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Episode Description
In this episode of Diving Deep, Subscript's CEO, Sidharth, is joined by Kareem Amin, Co-founder and CEO of Clay.
Sidharth and Kareem discuss:
- How Clay's co-founder dynamic creates operational balance
- Why Clay's first usage-based pricing rollout failed, and what they changed to fix it
- The fundraising mindset behind multiple preempted rounds
- How Clay approaches headcount, and why it helps to feel the pain
- Plus: a behind-the-scenes face-reading that revealed a core tension for Kareem
Show Notes
Follow Sidharth: https://www.linkedin.com/in/sidharthkakkar/
Follow Kareem: https://www.linkedin.com/in/kareemamin/
Follow Subscript: https://www.linkedin.com/company/subscript/
Follow Clay: https://www.linkedin.com/company/grow-with-clay/
About Diving Deep with Subscript
Diving Deep with Subscript is a video series where we dive deep and explore SaaS metrics with leading investors, CEOs, and finance leaders.
Watch the entire series of Diving Deep with Subscript
Get caught up on the entire series right here: https://www.subscript.com/diving-deep
Episode Transcript
Sidharth Kakkar
We met like three, four years ago at a First Round event. I think it was in the desert.
Kareem Amin
Maybe even longer.
Sidharth Kakkar
Maybe. And we were at dinner together, and it was like one of my favorite conversations at the dinner, and you were one of my favorite founders I've ever met, so I'm super excited to chat.
Kareem Amin
Appreciate that, Sidharth. Yeah, same. I remember that and I remember being like, this is it, which is my favorite statement.
Sidharth Kakkar
And yeah, so I'm super excited to just like, I don't know, this is obviously, our audience is like very finance focused. I have some finance stuff, but then also I think there's like some interesting, I just, I appreciate a lot of the way that you look at the world. So I'm going to just like try to bring that out a little bit if that's cool with you.
Kareem Amin
Yeah, exciting. Actually, just to let you know, I just came out earlier today of like, a face reading thing. My co-founder, Varun, met this face reader recently, and then we brought him over to the office to do face readings for a bunch of us. And so actually, his reading was so accurate within like 20 minutes of just chatting with me. So just throwing that out there for you for future...
Sidharth Kakkar
How confidential is this face reading? Are you able to share?
Kareem Amin
Yeah. Yeah.
Sidharth Kakkar
Okay, so actually, can I just start there? I want to know, because I can't read faces, which is ironic, because I've played a lot of poker. Still can't read faces. But would love to, yeah, what's your face reading?
Kareem Amin
Well, so it's interesting. This guy basically, he actually worked for a police department for like 20 years, and then he worked in a hospital, and then he started working with businesses. And his whole thing is: everybody's reading faces, right? Even if you can't, you're trying to notice, are the words matching with the expressions? Is someone trustworthy or not?
So it's not like this magical thing, but his whole face reading, and this is super fresh, actually I haven't told anyone yet about this, so it's funny to just publicly announce it, but he was like, he likes to look for contradictions. So that's kind of where the interesting things are. And he has this thing of like, personality is not the same as character, right? So you're born with one and then one you develop on top of and like, are they aligned or not?
And so for him, the first contradiction that he was noticing in me was that I'm a freedom-loving person, but then I seek responsibility and I'm high in duty. And so those two things are opposed. So like, I like spontaneity, I like freedom, I like being able to do anything, and at the same time, I have very high duty and responsibility. And those two things are in tension. And I also seek harmony.
Sidharth Kakkar
Okay, the harmony seems a little bit off. The first two really do seem... And you know, it's... I would ask you, a lot of people think, "The CEO: you have all the power, you're the most flexible, you have the most freedom in any job." I don't think that's true, do you?
Kareem Amin
No, I think you're working with free people, and so actually most of the time you are just trying to align and coax. He was actually saying, CEO doesn't fit me, like CIO, like chief inspiration officer, like you're inspiring people, you're trying to motivate them. So you have flexibility in how to do that.
I think that part is true. You have flexibility in your style, but you don't have flexibility in that it is very difficult to take in so many inputs like people, their personalities, the tasks that you need to do, the time that you have available, and then somehow kind of keep that moving along in some synchronized fashion. So you're actually constantly like, you know, marionetting like a bunch of stuff.
You're able to move some of the inputs, but then it's like a black box. I tell someone to do something, and then they say yes, and then they do something different. And then I'm like, hey, that's not actually what we discussed, right? So, it's like you're trying to make something happen where the buttons don't actually do what you're telling them to do. But sometimes people do things that are better than I had imagined. So it works both ways.
Sidharth Kakkar
It's very similar to having toddlers, let me tell you. I guess everyone's just a big toddler.
Kareem Amin
Yeah.
Sidharth Kakkar
Cool. And then the harmony part, how does that fit into the contradiction?
Kareem Amin
So actually the harmony part was connected to a second section. He was describing my character. And so he was like, "You're trying to do things differently, but you also value harmony."
Sidharth Kakkar
Yeah.
