Speaker 1Michael Walrath is the CEO and chair of Yext, a public software company doing nearly $450 million in revenue. Amongst Michael's other past successes, he bootstrapped Right Media and sold it in a reported $850 million outcome.
Speaker 2The magic is that we have an 80% gross margin business with 31%
Speaker 1EBITDA margins. If you're feeling frustrated by the world of fast-growing but highly unprofitable VC-backed companies, Mike is here to tell you that there's a better path, even if it's not as glamorous at first glance. The employees who are joining
Speaker 2XYZ Hot Startup today at $5 billion or $10 billion valuation, they don't really, I think, fully understand the contract that it's a lottery ticket.
Speaker 1In today's episode, Mike also gets into how he tackled a serious churn problem, why he stopped paying most of his people in stock, and why you shouldn't be so afraid to cut your weakest sellers. If I cut the bottom 50%, I'm going to lose 20% of my bookings. It's not even close to true, it's the opposite. Lots to learn in this episode from a strong operator who's not afraid to take some less-can-eat-cooking. Welcome to Top Line.
Speaker 3Hey, everybody. Welcome to another episode of Top Line. We're back in person. I'm joined by my co-host, AJ Bruno, the CEO of Quotapath, Asad Saman, the CEO of Sales Talent Agency, and we've got Mike Walrath back on the show, the CEO and chairman, I believe, as well, of Yext. Chair. Chair. It's non-gendered. Chairperson. Chairperson. Chairperson. You are the chair. Just when you took it over. I like to keep them guessing. I reached out to you again because you've been one of my favorite follows on X. Well, thank you, because I think you're like, you know, you're like a large percent of my followers. I'm a large percentage of your followers. I figured being caustic, you'd get a lot of followers, but apparently not. Sam just takes your tweets and puts them right to LinkedIn. They go viral every time. Yeah, great. I take all the credit for that. Ideal. Talk a little bit. I feel like you've been on a mission, and maybe the mission is an argument for physics, for gravity, for saying, hey, the old rules of business still apply. Talk to us about, like, what are you trying to articulate out into the market that you think is disconnected from reality?
Speaker 2Yeah. In all seriousness, like, you know, I haven't, like, I had a Twitter, I had, like, a Twitter account in, you know, 2000, whatever, you know, and I never, I used it, and then I was like, ah, this is terrible. It got hacked. I deleted it. Probably got hacked. And that may happen again. Yeah. I expect it to happen. Yeah. But I just, you know, in the last six months or so, obviously, you know, you guys have sort of seen the shift a little bit. I think I just kind of came to the end of my rope when it came to, like, saying what was on my mind and trying to counter maybe a little bit of the noise in the market, and at least provide another point of view. So it feels, this market reminds me a lot of when I started my career in the late 90s, and it's hypey, and we're doing crazy things that don't necessarily make sense. But they make sense in the short run. And so, you know, I think what I'm trying to do is just add a voice, hopefully directed mostly at founders, that there are other ways to think about these problems, that the sort of VC, and, you know, I have a lot of friends who are VCs, and, you know, we just stay away from this topic.
Speaker 3Do you really stay away from it? I mean, I think it's an interesting conversation, right? I just don't think they will tell you the truth. They'll just be very positive on everything. Well, they, I just think we're in, like, we're all playing different games. Their game is a markup game. And it is, they just don't have to be the last person holding the bag. And your game as running a public company is, I have to build a long-term durable business, and we're just playing different games, right?
Speaker 2Yeah, actually, it's a good point. I think this is like, people are like, why are you beating up on the VCs? And I'm like, actually not. Like, they're doing exactly the right thing, you know, generally speaking, like, this is a hype cycle, right? If you're a venture capitalist, you really don't have a choice not to participate.
Speaker 3This is when all returns are made in venture capital. Yeah. Is at the peak of hype cycles.
Speaker 2Yeah. Yeah. And the losses will just not matter, right? And so, you know, the problem that, you know, the thing that I think I resist the most is the idea that the vast majority of input that most founders are getting is that, right? And it's a completely different math problem for a founder. You don't have portfolio dynamics. You don't have 10 bets. You have one, right? And you all have one. Awesome. Awesome will say, but
Speaker 3you can sell secondaries along the way, so it's fine.
Speaker 2Sure. Yeah. And by the way, I would, right? If you can get those. And, you know, but the problem is, is that these deals, these, these, these billion dollar deals and multi-billion dollar deals, like, you know, 1% of founders are getting those deals, right? The, there, there's a whole world of people who are building businesses who aren't, you know, they can't, they can't raise primary capital, let alone sell secondary. And on top of that, so 1%
Speaker 3of founders, it's even less of employees, which is what we're talking about. Yeah.
Speaker 2Well, and I think you're, you make a great, that's the underappreciated point about the, the biggest downside, and if you look at these downside deals, the biggest downside here is not to the early stage investors or to the founders, it's to the employees who, whose equity was issued at these, you know, at 409A valuations discounted off these crazy numbers. So when we look at the air tables and the muses of the world, like the founders got paid, the early stage investors got paid, the late stage investors got all their money back. The employees got nothing. The employees got nothing, right? And the employees who, who are joining XYZ hot startup today at 5 billion or 10 billion valuation, like they don't really, I think, fully understand that. They don't fully understand the contract that like, you know, they're, they, that it's a lottery ticket. And in a lot of cases, you know, their compensation statement shows the opportunity, but that they're not really getting paid for it.
Speaker 4Do you think that from an employee perspective, if you're still working at air table right now, then that's a little bit on you. Like, why are you working? This company went to hell a long time ago. Right. Everyone that's still there. People there being like, fingers crossed, hopefully this works out. That's a really bad decision. And so, of course, it's not going to work out for them. They should have at this point been able to look at, no one has more insider information than an employee, right? And so when you think about careers, careers are like picking stocks, but you have inside information. And at some point you have to take that information into account and be like, it's the hottest job market in history. And I'm sitting at air table.
Speaker 2Yeah. Yeah. But yes, but right. So I think that if you're sitting at air table today and you're counting on, you know, the company being worth 25 or $50 billion so that your option package, you know, is going to be meaningful, then like, yes, you're probably not really understanding the situation that you're in. I'm sure there are lots of people working at our table who have realized that, hey, that's, that's not how I'm going to get paid and I'm happy in my job and I'm, and I'm well paid. And, and so, and I like the people I work with and lots of other reasons why people stay in jobs that aren't. Because I think I'm cashing this lottery ticket. I, I do think there's a, you know, this is like a bit of a non sequitur, but like any good politician, I'm going to answer the question that you didn't answer. We're here for it. I think there's this, this really fascinating thing going on right now because when the private market gets this overheated and then, you know, we've talked at length about, you know, how, how, you know, out of favor the public software market is. We're starting to see this really interesting discussion in, in prospect and candidates are beginning to understand that, like, I may have a 10 X opportunity at the undervalued software company that I don't have at the overvalued private software company. And it is like, it is a private.
Speaker 3How's your stock right now? How's it performed this year?
