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Episode Description
In this episode of Diving Deep, Subscript's CEO, Sidharth, has an engaging conversation with Tomasz Tunguz, Managing Director at Redpoint Ventures.
Tomasz is one of the brightest minds when it comes to SaaS metrics. His blog, https://tomtunguz.com/, is a must-read for SaaS leaders, and he also co-authored the book, "Winning with Data."
Sidharth and Tomasz go deep into B2B SaaS metrics as they discuss:
- The key SaaS metrics Tomasz needs to see when evaluating a company
- Why NDR might be even more important than you first thought
- The unexpected benefits of looking at cohorts of your data
- And more!
Show Notes
Follow Sidharth: https://www.linkedin.com/in/sidharthkakkar/
Follow Tomasz: https://www.linkedin.com/in/tomasztunguz/
Follow Subscript: https://www.linkedin.com/company/subscript/
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
You write one of the best blogs on the planet, especially on the topic that we're going to cover. So I don't know. I feel like a lot of people, including myself, would consider you basically the leading expert.
Tomasz Tunguz
That can't possibly be true.
Sidharth Kakkar
I'm definitely not the first person who said these things to you, but we'll go with that. So if it's cool with you, we'll just dive in because we have a bunch of, I think, really interesting things to ask you about.
Tomasz Tunguz
Fantastic. Let's do it.
Sidharth Kakkar
Okay, cool. The first thing that I'm going to ask you is what is the key SaaS metrics that you care about most when evaluating a company? Like you get a deck. What's the page you're flipping to? What's the first thing you're looking at?
Tomasz Tunguz
Yeah, good question. First page is the team. No question. Here's the team. What is the background of the team? Why are they uniquely suited to solving the problem that they're solving? The second is really around. Like the size of the market opportunity is really important. And so that may not necessarily be a metric, but it's just like, okay, if it works, how big is it going to be? And the mistakes that I've made more than I can count have always been on underestimating the market size of companies. And so when I look at that slide, I really have to push myself to be imaginative on how the business could create a market. Right. So before Gainsight started, what was the market size of customer success of? Zero. You can't just look at that slide blindly and then you go through the deck and look at all the different metrics. The first three metrics typically you're looking at is Arr growth, and you're kind of looking at the first derivative of that. So the change in bookings and what this looks like. The second is around Net Dollar Retention. I think that's the second most important, and then the third is sales efficiency.
Tomasz Tunguz
So what does it cost to buy another dollar of Arr? Those are the three big level ones, and then there's five or six at the next level.
Sidharth Kakkar
I can't help myself but ask you on the market opportunity thing, it seems so much an art rather than a science because you don't want to be under imaginative, but you don't want to be over imaginative either. Right? How do you find I don't know. Is this just like a skill you've honed over the years or how do you sort that out?
Tomasz Tunguz
Yeah. There's this awesome book called Super Forecasters written by a researcher named Tetlock, and he talks a lot about Enrico From was one of the men who designed the atomic bomb, so he had to deal with probabilities, and he has this way of breaking down problems. He found that the super forecasters, the people who are super accurate, they would think about a conditional probability. So let's say you and I were going to start a new company and we're going to make software for a tire company. I don't know. Something random, right. There's some base number of tire sellers and so we should start with that. And then what's the probability that we can raise the series seed and then what's the probability that we can build some software and those are probably 100% like you and I no problem we could raise that round and build the software. And then the question is like, okay, looking at the team and looking at the software, sort of what probability do I think I'm going to assign to the fact that we could get like the top five? What is that going to look like, right? And what probability do I think we could get 10% or 15%?
Tomasz Tunguz
And if we're really successful, what probability do I think Vertical SaaS maybe get 30% to 40% market share? That's conceivable. And then you kind of take a look at that and you're like, okay, in the success case, this is what the company could be worth. And that's why I kind of think about it. And then the other thing Bill Gurley wrote about this or talked about this. He talked about how there are certain companies that expand the market, certain companies that compress the market and certain companies that keep the same. And he's a specialist in marketplaces. Marketplace. Compressed markets, right. And so that's another thing to look at is the software. What is it going to do? If you need to think about that too.