Kareem Amin
And then his last thing that was kind of interesting was like, he was like, "You should try to figure out how to ask for help. Your facial expressions show that everything is good. Everything is calm. Everything is always good and you can do it. And so people don't know when you need help and you don't ask. And so you end up like carrying too much." Which is something that I've been thinking a lot about actually is just how do you ask for help?
Yeah, I think it's something that, you know, has been like a goal for me to just figure out how to actually set that up.
Sidharth Kakkar
Yeah.
Kareem Amin
And for the right type of help, as well.
Sidharth Kakkar
That's cool. I feel like your relationship with Varun is actually a really good example of you like getting someone who's an amazing partner at like, health, basically. No?
Kareem Amin
No, that's true, actually. That's a really good point. Yeah, Varun is super helpful. And I guess one of the ways that we work well together is that he nags me, which is super helpful, but in a way that doesn't trigger me. So he might be like, "Hey, you need to write this email." And I'll be like, "Yeah, I'll write it."
And he'll be like, "No, write it now." He's like, "I'm going to sit with you while you write it." Yeah. And then just, he'll hold my finger and start typing. That level.
Sidharth Kakkar
That's pretty great.
Kareem Amin
Yeah. So he's, he's been amazingly motivating and he does that for everyone. Like every day he comes in, he's like, "Are you hyped?" And I'm like, "I am." And he's like, "Okay, bear hug." Okay.
Sidharth Kakkar
That's awesome. It feels like a very yin and yang relationship. Would you agree?
Kareem Amin
Right, people have been mentioning that. I didn't notice it. Because I don't tend to think of myself as very—like I think I have moments where I'm like super high energy—but I've developed this kind of low-key affect, where it's like everything is steady.
And so now we have this interaction, especially work-wise, where it is a yin and yang thing. But we've also balanced. I think Varun has become more yin, as well. And sometimes, we switch roles, which is, I think what helps us stay balanced, is that we're not always playing the same role. There are situations where I'm much more aggressive and "let's go get it," and he's much more steady.
Sidharth Kakkar
That's really cool. One of the other things I think about when it comes to like, sort of freedom loving or not always conforming—from the beginning from when I met you, one of the things that's so refreshing in talking to you as a founder is that it feels like you're less in the echo chamber of the startup scene, of like, "You must do things this way," or you must, I don't know, all the you musts of being a startup founder.
You either are blissfully unaware or actively DGAF about them. What are those things? And how did you do that? People get trapped in that.
Kareem Amin
Yeah, I think that's a high compliment from you. I really appreciate it. I think I call my approach like "naive optimism." Like I tend to not be unaware. Actually, one of the things that—Wow, this face reader: I didn't realize that they were going to play such a big role in this podcast.
Sidharth Kakkar
Me neither.
Kareem Amin
He was saying that a lot of people—he's like, "I feel like a lot of people have underestimated you...to their detriment." And his whole thing was that, he was like, "You're really observant, and usually people who are observant are quiet," you know? But he's like, "But you are someone who talks while observing," and that's pretty rare and so that's the thing that he was like, "A lot of people might think that you're not aware of the situation when you are."
And maybe this is revealing too much, who knows who will watch this, but I actually thought that was a very interesting observation from him, because he's like, you're watching me right now. And I tend to have been in rooms where I think I understand what's happening, right?
Whether it's like, someone is trying to prove—I've shifted mentality where like, let's say some of these status games that people might be playing or trying to like telegraph certain pieces of information. Now, I see it as like a form of like insecurity or doubt. And so I actually feel compassion for the person. I've like switched it where I'm like, they're worried, they're scared. And when you're confident, you don't need anything. Right?
Sidharth Kakkar
Yeah.
Kareem Amin
And so one of the things I've learned is like, actually one of our investors, like they gave us a term sheet and they were like, "You fill in the numbers." And I was like, "Wow, that's a really confident move." And they also know that maybe we—they were kind of saying, "You guys are great. We want to work with you." And I was like, "They're putting all their cards on the table."
And what I realized is—Well, when you're confident, you're able to say, "I want this."
Sidharth Kakkar
Yeah.
Kareem Amin
And if you don't get it, you're like, "Well, that's fine. I'll get something else."
Sidharth Kakkar
Yeah.
Kareem Amin
Whereas when you're not confident, you actually tend to do things that make it seem like you're better or like it would be great if you worked with me. And so I realized, one way to imagine it is like, let's say that you had, I don't know, a lot of wealth, a hundred million dollars. How would you interact in this situation if you didn't need anything from that person, right?
Sidharth Kakkar
Yeah.
Kareem Amin
If you didn't need to be known. And I was trying to just embody, I'm like, "I already have that," whether or not I have the money, I'm already—My other tactic for this is that a lot of people tell you that founders should have a chip on their shoulder. There's something incomplete. And maybe that's like a motivating way to get started. But I'm trying to operate from a place of wholeness, right? Where I'm like, "What if I operated where I have everything, but I'm just trying to have a good time and have fun?"
And so I'm really kind of operating from this place where I feel like I'm seeing what people are trying to get to, but I kind of feel like there's nothing at the end, right?
Whether you've created a big company or not, whether, you know, like the product is amazing or you've created a great culture. If none of those are ends in themselves for you to be satisfied, you have to have your own self-respect.