Speaker 2Oh, this year, I'm sure it's down on the year, but it's doubled since the last time we talked, I think. That's what I was going to ask. Yeah. We've, we've, so I'll come on again when it doubles again. Is it too late?
Speaker 3I definitely can tell. Well, I can tell the temperament. You were in the, we talked about the D G A F, right? Yes. Yes. A shirt, but you're not wearing it today.
Speaker 2Yeah. Unfortunately I left it in Florida.
Speaker 3Are you sure it's down for the year? Because isn't it that you guys have all of this great restaurant data and consumer data and the agents need that data to make recommendations. So you'll follow along on Muse and instinct and all of these other, I appreciate that you're asking the CEO. Are you sure it's down? I'm just saying I'm getting bullish on X for exactly partially for what I just said, partially because I agree with Mike that at some point cashflow generation and good businesses will matter again. Yeah.
Speaker 2And, and, and, you know, I think. Yeah. Yeah. I mean, I think it's, it's a good, good data and, and how you, you know, bring value for your customers matters a ton. Our, our situation's strange because we have the take private thing going on. So the stock was sort of unnaturally elevated until it wasn't. And so, you know, when you look at it on a, let me say it this way, since I took over four years ago, we're basically flat. Right. That sounds horrible. Right. But it's actually like top decile performance. I think. Yeah. I'm going to take flat at this point. Yeah. As it turns out, actually, you know. We're, we're not real, real, you know, happy about that. Um, but I, I do think the most important thing is the business is incredibly healthy and getting healthier. Um, and.
Speaker 4And the market's standing around a little bit to software as well, right? Like since we lost spoke, I think when we lost spoke was when SaaS companies were getting beaten up in the public markets a lot. Yeah. Yeah. Since then, most of these SaaS companies are quite up. Yeah. And they've been right-sized and the market's starting to look at them a little bit differently. Yeah. And the market has changed its view.
Speaker 2Yeah. I mean, we, you know, actually revenue, I think overall revenue has stabilized and revenue growth rates are beginning to at least start to tick back up. Ours has significantly improved in the enterprise piece and every, you know, everyone has a different set of sort of complicating dynamics. Um, it's re this feels to me and I, and I may wind up sounding really stupid about this, but like, you know, and this shows how old I am. This reminds me a lot of like the middle of 2004. Interesting. So. In, in 1999. Oh, that's so interesting. Yeah. So, so like we, I started working at DoubleClick in 1999, um, you know, uh, you talk about talk about like, you're stupid enough to stay when you're stuck. Like, you know, the stock was going up $20 a day. It was like 10% a day, every day, right? Clockwork. I got my 2000 options and I was like, I'm going to be a millionaire. Right. Um, and then six months later, the stock had gone from like 220 bucks to seven. Right. And you wake up and you're like, I'm not going to be a millionaire. Right. Not, not off this. Um, and then I, you know, the whole thing happened. Right. And in 2002, I left double click and I started right media and it was brutal. It was like, the only reason why that was possible is I had a couple of customers who were basically willing to shift their media buying to us. So I bootstrapped. So we, we really bootstrapped the company, Jonah, Noah, good heart, put some money in and that was all we had. Um, and, and so we kind of put our heads down and just said, we're going to survive this moment. It was the sort of the apocalypse of the post-apocalyptic, you know, post.com meltdown and somewhere in middle of 2004, maybe it was late 2004. We just kind of looked up and went like, Oh, it's like, it's, you know, it's getting easier. Right. Like the budgets that were slashed or not slashed anymore. And customers want to spend more money. And it was all digital advertising stuff. I mean, it's almost comical, right. In 2020, second half of 2022 was going to be the recovery, right. Second half of 2023 was going to be the recovery 24. Yeah. We're going to see the recovery. Right. So it's like an interminable period of time to go four years from like, you know, everything fell apart at the end of 21. And now we're literally we're five years removed. Right. It doesn't seem like it's been that long, but I think something's shifting. And what I feel now is like, you look at like generally corporations are over-earning the sort of CFO is satisfied that you've like taken enough cost out. There is this opportunity to be productive. And all of a sudden it just feels like deals are easier to get done right now. Like this could turn, this could, could absolutely turn out to be a horrible sort of feeling, but my spider sense is that we may just be entering the phase where like, you know, we're going to be able to optimize everything for, you know, a really hard selling environment and it might just get a little
Speaker 3bit easier. Do you worry that the other part of the economy, meaning like the AI first, the AI native economy is going to cause enough disruption, maybe whether you think it's a bubble or not, but a correction in that part of the world impacts your ability to keep improving your business or are they uncorrelated?
Speaker 2I think that's the beauty of being like rational, right? Is that like, we don't require any venture capital. We don't require any huge CapEx. We don't require like, you know, the company has gone from breakeven to over 30%, you know, real EBITDA, not like fake EBITDA. That's amazing. Generating tons of cash and that cash and starting to grow again a little bit in the enterprise core, which is the important part. So as we get there, one of the most interesting underappreciated things I think from, and you know, I wouldn't have understood this 20 years ago is when you're actually profitable, like really profitable, then any growth becomes hugely accretive, right? So like, you know, running a business at, you know, I think our, our, our EBITDA margins last quarter were 31%. Um, and so that's fantastic. It's been, I mean, look, it has, it has been, it has not been a simple journey to get there, but you know, what, what I, what I think the magic is that we have an 80% gross margin business, with 31% EBITDA margins, every incremental dollar, I can spend 45 cents of it and not affect my margins in any way. And so, you know, I think this is the underappreciated thing about some of these kind of left for dead software businesses is that we have an unbelievable amount of investment capital just in, in even very modern growth rates. We don't need, and, and we can be totally dislocated from our valuation, right? That's, that's a completely different story than if I have to keep raising. So is your balance sheet just exploding? Well, we, our balance sheet, we've used our balance sheet to buy something like 35% of every share ever issued. So, so did you, did you announce those buybacks? Yeah, that's all, that's all public information. Yeah. Yeah. Um, I'm going to do my very best not to disclose. I'll stop asking sensitive questions. Um, no, no, it's not sensitive. It's, it's, you know, we, we've chosen because we have such healthy cash flows, we've chosen, you know, at a time when the market is, you know, at a time when the market is, you know, at a time when the market is trading our stock for, I don't know, less than five times EBITDA. Like we believe that our business has more than like three years of life in it. Right. And that's kind of what the market says when they trade you for, I think the last time we got together, we were trading for like, I don't know, two and a
Speaker 4half times EBITDA. When you look at 2004 for let's say SaaS companies, right? Mid cap, public SaaS companies, maybe even the large caps. Where do you place this AI side of the market? There's this conversation happening that it's, it's 97, 98. There's other people who are saying it's 98, 99. It's getting close to like, it's going to pop. And so there's, everybody understands that it's bubbly. Everybody understands this hype. That doesn't necessarily mean the bubble bursts, right? Like there can definitely be a world in which this goes on for five, six years with many corrections along the way, something that it might burst, but it's hard to place it because it's also very different. There's real revenue. You saw that market, like, where do you place this?