Sidharth Kakkar
That makes sense. It seems like it's sort of like on a bottoms up percentage of this thing that you could do capture in the bottoms up. But I'm sure you're pitched sort of like the entire market size of tires being sold in America is less it's much larger number and we're, I don't know, going to take some cut of that or something. I don't know. We're going to have this innovative mechanism and it's going to be sitting in all these parts of the value chain. How do you think about that?
Tomasz Tunguz
It can be, let's say in our tire business. The initial software was inventory management.
Tomasz Tunguz
And the first bit of software was just managing inventory. How many tires are coming in, how many tires are going out there? If I were to pitch that business, I would pitch it as a subscription company and the market size would be some fraction of the It budget of those shops. And if I wanted to get a VC really excited. What I might pitch is after we have the inventory management part, we're going to start dealing with AP and AR accounts payable and accounts receivable and we can start being in the payments flow and factoring. So we might lend in order to mitigate cash shortfalls. And at that point, all of a sudden the total value of all the tires sold in the market is relevant to the Tam conversation, but not before.
Sidharth Kakkar
Right. So let's imagine this tire company's at series B, Series C, you're like, oh, this team is the tire and software experts of the world and you're starting to look at recurring revenue and growth rates and NDR. And let's say the CEO is pitching you, not me, because I don't know tires, but a different CEO is pitching you. And how much do you care that they know all of these things off the top of their head? Do you use someone more positively because they can rattle off all the numbers off the top of their head? Not really. How do you think about it?
Tomasz Tunguz
Yeah. Having incredible command of your business is a huge asset. It is a huge asset because especially the series B and the Series C, you are making a bet that the company has developed a money making machine and that more dollars makes the machine spin faster. And sometimes, I mean, it used to be ten or 15 years ago it was very common for a CEO to bring a CFO or a VPF into a pitch. Now you never see it and it's surprising or like a chief of staff or the head of data analysis. Because if I can ask you some random questions, like in the tire business, what fraction of your revenue comes from enterprise accounts worth one hundred K in ACV or more? Right. Most CEOs will probably have a good guess. But then if I ask how does the net dollar retention of that cohort compared to the other three cohorts? What you're likely going to say is all that information is in the data room, which is a fine answer. But if you're able to say like, actually the NDR is 40% higher, it just goes out much further in demonstrating your mastery of your own business.
Sidharth Kakkar
Yeah, I could totally see that. Like, you know what you're doing because you care about that number and that means that you've thought about it and are probably doing things to manage it.
Tomasz Tunguz
Right. Exactly.
Sidharth Kakkar
In your head, do you have benchmarks for some of these things? Like I won't touch a business that's or I will always look at it more carefully if a, B and C are above D, E and F
Tomasz Tunguz
So I have benchmarks in my head and it comes from a survey we ran in 2020 looking at we looked at almost 600 companies from seed stage all the way to public companies and we got a lot of data and so sales efficiencies I know what to look for and Ae quotas I kind of know what to look for. The thing that's happened though is it used to be that SaaS companies were far more homogeneous in their go to market strategies and I think with more competition or just more players people have become more experimental and so with benchmarks it's easy to kind of keep a close. Like I recently learned about Samsara which is now a publicly traded company and they went to market in a very different way. So most companies like the typical SaaS company let's say you're selling a 20 to 40K ACV business. You're probably targeting a sales efficiency of like zero four on the very low end to kind of zero eight or higher. If you can change the payback period like 14 to 18 months and you're going to continue to operate in higher sales people provided your pipeline and quota ratio is kind of in the three to five range which means it kind of implies like a 15 or 20% to 33% close rate from second stage sales lead.
Tomasz Tunguz
Samsara did a very different way. They emphasized longer term contracts and the bar that they wanted for their account executives is that the account executives would pay for themselves in cash every year. So if you're paying your account executive $175,000 they just needed to close $175,000 in gross profit and that was successful whereas the typical startup would say actually for an inside rep want them operating at 550 to 650 X Arr.