And I think that's actually the hardest thing to get. So I'm working on that.
Sidharth Kakkar
What I would say to anyone who listens to this and is like, "Oh Kareem, you're so successful. That's why you can say all this stuff." I promise you, like four years ago before, you know, Clay was like the obvious breakout success it is today, Kareem was exactly like this. Like he was just having fun.
Kareem Amin
Yeah. And in fact, it was not a breakout success. It seemed like a big dud. And so I actually think that like, that's something that I try to remember is that like what got you to a place of success was actually some of these things.
And I've had actually people, you're right. Sometimes I've said things to people before anything happened and we're in this catch 22 where, let's say I say, "I don't care about money." People will be like, "Well, you don't have any money, so that's why you don't care."
Or if you do have money, you're like, "Well, that's why you don't care, because you do have money." Well, I'm like, "Well, then I can't communicate to you any truth because you don't want to believe it."
Sidharth Kakkar
Right. Either they will believe you or they won't.
I really appreciate your point about compassion, too. Actually, my sister taught me this. When someone's behaving in a way that is really problematic repeatedly, usually it betrays something going on in their head. And she's like, it can't be pleasant to live with that thing that's going on in their head.
Kareem Amin
Right.
Sidharth Kakkar
That really sucks that they have to live with that.
Kareem Amin
That's painful.
Sidharth Kakkar
You only have to live with that in your interactions, and they have to live with that all the time. That's true.
Kareem Amin
That's right. Yeah. And then it can calm you down because then I'm not—like if someone is angry, I'm like, "They're scared." Rather than they're—I can't always remember that, but I try to.
Sidharth Kakkar
Yeah. OK, so taking the theme of doing things differently and applying it to like a bit of the financial design of Clay. For a lot of folks, the obvious thing to do four years ago or whenever you started doing usage-based pricing was the seat-based pricing. But you kind of took a path-less-traveled approach. You remember what your thought process was as you first did it?
Kareem Amin
Yeah, totally. And, you know, we wrote a couple of blog posts on actually how we set up our pricing that I think folks should check out if they're curious about it. We're always trying to like dig deep into that. And that was really spearheaded by Varun. Like we're trying to be transparent about how we think about it. But the story is actually more complex than it seems.
So one thing I think about in general in the company building is alignment.
Sidharth Kakkar
Yeah.
Kareem Amin
But like, how does every part of it align with the market you're going to, the type of customer you're selling to, with yourself, with the people you're hiring. And so for us, we knew that—so we're aggregating—so just to give people a high-level view of what Clay is. Clay is a creative tool for go-to-market teams to help implement any idea for growing their business.
And it's based on this concept that if we just had the best data in the world, so we aggregate all of the data providers around company and people, you can then have any piece of information, so that you can find the right person at the right time and send them the right message, which is kind of the ever-ongoing task of go-to-market.
And we call that go-to-market alpha, actually. Like if you can figure out who the right person is before other people and send them the right message, whether they're your own customer that you're expanding or a new customer, that's the alpha that you have. That's the competitive advantage.
So we aggregate all these different data providers and we were thinking about pricing. In the market, the way people think about it—At the time, there was seat-based pricing and then there was also already some kind of usage-based pricing, but it was based on leads. So you would say, "Oh, well, you gave me 10 leads. How much is each lead? It's like 25 cents."
Whereas what we were saying is we're not selling you leads, we're selling you data from lots of different data providers and you can choose to use as many or as little as you want.
People did not get that. They were very resistant. And they were like, why don't you just figure it out and figure out who the right thing is and just I'll pay the right amount if you can figure out how to, you know, unify the profiles or figure out who my ideal customer is.
And so this was a big part of Clay where we kept going back and forth. We're like, okay, let's try to do that. But then we realized it's not really possible. If it was, then you would have kind of the magical database that has everybody's—like, you know, what they do and what company they work at. And there's so many different ways to slice out a company, right? And so does it have SOC 2 compliance? That's a new property that might not have existed before, right?
And so what we wanted to do is to give you the tools to figure out what is actually useful to you. And then you pay for what you use.
Sidharth Kakkar
Yeah.
Kareem Amin
And that made sense.
So we set up this usage-based pricing based on the number of data providers that use and which data points you look for. And it didn't work. It was very confusing. So people were super confused. We had a lot of questions about it and we actually rolled it back.
Actually, I've never talked about this before. No one really knows this. We rolled it back and then we tried to have a flat platform fee and then some amount of usage based on number of rows. That one was even more complicated and worse.
And so I made this decision and there's a couple of decisions in Clay that I think were, you know, they take a little bit of courage because you have to kind of say, "Okay, like, what if I really believed what I'm saying and put it out there?"
And so we actually realized some of the problems were that our billing system was not as well-built as we—like it had a few bugs—and we didn't wait long enough. So we rebuilt it again. And this time, it was perfect. It's the same billing system that we use. There were no bugs from the beginning and no bugs afterwards, right? You just have to pick the right engineer to work on this.
Sidharth Kakkar
Wow, that's amazing!
