Roxanne Petraeus - Modernizing Compliance - [Founder’s Field Guide, EP.26]

My guest today is Roxanne Petraeus, co-founder and CEO of Ethena, a modern compliance platform for businesses. Roxanne’s background is pretty incredible, before starting Ethena she was a Rhodes Scholar, served in the US Army, and worked at McKinsey. In our conversation, we cover the lessons Roxanne ported over from her military career to building a business, how she’s trying to make compliance training not suck, and the woeful state of funding female founders in VC today and what can be done about it. Far from a boring conversation about compliance, this was an incredible discussion with one of the best founders I’ve met recently. I hope you enjoy my conversation with Roxanne Petraeus. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Klaviyo. Klaviyo is the ultimate marketing platform for e-commerce. With targeted segmentation, email automation, SMS marketing, and more, Klaviyo helps you create your ideal customer experience. See why Klaviyo is trusted by more than 50,000 brands, like Living Proof, Solo Stove, and Nomad to help them grow their business. For a free trial, check out klaviyo.com/founders. ----- This episode is brought to you by DigitalOcean. DigitalOcean provides founders and creators with the platform they need to get their website and apps off the ground, all with low-bandwidth pricing to save them money over other cloud providers. If you are looking for the best place to build web apps or API backends on robust infrastructure, DigitalOcean is the place for you. They provide a fully managed solution that handles your infrastructure, operating systems, databases, and other dependencies on their new App Platform product. App Platform makes it easy to build, deploy, and scale apps. Get started for free at do.co/founders. ----- Founder's Field Guide is a property of Colossus, Inc. For more episodes of Founder's Field Guide, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @patrick_oshag | @JoinColossus Show Notes [00:03:29] - [First question] - What Ethena does [00:06:31] - Lessons from her military career [00:09:13] - Good and bad elements of leadership training from the military [00:11:35] - The problem of what sucks in compliance training [00:14:33] - The enablement of bad behavior among people with power [00:17:56] - The original idea for Ethena and bringing it to market [00:21:15] - Determining who is the right person to serve first [00:24:03] - Lessons for building good software [00:26:21] - How they have adapted to working in and around regulation [00:29:31] - Getting other companies to buy into the product [00:34:45] - Creating effective content and measuring that effectiveness [00:38:13] - Darker sides of growing the business and raising money [00:39:57] - How ‘the Motherhood Penalty’ Plays Out for Startup Founders [00:43:12] - Fixing the problems with bias in venture capital investing [00:46:57] - What is the outlook and long-term vision for the business [00:50:38] - What has her most excited for the future [00:51:53] - Most interesting about the Rhodes Scholar program [00:54:02] - Kindest thing anyone has done for her

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Patrick O'Shaughnessy?

  I know firsthand how complex the tech stack is for asset management firms. And seemingly every new tool and data source makes the problem even worse, adding more complexity, more headcount and more risk. RidgeLine offers a better way forward. One unified platform that automates away the complexity across portfolio accounting, reconciliation, reporting, trading, compliance and more, all at scale. RidgeLine is revolutionizing investment management, helping ambitious firms scale faster, operate smarter and stay ahead of the curve. See what RidgeLine can unlock for your firm. Schedule a demo at ridgeline.ai. This episode of Founder's Field Guide is sponsored by Klaviyo. Want to deliver marketing moments that last a lifetime? Klaviyo is the ultimate marketing platform for e-commerce. With targeted segmentation, email automation, SMS marketing and more, Klaviyo helps you

• 0:45Patrick O'Shaughnessy?

  create your ideal customer experience. See why more than 50,000 brands like Living Proof, Solo Stove and Nomad trust Klaviyo to grow their business. Keep your customers coming back. Get a free trial at klaviyo.com/founders. That's K-L-A-V-I-Y-O dot com slash founders. This episode is brought to you by Digital Ocean. Digital Ocean provides founders and creators with the platform they need to get their website and apps off the ground, all with low bandwidth pricing to save them money over other cloud providers. If you're looking for the best place to build web apps or API backends on robust infrastructure, Digital Ocean is the place for you. They provide a fully managed solution that handles your infrastructure, operating systems,

• 1:27Patrick O'Shaughnessy?

  databases and other dependencies on their new app platform product. App platform makes it easy to build, deploy and scale apps. Or if you prefer to manage your own infrastructure, Digital Ocean provides a suite of products that gives you full control. To learn more about Digital Ocean, get started for free at do.co/founders. That's do.co/founders. Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Founder's Field Guide. Founder's Field Guide is a series of conversations with founders, CEOs and operators building great businesses. I believe we are all builders in our own way and this series is dedicated to stories and lessons from builders of all types. Founder's Field Guide is part of the Colossus family of podcasts and you can access all

• 2:09Patrick O'Shaughnessy?

  of our podcasts, including edited transcripts, show notes and resources to keep learning at joincolossus.com.

