A lot of companies are going through the stages, A and B and C and D have to build this out and they have to do it by hook or by crook. A few things rip and replace is hard to create a new category.

Wow. There's this new technology. We don't budget for it. We've never heard of it. You've got a market now. You've got to educate them. You've got to help them go find money that can be difficult. So rip and replace is nice place to be for both the entrepreneur and the investor too is high prices. I sometimes say, do you want to build a big company, medium company or small company? And most entrepreneurs want to build a big company correlates with high prices versus median prices versus low prices.

It's not always true.

You can have a distribution model where you distribute low priced software, I think kind of Shopify or Sigma or something, or you better distribute that far and wide and a better work. We talk about the SAS death zone sometimes say ten to twenty five or even fifty thousand can be kind of a death zone if that's your annual sale price, because it's very expensive to distribute this stuff. The organizations are designed to basically want lots of people and expenses to sell to them, to educate them, to navigate them, to hold them in your hand and how to flow down the river.

So high sales prices are important. They're also they help the buyer take you seriously. Hey, we're a real player and this is serious stuff and we're a premium vendor. If you're looking for cheap stuff, I can recommend things. I can tell you to go look at vendors. I don't personally recommend it. Three, I would say you've got to build the functions out and you've got to map it to the buyer. Very few buyers have the authority to get this done.

So you've got to get a technical win. You've got to get what we call a political win, maybe with the board or certainly with the chief executive. And you've got to get the commercial. It's got a map up to competitors and like, be worth it on the features and value. I mean, there's whole books and schools on this, and I'm still a student, that's for sure.

Can you say more about those three levels and sort of how they happen? So a technical, political commercial are those three concurrent processes that are running side by side? Like what have you learned about getting those three kinds of wins? That sounds interesting.

So let's say you were the city manager. This goes for private sector selling as well. But we'll call you the chief executive. And let's say you're buying a financial system. So your CFO would clearly need to be in that. It'd be absurd for you to buy that and not consult with your CFO. In fact, you probably say to the CFO you lead this. Similarly, it be absurd for the CFO to buy it without consulting with the staff.

All of a sudden you can start to see the complexity here. The staff accountant who spends all day entering cash receipts into the system, very different than the CFO, very different than the CEO, and now you've got to be selling to all of them. So that user level wants to. Show me the features, what's it going to do to my job is not going to threaten my job, is it? And then the CFO wants a mix of like safety, security.

Is this the market leader? Is the right amount of spend? Is it going to live? My vision, the CEO. I don't want risk. I want reasonable price. And he's the one who's got to sit in front of the board probably and say this is what we need to do and we need to spend X hundreds of thousands or millions of dollars of taxpayer money on this. And the board's going to ask questions. And so you've got a political win around the narrative, the board, the CEO, you've got a commercial win that's required to get everyone to say, all right, fine, spend three hundred thousand on this.

Let's move on to the next topic. And then you've got a technical win where like all the staff, accountants and others who touch this thing and maybe it gets involved. Right. And it's like, oh, this keeps getting more complicated. So you typically almost want to map up sellers, if you will. I'll play different roles, other folks on our team. And you can talk politics or you can talk commercials or you can talk technical and the technical could be a five hour demonstration of the software using your data, showing all your business processes.

If you don't have all those, you could get to the eleventh hour. You think you have a deal, you forecasted it. We're not public yet, but to Wall Street, to your investors, whatever. That thing's not real. It's not real. And if you can't forecast, it's pretty tough to build a business and make the right investments to have the business grow. And it's certainly demoralizing.

You can certainly see why incredible enterprise sales forces are such a competitive advantage. A machine like this that's well built, especially if you're talking about thousands of customers who are paying huge numbers, have to have all these wins going on simultaneously. We really see why it's no joke to build one of these things. And a frank segments of the world around Snowflake are so revered for the systems that they put in place. What have you learned concurrent with that sales process and I guess ongoing support of these customers and the continued iteration of the product alongside that?

So you joked thousands of screens of software. You don't even know how to demo it anymore. As the CEO, the business, how do you keep like enough intelligence about what's going on but push as much down as possible so that you're not a bottleneck?