Kareem Amin
Yeah. And then, we explained our thinking clearly and we targeted the right type of customer when we launched it again. And then it worked.
And the thing is, we still get a lot of complaints that credits are confusing and I spent too many credits or how much—yeah, there's a lot of questions about this. We can dig into them. But each of them is something that we can tackle.
And I saw the market change. So it used to be that people were like, "Sell it by leads."
And then once we started to get enough traction, people were like, "Actually what Clay is saying makes more sense." And people would explain the pricing to each other.
So there is also like an element of patience and of the market coming to work. Like if you think the idea makes sense a priori, it might take some time for people to adjust their norms and habits to understand how you're doing it as long as it's logically consistent.
Sidharth Kakkar
That's really cool. When it didn't work the very first time, what did that look like? What did "not work" look like that made you change it?
Kareem Amin
It had the same kind of complaints that we have now, but we freaked out faster. So we didn't have enough patience or traction to believe in it. So we changed it back too quickly. And number two is, we were in conversations where people would bring up the pricing as one of the issues when really the main issue is that the product itself wasn't delivering the value yet.
Sidharth Kakkar
Yeah.
Kareem Amin
So it's like, if you deliver the value, then it'll still work. The pricing might be kind of a brake on it, but you can then remove the brake versus in the beginning we're like, "Oh the pricing is the problem." And it was like, no, the product is the problem.
Sidharth Kakkar
It's always the product.
Kareem Amin
It's always the product. Yeah.
Sidharth Kakkar
If you have to think about the three big changes in the product from "the pricing doesn't work" and now "pricing is not an issue," same exact pricing or similar enough pricing, what made the product click?
Kareem Amin
I think there were a number of things. I think the product itself—so in our case, the positioning was the problem even more than the product.
We were positioned too horizontally, so when you, you know, if you pick the wrong person, then the product is always the problem, right?
Like if you give someone who doesn't know how to build a house, tools to build a house, it doesn't make sense. But if you give it to an architect or, you know, a construction company, it makes sense.
So one, we had to position it to attract the right type of customer, which was—in our case, we weren't picking between are we selling to salespeople, SDRs or marketing people, or are we selling to a growth kind of marketing person and a rev ops person, like a more technical person within the organization. And so we made that decision very explicitly. We're selling to slightly more technical people.
And by technical, I mean that they can think in ways that are like input output, like computation, and are not in the tasks of actual talking to customers, selling to them. So they're thinking in systems rather than like needing to know how to code. They're system thinkers, which is a really powerful ability and something that a lot of people can learn, as well.
So when we decided that we're targeting people who can do that systems thinking, we then can architect all the features for that. And it's OK if there's a little bit of a learning curve. Sometimes people think there's a learning curve in Clay when really it's a learning curve into systems thinking.
And you have to kind of isolate those two things. So if you can do systems thinking and you can't use Clay, that's a problem. But if you can't do systems thinking, then we first teach you that, then we teach you Clay, right?
And there's schools now like claybootcamp.com. There's a lot of other places where they teach you both in tandem. But yeah, back to kind of what we did was—first we aligned the positioning to say, here's what we do. We're getting all this data from different places so you can implement any growth idea. We're clear about that. We removed any integrations in Clay that weren't related to that. So we removed features that got in the way. And then we streamlined.
Because our tool is somewhat like Figma or Cursor, an IDE where you know, we think of it internally as a go-to-market IDE where you can like do things that are unexpected. There's a lot of potential for bugs where you pull data from two different data sources and they don't merge well together. So we started looking at all of these paper cuts and really being super aggressive about fixing them.
So when people used to come to us in 2022, we would take a call with them and it would take us three calls to close a customer. I think Varun has talked about this publicly before, but we would do reverse demos. So, you'd get on a call. We'd say, “What are you trying to do?” And then they would tell us and we'd be like, “Okay, let's do it right now in Clay. But you do it. So tell me where you would start.” So it was almost like a user experience session and teaching you how to use it.
And our goal was to go from three calls to one and then eventually from one to zero. And the way we did that was anytime we would see an issue or a bug as the person was doing it, we had an engineer sitting right next to them that was fixing it in real time. So sometimes we'd see a bug and fix it during the call.
Sidharth Kakkar
Amazing.
Kareem Amin
And so that was the kind of the speed that we operated at. And people found that really, I think, refreshing.
And—or you, you know, you would try to do something, if you weren't able to do it. We'd make sure that it gets done right after the call and make sure that you're happy.
And then we had a Slack channel where people congregated together and that's where we did all of our support and people would discuss, you know, someone might be really angry at something and we'd fix it, and then they'd be really happy five minutes later.
So that was the speed of iteration that we used to hone in the product once we decided who the target customer is.
It's very meta. We're a product that helps people find their target customer and we did that for ourselves.
Sidharth Kakkar
Yeah.
Sidharth Kakkar
That's pretty amazing. One of the things that CFOs are often afraid of with usage pricing, and maybe this is why you didn't have a CFO until pretty late, is the variability that it brings. And it's pretty stressful. Did you worry about the variability or did the credit system help a little bit with the predictability?