Tomasz Tunguz
The OTE ratio. And this sort of cash strategy means that your payback periods are quite long, but as long as the multi year contract lengths are longer than the payback periods, totally fine and the general rates are low, you're totally fine. And so that enabled them to grow really quickly and sort of delayed the quota increases and the focus on efficiency until they were at a much larger level of scale. Yeah. I've been wondering actually, I work with one business that's doing this, and it's doing it marvelously well. And I've been wondering if there's more and more competition in SaaS and the willingness for the enterprise and mid market buyers to commit to multi year deals, whether or not we're going to see this strategy more because it's actually far less capital intensive than a classic software business. And if you operate the business on a cash basis, you can finance a lot of your own growth. Fact, you might even be able to borrow debt in order to finance if there are certain providers that have you that. So all of that is a really long way of saying there are certain benchmarks. But what we're seeing is more heterogeneity in the go to market strategies in order to compete and get an edge in the market.
Tomasz Tunguz
And you can't have Blinders on to say, I only look at businesses that are 30 KC with .8 sales efficiency.
Sidharth Kakkar
That's fascinating. On Samsara, were they getting paid upfront for these multi years, or are they getting paid upfront for these.
Tomasz Tunguz
Some fraction of it was upfront. Yeah.
Sidharth Kakkar
Okay. So they're getting some of that financing from the customers.
Tomasz Tunguz
Exactly right. Which is what I mean. Salesforce pioneered the annual prepay, which is a loan from your customer at a 0% interest rate.
Sidharth Kakkar
They just took it further.
Tomasz Tunguz
Right. If you're just doing it for one year, I want to do it for three year. Five.
Sidharth Kakkar
Yeah. Oh, that's so fascinating. That's what allows both the quota coverage to be lower as the ratio of the salary and allows you to sort of be able to have more money to fuel into the business. Okay.
Tomasz Tunguz
Yeah, exactly right. So now all of a sudden, instead of having ten AES, you might have 40 AES for the same spend, which means you're building the brand faster, you're getting the compounding efforts of having all those people on the street. And so you push the efficient. The bet that you're making is eventually you'll be able to get to that same level of efficiency to be on par with other software companies. But I think you kind of look at the number. Well, we can all look at the number of successful software companies at this point. You can have a pretty high degree of confidence that you can get there.
Sidharth Kakkar
Yeah. Actually, what do you need to have that degree of confidence? Because sometimes you could just have a broken model and you don't want to push it too far, only to realize later and then have to hit the grid rates totally.
Tomasz Tunguz
Well, I mean, for a lot of these, most software companies typically start out in the SMB, and then they're looking for a modest level of efficiency there. Then they build enough features to move into the mid market. And so you're really looking for being pulled into the mid market and then seeing some greater efficiencies at that point, maybe in year two or three of the go to market and at that point you should have relatively high confidence.
Sidharth Kakkar
Yeah. And by being pulled into thin market, you mean like your ACVs are now starting to get closer to something.
Tomasz Tunguz
Exactly. You know that.
Sidharth Kakkar
Yeah. Cool. One thing to think about is something that makes that sort of Samsara type model really work really well is if your customers just never leave. Right. Because you're LTV or however you want to think about it is really good. But the other thing, I wonder, can a high NDR also make that type of model work? So let's say maybe you don't have the most incredible retention, maybe it's not 99.9%, maybe it's 90%. But if your NDR is really good, could you make them, I don't know, curious if you've come across any examples?
Tomasz Tunguz
I haven't come across examples. I think it would not be crazy if you had sort of like a Snowflake, like 170% NDR and your logo churn, let's say, like you said, 90% or above and you were going to remain within that segment for the next couple of years. I could imagine people taking that bet. It's probabilistic in a certain sense, because there's some discontinuity in the business. You could really end up upside down on the economics where you've paid out commissions on stuff that's not never going to actually see the light of day. So you need to be really careful there. But I think if you had a pretty good longitudinal data set at scale, I mean, think about the usage based companies like Twilio and AWS, they sign up a customer, they don't know what the customer is going to generate. They've got some probabilistic estimate of what that LTV is going to be or the ACV is going to be even for the year and they're still paying commissions on it. So again, they're doing it at the one year time interval. And at some point some brave entrepreneur and some brave financier are going to get together and magic will happen as.