So there's a few questions in there and they're all really key to doing this, right? One is I'm in the market every day trying to absorb information. I know not just the names of the leaders of my competitors, but I know what colleges they went to. There's the old joke like, oh, rep from Oracle seems to be army crawling in the bushes over there. It's real. It's hand-to-hand combat and some of these. So you got to know the competitors.

You got to know the market. You got to know how they're selling. Even the reps often should know who they're competing against. It's very competitive. It's why it's often like top athletes get into it and that kind of thing. It can be a lot of fun, kind of thrilling, the thrill of the chase and the win and team sport and all that kind of stuff. We brought in a lot of really good people and continue to try to build this.

I'd say the next stage is how you build this so it can scale and that means training materials and the right management structures. Everyone needs management, something that I've learned painfully. It's just every four to eight people needs a manager. You people need to know they're cared for. They've got career paths. They need more comp, they're taken care of. And so you've got to get the management structures and then there's tons and tons of training. And the training is not easy.

I mean, you've got to have teardowns on your competitors strengths, weaknesses. And the thing is, it's constantly evolving. So there's no like we achieve market leadership. Let's chill. I mean, a lot of businesses do that. A lot of private equity owned businesses do that. And you can milk the cash. But if you're into a growth company, there's no end to features. And if you're certainly selling to a big, complicated enterprise like a government, I mean, we could build for ten years.

So it's more about dialing in the investment on R&D and following the metrics about sales efficiency to know when you should hire more reps. What's your magic number? How is it trending and how you scale this? And that's the stage that we're at, never ending. Learning game on the competition on your own weaknesses and then you're building software rapidly. So how do you how do you get that not only out to the customer base or to the prospects, but how do you even train your people as you start to get hundreds of people just telling them what you have is a challenge?

So there's all these different functions from product marketing to product management, of course, that form increasingly key parts to making this all work. And if you're broken in one area, it's kind of the goal, the theory of constraints. It holds back the whole business.

What else have you learned about how government, state and local governments operate that we haven't talked about yet you think would be interesting or relevant, I guess, to anyone? Because everyone's part of one of these things.

Most of our governments are not run by idiots. I know. We like to think that trust in government, as you alluded to, is very low. It's the highest of the lows in local government. And believe it or not, there's a lot of competent lawyers, accountants, professional managers who are running our nation's departments of public works and serving as the assistant city administrator. And and in all of these key roles, I. I do think and I do lament a little bit, I got a master's degree in public administration and the school was founded in an era when the phrase good enough for government, you know, this phrase, it's become a pejorative, right.

You laugh at your colleagues works. Hey, that's good enough for government. That actually came from an era when the best people went into government, are post offices, were gilded and made of marble, and a vendor had to be so good as to, quote, be good enough for government. It is kind of sad. I'd say in the last couple of generations, the disrepair many of our governments have fallen into. And there's a lot of reasons.

But we can't just pass the buck. I mean, we're all members of communities and certainly society at large. This is what we get. We get who we are. We get what we do. And that's what's kind of shocking to a lot of people. It's like, wait, this is my issue is they're just boards. Anybody can run for these things. So if you really care, you can step up. And if you don't care, you don't have a great claim to just saying, oh, yeah, everyone sucks.

You can lament the state of society or culture, but that's certainly not going to affect anything. So I think that's a very interesting lens through which to look. And most people do not spend the time looking through that lens.

If you could have a dashboard in your Start-Up screen in the morning and it can only have three metrics on it that you could use to assess the health of open governance, your business, what three metrics would you put on that dashboard?

We use exit or cumulative IRR. That's critical. I'll mention a couple that are maybe less critical. We're on a big train at Open God right now, building our professional services business, building an enterprise SAS company. I'm now of the belief that it's really two businesses. It's a software development and distribution business, building and distributing cloud software. But you got to screw it in. So you build the product and you've got to screw it in implementing it.

You could charge by the hour. You can charge by the project. It smells like consulting, but installing or deploying or implementing whatever you want to call it is its own business with its own motion. And what we found as we're driving towards cash flow positive is that not losing money on your processor? It's common that a lot of these businesses say everything's about error. And I disagree. Chambers' came in onto our board, former chairman, CEO of Cisco, who, you know, he said, you know, what's up with the services business?