Speaker 2I can tell you where I hope it is. Right. And what I, what I hope 95. No, I actually hope it's 2005. Right. Like I hope, because if you think about it, like, depending on the seat you've been in the last five years have either been an unbelievable bull market or like the worst bear market we've ever seen. Right. So, so in my seat, right, the last five years have been like, you know, the worst bear market that we've seen since 1999. So in the, but where I was sitting in 1999 was the equivalent of in being sitting at one of these AI, AI. Yeah. Yeah. I mean, DoubleClick wasn't, wasn't open AI, but it was in that world. There was a point where DoubleClick was, you know, worth, you know, $12 billion. Right. And, and everyone looked at it and said, this is insane. Right. It's a highly unprofitable company that, um, but it was, you know, it was how to play the trade. Right. Um, and so, you know, I like to think is from where I sit that it's 2005 is, is that, you know, for software in general, like we're about to enter the next phase of this is incredibly productive stuff and businesses need productivity. Right. It doesn't, I also have a very, you know, sort of counter narrative on the jobs thing, which is like, we're not losing jobs. We're going to create a ton of them. A hundred percent. Like I'm so uninterested as a CEO in cost savings at this point, partly because we run a very disciplined business. Don't, I don't want to talk about like AI saves us money. I want to talk about like your AI, you know, if you're my marketing head and you tell me you can do the same marketing with 90% less heads, I want 10 times, give me 10 times, right. Or 20 times. That's what I want. I don't understand how more people don't get that.
Speaker 3That's history. History is hard to understand, but there is no history of technology. It's because they're being told that that's the case. I mean, just as like you profitable, efficient growth. Well, what does that mean? It means less headcount. The growth is no, not necessarily less headcount. It just means it still means growth. Growth is still a big part of that word. Yeah. But the profitability piece of it is as well. And software business is 70% carry. Yeah, but when I say profitable, efficient growth, I mean, you know, economic profitability. I mean, people will read into that, whatever they want to read into it. And I agree with Mike on that. I agree with Mike on that point around it is like, I want, I want our engineers to be working at a hundred X, not one engineer working at a hundred X. Like that doesn't.
Speaker 2Well, cause growth is, you know, like this, this will surprise some people because they think I'm the profit guy, right? Like growth is the most powerful, of course, you know, value driver you can have. The only thing that, that, that rivals the, the, the value driving of, of organic growth in a business is the value destruction of chasing organic growth when it's not there.
Speaker 4Right. Like, like when you're saying growth is not nice, it's like saying the six pack sucks.
Speaker 2It's like, yeah, it's, it's, it's amazing. It's amazing. And it's amazing. And in a lot of cases, if you have some operating leverage, it's amazing. It's amazing. It's amazing. It's amazing. It's amazing. It's amazing. It's amazing. It's amazing. It's amazing. It's amazing. It's amazing. It's amazing. Which is like, you know, if, if, if we, if we grow 10%, right. Which is, which is faster than we're growing today. But if we grow 10% a year, right. Off our current business, that gives me like $25 million of additional money to put into R and D and marketing and sales this year, next
Speaker 4year. So if you are, you, you're playing the game the right way, like your way. I'm playing it my way. And it makes a lot of sense, right? The reasoning made sense. If you're one of these AI they don't have the ability to be in this position with EBITDA, with the security, et cetera. There's a whole different game on the field. And what's your analysis of how they're playing, which is very much, it feels like this is a moment in time where there's a chance to make, build some really big, special companies. Every buyer in every department in every part of the market is going to buy AI technology with an experimental mindset, it's a chance to get in. And then you're going to have to make a bunch of decisions around how to continuously provide them value to hold onto that customer. You're going to be able to raise easily to do so. You might crash and burn, but if you did, you do a bunch of secondaries and your employees do a bunch of tenders and everybody plays, you know, wins to some extent along the way. It's very different to an air table. It's less binary. How do you think about this version of the game? Kind of made sense, no?
Speaker 2Yeah, no, I mean, I look at air table and, you know, I think like they actually played the game, I think in a very intelligent way. So the reason why that, you know, why that deal wasn't a catastrophe. was because they didn't spend all the money.
Speaker 3They had a lot of cash.
Speaker 2Right, so they had tons of cash, right? And again, I don't know anything about that deal. I posted, you know, a little bit on X just from the outside. You know, it seems to me that, you know, that team probably wanted to focus on something else, right? Something that was entirely outside of. Yeah, and they kept the AI thing out of the deal. Yeah, and so it goes back to, like, that was a good deal for the early investors and an acceptable deal for the late investors and a pretty good deal for the founders, and it was pretty **** for the employees who signed up after they raised money at $12 billion.
Speaker 3Well, I would also argue, though, it's not just the employees that are there now. I mean, think about if you were the first VP of sales. Your 409A is pennies, and yet you stayed for four years, you helped build a $100 million company, and then you did leave. You did go on to Ryder, the first VP of sales at Ryder.
Speaker 4Are you telling me that, like, these Airtables and these companies, when they did those really big rounds, because we all know, people that worked at these companies, whenever they did those big rounds in 2022, everybody made money.
Speaker 3But there's a very, very small portion. They're not selling more than 10% of their equity stake.
Speaker 4They're not a seven-figure outcome from a company that ended up being a dud. There's pretty, I don't, look, I don't know. There's lots of ways to round things,
Speaker 3but the rules are really specific. You can only sell, like, 2.5% of enterprise value for secondary market during any tender offering.
Speaker 2Here's what's interesting, and again, Airtable's just a really interesting example, right? Because, you know, they raised $800 million, right? They didn't use it, right? They still had it on the balance sheet, right? So one of the reasons why that, you know, the deal value was $2 billion was they still had, like, $700 million. I don't know the numbers exactly, but. $700 million on the balance sheet. So now, if you imagine a world where Airtable hadn't raised that $700 million, right, had only raised $100, and never raised another round, which they never needed, right? They needed it. They only, you know, they sat in the bank. Like, that's known, right? So if they raised $100 million, and then they built, and they just, you know, built it on cash flow because the company was breakeven, it wasn't burning a lot of cash, it clearly didn't burn through the $700 or $800 million, they didn't play the, like, you know, moonshot or nothing game. They held on to the cash, let it sit on the balance sheet.
Speaker 4But doesn't that give you an idea of, like, a really confused group of people? Like, I'll tell you why. I look at that, and I say, first you went and you raised this money. Well, he's making the same point you're making. But then they didn't know what to do with it. Right? They just held on to it. This is why he's.
Speaker 2So I'm going to say what I said before, which is nothing's more powerful than growth at creating value. Nothing is more destructive to value than chasing growth when the growth isn't there. So somewhere along the line, they realized that, like, spending that money wasn't going to get them incremental growth. This is the big problem in the market. And because of that, they didn't destroy value. Because if you think about. So if you, like, fictional, like, in the alternate timeline, right? Airtable, I forget what the numbers were. $600 million of revenue, you know. $400, I think. $400 million of revenue, maybe, like. $700 in cash. $700 of cash. Yeah, that's how you get to the 1.2. So roughly three times ARR, right? Making. You know, basically break-even. You take that same business burning $150 million a year and seeing a declining growth rate, it's not worth three times ARR. It's effectively worth cash. Yeah, it's worth half that. It's worth half of a turn of ARR because the burn rate is so high. And so I actually give that team a lot of credit. A lot of credit for identifying. Like, Yext lived this, right? We were at, you know, at the peak of the decline. of the pace of decline of growth. We're spending 74% of revenue on sales and marketing, right? So that was with a massively declining growth rate. What year was that? It was, like, 2001.