Sidharth Kakkar
Long as the times are good. Yeah. In the past you've shared this idea that NDR that's just 20% higher can be like how valuable it can be for a company. If you can elaborate more on that idea, you bet.
Tomasz Tunguz
So Einstein said the most powerful force in the universe is compounding interest and it's never more apparent than in a software company. So the net dollar retention of being 20% higher, it's like five X, four, five X three or four years later in terms of the difference in Arr, and you can kind of look at like a 20% increase, not that much in a year. Imagine having that conversation with your head of customer success saying, I just need you to get 20% higher on the NDR this year and then 20% higher. And all of a sudden you wake up and you have a business that's four or five times larger than it would have been had it stayed up at the standard NDR, hugely powerful. And it all comes down to that compounding effect. And I think one of the reasons I'll take this on a tangent, one of the reasons that software companies used to be priced like eight times forward multiple in the public markets was the 75th percentile. It was not broadly understood these compounding dynamics. And then the other thing that's really becoming apparent, it was fantastic block was I'm not sure who wrote it was how long software companies can grow up like 50, 60%, way longer than most other businesses, and they can sustain those growth rates.
Tomasz Tunguz
Big part of it comes down to NDR and account expansion.
Sidharth Kakkar
That's fascinating. So one thing that's interesting to me, in part because of what we do at Subscript is the compounding nature of this, because most of the time when companies report an NDR number, it's not cohorted. And so it's unclear whether that's year one NDR or year three NDR. The question is, does it actually compound or is it like a one shot thing?
Tomasz Tunguz
That's a great question. Most investors we're blind, right. Unless you're a private market investor and you ask for that data room and run the cohorts, there's not that level of public reporting yet. It's only relatively recently, maybe in the last four or five years where even the IPO filings, you have some notion of net dollar retention and then the definitions actually vary across. Companies like Box and Zendesk only report NDR above $5K ACV, for example. They don't report it below that threshold. There are meaningful differences between enterprise NDR and mid market NDR. In fact, the survey that we ran showed that the median net dollar retention in enterprise companies selling products of $100k or more are significantly higher than the ones in the SMB, which was counterintuitive to me. I mean, in retrospect, it makes sense that if you land with one department at Walmart, then you can cross sell the entire team. But on a percentage basis, I thought if you land with one seat in a 20 person company, you can grow that account, but not true in practice.
Sidharth Kakkar
That's super interesting. Is it because so many of the latter turn that it's just like some of them do go to 19 X?
Tomasz Tunguz
But I think that's definitely a part of it. I think another part of it is the willingness to pay in enterprises. Right. It's like a four to a ten X on a per se basis if you sell to an enterprise relative to a mid market company because of all the security of the compliance or just pricing power that you would have.
Sidharth Kakkar
Yes. On the NDR reporting front, I think it was Snowflake that had a particularly interesting NDR number where I think they only counted it after year one or something, because I think companies start at zeroish, spend at the beginning, and then I guess, stabilized. I don't know. I thought that was really interesting. And I wonder if for usage based companies, it's not like the right model that I could look for stabilized and then go for NDR from there.
Tomasz Tunguz
Yeah. I haven't looked at that specific metric. And I probably shouldn't comment on something because we're still investors. But I do think it makes a lot of sense that you would look at it after the first year because there's so much volatility in the number. Right. Customer could churn, and it's probably not a good long term indicator of the health of the account.
Sidharth Kakkar
Yeah. You talked a few minutes ago about when talking to founders and trying to understand, like NDRs at the enterprise level versus NDRs at the SMB level and stuff like that in general. Are there things like that where you're like, oh, I wish founders were able to go deeper on some of this stuff, but you don't necessarily see it yet. You wish they knew as a group of people.
Tomasz Tunguz
Yeah. I think at the early stage, the thing that's the most important is if you can have three examples of customers that expanded and you can go deep in explaining why the story behind the champion, why it is that they expanded, what were the use cases? How did it grow? The more granular the details, the more tangible it is, the more effective the pitch. So it's not necessarily on the metric side that's really important. It's the storytelling and the knowledge of the account, because that really helps. It really helps equip your champion inside of the venture firm, because when I was coming up in the firm, I would go and find some awesome I thought an awesome company, and I would go and pitch it to a partner today, another one of my partners, and they're going to ask me immediately for the use case. And if I have a story or two or three stories, like, this is the way Netflix uses it. This is the way the Google uses this is the way whatever. It just really grounds it, and then it helps people imagine what a business could be.