And Andriessen said the same thing. We were operating under the hood, will distribute it, will make it up the hours worth whatever, five, ten, twelve. The services are worth one, two. And the reality is more services equals more software. More services equals happy customers. Charging more for the services equals faster to profitability. We're following our professional services gross margin very closely. And I'd say a third one is that magic number, essentially how much you spend on sales and marketing and how much you get back in the form of revenue, really focusing on efficiency.

covid has been a minor blessing in this regard. Every government now uses a video conference. We were traveling around spending so much money on planes, trains and automobiles, and not just the money. How many people are sleeping in cheap hotels and missing flights? And that's lost selling time, let alone the morale impact of missing family or children and so on.

And so our productivity has just spiked in the last six months.

I was going to highlight that middle point is so interesting. I will mention who said this to me, but just because I haven't asked if I can. But a very well known enterprise software investor said to me once, one of the hardest things to convince his young founders to do is charge for professional services from day one.

Oh, well, then the whole world gets it. And I was the only one who did. That's great. I think he said it was so hard because it so goes against the instinct.

I felt it, too, of wanting to get those first big wins with that huge software contract that's recurring revenue. And I think his point was just like, look, people need to respect. This is a lot of work and work costs money. If you get that muscle built early, you'll be way ahead of peers, even though it's not high margin business, even though it feels unnatural, it's a great muscle to develop early on. It's charge for services.

I love it. Well, it sounds like you get it. But, boy, I wish I'd gotten it earlier. I actually think most venture investors don't get it. I don't think they get it because a lot of their companies, they just Erza multiple they are. And so I think they don't get it in large. Some do. Obviously. I got beaten up a little bit about it. By the way, it doesn't have to be low margin.

You can dial it in. I mean, chambers like we have. We got 60 percent margins at Cisco, so you can dial that in once you get good at it. But it takes a lot of muscle, a lot of things to be built, processes collateral. But I find the buyers want it and I get that if I was an enterprise buyer and you walk up to me and say I got this new fangled software and you don't have any plan to install it, you don't have your racing matrices and your charts and your five person team and all the bios and all the scopes and so on.

I'm like, you're a joke. I don't think this is going to work. We all hear about these massive tech disasters and governments, and there's a lot of I mean, it's actually why we started open. God, there's a major disaster going on in California. Replacing their Kobol based financial system, it was originally projected to be done in twenty sixteen, seventeen at one hundred million, you know what it costs today? Ready for this? A billion bucks and going strong.

So the whole agency set up for this thing. And I think that's because the consultancies have gotten so good at professional services and the big incumbents are so good. I call it the change order to help process you just change order to forever. We're very mission driven. It opened up. We want to deliver value for our customers, but we've got to learn from the kind of nefarious business tactics and make sure we stay aligned with our values and our ethics.

But building a professional services business has really vaulted our company forward, and I see a lot of young companies that aren't doing it yet.

If you look back on the eight years spent so far building open govt, I don't necessarily just mean in the business, but in that eight year period, what period or episode has been hardest for you personally and what did you do about it?

It's all about people. I'm actually scared a little bit to talk about it because I feel like I'm walking on eggshells every day just how hard it is to build culture and build organizations that work well together with both really motivated and hard working people as well. It's just really nice, fun people. But three or four years ago, I had all manner of problems. I got some really helpful advice. My boards say you got to fix this and you can do it and you got to obviously hire the right people.

Everyone talks about that. But how you exit people is really key. There's no way to build a business and go through the phases one, five, ten, forty million in recurring revenue and not need new talent and new management strength. And how you exit is really key. Don't give them that terrible performance review on the way out. Celebrate them. If you know something's got to be changed. You've got to treat people with dignity. You've got to treat them with respect.

You've got to understand that people are people, they have needs. And we've brought in an excellent head of recruiting, excellent head of H.R. and people, and we're investing really hard. Jeez, I was in the doldrums CEO rating on Glassdoor and the company's rating. And and it's really soared through spending time on this, spending energy on it and bringing in real managers, people who like it, people who love people in management who know how to do it, who manage large groups of people.