Speaker 4Oh, okay. Late 2001, yeah. I think the push on that is that Airtable went and raised this money. They had a vision. They had ideas. They wanted to invest it in growth. And you invest in growth doing two things. Innovation. M&A. Distribution, right? Like, one of the two. Oh, M&A. Yeah. And at some point, they didn't have anything left to spend on. You have AI happening. They had no ideas on what to do with that. The M&A point is interesting enough, though. They didn't go and buy a bunch of companies.
Speaker 2Well, I think they did have some ideas. I think they wanted to go do those separately with a fresh capital structure is what it would appear. Which is mind-blowing. Because they didn't go with the deal. The people that actually screwed the employees
Speaker 4end up being the founders in that situation.
Speaker 2Look, I don't like pointing fingers and, you know, at anybody, especially founders. Like, you know, I think this is such a hard thing, as you three all know, that, like, you know, it's really hard to get me to criticize founders. And my advice to employees would be understand the economics of, like, these are not sure things, right? These lottery tickets are, like, just as likely to be what I learned in 1999, which is, like, it was, you know, my stock options were struck at $185 a share, right? You know, in the end, I think DoubleClick sold for $12. Right? Like, you know, I learned so much through that experience that, like, it was the most valuable thing I ever did in my career, right? I didn't make any money. But it gave me what I needed to go figure out the next thing.
Speaker 3What was the market cap when it sold?
Speaker 2I think they sold it for $3 billion. And at the height, it was $12? At the height, it was, like, $12, yeah. Yeah. My point was, sorry, just to land the point with the Airtable thing, like, if they had only raised $100 million and if they had never done that big round, the outcome to the founders would have been the same. Yeah. The outcome to the early investors would have been the same. And more of the employees would have made money. And so this is exactly why I'm so annoying on Twitter about, like, you know, Andrew Russergan this morning, like, you know, said, like, oh, well, like, Instinct is now worth $10 billion.
Speaker 3Right, you said there's a difference between valued at and worth.
Speaker 2There's a difference between valued at and worth. Like, Airtable was never worth $12 billion, right? And, you know, what it wound up being worth was $1.2, right? Great outcome. It's just unfortunate that more people didn't participate because, you know, the market, you know, by the way, we're only five years since the last time the market was psychotically overheated. That's the other weird thing about the situation is, like, the companies that are truly left for dead right now are the private software companies that were overvalued in 21.
Speaker 3We're going to talk to one of those founders in a little bit. It's fascinating. You know, David Sachs made this point a long time ago that, you know, the mania, the psychology of mania is so. Everybody in hindsight can say, oh, that was never worth that much, and that was all a bubble, and in the moment it is. Because your point is, I'm speaking to founders, and I want them to know that there's a different path available to them than raising a huge round and pursuing growth at any cost. And that sounds true, of course, but for the founders where that capital's available to them in the first place, because there's always, like, this class of people that it's not. They don't have the option of raising $300 million. Their business is struggling. So it sounds nice, except that there's a whole class of other people whispering in their ear that if they don't take the money and they don't get the market share, that when things settle and consolidate, they will be on the outside. They won't be in the pole position of driving the consolidation back to them.
Speaker 2Yeah. The world is a hard place as a founder, as, again, the three of you all know. And it's only made harder by the fact that you have access now to, like. The best thing about raising money in 2005 when I raised money was, like, there was no public square. Right. It was all a very private process, and, like, no one. It's not like everyone knew. And, by the way, this whole thing was, like, why do we have to say what the valuation was on every deal? Like, that used to be a secret.
Speaker 3No, and not only that, like, people were. Companies would try not to file so that your competitors didn't know you even raised money.
Speaker 4Yeah. Really? Yeah.
Speaker 3Oh, yeah. And now. I think what ended up happening in 21 was, you would have these industries that would pop up overnight. They're, like, the industry where companies would build demo instances on your website. There was, like, 10. A reprise and demo stack or whatever. Yeah, there was, like, 10 of those companies. And so companies would raise off the fumes of those raises. They're, like, hey, I was involved in this. I can now raise off of it. Yeah, it's a market signal. Yeah, and I think that that's just persisted, unfortunately.
Speaker 2Yeah, and I think it's probably. I think it's very important from a recruiting standpoint today, which is interesting, because to me, like, you know, I have children who are. We're entering the workforce now, and, like, you know, my advice to them is, hey, you have to be extra careful if the company's hot, right? Like, if you care about equity, right? And everyone cares about equity in this world because the lottery ticket thing. But in this world, you know, we operate in, and. But I think that the higher that last raise was, right? Like, you know, if you're employee number 15 at Instinct, I think they have 14 employees now, right? 15. Like, you're 15. Employee number 15 at Instinct, what's your 409A valuation going to be? Five billion? Right? Employee number. Imagine being employee number 15 at, like, coming in at a $5 billion value. Like, the math is different, right? And I'm sort of. You know, I make this case to candidates all the time. Like, yes, you can go to XYZ. Like, you can go to the company with 50 million of revenue who's valued at, but not worth, five times what the X is worth today.