• 2:19Speaker 01

  Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

• 2:44Patrick O'Shaughnessy?

  My guest today is Roxanne Petraeus, co-founder and CEO of Athena, a modern compliance platform for businesses. Roxanne's background is pretty incredible. Before starting Athena, she was a Rhodes Scholar, served in the US Army, and worked at McKinsey. In our conversation, we cover the lessons Roxanne ported over from her military career to building a business, how she's trying to make compliance training not suck, and the woeful state of funding female founders in VC today, and what can be done about it. Far from a boring conversation about compliance, this was an incredible discussion with one of the best founders I've met recently. I hope you enjoy my conversation with Roxanne Petraeus.

• 3:21Patrick O'Shaughnessy?

  Our mission with these episodes is to provide access to the best ideas and people in business and investing. We will soon be significantly expanding the scope of this effort. To make it possible, at Colossus, we're expanding the team and hiring two critical early roles. The first position will be our lead mobile software developer. This person will lead the development of our mobile applications, which will change how people learn together. The second position will be our lead designer. Because the existing team lacks UX and UI design experience, this person will have a blank slate to creatively design new applications from the ground up. To learn more about both roles, visit joincolossus.com/careers. Now, on to the show.

• 4:01Patrick O'Shaughnessy?

  So Roxanne, this is going to be so much fun. We're going to talk all about the business that you're building now, but also about your personal background and a number of topics that you're passionate about. I've been really excited to do this since first hearing about your business because I remember seeing what you were doing and just thinking how much I wish that this had existed to solve a pain point of my own, running a business a year ago when we were dealing with it. Maybe just to set the frame for the audience, you could give the sort of thumbnail sketch, and we'll dig in on some of the details of what you're doing now and sort of the path that got you here.

• 4:31Speaker 02

  Thank you so much for having me. What we do is compliance training and I would understand if anyone's reaction is, no, thank you, that sounds very boring. But what we've done is completely reimagined it, asking the guiding question, how would you train if you actually designed it to be effective versus just check a box or provide legal cover, these sorts of things? Anyone who's been in the workforce for some time has had this experience of getting an all caps email telling you that your, say, sexual harassment training, or cybersecurity, or anti-bribery, your training is about to expire and you need to go sit through an hour of just an incredibly painful experience where the slides

• 5:14Speaker 02

  seem dated and from the 1990s, the scenarios make no sense, the best case scenario, and sometimes they're just downright offensive or insulting. And you click through as fast as the program will let you. And then at the end, you get a certificate, some PDF that lives somewhere for a year or so, until you have to do it all over again.

• 5:35Patrick O'Shaughnessy?

  Everyone listening is nodding right now.

• 5:38Speaker 02

  I think in particular in finance, someone told me that they added up all of the required training that they need to do and it was just an astronomical 10 hours or something quarterly. It's just pretty significant. And when you think about the value of that time, it is large. And the other thing that is strange is that these topics are actually incredibly important. They aren't solved problems. So the space we exist in is these topics are in the news all the time, sexual harassment, privacy issues, all of it. And what we wanted to do is reimagine training such that it be effective, that it would actually give people tools to navigate these tricky, complicated, ever-changing issues.

• 6:19Speaker 02

  And the way we do it differently is digestible training over time. So think about five minutes a month, delivered via Slack or email, because we want to remove all of the barriers to doing this training. So one barrier might be it's so annoying to even log in. If you have to leave halfway through, it doesn't save your progress, all of that. Signal that this is important with really nice design and then make the content fascinating. We think of consumer grade. There's no reason that training has to be a PowerPoint. It could be a podcast, it could be a comic, it could be a short form video. So essentially what we do is compliance training, but the way we do it is training in order to learn, to change behavior, to make a better workplace.

• 7:03Patrick O'Shaughnessy?

  I want to back up all the way to early in your military career. Have you described that career? I think it's important soil from which what you're doing now emerged. I'm just always fascinated by people that have served the country and lessons that they've learned that then are portable to a professional career. Can you describe what you did in the military and the major things that you take from that experience?