Kareem Amin
I think the variability is always a worry, but the way we do it, you know, initially what we did was, if someone made a mistake, you know, or things like that, we always just like unconditionally refunded them. So that's the way at the beginning. Then we started adding features to help with that. So we have overage credits. So you buy a set amount of credits in your plan.
And then if you go over, you have overage credit. So you always have like a method and, you can upgrade to the next amount. So you have like a mixture between kind of the predictability of like, here's the number of credits that I have in the plan. And then here, I can always go above. That's fine. And in, in our enterprise contracts, we work with you to estimate how much you think you're going to use. And then you buy that plan.
And we have all kinds of things, right? So we introduced rollovering. So like you can rollover your credits if you don't use them, that really helps—to some kind of limit. And then you can also, the thing is actually, that's interesting, is that these are all worries before you start using Clay. But once you start using it and you get value from it, then almost everybody tends to use more.
And so, and the reason you're using more is that you're obviously getting some benefit. We're helping you grow your company. And so if you think about it, if we could show that we help you grow your business by whatever X percent, and we say we're going to take, you know, 3% of that, you'll be okay with it. And so I think actually because it's actually like a profit center, it's a profit-generating tool, there's less of that worry than in other credit-based systems where it's more of a cost center and you're trying to manage spend.
Yeah, but it definitely comes up. And I think the tools around that are being flexible, so like offering credit rollovers, if you didn't use all of your credits, offering overage credits, figuring out ways to help you optimize, actually, your spend.
Sidharth Kakkar
Yeah.
Kareem Amin
So one of the things we talk about, and maybe this is interesting for your podcast, is that not everything in Clay costs credits. So it's not true that all the value that you're getting from Clay is being captured in credit spent. That's something that I'm thinking about a lot. A lot of things in Clay are free.
Sidharth Kakkar
Yeah.
Kareem Amin
And they're actually also super useful. And the credits are somewhat tied to data spend.
And actually we're aligned with customers because data costs us money, as well. So we want to drive data costs down, and we explain that to people.
So we don't want you to use more credits that cost us money because that like lowers our gross margins. And so we actually want to find more and more ways to provide value for you to drop costs down.
And so the credits actually, especially on the enterprise side, contain a blended cost of all the value that's coming within Clay, and we expect that you're going to use more and more as you get more and more value, but it's not quite perfect yet.
Sidharth Kakkar
Yeah. And how do you think about this as a business then? Like that's at individual customer level, how credits work. But as a business, you may have more or less in overages or more or less in credit spend in any given period. Does that like, worry you as the CEO?
Kareem Amin
Not really because most of the—don't forget when people are buying plans, they buy plans with a set number of credits and so most of our recurring revenue—and actually we will probably need to change how we think of our revenue—more like Snowflake than ARR.
But at the moment, probably 95% of our recurring revenue—is based on plans with set number of credit. And then there's an extra amount through overages that is really reliable. So we also count it as like a separate component of ARR. We break the two up.
Sidharth Kakkar
That makes sense.
Kareem Amin
And that one goes up and down a little bit, but it's consistently like, it's a bit more variable, but it's consistently going up.
Sidharth Kakkar
That's cool. I suppose a major part of this is that there is an actual true recurring portion and that ends up being—you need to make it that most people are incentivized to go with that rather than just do overages, right?
Kareem Amin
Right, right, right. We don't have a just pay-as-you-go, start from zero kind of plan and completely usage-based. You buy a plan. It's almost like a phone plan where you're like, I'm buying, I don't think that they have those anymore, but where you'll be like, you'll 900 minutes, right? But minimum.
Sidharth Kakkar
Yeah. People who had phone plans in the, I guess, like, late aughts, early 2010s know this.
Kareem Amin
Yeah, yeah, pretty ancient.
Sidharth Kakkar
That's cool. We've talked previously about fundraising and you've always had, I feel like, a unique perspective on it. And your fundraising history is also fairly unique. It's not the usual hyper-scaler, every year we raise a round that—whatever.
What can you share about how you think about fundraising in the context of building Clay?
Kareem Amin
Yeah, well, we've actually, you know, we haven't announced all of our rounds. So we raised in 2017, 2019. So seed in 2017, 2019. We actually raised an uncapped note in 2020. And we raised again in 23. I think we raised twice in 2023.
And then three times in 2024, and then twice already this year.
Sidharth Kakkar
Amazing.
Kareem Amin
Yeah, so, and then some of those, I mean, the like, that's the more detailed look actually. On paper, it looks more like there's a seed, series A, series B and then series B expansion.
Sidharth Kakkar
Because you grouped many of these.
Kareem Amin
Yeah, and then we did the tender, but there were some notes in the middle. This is just to like help people visualize this a bit more.
But yeah, I think that our—my strategy is, well, there's many elements to it, but it depends where we want to dig in. But I think that I've always thought that the best approach is to bet on us.
And so we should have as much money as possible for dilution that's reasonable.
In the later rounds, we've been raising at like a 3% dilution, which I think is very low. And so we always raise money if it's the right partner at the right time with the right price.
All of our rounds have been preempted other than the seed round. So the pre-seed was actually preempted. And then I went out to do the seed round. And then after that, they all came inbound.