Sidharth Kakkar
Yeah. I guess as a venture investor, you're only partly sometimes investing in the numbers, but so frequently investing in the story, that's going to drive the numbers.
Tomasz Tunguz
Yeah, less and less. I was looking 2019. I ran benchmarks on all the companies that we had met and what the median Arr was at the series A was 1 million to about 1.5, with a pretty big confidence interval that took it to like 1.7. And that number has come way down. Way down. I mean, we're talking like. Yeah, zero. Sometimes we're talking like $30K, $50K in ARR, not MRR. And so it's quite rare to have any significant data. There's no pipeline, there's no historical conversion rate. So what you're really trying to do is you want three to five customers that you can call and you want to hear those stories in the pitch and then call those customers and have them Echo the same feedback, make sure it's consistent, and then it's easy to draw a line.
Sidharth Kakkar
Yes. When you do have more data to work with, are there things there than you wish that founders had a greater grasp?
Tomasz Tunguz
I think Cohorts are really important and underappreciated and understanding of why certain Cohorts are performing, whether it was tied to a particular feature launch or the hiring of a VP sales or something else that happened in the market. I think Cohorts broadly are underused in order to understand businesses. One big idea like.
Sidharth Kakkar
This might be a hard question to answer. So you can pass if you want, but do you have a thing or an example of something that you think people would do differently if they were more focused on looking their business on a Cohorted basis? What would they do better?
Tomasz Tunguz
That is a good question. That's a really good question. Okay, I'm going to make a leap here. So I'm not sure this is quite true, but my hypothesis would be I think companies that move really fast, particularly at the early stages, have a huge competitive advantage with the execution speed. And I remember meeting this one CRO, who took a company from very early stages all the way through IPO, and on Mondays he would bring his team together and he would kick off the meeting or the stand up or whatever, with the week number in the year, he would say, we're in the 36th week of this year, and there are 52 weeks. And in that way, he was able to drive urgency even through July and August. And it just kind of gave you a sense that time was running out. And I wonder if the management teams and Ford put the Cohorts more frequently, that they would be able to drive that same set of cadence, like, okay, let's look at whatever this month's numbers and the next month's numbers. And it also ties why a lot of sales execs have moved to from quarterly quotas to monthly quotas.
Tomasz Tunguz
It's drive like a repeatability and a faster cadence in the business.
Sidharth Kakkar
Yeah.
Tomasz Tunguz
There's no hiding.
Sidharth Kakkar
I like that. I like that in part because once a month passes or quarter passes that Cohort is done. That's it. You can't add anything to it. And yeah, you can grow that Cohort over time. But the initial it is what it is. I also like that from like, it's a very clear separation on the acquisition and then the sort of retention side of things in there. It's like the Cohort is now closed and now it's sort of moved into the territory of your success team.
Tomasz Tunguz
That's a brilliant insight. Yeah. And you want to be able to influence that Cohort Midstream.
Sidharth Kakkar
Yeah. And so you have a team that does that. Yeah. That's good. See how it all works. Now, the next thing that I wanted to ask you about is you talked late last year about two types of payback calculations, one on sort of a gap revenue basis and one on top on a cash flow basis. I was wondering if you can expand a little bit more on sort of like why those two and how you think about it.
Tomasz Tunguz
Yeah. So this goes back to the Samsara example. So most businesses look at it on a cruel basis, and they say, let me look at the life of the contract and figure out how many months of that contract is it going to take to pay back. And the funny thing is then it's probabilistic, too, because most companies operate with gross margin normalized payback periods of 14 to 18 months, which means if you sign a one year contract and the customer turns, you've lost money on that customer. But with a logo retention high enough, it all kind of works out in the end. The cash based payback period is when you're just like an AE being paid $150,000 only needs to bring in they've hit quota. And again, as long as you have a high degree of confidence, the durability of those contracts, then it really allows you to scale up quite nicely. And so I think there's a competitive advantage if you can do that. But you do need to make sure. You absolutely need to make sure that the logo churn is quite low.