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Speaker 3need these people are cool you know what i want to meet the founders of dev rev because they're interesting they're here i hope so i want to go demo computer yeah and also understand we've been talking about it for the last couple of months yeah we're i'm definitely i think the three of us need to go up there we're gonna go right now this episode of top line is brought to you by pavilion we're coming off the best pavilion gtm we've ever done 10 years after pavilion started as a few operators getting together for dinner we now have a community of over 10 000 across 50 chapters and 15 countries and at gtm 2026 we laid out what we think the next decade looks like ai is making capability abundant but judgment relationships and access are becoming more valuable not less the gtm leaders who win from here will be ai fluent pnl fluent cross-functional performance oriented and deeply connected so we're building pavilion around exactly that we launched gtm skills.com along with new programs like leading with ai and gtm engineering school we introduced dream fuel bringing elite performance coaching to operators and we're expanding access through pavilion scale pavilion gold and pavilion ventures connecting members to the pavilion not just to ideas but to the people opportunities capital and ownership that can change your career the next decade of gtm is going to look very different from the last one if you're an operator and you want to be ready for it come join us at pavilion go to joinpavilion.com to learn more
Speaker 4so if we take a few companies because i think this is a really good point and it's really confusing so if you look at let's say one of these inference companies almost all the top five inference companies have doubled revenue in four months and so they're about to hit let's say the top two or three at a billion dollars in revenue valued at about 25 to 30 billion dollars right and they are all raising new rounds right now you look at harvey lagora they have grown massively in the last six months massive valuations but massive revenue growth when you look at those companies if you had some young person come to you and say hey i'm thinking of joining lagora right now yeah is this the right moment the wrong moment yeah i think it's a good point because i think it's a good point because i think it's a good point was the right moment like six months ago but now it's the wrong moment like where are these companies in that calculation instinct mates like instinct seems like the frothy crazy company of the moment but what about these ones i mean
Speaker 2i think it probably depends on what you so so i think there's a lot more to where you choose to work than there should be a lot more to where you choose to work than just like can i you know can i make you know can i can i can i um is that is that what it is i don't know apparently that's the thing so can you can you secure the bag right and and like you know when i was i guess for a moment i thought for about five minutes when the stock you had secured that i had maybe you know secured the bag i also was making 35 000 a year as a entry-level sales guy at tuba click so the bag wasn't very big i think there's a lot of reasons to you know decide where you want to work and hopefully people think about more than just the probability i really do believe there's probably an inverse correlation between the the the hype the hype value of a company and the probability of not zero yeah right like everyone thought google was way overvalued at one point and and facebook you know plummeted after its ipo and a lot of wealth has been created so google even you know there will be winners in this there's no question about it there will be the ones where it's like okay like everybody made millions
Speaker 4right i think these tenders are really interesting fireworks just did a tender for 115 million dollars for their employees and yeah if you're an employee what's interesting is that as as high the valuation grows in these companies the probability of tenders increases so when you join these like 20 30 billion dollar companies there's a high likelihood they will do two tenders a year till the market breaks till the market right till the market breaks this is the kind of thing we'll look back on and be like can you believe it can you believe it but for now till the market breaks that's going to happen and so you look at that and you're like crazy valuation but this might not be so bad for me in from a financial perspective when you go one tier below you're like okay i've i'm getting into a company that's got really good revenue growth and a decent valuation and my equity might materialize into something so if you look at that like two sorts of companies and you put them together it makes a lot of sense why everybody's trying to get into these companies to me because like the calculation from a risk versus upside perspective is very reasonable
Speaker 2it is until it's not right so i think you know if you you know i don't know i'm gonna not gonna pick a company but say there's one of these companies 25 you know billion in revenue or 600 million of ar whatever error means these days which is not what i wanted to ask you in my public disclosures but let's just call it let's say 600 of whatever this new metric is and and it's worth 25 billion if i joined that company in the last you know six months yeah right like and there's a lot of people who are like oh i'm gonna do this i'm gonna do this going to be a tender in six months like it's not like i'm holding penny stock equity right like you know when that when the tender comes around at uh you know at first of all am i vested right second of all like you know i'm not i'm holding equity at 12 and a half billion like i don't know whatever the foreign right yeah so so yeah maybe double it but but as a you know you're not as a employee joining now that's you're probably not securing the bag right so what you need is you need 100 billion or 200 yeah maybe some of these companies have that opportunity but what we're also seeing is like you know you're not securing the bag right so you're not securing the bag a lot of companies who candidly look and act and smell like you know they looks like walks like quacks like you know a software company right not a not like an immature software company
Speaker 3like operations aren't there durability of revenue with a lot with a
Speaker 2lot less revenue durability and you know so so you know and these things are two billion three billion yeah on 100 million of do any of your kids
Speaker 3work in tech they do yeah are they in the bay area no okay so none of them do not at the office
Speaker 2i think i think yeah they work they work both of my kids work for they're in office for early stage companies and uh both kind of semi-remote type things and they work really hard and i like it i mean it reminds me of what like you tell you tell them about the double click days you're like yeah it's like you know i mean the you know they know because they were there for it right like they my kids are just old enough to remember that like you know i would have dinner and then i'd go in the office for three hours right it was like you know there was no if one of
Speaker 4them can't do it right they can't do it right they can't do it right they can't do it right came to you and said i just got an offer from hubspot uh-huh what would your like advice in that moment be because i we know of people that hubspot even though they're struggle city right now there's they've got a good foundation um they still are hiring people so they need people and so if some if somebody comes to you and says hubspot's one of my options i could go to one of these crazy ai companies i have an offer there i have an offer at fireworks and i have an offer at you know a set of things that you think go into the job and the upside and all of that which one's the how do you think through these
Speaker 2two yeah i think we probably as entrepreneurs you know we're all entrepreneurs the four of us right and we're all you know i think of a generation you know of like where we sort of where the implicit contract was like you know you get equity and that equity has you know a very reasonable likelihood of being worth something in the future right you know kids and their friends and we have a lot of young employees at yaks i don't think that this and i'll get in trouble for saying this that most of this generation is as focused on that as like i was when i was that age um certainly what i've heard if i'm advising my kids or my kids friends what i would say is find the place where you're going to learn the most right if that's a super hot crazy value startup and like you feel like that's where you're going to learn the most you think there's more to learn at hubspot today or if i was i don't know probably probably the same really so i want to go work at fireworks yeah yeah my guess is that my guess is that's more exciting right um i think there's a lot to be learned in you know in in any of these situations because you know it's not like fireworks and harvey and these other hot companies don't have problems they have a million problems have a million problems just like we do of course and and problems is how you learn like you know i started working at double click in 1999 there were eight rounds of layoffs between when i started working there in 1999 and when i left into how'd you make it through all those it was the best environment ever every time there was i mean i made it through because i was one of the top sellers yeah you don't i happen to be very well positioned i sold to direct marketers and so like it was it was it was like the best environment ever for
Speaker 4direct marketing it's such an interesting situation for like a company like hubspot because you're in such a corner and you need good people to help you fight out of this corner but i can't i've thought about this a bit over the last few days i can't come up with the reason to choose hubspot today as an employer i find it
Speaker 3interesting you chose hubspot here as the example well we're always talking about hubspot well they're investors in quota i know they are investors that's why i'm keeping my mouth shut not allowed to say anything yeah but i think i mean i i would look at zoom info like zoom info is a company right and so when you go back to to mike's comment earlier just on like public companies and just looking what's going on i don't like they're a business where i don't think they have the same problems that yucks has because i'm just like and then go to market space like who's who's renewing with zoom info right now
Speaker 4yeah so how do you win when you just cannot attract talent anymore where like what you're doing is so boring and your company is struggling so badly what do you