Sidharth Kakkar
The dream.
Kareem Amin
Yeah, it is a dream. It's very helpful because it always takes, even when it's preempted, it takes longer than you think. Like we usually do the deal in like one or two days, but then it takes, you know, there's a lot of conversations back and forth around some of the details and the diligence and all that. And it is a distraction because it's hard to focus on that and make sure that that gets closed while dealing with like the day to day of the business.
Yeah, I think that like the best way I like to think about this is that you have to have multiple options available at the same time.
So you have to have a lot of money in the bank, right? Some people try to—I personally don't fully understand. I think there's just like a different genre of like thinking where people are like, we have nine months of money in the bank or we have six months. You know, we've never come close to that, even when we were making zero.
So I prefer to have at least two years of money always in the bank. And what that means is that we always have leverage and we always have time. And then you need to have your own investors excited to participate or to preempt the next round.
And the way to do that is, you know, sometimes it is through like metrics once you start having them, but it is through keeping them kind of excited about the direction and the potential that's about to happen, right?
And then you need to have strategically like a couple of people that are looking. I don't tend to kind of spend a lot of time talking to investors beforehand. I think that if you pick the right set of like investors around the table, they'll be doing that for you, right?
Because they have deeper networks, most likely, than you and they're talking to their friends who are investors and if you're telling them the right story they should be kind of passing that on because it is kind of a benefit to other investors to know who is up and coming that they should get interested in.
Sidharth Kakkar
And I assume to get preempted, you're at least doing some talking to some of these folks, or are you like, not really like, how much sharing or chatting with these folks do you usually do between rounds?
Kareem Amin
Not much. And I think that, a lot of times, your investors will connect you with a smaller group. I think it's better for your investors to kind of know who is interested and who isn't, because fundraising is a breadth-first search, right? Where you need to find someone who is already interested and then you align with them rather than convince someone who's not interested.
And so your investors should be doing that for you by kind of talking to others, seeing who's interested. And when you check in with them, you can hear like who's interested, who's excited about this, where is it resonating? And then you could take some of those meetings as you get closer, feeling like you have what's necessary to get preempted. And then in those conversations, you're usually sharing kind of the story of what you're doing so far and what you're excited about.
And, you know, when investors are interested, they will tell you. You don't need to, it's not like they won't tell you if you don't ask, right?
There is a little bit of nuance here. Like I've gotten into situations where someone was interested, but didn't want to feel like they were crossing the line or like annoying me. And so you're always, you need to be open to it, but not seeking it, I think.
Sidharth Kakkar
Yeah, delicate.
Kareem Amin
Yeah, it's very—actually the more I think about it, the more I'm like, yeah, it's a very delicate balance.
Sidharth Kakkar
Clay isn't your first company and I feel like a lot of these lessons you've probably learned over a longer period of time. You, in the past, said with Frame that you sold too early. How did that experience influence the way that you're building Clay?
Kareem Amin
Yeah, I think that, I mean, so the first company, think I was 24, we sold it after a year to another company that was growing really quickly. And I think they had raised their Series B from Benchmark right after we joined. And I think what I learned was that—I think we grew from like 30 to 150 or 120 people really quickly. And then it kind of stalled at that point. And there was like a lot of change that was happening.
But what I realized is that we were growing. I didn't realize how hard, like the product that we were building was growing and I didn't realize how hard it is to find growth. And so whenever you find growth, I think you should be figuring out how to like narrow focus, kind of nurture that growth. It's hard. It's like you're walking in a desert. You find a patch of land. Don't walk. I actually, someone told me, "Don't leave fun for fun" as advice, which I've, I think is really key.
So yeah, don't leave a garden to find another garden, like, you know, tend to the garden. And so when we sold, we, it's hard to diligence the company you're selling to, right? Are you, are the leaders aligned with you? Do they actually care? You know, at what point will they stop caring once they sell their secondary in the Series B and they're pretty well—there's just, and how much and in what way do they care, right?
So I think you need to kind of figure that stuff out. And to figure out if the quality of the other hires is really high, like it's tricky when you have like full control to not having full control, you're trusting that team. And for me, I didn't have the tools to figure out how to do that.
And so I think that—actually First Round asked me in our partner meeting, they're like, "Well, you sold a company after a year, why, why wouldn't you sell this one?" I was like, "Well, because I sold that other one. Now I know." So even when we've done acqui-hires, actually I've, like talked to the founders and been like, "Are you guys sure you want to do this?
Sidharth Kakkar
Yeah
Kareem Amin
Like, are you burnt out?" Number one, because we can't have that, right? And number two is like, "Are you culturally sure that this is the right place for you? Like why? Here are all the..."
The other thing that I've learned is like, when we got acquired, they talked to us for a long time, and then at the end, they talked about comp after we had spent all this time, and then we were super distracted.
And so I try to treat people differently here, learning from that experience where I'm like, when we talk, I start talking about the comp first. If you agree with the comp, then let's have the conversation because I don't want to waste your time or our time, right?