I was so stressed running around like a headless chicken that I probably made every mistake in the book. And those are some battle scars that I remember like there yesterday.

What specifically not to pour salt on a wound here, but what specifically about, say, negative reviews on GLAST or something? Do you think we're there for the right reasons? Like what were you doing wrong that anonymous reviewers were right about that you've since fixed?

When I was getting hammered, I was like, I'm killing myself to make this work. I'm trying hard. I know we care about our values. So why is this happening? And I used to think to myself, man, this is like some type of mob thing. I mean, what a business glassdoor like. You get jammed with these ratings and then building a business out of that. It's like it's not like the modern version of the mob.

And I used to criticize and I found I said, you know, I got to go deep. I got to introspect. Where there's smoke, there's often fire. What am I doing wrong? What are we doing wrong? I said, why don't I try to love this public rating system, whether it's glass door or cultural pulse surveys that we do, and getting that feedback in that tough feedback, why don't I embrace it? It's a gift.

Feedback teaches you and the problems probably with me and not with that salesperson who left or that office manager that didn't work out. And when I started to do that, things started to turn around. Obviously, bringing in the right talent and then working hard on the alignment is really key. But I found embracing it and seeking that feedback is probably the big difference maker. And there's tons of tactical plays that need to be run, including I still get deep and I love the business and I love going deep.

But the less I kind of get up in everybody's business and the more I'm like inspiring and a figurehead, it seems obvious, but that's been really helpful. People need room to breathe. They need to be autonomous. They need to have some creative spirit so they can execute. The last thing I'll note that we've done a few times, which is literally change the trajectory of the business, get every manager and functional leader in a room when the strategy is clear.

If you're making a strategic turn or you're repositioning the company or you're moving to the next phase, get them in, get everyone signed up in a loving way, you might even need to say if this isn't the right strategy for you, will educate you, will train you. It's still not the right strategy. We can help you move on. But this is the strategy and we've all got to be aligned. That's the old disagreeing commit and then roll it through the company.

And we've done a couple of those and the company just falls forward when we do it.

So a lot of these lessons that you shared with us are kind of big company lessons, right? Big complex machines for selling, pushing through kind of different levels of IRR. It's like having kids like bigger kids, bigger problems. It's a bigger company, bigger problems, it sounds like, but really embracing and acting on feedback. Good or bad is so interesting, I want to rewind to the earliest days and any advice that you would leave entrepreneurs with out there, especially in vertical SACE, which is space that you've been spending your career and know very well.

What advice would you give the new entrepreneur that wants to build a vertical SACE business successfully?

So I've watched some people succeed marvelously and I try to learn from them even if they started after me or they're not as big as me, but they might be worth three times as much. They're just zooming off. It's really all about the product. Does the product work in enterprise software product? It works. I mean, that's worth a lot enterprise as enterprise. You've got to have the interfaces and the hooks and the APIs and the access controls and the security and all that stuff.

It's unending. It's why the incumbents have such a moat. I would probably have invested less in sales and marketing early and more in product to try to get more fulsome, closer to customers, know it works, tear down the competition, know that I can rip and replace and then pour the gas on. But being really good on product, really having a vision and a strategy. That's right. And not just vague or kind of naive courage. You're going to have a lot of that.

And that's my second point. It's basically as hard as Ben Horwood says it is in the hard thing about hard things. If you read that book. Yeah, of course. It's kind of a little Bible for early stage entrepreneurs where it's just like, why is this so hard? I remember reading it like and he understands me, but Elon Musk's chewing glass and you like the taste of your own blood. It's not mojo that I'm friends with and advising some outstanding women entrepreneurs.

And everybody's in pain at these early stages. Unless you love it. Some people love it. They must be masochistic, sociopathic, more power to them, little cellist's. I have actually, as we've gotten tighter, product market fit most people. I say a lot of entrepreneurs like I miss the old days with the garage, with the buddies and the trick duck and tricycle, zooming around having fun. And I'm like, I don't miss it. It was so hard.

I felt like we're going to fail like any second or every day you're going to hit the wall. And as we've grown, if we brought in talent, amazing people leading the business, my life's improved, my optimism optimism's improved. It's getting more. My fun to stress ratio is going down. So keeping the faith, having courage, I've seen a lot of companies look like they're going to die and then they work. It's just amazing how it works.