• 7:23Speaker 02

  I was an active duty army officer for about seven years. I deployed to Afghanistan, worked in Cambodia and Mongolia. I got to do some foreign military training experiences. One of the things that directly caused me to think about this space and to eventually found Athena was the military spends a ton of time on training. I think that often from movies or something, military looks very action oriented, but for every hour of cool stuff, there's usually 10 plus hours of training to do that thing. And the ratio might even be less good. So in my time in military service, I spent a ton of time with two different types of training. One was great. So it would be things like airborne training is a great example of it,

• 8:08Speaker 02

  where you do a lot of training that simulates the exact thing that you're going to be doing. So it's all about repetition. It's about making sure that the way in which you train resembles the exact thing you're going to do. So there's this phrase, train like you fight, fight like you train. So for airborne, that would look like practicing putting on your parachute a million times, doing it in a mockup of the plane. All of that. And then I found it really strange that the other bucket of training that's common in the military is what we used to call check the box training. And that was how the military would train on things like sexual harassment, because unfortunately, harassment is a huge issue within the military. It's how a lot of security type training would happen, suicide prevention.

• 8:50Speaker 02

  And that actually looks really similar to what I'm sure you're familiar with from experience in finance of kind of PowerPoints that you click through, or everyone would pack into a hot auditorium and just be talked at by someone who was voluntold maybe that morning to conduct a certain type of training. And there was no expectation that anything would change. This wasn't a learning experience like airborne school where we would measure outcomes and see if you were actually good at it. Instead, check the box training was just all about, did you sit there? Did you get your certificate at the end? So I found that dichotomy between effective training, really good training, that signals that the military takes this thing seriously versus check the box training, which just signals to everybody that it's exactly what you think it is, which is this sort of a

• 9:35Speaker 02

  cover the commander kind of exercise and not impactful. And that distinction, I was just surprised to see that when I exited the military that check the box training actually existed in the private sector, too.

• 9:46Patrick O'Shaughnessy?

  Military is obviously very hierarchical and leadership becomes a really important function in the military, kind of at all levels. As you think back on that time, what are the good elements of what you learned about leadership from the military and what are the bads? So said differently, like, what are you bringing with you to the corporate world and what are you leaving behind?

• 10:05Speaker 02

  I feel like sometimes in the private sector, military experience is kind of lauded, which I think is right in some perspectives. There's a lot of great things you can learn. I certainly wouldn't take what worked in uniform and just bring it over to startup and be like, this is going to work and be incredibly effective because they're just completely different environments. I think one of the biggest lessons that I have taken from the military is that great leaders care. I know that that sounds incredibly simple because it is in theory, but where it's hard is in practice. I just remember being surprised when I was in uniform about this idea of servant leadership and that leaders actually exist in order to make sure that the people that they have the privilege of leading. Are taken care of and there's a lot of corny phrases in the military, but they get at

• 10:50Speaker 02

  something real about things like leaders eat last, the focus on really leadership being a privilege. I think the things that I don't take are sort of the worst aspects of military leadership, which are about hierarchy. And there's certainly a place for it. But I think whenever someone's relying on their rank or the inherent power they have from a certain title or position, there are very few instances where that's a good idea. And the few instances might be time sensitive, there's something very dangerous and it's just important to listen to the leader. But in startup world, everyone has just incredible optionality. One of our engineers yesterday sent me his inbox of a bunch of coaching emails. All of

• 11:34Speaker 02

  these competitors are always sending, or all these other startups are always looking for great engineering talent. And if I led Athena like a very stereotypical military leader where it was my way or the highway and I came in and expected people to stand up when I walked into a room, I think I would have very few talented folks, just because the job market is so different than in uniform where of course, you actually cannot leave a particular posting or duty assignment without a lot of paperwork.

• 12:07Patrick O'Shaughnessy?

  I love the two lessons, good and bad. If you start thinking about those in the context of, I think the very first thing you said describing compliance training, like maybe most people hear that and think, sounds boring. What I think is interesting about it is, it passes this fun test that my friend Josh Wolfe always applies, which is what sucks about a certain situation. And I think certainly in finance and probably in other places, just about everyone would say that the check the box variety of compliance training sucks. But nonetheless, it's there. I like when there are situations where there's something that has to happen. And it usually means there's some kernel of underlying truth that is bad, that needs to be adjusted for, and the method with which we tackle it is just subpar. So say a little bit about what I'll call like the core kernel of truth problem underneath

• 12:51Patrick O'Shaughnessy?

  the solution that's not great that you're trying to fix. But if you go all the way to the root level, how did you first encounter this problem? How do you think about it?