Instead of like luring you in and then you feel like the sunk cost because the thing is negotiations aren't about winning. If you hire some people who are annoyed the day they walked in, they feel salty. Right. You've already lost. Like you want to start with some leeway.
I think it's the same in, I mean, we were just talking about fundraising. You know, you should walk out of the fundraise—like some people think everybody should be annoyed—that's a good negotiation.
And I don't think so. I think everybody should walk away feeling like that was good. And actually the best investors have been the ones that have been the easiest to work with. Right? "Here's the valuation. Here's the number. Yes. Yes. Yes. No to that. Yes."
And then I feel, I'm like, "Oh, I'm excited," right? "This is a partner."
Whereas the other people who are trying to pull one, you know, over you, or like nickel-and-dime you, I'm like, what are we building like wealth together? Are we negotiating over silly things that don't matter? The whole thing is based on trust anyway. Both at work with investors or with your employees, the rules are there to guide us on the edge cases, right? Yeah.
Sidharth Kakkar
I feel like that principle applies to every negotiation. Even I found that customers who are just extra difficult in the purchase process, they're going to be extra difficult always. Or employees who suddenly worry about random things that really shouldn't matter, you're like, yeah, this is actually going to be a bad relationship.
Kareem Amin
Totally. I think some people—the interesting thing and where I think the coaching can come in is some people have this as a learned behavior where they think, "Oh, this is what I'm supposed to do," right? "I'm supposed to do this because it's the expectation," or like, "I'm going to point out this thing because that's providing value." And I'm like, actually, you're not, right?
It's kind of like, with your lawyers, for example, you know, like
our lawyers might point out a bunch of issues in the contract, but I'm not going to bring up each one of these issues because some of them are unlikely. And it's me being pedantic about it. Whereas like if I'm going into business with you, I have like a high level of trust, right?
And you know, I'll give you an example that I heard from someone else—well, or even just some of my own time—like, sometimes, let's say we made a mistake, you know. Sometimes I've had employees, like you make a mistake in the stock option grant, like in the document that we send. And it's like, of course we should have that right, right?
But at the same time, my approach is, even if we had it wrong the other way, we would make it right, you know? And actually you want to work with people who will do the right thing, regardless of what's written there, because the documents are there as a safeguard. And of course you need to have everything papered, but actually as you build more trust in the organization and with your employees, with your investors, you are all aligned on doing the right thing.
Obviously, there's interpretability around that, but when you have a really good partner, you actually end up sometimes sacrificing your own rights, even in the moment, because you're trying to go towards the right long-term thing.
Sidharth Kakkar
I like to think of it as like, generally I want to work with people who operate in a high-trust way. And if they don't, it's going to just be painful all around.
Kareem Amin
I'll give you like a really concrete example that I don't think many people talk about, but like, you know, actually figuring out your stock price apparently is not as simple as one thinks, right?
Like you think, "Oh, here's the valuation of the company. Here's the number of stocks divided by the number, you know, the two by each other. And here's your stock price."
But actually if you have convertible notes, there's a lot of things where they convert before or after. Surprisingly, this stuff is not actually written very concretely to my surprise, right?
Like you would think that all of these machinations are like, but actually a lot of them are written vaguely in a way to allow negotiations to happen. But it ends up being bizarre, right?
And so at one point with an investor, we actually had a situation where we could interpret it in a way that would benefit them and the price would be lower and it would actually benefit me for the price to be higher.
And we had a conversation and I was like, "Listen," like they were like, "Let's split the difference," right? Which could have been a case, but I was like, "Hey, this actually really matters to me. And to you, long-term, it doesn't. Like the most of the value in the company, right? So..." And they were like, "You know what, you're right." And so they did that.
And in another case, you know, another investor I had forgot to write an MFN, like a most-favored-nations in one of their docs. And I actually gave it to them, like basically backwards to make sure that they get the benefits of that.
And I think that's sometimes what makes you an actually good business partner is not sticking to the letter of like what you wrote, but like actually sometimes it's the intent that matters the most.
And I think that's the energy, I think, I, and others hopefully try to bring to working with each other.
Sidharth Kakkar
I so agree with this advice. It's awesome. I have a question around how do you maintain capital efficiency even while raising large sums of money?
Because you keep the team so small. I mean, I don't know these exact numbers, but I'm fairly sure Clay punches way above its weight in employee count versus revenue and growth and all of that. How do you maintain that discipline for yourself and your team?
Kareem Amin
Yeah, that's a great question. Actually, you know, that was like a worry that people have. And as we raise more money, right, like if you raise at the right time, now you have too much money and you're like, maybe we should spend it on frivolous things. But I think one is that you need to prove that to yourself.
So the way that we operate has been always around how do we—I think step one is to make sure that when you're investing, you invest in the growth as the company is growing, like in the next, let's say quarter of growth. So you plan based on the stage that you're at. So we would add head count based on the growth that we're seeing right now and not based on some imaginary growth, right?
And number two is that we got to 10 million ARR, I think, with 25 people.
Sidharth Kakkar
That's rare.
Kareem Amin
Yeah, so we also keep the team—It's also just easier to manage for me, right? At the time.
But we keep the—so there's a couple of things actually that make it possible for us.