So I'd say that persistence is often rewarded. We've also often seen a lot of entrepreneurs pivot, pivot, pivot, pivot and hit. So it's tough to overgeneralize. The third thing I note is you've got to build momentum. These businesses and frankly, almost any organization is about momentum. Why? Because we're people people live for momentum, inspiration, encouragement. What's the next thing? Our minds naturally gravitate forward. So I started doing some things early.

We close a sale, bam, we hit the gong. Right. We close the deployment. We started ringing a cowbell. We ship software. We want to exalt the engineers and celebrate. We've got to celebrate the small wins. It's a bit like I don't know if I should share this, but like throwing a party in high school when your dad's out of town or something. If you call up the people you want to come to the party and you're like, so you want to come to my party?

And they're like, well, who's coming in? You're like, well, so-and-so maybe. But the quarterback might be there and like, prom queen may show up. But she says her mom, nobody's come to your party. That's the lamest party. It's not going to work. If you call up everyone, you're like, oh, my God, biggest party ever. Saturday, I have got to go. I'm so busy. It's going to be huge.

Everyone's gonna be there by you're defeating the holdout problem. And these businesses are built brick by brick. You can't recruit the top sales guy until you get the revenue, but you can't get the revenue until you get the top sales guy. You can't get the top investor until you've got the exact team or two. You got the revenue. It's like everything's dependent. How do you break that? You break it through inspiration, selling momentum and kind of attacking that holdout problem.

And it's something I think about a lot, because every stage of this business has that holdout problem and you typically can't recruit the people that you want because if you were, then you wouldn't work for you. And so you've got to get to the next level and bootstrap each step of the way. It sounds like you work with other founders as well. What other creative strategies have you seen for sort of engineering momentum?

Because I could not agree more that momentum is the lifeblood of getting people to work harder and be happier and sort of like create something from nothing. It really is a magical thing.

Have you seen other leaders do it differently than the gong in the cowbell and your way of doing it?

So there was people way better than me. It takes a lot of it's a technical term, I think sometimes called kahunas. You have to have the steel courage to lean out way over your skis. And you've also seen people fall flat on their face. I mean, I don't want to go there with their nose. It was obviously wildly unethical, but if you're not sure, you can start to see how it happens when you're leaning that. Far out over your skis, and it almost turns into a Ponzi scheme to try to get the momentum going, and the thing is, it sometimes works and people actually do build products and companies that work.

And so it's a bit about that risk tolerance, even among what is arguably one of the riskiest professions, not physically, of course, but ego and all the drama that goes with it. So it's hype. Can you deliver? And you've got, I don't know, Magic Leap was maybe the last one. And and the thing is, I don't even bet against people anymore. They may be down and out and they may come back. I've seen it.

I've seen all the craziness and so of you. And so it's really a Hollywood type environment where it's like who's going to vault to the A-list next? And you don't want to bet on people. You don't want to be negative. You want to do what's best for your company, your shareholders, your people, your customers. But momentum can breed into hype, and it's very important to find the line that you're willing to to lean out on.

Love the topic. And that's not in any of the business classes I don't think is building hype and momentum in a business. But God is important. And almost every success case that I've seen, like you said, it's about balance. It's not getting too far in front of your skis, but being willing to lean a little bit and really push yourself and your team. I don't think I've seen anybody go through that kind of journey that you've been on from a brand new business to now a fairly large business, not change a lot personally.

And sometimes that's for the better. Sometimes it's for the worse. It can be a really stressful job. John Chambers, who you introduced me to, said, you know, it can be very lonely at the top and no one really gets that unless they try it. What have you learned about, I guess, on a more personal level about improvement, adaptation, change, how you conduct yourself? I'm sure this is something that you've thought about because you've had to.

What have you learned there?

I think about it all the time. I think interpersonal relationships and I mean personal relationships. I've learned tremendously from failing and from making mistakes and getting feedback from my colleagues at work. I don't know if that's cliche or innovative or what, but a company, for better or worse, particularly in the early stages, is often a reflection of the leader. Many organizations are reflections of the leader and I mean all the problems. And as I saw problems and I still see problems, I have to look internally to what am I doing to contribute to those?