Speaker 2think about that yeah i have a as you might expect a relatively non-conventional bring it i love it here for it i think this whole idea of like you can't attract talent you can't attract talent you can't attract talent you can't attract talent
Speaker 1is utter really utter
Speaker 2and i think we i think we we we sort of over index to the like the the the resume you know and the hotness of the company is directly correlated to the talent of the people at the company obviously there are really talented people who are starting and building and growing these companies and there's really talented people who work there but i you know by by that measure i shouldn't be able to employ anyone at all yeah like no one should want to work at yes because like we are the you know we are probably you know one of the lowest valued based on revenue or or ebitda multiples you know in in the market yet like every day what i see is amazing talent in the building and amazing talent who wants to be in the building because we're working on really interesting problems it's like we have a little bit of that you know sort of on your shoulder mighty ducks or yeah but that's your energy like you have this doesn't
Speaker 3have this well they need a vision they need a vision to be when you go to their events
Speaker 4they do not have this energy and that's what i'm saying
Speaker 3i find the strangest part of it is darmesh's role because i never under he just feels like he's in the corner like working on his own stuff i stayed up till four in the morning vibe coding this it's like okay i look
Speaker 4at you and i think if i'm young and i want to join a company you are out there there's aggression there's a point of view there's a counter position you've taken i'm like okay i can learn something here like there's something to learn but those companies are not counter
Speaker 3positioning but that's that's a leadership point then your point is about leadership it's not necessarily about like the structural dynamics
Speaker 2of the company yeah but all of that is down and i actually think this is you're getting into like the really the heart of the thing here which is if you if we had a time machine and we went forward 10 years right what's going to happen is 10 years from now like 10 years is eternity in this world 10 years from now there are going to be massive winners from the left for dead category and there are going to be massive winners from the new ai native category and they're going to be massive losers in both and and so you know i think that go back to your question about like how do you how would i advise my kids i would say you want to work for the smartest person you can find yep and you want to make sure that you're culturally a lot culturally aligned to the people around you so like we've done crazy what you know the market would view as crazy things that yes right cutting cutting as aggressively as we cut to get to this to be one of the most profitable companies in the you cut half the you cut
Speaker 3half the company right i want to can we hear about that a little bit sure like what is that because to the point this is the playbook for some company some ai native company that hits away at the company that hits away at the company that has to transform into yeah an efficient business what was the journey to 30% EBITDA margins yeah it
Speaker 2was it's it's really painful and i made it more painful because what i did for the first 12 months was you know was was buy into the idea that we were just one good go-to-market pivot or or products away from returning to hyper growth right and and you know you you know i made this the you know like the same mistake of i you just look past what's directly in front of you and you're like what's directly in front of your eyes which is like growth is declining fast what we had was a churn problem in the enterprise that we were offsetting by acquiring highly unprofitable customers in in the small business side of the course
Speaker 3right it's the death spiral
Speaker 2it's the worst problem you can have because you're you're you're basically
Speaker 3losing high margin customers for low
Speaker 2you're losing high margin customers for negative margin customers and that's super high cac or
Speaker 3whatever you know not breaking
Speaker 2even it's just ugly right and you need to maintain the and and and and you put yourself in a position where every dollar of churn is so painful that you feel stuck in this corner where you have no choice and what you eventually have to do is you have to you have to bear down you have to say we're going to do the right thing for the business and the right thing for the business is we're going to focus our product roadmap and our energies and our and the resources we have on the enterprise customers and we're going to help the unprofitable small customers find the door and that means you know really painful decisions like exiting markets and exiting site segments and things like that and it and you're signing up for a two to three year journey where you're you're going to have negative growth and this is all things i've talked about publicly in 2024 our enterprise segment which is today 92 of our business it was probably 88 of our business or something like that at the time was shrinking at six percent a year our uh our small business smb segment was growing a little bit right you fast forward to today and we're going to have a negative growth and we're going to have a negative growth and we're going to have a negative growth and we're going to have a um i'll just use last quarter's numbers because they're relatively top of mind the year-over-year growth rate in our enterprise angle was two percent right which is not an exciting number but it's 800 basis points it's eight percentage points higher than it was two years ago the the growth rate in the small business segment was negative 23 so you're in that 12 months we we jettisoned 23 of our small business revenue in the aggregate we're like down less than one percent right so the headline is hey there's a company that's dying right one but if
Speaker 3you look into it the composition of the business much healthier
Speaker 2you have to you want to get into like the what this process is like you you have to explain to people why you're doing what you're doing right like this was the you know so we had there were a whole bunch of things we had to do we've shrunk the headcount of the company roughly in half right um i don't believe we changed the opportunity for people inside the company in fact i think we've gone the other way like i think there's more opportunity inside yex than ever because we no longer have all of these silos and redundancies and so if you lead a function at yex now you lead a function right and so if you work for someone who leads a function you get to see how that function gets led we had so many silos and and and wasted effort you know in the in the company that was so desperately seeking growth and you know this is why like it's personal experience the most destructive thing you can do to value is and and we're living today still that it takes a long time to do you feel because of
Speaker 3being a public company you're subject to all the public feelings and yeah i'm sure you've had activists members i don't know if board members the right word but members throughout the company throughout this how do you deal with both sides of this you know like yeah you're looking at the business you're like i know what we have to do i have to rip this off but i've got to deal with this whole public yeah i mean i
Speaker 2i think one of the things that's probably somewhat unique about me is is i do i have the ability to just turn off the inputs right like you know the same way i can disregard the noise from the venture community you know about why you know the ais are going to all replace us i had to learn to turn off most of the noise from the from the public investor community and it turned out actually when you start to think that way what you find is is like you know this
Speaker 3whole like i think well you need job security to do that so i guess you need the support of howard and the board um well no howard
Speaker 2he moved on so he was the last chairman i
Speaker 3mean before i
Speaker 2went to chair no actually i was always a chair so you know that one i always had um no howard has been incredibly supportive but when he left he left he walked out the door brian stayed for a little bit and then ultimately he he left as well but yeah i mean the board has to back you and that's not an always easy thing i do think you know at some level the board's probably got to wonder if they could ever hire someone else right easy enough to take this job right yeah but what you realize is like that those investor voices like i've done all the things that have made everyone mad i've withdrawn guidance i i don't do earnings calls anymore i write a really long letter that very few people it's kind of like my ex posts like you know long but most people don't read them uh but we provide like an eight page letter to investors every quarter we talk about all the metrics in the business and things like that what i was doing was spending 30 to 40 percent of my time talking to hedge funds talking to you know and what they mostly wanted to do was advise me on what i should be saying differently in the quarterly calls to make the stock move near term so they could trade it right and and so we've changed a lot do you
Speaker 3have a head of ir ir
Speaker 2right now no that's awesome wow no more no we do no we no longer have an iron analyst day you don't do analyst day no we may we may do some some investors days over time. Like I fundamentally believe in like this, I think it's a moment like Buffett mongerism, like you get the investors you deserve. And over the last, you know, four quarters as I've sort of gone through this journey and really sort of said, we're going to do what we do. What we've developed is a very concentrated base of very long-term shareholders who don't get agitated about the volatility in the stock.
Speaker 4When you look at companies like Dell, Nvidia, etc., you know, I run a company that's been around now 20 years. And so it's never this straight line, just no problems, right? You have moments where you're growing, you have moments where it's down, you have moments where you have to stabilize the business. In moments where you've got low growth, but stability, a lot of these businesses and how I also found myself thinking is you're like trying to buy time to like find the opening. Like when am I going to attack? What is the way what's the measured, but you know, risk on move to get 30, 40, 50% growth in any given moment? Yeah. Is that how you're thinking right now as well? Is that now I've gotten this to a point where we can play an infinite game. And so now we're looking and saying, okay, how are we going to attack? Yeah. I mean, you know, it's funny, like, and how do you do that? Like how much are you observing the market? How much time to spend, et cetera, et cetera.