One is that we are a PLG-based business. So a lot of stuff is inbound. And then once we started doing outbound, we would do it in a small experiment and then grow that very carefully.
And the same thing with like the engineering team. So, we would, we always push ourselves to be slightly overburdened and then we lessen the burden rather than we add capacity and then we kind of overtake it.
So we're always in a place where there's slightly more work than we can handle and that forces us to prioritize. It doesn't mean that we overwork ourselves.
We're like, "Oh there's too much to do. What are we going to do first? And then if we can get more people, what will we do next?"
And for me, I've always wanted to like control our destiny, as well. That's why we have always tried to be close to profitability.
So our burn rate is pretty low. So that if we stop hiring people to invest in that growth within like two months, we could be profitable.
And we've actually had like some months where we've been like accidentally profitable just because like some of the enterprise contracts pay us ahead of time.
Sidharth Kakkar
Nice.
Kareem Amin
Yeah, but like our core thing is to be able to have enough money that we control our destiny at all times.
Close enough, like we add headcount so that our growth at any moment, we can turn it into profitability. Once obviously we hit product-market fit, right?
And then we add the money to give us flexibility. And maybe it's like an internal thing. Like to me, every time, I don't know, I do this with my own personal money. Like every time we reach a new milestone, I'm like, we never go below this milestone now.
Right. So like 50 million in the bank. I'm like, we should never go below 50 million. Right. If we got, let's say we have 70 and now like there's a new marker 50 is the minimum. Right. If we're at like a hundred, 120 and we're like, we never go below a hundred, right?
That's our money that gives us optionality. Um, and it needs to be proportional to the size of your company. So I like to think about disaster scenarios. Let's say we lose 50% of our revenue tomorrow. How do we survive?
Sidharth Kakkar
It's special to have that as a founder, have that discipline, but it's extra hard to have that discipline sort of be, because you're not the only one making hiring decisions anymore, right?
You're not the only one who's thinking about, should I add headcount?
Kareem Amin
Right. I am though.
Sidharth Kakkar
And so everyone's sort of instinct...
Kareem Amin
So maybe this is helpful. I was just talking to someone about this and they were saying like, "How did you grow from like 30 to 160 people? Like, it's so hard to manage."
And we actually have had, you know, fortunately a smooth ride around this, but we—like, headcount planning is done centrally. We don't, we don't say to teams like, "Hey, you can go hire people."
If you want to hire someone, we do headcount planning every quarter. We just kind of like, we do it at the beginning of the year, then we adjust it and you add your requests. Then we go in and prioritize it.
And for EPD, I'm aware of all the hires and for ops, Varun is aware of all the hires. And we then go out and recruit against those hires. But you can't just go hire someone.
And it's not completely distributed. Every person that's been hired has gone through me or Varun. And I think we've kept tight.
I've heard some people like hire a head of sales and then they say, okay, you hire your team. We don't do that. Like we're hiring every single person on your team with you until you understand the philosophy that we're using. And then we can move on to the next person.
Sidharth Kakkar
And this, are people like disappointed when you're saying no to their requests? Or how do you manage that? Like are they saying like, "Well, I can't do my job then?""
Kareem Amin
Well, we have to explain. I'm like, listen, do less. It's actually about focus. I think we try to explain exactly what's happening.
More people equals more management. Do you want to be doing that? Do you want to figure out all the problems? Because if you come to me with people problems, I'm going to be annoyed because I told you not to hire this person, right? Or not to grow this team too fast.
And we try to keep the teams—I think it's also, it is the type of people that you hire, the explanation around why no, right? So for example, our support team was growing and I was really worried about it. Our support team is very smart and actually is a feeder into a lot of other teams. So people go into product, people go into growth strategy, right? And they, and then we're also like, "Hey, use AI tools to build new systems." But actually the support team to me is the vanguard of the product team. I'm like, "You're the product team. You know everything about the product more than the product people."
Sidharth Kakkar
Yeah.
Kareem Amin
But at the same time, if it's growing too quickly, right, we'll have a problem. And the problem isn't actually that there's too many people. The problem is that we are not feeling the pain as an organization. So I would rather that the support team is quite annoyed at the EPD team and is bringing it up so that we can fix the things rather than there's more support people to fix support tickets.
So sometimes you have to engineer things so that the pain is felt around the company. If we don't have enough engineers to build features, right? Well, we need to decide which features are most important. And also maybe we should ship things with fewer bugs so that we actually have more time building features.
So I think sometimes forcing the issue through controlling headcount is super important.
Sidharth Kakkar
Okay.
Kareem Amin
And I don't want to control a super large organization. It's very, very challenging to make sure information flows.
So we all are like, we want the smallest team possible because it's just better vibes.
Sidharth Kakkar
It's so true. And we're a bit over. Thanks so much for taking the time. I could hang out with you and talk to you all day. Maybe I'll just come to New York and do that.
Kareem Amin
Yeah, please.
Sidharth Kakkar
But thank you so much for all of this and for sharing so much all about the face reading all the way to controlling the finances. Really appreciate it.
Kareem Amin
Yeah, this was super fun. Thanks for having me.