How did those happen? I grew up in a difficult home environment. My mother was an alcoholic. I guess a lot of entrepreneurs maybe have some adversity in their background. So many Americans do. But it leads to maybe a chip on the shoulder. And I want to prove myself or I want to compete or I want to do something great. It probably comes from a deep seated insufficiency at the maybe self-esteem level. That drive can get you a lot of places, but it probably doesn't actually get you where you want to go.

And you've got to temper it with all the learning, all the self development. I mean, coaching, reading, making your colleagues feel safe to tell you you're stinking or you're sucking. I didn't like the way you did that or what you said. I have found in my personal relationships that it's had a huge impact over the years. The number one job of a leader or a manager is to confront issues. Sluman said that in his piece AMP it up.

I would say it's conflict management. Andriessen would say it's conflict management. What does that mean? I like to say to my staff and my team, work is basically one long series of awkward conversations. It is. And if you're not having awkward conversations, you're almost certainly not doing your job or you live in a fairy tale business. And please, I'd love to invest in it because it's going to be perfect. But everyone else on Earth has to say, hey, what's going on such and such as late or why did we lose that sale or what's going on here?

And you just basically have to have awkward conversations all day. Well, what do you have to do in your family life or your personal life? You probably need to talk things out and resolve conflict. And you need to do it by listening, by reflecting and by kind of finding compromise and by quelling those kind of primal or innate emotions that well up and make you defensive, or as my girlfriend likes to say, turn me into a rattlesnake. And like, I got to put that away and put the big boy hat on here, people out.

And most of the time they're saying something really important.

I have no good translation for this, but I know it's something that we're both kind of strangely interested in, which is the topic of death. Again, I have no way to bring this up other than I'm really interested in it. And I think you are, too. Can you say why that's interesting to you and why a study of death is ultimately a study of life and kind of what you've learned from that investigation?

My mother was an important figure in my life. She was a very troubled person. She passed away four years ago. And it was it was really brutal. She was very ill. She was an addict. I kind of took my first foray into some of the literature, the Tibetan Book of Living and Dying and even The Autobiography of a Yogi and as well as relationship books. And one of the interesting things, at least the Tibetans, I think, say is you've got to meditate on death.

You've got to think about death if you want to live. And my mother always instilled a sense of adventure and curiosity in me. And it's the two things that I'd say drive me at opened up in my. Leadership journey in the business journey. I love the adventure and I love the learning, every quarter is like a new year. I call them like startup years as opposed to dog years. It's constant learning, constant challenge, constant adventure. I think it's why I'm doing the same thing eight years on.

I hadn't done anything for more than a couple years before this. And I remember as a kid boarding planes and thinking all these people who are afraid of flying and I used to actually weirdly meditate on like, what if this plane went down? Could I take a deep breath and like, enjoy that journey? And it's a super weird thing. I don't know. It's probably eight years old. And I took my first flight. I think it maybe helps you get that extra juice out of each day or pursue challenges with zeal or take on things you're scared of.

But I'm just at the very beginning and the past few years have been difficult. That's been my, I guess, adult entrance into death. I lost my mother, uncle, my grandfather and a couple of friends this year. And they say you don't really achieve adulthood until you lose a parent. We're in a time a very interesting and complicated time for our country. A lot of people are losing a lot of people. I don't know. For me, it certainly opened my eyes.

We lost an employee at Open Govt recently. It's really painful and it's really hard. And it's a time to kind of bring people together and reflect on what we're doing and why it's important.

And getting meaning out of work and life sounds like a grim topic, but I think for those that study it carefully, ultimately it's the most positive of topics. In a weird way. Maybe we'll transition and close on what you think people can get from spending some times in the mountains.

There's a few different theories on this. I love mountaineering literature. I've been climbing mountains since I was eight years old. My father introduced me to the mountains and the Adirondack Mountains in upstate New York. And now I've had the good fortune to go around the world on many different mountains. There's solace and solitude and nature. There's tremendous challenge. Everyone talks about flow. Mountaineering is one foot in front of the other. Stomping up a hill, your mind clears.