Sidharth Kakkar
Yeah. Once again, it seems like your confidence in the integrity of your data is like, absolutely critical here. Right.
Tomasz Tunguz
Critical. And so you need a sophisticated sales finance function. You definitely need a deal desk, which is when the CEO, the CFO, and then the head of sales come together and look at the construct of a contract to determine whether or not it's viable. One company I worked with, we tried this promotion and we didn't think through it, and we ended up doubling burn for a quarter because the cash flow dynamics were terrible. So having that sales finance function is really important. And then the last thing that you really need is a really terrific sales training program because you're going to be hiring account executives at a clip that's two or three, maybe even four times faster than the classic SaaS company would. And when you're making that kind of investment, if you're not generating enough pipe or you're not onboarding the AES, the impact of cash burn can really turn quite quickly. You need a lot of sophistication or at least a lot of instrumentation to understand exactly when that's going to happen. And again, that's why you would look at Cohorts, you look at AE quota attainment Cohorts in order to understand that.
Sidharth Kakkar
That's so good. What is the example of a canonical company in your head that is primed to have the finance function start being built out? When should people be like, this is me, I should be building this thing out. Like, I need sales finance and I need a deal desk, and I need someone to model out all of these scenarios before we flip the switch.
Tomasz Tunguz
Yes. In my mind, you want to hire that function. Right. When you have your first sales team. So sales manager and three to four AES all of a sudden, particularly if you're a lower ACV company, something like 15 to 20K, your deal velocity is going to be high. You're going to want to grow really nicely and continue to hire, and you'll probably hire another sales manager. And then you'll have two sales teams up to maybe 14 AES because you really want to maintain seven AES per manager. And so if you get that sales finance person in, they're going to take a quarter or two to build the model, understand how the team works, and really give you that instrumentation so that when you hire that sales leader and now you're going from 14 AEs to something like 20 AEs, you've instrumented the organization and you're ready to go because a mistake at greater scale is that much more expensive.
Sidharth Kakkar
Yeah. I really like your point you made there. I feel like Ae ramp and SDR ramp is like an incredibly well understood concept. But when you hire a finance person, they also got a ramp.
Tomasz Tunguz
Absolutely. They have to ramp, and then the business is going to change underneath them at the same time. Right. So things change a lot. So there's complexity. Absolutely. And they need those relationships. A lot of people look at finance and say, oh, it's plug and play, but it's not that you really want a sales finance person to sync with the sales leader and understand how they work together and develop those processes before you scale.
Sidharth Kakkar
Yeah. Last question, which is somewhat unrelated, but Subscript is a totally asynchronous company. So we're like a very heavy writing culture and commenting and asynchronous discussion type of culture. And you wrote a piece about why you prefer Google Docs instead of Google Slides and board meetings that really resonates with us. So talk a little bit more about that.
Tomasz Tunguz
Yeah. One of the reasons I got into writing is it really clarifies your thought. They say if you want to learn something, teach it to somebody else. And there's this awesome concept. There was this called the Illusion of explanatory depth. There's this Italian artist, and he went to, I think it was 50 or 100 people. And he lives in Italy, and he went to a big place, maybe in Rome, and he asked 100 people to draw a bicycle, a functioning bicycle. And then he built models of 16 of those drawings. And you want to guess how many of them actually work? There's only one or two.
Sidharth Kakkar
I mean, I'm shocked even that's.
Tomasz Tunguz
Right. And so there's a sort of human bias that we all have, which is the more familiar are with something, the more we think we can explain it. But in reality, it's quite difficult. And we take a lot of details for granted. And writing breaks that it breaks that illusion because in order to make a coach and argument, in order to distill a letter. Right. Like the Twain quote of letter would have been shorter if I had more time. You have to spend time on it. It's got to be clear. The flow has to be really clear. And so if you're going to take lots of people's time, condensing, it is really valuable. We went there with this other company that was doing metrics analysis for meetings. It's been out of Bain and Microsoft ended up buying the business. And I'll never forget they had this stat, this big Fortune 500 company, and the average number of people in the meeting was 50. And then the other stat was crazy. And the other stat was there was the CEO at the time asked for a weekly meeting on Friday to gather a certain amount of data, and they calculated that single meeting, which was 20 minutes long, cost the company 50,000 man hours a year because of the cascade.