Speaker 2Well, so the first two, two and a half years was really completely, it was, it was what I call private equity work, right? Like, we had to go in and we had to do the hard work. We had to, we had to, you know, we cut over a hundred million of expense out of the business, right? We did it as painlessly as we could. And then we went further, right? Then we basically did things that other people will think are crazy. So we, we stopped issuing equity as, you know, part of your, the standard compensation package, right? And the messaging around that was, was actually, we did that after we had cut all this cost. So it wasn't about cost savings. What we, what we're doing is we're, we're, this is one of my favorite topics. I'm going to talk about it for a second, if you don't mind. Stock-based compensation is one of the biggest problems that, that these, you know, sort of software companies have because they bought into this notion, same, same notion that like you have to do it. And when the stock price drops, you have to do more of it because everyone's entitled to the nominal value of the, of if that's the way you think what you should be doing is paying more cash. Right. And so, so, you know, what we ultimately did was we said, other than our, our kind of most sophisticated, most senior people who really value the long-term incentive of the equity, what we saw was the same behavior every time, which is we give you RSUs, you sell them the day they vest, you treat it as compensation because you want to pay your rent and go out to brunch and buy a new car, whatever it is you want to do. And so the vast majority of our population was not taking advantage of this long-term incentive. We also have an incredibly favorable employee stock purchase plan. So for most employees, what we effectively have done is we've don't need to cost savings because we're already very, very profitable. We're going to pay you more cash. And we encourage you if you believe in the company and you want a long-term incentive to buy the stock at what we believe are very undervalued prices and hold it for the long run, right? Better tax treatment. And we're not creating, you know, the, this whole thing of like RSUs, like people don't understand that when you have this behavior or they, I guess they understand it. They just don't think about it. Like every quarter we'd have this big issuance and then you sell half of it to you're literally in the market selling it as a company to cover taxes. And then most of the employees turn around, they sell it again. So you've created sellers of your stock during a time when you're, when your stock is volatile and struggling, the last thing you need are more sellers of your stock every quarter.
Speaker 3But the point you made earlier, just to Austin about like the talent being, I mean, for Yaks, it's kind of in a privileged position though, because you can pay that cash. So you are going to see from a talent standpoint, you're going to be able to, you're going to be able to pay a 10% median for employees, given that's how you, you all think about it,
Speaker 2right? Yeah. The, the funny thing about this is that I would, I would tell you that if I think if you're well, it's not
Speaker 3higher than the 50th. Well, I mean, maybe they're in the 80th. I don't know, but like it has to be higher than it feels like Yaks pays well. I think, I think, you know,
Speaker 2especially now that we have, you know, largely replaced, you know, general equity incentive with, with cash, I believe we pay incredibly well. Incredibly competitively tech, you know, from a, from a cash compensation standpoint. And look, I think that's part of, you know, what attracts talent. So, and it attracts a certain, certain type of mindset, which is like, you know, not necessarily the same one who just wants to roll the dice.
Speaker 4How do you do this and go to market? Like what's, if I'm an enterprise seller, right. And I have to choose between a couple of different options, because I work with a lot of private equity companies and this is kind of what they do. They do not give equity to individual contributors. And so, you know, I think that's part of it. I think that's part of it. So in most of the time, that's not a problem, but right now it's become this real tough thing for them because you're competing for enterprise sellers. There's only so many good ones out there and you're competing against companies that have really rich cash comp packages and really rich equity packages to match that. Yeah. How do you compete for, let's say top enterprise sellers? Like what are you doing on comp to offset some of this stuff?
Speaker 2You know what the, you know what the best thing you can do if you're, if you're a, if you're a and potentially struggling with like, you know, sort of sellers who aren't making the money that they want to be making and you're trying to not lose your best sellers. No, you can do that. The first thing you have to do is get rid of all the underperformers. Yeah. This is the type of like stuff you go through when you go through the process, like we've gone through that makes you feel psychotic is you, you, you look at the list of, you know, okay, we have 150 sellers, right. And you look at it and you're like, okay, 20% of them are making quota. 80% of them are not right. And then the bottom 50% represents 20% of bookings. I'm making up numbers, but you can understand. So, so you're looking, you're like, we're, we're desperate for growth. And, and what that spreadsheet says on like the very sort of most cursory glances, if I cut the bottom 50%, I'm going to lose 20% of my bookings. That's not true. It's not even close to true. It's the opposite. You go up by 20% because you're giving the high performers those. So, so it's interesting. I would, I would tell you that I believe I I'm fairly sure of this, but I'd have to go get numbers is that at the, at the peak of Yext sort of, you know, nadir, right. At the peak of, at the first peak, right. We'll get to the, well, it's my job to give the second peak to ultimately surpass the first peak. But like, you know, we were a third of the size. We had three times as many sellers. I think our sellers are making more money today than they were when the company was as hot as it could be. Right. We have, we have less of them and they're better.
Speaker 3Right. And that's great. That's a good culture. How many, actually, how many of those sellers were around during a peak? Like, do you have some long, long, we do have
Speaker 2some long tenured ones and we have some, some less tenured ones. We're doing some really interesting things on the go-to-market side of things, which you probably don't have time to get into today, but we, we are effectively eliminating all distinction between go-to-market roles, just as we have, you know, effectively
Speaker 3between like SDRs, account executives, customer success.
Speaker 2So I am where this is in a novel idea, but we're doing it very aggressively. So we're moving toward, as we have done in R&D. So we, we, in R&D, we, we, we organize around either a product or verticality, but we've, we've largely eliminated a lot of the distinctions between products, engineering, and designers. Right. We're, we're now taking the same approach into our go-to-market where, where in effect we want, you know, teams spending more time with customers with less distinction. We just got so over siloed with all these different roles. It's like, if you're, you're, your AEs and your SDRs and your CSMs and your platform consultants and your services people and enable, and it's like, you wind up, you look across and you're like, we've seven different organizations that touch the customer. And we have all this technology that basically makes the generalist, the strongest participant in the, in the organization. It's very interesting
Speaker 4because it feels like CSMs are going away, account managers and AEs are kind of becoming the same thing. Right. And so, and they'll get eaten up more by the eight good AEs than the good account managers. Cause if you've got like a land and expand in one role type of model, you'll want the more growth. So it's actually like, if you're in go-to-market and you're a classical account manager today, or you're a classical customer success person, you should be freaking out. Like there's going to be less and less jobs.
Speaker 2Well, it may be, but I actually think it goes, I am a, I'm a job bull. So I think it goes, I think it kind of goes the other way. So, so we, we talk about models like wealth management or consulting as sort of models of, for how we think about our go-to-market now. So, so, so because it's becoming harder to tell the difference between like, am I selling you for, am I selling you services? Am I selling you expertise? Like, what is it? Right. Palantir has shown everyone the way on this after a decade of getting beat up for it. So if you, when you, when you start to, and now everybody wants forward deployed engineers and they want to sell services and softwares and all that stuff. Right. What, what, what that actually means is you have to fundamentally rethink the go-to-market around a team approach to the customer. And so, so interestingly with all this siloization, what we get is, well, like, my CSM left and they're the only ones who knew anything about, my account. And now I have to start over. Like, I mean, I've heard this so many times.