You can achieve a state of flow. You can achieve a state of flow in the golf course or playing the piano. But this is an area where I think a lot of people achieve that. Some of the literature says you get closer to God, you get up into the altitude, you get up into the clouds, you get into the cold and you feel not only a sense of accomplishment, but a sense of awe and wonder. I don't want to take it to the religious level, but it's there's something kind of bigger than you and that's really powerful.

You, of course, get to see different cultures. And if you're climbing with others, you get the camaraderie. And it's really incredible camaraderie because it's often extremely uncomfortable. And the last point I'd say, which is probably my favorite, it makes you appreciate what you've got. Warm bath or a hot meal, a good night's sleep. These are things you don't get sleeping at twenty thousand feet or being in the freezing cold temperatures and grinding it out to achieve a summit.

And there's, of course, many parallels with building a company or really even building a family or a relationship or anything else you do in life.

I was going to say it's mountains all the way down, I think, for sure. Is there a single moment in your mountaineering experience that stands out as the most magical?

Looking back on it all, there's a lot climbing Denali for me. I remember being eight years old and my camp counselor had just gotten back from Denali in Alaska and I said, I want to do that. I'm going to do that. I was living in Mexico. I trained on the volcanoes in Mexico, and I literally spent the last few pennies I had at the time to go to Alaska and get into the summit. It was weirdly emotional for me and people climate every year.

And it's a very special place being up in Alaska near the top of the world and seeing the Alaska range and very cold temperatures. And it's just the culmination of a lot of work. And so for me, that was a very special time. And I thought about my dad who taught me how to go on the mountains and felt a deep sense of gratitude both for him in the world that has been so much fun.

It's very unique, obviously, space that you're building in, but also a lot of unique lessons that even though I've had tons of these conversations, a lot of things stand out. One final closing thought that I know you care a lot about and we didn't talk about earlier, is the role of capital efficiency in all of this. We talk about momentum in DC and the speed of tech and all this stuff, and there's capital aplenty. But one thing that doesn't get talked about as much as capital efficiency, maybe just say a few words there.

Yeah, I have tremendous admiration. I've done it differently, in part through just mistakes as well as the coaching and the ecosystem I was in. We raised a bunch of money, pierde, great people. We spent a lot of that money and we're charging hard. We did talk about momentum. I would say the flip side is capital efficiency. And it's probably the entrepreneurs I have the most admiration for are the ones who they've actually pinched every penny and it kept it really tight.

And I've developed a theory in just the past couple of years as we're driving towards cash flow positive, that actually spending less money can generate more revenue. And it's almost counterintuitive for so many. But you tighten up, you understand what works. The machine works better. I learned. A lot from the founder collective team, very good seed investors there in open govt, and they started ragging on me a little bit. I started taking their lessons, their blog post to heart, and I started looking at some folks in the space that I'm in and other entrepreneurs.

And I realized, wow, don't pour the fuel on the fire until you've got a really good kindling going. Don't shift gears until you're in the five to seven thousand RPM's. You're just burning cash. And I've also seen the noise come down. Every move we've made to actually tighten up or to remove unnecessary resources or to stop doing unprofitable things has calmed the company down. I sleep better, everyone else sleep better. A thousand less email chains, 20 less meetings.

And so a lot of entrepreneurs who come to me and they exalt the let's go to Sandhill Road and let's do this, I encourage them to think seriously, as you know, Michael Bloomberg and make fifty billion dollars by raising a bunch of venture capital and a lot of entrepreneurs that we admire didn't. And so I think long and hard before going and raising the next round just because it sounds cool. And certainly the measure of a company is not how much money it's raised, it's how much it returns probably to its investors and its shareholders, the value it gives to society.

And it might even be a ratio between capital raised and valuation.

Sadly, we have to turn to my traditional closing question for everybody after an awesome couple of hours together. So thanks so much for your time. The last question I ask everybody is for the kindest thing that anyone's ever done for them.