Tomasz Tunguz
Right. If you're taking that amount of time or a management team meeting or you're taking 8 hours of management time, you can calculate it for your company how much that costs. You really want the content to be distilled and clear. And I think what ends up happening a lot of time with presentations, you can look at the challenge or disaster or whatever. What ends up happening with a lot of the presentations is there hasn't been that investment to clarify the thought and really boil down the two or three key issues. So constraining people to one page, maybe two pages Max, to talk about the top two or three things and elucidate the issues is a really good exercise to make those meetings more powerful. We all complain about being in meetings, and it's because very few of us and I'm just as guilty as anybody else do the preparation in order to maximize the value for those people. And so the document, the written document, the one pager is one path. Right. Not the only path, but one path to getting people to consistently distill what it is they want to convey.
Sidharth Kakkar
Yeah. And as a board member, you basically have the most expensive time in the company in that one meeting. And then you have outsiders who need to absorb all this context and hopefully give great advice.
Tomasz Tunguz
So it makes total sense that there was this awesome. Being a CEO of a company is a very difficult job. I think, underappreciated how difficult it is. And there was this awesome interview with Barack Obama and Vanity Fair when he was President and kind of equips around. He wore the same thing every day and didn't want to fatigue his brain making consequential decisions. And they asked him kind of a lead up question to the big question, which was what is the day in your life like? And he said every meeting is an impossible decision because all of the decisions that could have been made by other people have been made by those people. And so only the impossible decisions come to me. And if you're going as a CEO, you're not operating on that sort of the nuclear launch code scale. Yeah. But within your own world, you're making the most important decisions for that company. Right. And all the people and the welfare of your employees. Another reason why I like the written form is again, you don't have that much. You will get tired if you're inefficient with your time and you can't focus.
Tomasz Tunguz
And so the written format, at least for me, it really helps you maximize your decision making ability.
Sidharth Kakkar
Since for almost the time I just have one last question for you, which is our audience is primarily series B, series CFO's, VP of finance, records of finance type of folks. And just any last word, the words that you might have for them, or any last piece of advice that I did not get a chance to ask you about that you would offer.
Tomasz Tunguz
Yeah, I will say. And I wrote a blog post about this. I think the most underappreciated function within a company is the head of finance. I think they are in a position to be the consiglieri, just really the advisor to the CFO and their unique view on the business through the lens of the spreadsheet or the SP. And a function is, I think, dramatically undervalued. And so I would say at the later stage, CEOs make sure you have an incredible consiglieri because they will help you see around corners in ways that most people need, but very few appreciate.
Sidharth Kakkar
I couldn't agree more. I feel like that role and the head of people without those.
Tomasz Tunguz
I think Michael Morris had a quote which said the startup business would be easy if it weren't for the people. In other words, it's the interpersonal stuff that really challenges companies.
Sidharth Kakkar
I feel like those are the two. Once you have an amazing those two, everything else can fall into place.
Tomasz Tunguz
Absolutely.
Sidharth Kakkar
Thank you so much. We're so thankful for this.
Tomasz Tunguz
It's a privilege. I really appreciate the invitation.
Sidharth Kakkar
Thanks so much. I hope you enjoyed today's episode. Before you go, let me give you a super quick overview of what subscript is because chances are we can help you. I started subscript because in my last business, I had this problem. We had this giant Google spreadsheet and that's where we kept track of everything about our business. And if you're anything like me, you're a data driven leader who really cares to understand numbers in order to make sure that you're making the right decisions. But when you're looking at a giant spreadsheet with lots of tabs on tabs and tabs and lots of people with access, you're probably not looking at the right thing because you can never be confident that someone didn't mess something up or that someone didn't fat finger or number, or that you considered all the corner cases that you actually need to consider. So that's what subscript does. We help you understand your subscription business at a much deeper level than you ever possible. If you'd be interested in giving it a try, come check us out at subscript.com.