Speaker 4You might be the one person that had really good CSMs in the market. Most people are not, they don't feel that way about CSMs.
Speaker 2Yeah. Well, we have a great, you know, really talented group of people, but like they became sort of a, a, a single point of failure where, you know, if they're out sick or only, or, or they leave, then like they knew everything about the account. And so, so I really think this new world is going to require a completely different approach and, and the approach that we're, you know, moving very aggressively towards is one where you sort of have practice leaders, right. And you kind of have, you know, you, you, you start to really blur the distinction between the AE, the account manager, the CSM, the sales engineer, the solutions designer, like all these different roles. And you, and you start to have these, these groups of people who focus on books of customers. And what we're finding is like the, the output is unbelievable because not only can they prioritize the work inside of an account, but there's like one
Speaker 3team, one territory lead or whatever it is of the portfolio. And then there's people that are handling individual accounts.
Speaker 2Yeah. And now think about like how this affects, like how people see their career path, because, you know, there's seniority, there are levels of experience and seniority inside these organizations. And so you can start to see, you know, I'm not an SE stuck over here or a, a, you know, a, a services person stuck over here. You can start to see.
Speaker 3Yeah. I'll be the GM of a bucket of accounts.
Speaker 2Exactly. And, and it's, it's not a, like, you know, it's not that there's not different skill sets. There are like, there are clearly some people who are more technically savvy, but the more closely they work with the people who are more commercially savvy or the more service oriented, the better everybody gets. Um, and then what you figure out is very quickly, like, as soon as I eliminate the silos, there's layers of management, there's all these different pieces. And what happens, you get more efficient. Right. Um, so, so I just think it's a, it's a, like, this is the kind of stuff he said, like, what do you learn in a company in transition? You learn a lot of things like, like, like that you do a lot of
Speaker 4design work for sure. Cause you're like, how do I design and organize this group of people? Yeah. And you get that, right. But eventually you also need to then go find that opening, right. And then you have to attack that opening. Do you feel that when a business has gone through such a defensive period of time that you're looking for the opening, but are the people that you have and the design you have set up to be able to capitalize on that opening? Yeah. Yeah. What has to happen then?
Speaker 2Well, and so I think this is the, I started to, I got halfway through this. So, so like the first two and a half years was PE guy, right. Which was interesting thing for me. And I think really painful, but like I had to do it right.
Speaker 3I say PE guy, you're like looking at the business, how to fix it. I got to fix it. Hey, like, that's what you were brought in to do though. Right. Like, was it, or no, you went in and probably wasn't clear. He said that he spent the first 12 months trying to deny the truth. I tried the playbook, right.
Speaker 2I tried the, like, we're going to, we increase sales and marketing spend. Like I'm going to go get the growth. Growth is all that matters. Growth, growth, right. And it's like, and it, you know, you know, it goes from 60% to 70% of revenue and nothing happens or actually, you know, really painful. And so then, then, you know, it was, but, but like I had made the problem bigger. So then we, exactly. So then we had to get into the, now we have a lot of people. Like if you realize you have these moments on this journey and it sucks and you're like, I made it worse. Right. And now I have to fix it. Right. Yeah. Or I either quit or I fix it.
Speaker 4And then, you know, that it's going to be this like long.
Speaker 2Process after two and a half years, you were a PE guy. So this is what's beautiful is, is that, you know, I, and I know exactly when it happened, it was probably just over two years ago. That work was largely done, right? Like our last major reorganization, like we're always fiddling around with things or that was in June of 24. And you kind of wake up and you're like, well, like we're about to be really profitable. You can't cut your way to greatness. And there are plenty of problems every day, but like it was the first time I had a time, you know, moments since I started, to think about like, Hey, like, you know, I can actually now go back to being who I've been my whole career, which is the growth hacker. Right. Like, I mean, you know, we write media was, you know, we raised 20 million bucks or something. It was like, you know, it was, it was a billion dollar outcome with, with, you know, uh, what Jonah and Noah did mostly at, at moat, but I was very much part of was this very similar thing. Like, and, and, and, you know, Yaks was very capital efficient early on. That's when it got started to get really fun. And I think that's two years ago when I got actually now I had time to spend with our products and teams and started building products. And so this, you know, scout competitive intelligence, we're launching a new product this week. I'm not going to give it away here, but maybe two, um, this is when I started to be who I was again. And what's funny was once I got back into that mode, the, the sort of give a factor just really fell through the floor.
Speaker 3So, but to Austin's point, did the employees notice that change right away? Or were they like, they were, they a little like skeptical because if you're, if you're like this PE guy, that's been like cutting all these jobs, like, and now he's all of a sudden this big thinker. I'll tell you this.
Speaker 2I will say this. I think one of the hardest transitions. So I believe that the company will grow again. Right. I believe, and I think we'll grow meaningfully. Right. I'm not going to predict what, what those rates are going to be or anything like that. I know we're building things that our customers want. I know that, you know, that, that we're, we're building for the future. I think one of the hardest transitions the company will have to go through because, because, you know, we have created this culture of sort of extreme efficiency is, is getting back into the mode of like, we can now, we can invest ahead of things. We can afford to, you know, we had a hilarious thing recently where, where we have this really great small team working on this new SMB product that we kind of sort of launched in what I would call like alpha about three weeks ago or a month ago. It was a Friday afternoon. I was like, Hey, I want you to run some, paid media to like, just, I want to see it. Like, like, no, it's not ready yet. Like we need to, we need, we need, we need to, you know, there's, Hey, look at all this list of things we got to fix. And I was like, no, I just do it. Right. And they're like, I literally had to be like, I want you to spend like $2,000 on paid media this weekend. Right. Like I just
Speaker 3pay you in gift
Speaker 2cards to do it. Yeah, exactly. No. And it was, it's like, you have to, this whole thing is such a journey that eventually you have to get back to the like, okay, we're going to be aggressive.
Speaker 4This is the beauty of this moment. I think is that you have examples like Michael Dell and Jensen at NVIDIA, where these are companies that found growth again. But one of the ways that they found growth was doing something totally different to what they were doing before.
Speaker 3Right. And we'll cover that the next time. In our next episode. Mike joins us on top five. As soon as the stock doubles again, I'm coming behind. So it's, you know. I will say this like after, after that first episode, I did this cause I was like looked at it. I actually did buy X stock. So thank you. I was like this company, what's going on?
Speaker 4That's why you keep saying, let's get Mike back, we need some exciting information.
Speaker 3Thank you for being our guest. It was great to be with you guys. Great to be back and we'll have you back into the stock will double. Let's go. As soon as it does, I'm back.
Speaker 1Awesome. Thanks. If you are looking for more Topline, check out the Topline newsletter at ToplineMedia.substack.com. That's ToplineMedia.substack.com or if you're a video person, check us out on YouTube. Topline-Media is what you want there. Have a delightful day, everybody. Bye.
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