Maybe a little ironic, but it's the tough love I've gotten from my business mentors, my board. It's the chance to fail. It's the chance to be told you suck and not lose your job. It's a huge amount of pain. And I do wish I wish somebody had saved me from some of it. But going through some of those gauntlets, I don't yet have children. But you want to raise kids with a little freedom, a little autonomy to fall down and experience that without permanent injury or really getting hurt.

And I know I've received a lot of that that critical feedback I get from my team, from my board. I don't know if that answers your question because it's not a single individual, but it's really made me a believer in critical ACC.

Well, I can't wait to listen to this one again and pull the lessons out and hopefully apply some of that myself. Thank you so much for your time.

Thank you so much, Patrick. This episode was brought to you by Microsoft for startups. Microsoft for Startups is a global program dedicated to helping Enterprise ready B2B startups successfully scale their companies. In this five part mini series, we talked to Greylock Partners Sammo Tamati and Microsoft for Startups Jeff WMA about why companies should partner with Microsoft for startups.

And this week's episode we flip the tables. And Jeff WMA, the Microsoft for Startup Lead, asks me about my experience building on the Microsoft stack in my own business.

One of the things I've wanted to ask you about as sort of a now flipping the tables and entrepreneur yourself as you thought about what cloud platform to work on and ultimately chose Azure, what were the reasons why and how is that experience been for you so far? I guess the simple answer would be the ecosystem advantage. So everything from me knowing you, Jeff, prior to you joining Microsoft and sort of the related network around both of us, our past experience at O'Shaughnessy Asset Management building all of our infrastructure on Microsoft so that when we moved our business to focus more on enterprise software, we were already using the vertical services from Microsoft and using Azure.

It just made a lot more sense. Our lives were much easier using Azure, given everything else we did in that business, versus trying to build something entirely new on one of the other providers. So prior to us talking about this partnership, we had been using it already just because it made more sense for our business, because we were already plugged into that ecosystem. The other thing I would add is that we've chosen to do the same in this media business, which I think ultimately will will actually use cloud quite a lot as we think about building very fast, effective products, using storage, using compute.

And what I would say is my experience working with you and your team so far with a portfolio company that will mention the name of.

But exactly in the spirit of what you're discussing, which is, yeah, we're strong technically, but we also bring this ecosystem advantage where we can plug you if you're an enterprise software business into a wide array of different companies that are already Microsoft customers. And I've been sort of amazed by how fast and efficiently that process has gone with the portfolio company that I'm an investor in. And so just seeing that in action where it's both the infrastructure but also the ecosystem that you're effectively selecting as a young company, I think that's an incredibly powerful combination.

And the roadmap that you laid out makes Microsoft and Azure interesting for those reasons.

Yeah, I think one other thing that would be interesting to talk a little bit about is as someone that was in the Valley starting companies in the early 2000s, and then there was like a probably like a 10 year gap for me. And using Microsoft products, and so I've come back to them now and use them, and one thing that I think that was sort of the promise of Microsoft that didn't used to be the case, but I really feel like is now and I'd love to hear your thoughts on it, is this idea that this ecosystem is so strong that you can basically do everything you want with Microsoft products all integrated across the board?

So how much of that sort of comprehensiveness of Microsoft Solutions and ecosystem is a factor for you?

Maybe it's one of the nuances of what I would call the ecosystem advantage, which is even something like teams, which I know is a focus for Microsoft. The fact that it's so easy to just flip that on and make that our default solution for solving that problem is every single button and every single feature. Exactly right. Like, I don't know who cares? But the fact is that it's just easy to integrate into our existing workflows. And our experience so far with Azure is the same, which is everything just seems to go relatively seamlessly given how we built stuff in the past.

And we're the poster child of on Prem Old World Server and on infrastructure type company that has aggressively migrated into the cloud using Azure. And I would say that's a huge part of it. Our default decision was, well, we already use the Microsoft stack for so much else. Why not just use Azure for building canvas, which is our software? But what's interesting is that that's then bled into other choices. So we're now using teams internally. So it just seems to be this kind of domino effect that if you are willing to invest in a single partner, they then make life very easy by solving a lot of jobs for you, not just one job.

And that seems to be less the case with us for sure that you don't have a lot of the application layer. Obviously, Google does, but our legacy as an enterprise was in Microsoft. So that piece of it is a big part of our decision.

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