• 12:59Speaker 02

  Yeah, I think that the what sucks framework makes a ton of sense. The core problem that this training is attempting to solve is obvious if you open up the New York Times basically on any given day. Some leader is being removed for any sort of personal indiscretion, whether it's harassment, discrimination, bullying, financial issues. Not everyone is doing the right thing. Not a especially hot take, but it's just important to remember that these are not solved problems and a lot of them are actually quite tricky. So an example of what this sort of training is attempting to address is the fact that in 2019, more CEOs were removed for personal indiscretions and in that bucket falls all

• 13:42Speaker 02

  the things that I listed versus financial shortcomings, meaning people are being removed because of their code of conduct style issues, not because they didn't need their earnings report or something like that. And that's just really an interesting thing to pause on, to recognize that there's just a ton of issues in the workplace that have really severe business consequences and of course also have very severe personal consequences. These impact the lives, the health and all of it of employees who have to deal with this type of behavior. That's fundamentally what compliance training is attempting to do. The point isn't that you have a certificate saying you sat through sexual harassment prevention training. The point is that it is preventing sexual harassment as an example, but there's actually

• 14:27Speaker 02

  no evidence to show that compliance training does that. Unfortunately, there are studies that show that it's not just that it's ineffective, but it actually produces a backlash. There's a study in sexual harassment prevention training showing that participants have more unconscious gender bias after training than before, meaning it's actively making people worse. Someone had joked to me that like you think you're eating kale and you're actually jeweling, which I think is probably an apt description of what's going on here. The underlying kernel or issue here is that there's a lot of stuff in the workplace that's happening that isn't ethical and this was the attempt to address that.

• 15:06Patrick O'Shaughnessy?

  What have you learned about the deeper origins of the enablement of that kind of behavior? It strikes me that today, especially when I think it's become more common and acceptable in a good way for this stuff to stop because someone says something, right? But it's stunning, the people that are in positions of entrenched power and the perverse outcomes that that leads to. So I wonder if you've thought even all the way down to the baseline, the very nature of power and institutions and how this sort of thing just seems to bubble out of those structures and what the underlying cause is.

• 15:42Speaker 02

  I haven't solved the problem of why does power corrupt or things like that. But I've certainly thought a lot about it and we have some great researchers we work with who provide us with incredible peer-reviewed research that tries to get at these sorts of things. One of the biggest lessons that comes through in looking through that research is that it really is all about leadership buy-in. Employees are incredibly smart and they understand what types of behaviors get someone promoted and what behaviors get someone fired. A lot of this research actually comes from the military because of data availability. And there is a study, again, on sexual harassment, because that's one of the biggest buckets of compliance training, that took a military unit, I think surveyed it over a year.

• 16:26Speaker 02

  And the biggest determinant of the prevalence of harassment in military units was whether the leader of that particular unit was perceived as actively caring, meaning that the troops under that person thought that if there was a harassment incident, it would be taken seriously, that it was a serious leadership priority, those sorts of things. It seems maybe obvious or simple that the solution is just that leadership has to care. Where I think it gets a little bit tricky is, one, of course, if leadership is actively part of the problem, that's a whole bucket of issues. Let's say that you have a leader, you know, CEO or something, and she does actually care about these sorts of things. What tools are available to allow her to demonstrate that this is an important priority?

• 17:11Speaker 02

  Say that she runs like a fintech startup. And if you then think about like, what can she do to show that code of conduct style issues, acting ethically is important to her fintech company? There aren't a lot of great tools right now to allow her to do that. So she could at all hands say, hey, I care about this. Of course, when there are incidents that happen, so maybe there is a Foreign Corrupt Practices Act issue or something, it can be taken really seriously, meaning instead of feeling like it was swept under the rug, there was a proper investigation in which the goal is really to figure out what structurally went wrong, not just tanks went out to dry. But if you think about the training that's available for her to say, hey, everyone at this company, we care about this and therefore we're going to take it seriously by doing good training.

• 17:55Speaker 02

  That's where it breaks down because again, employees are smart. They recognize that if you say that I care about our code of conduct, but then I give you code of conduct training that feels like it was made in the nineties, that is really hard to access, I can't do it on mobile. It looks so much worse than, for example, the sales training that we do, that employee gets that what's important is sales and what is not important is code of conduct. So just thinking about what signals that leadership actually cares about this is actually incredibly important.

• 18:28Patrick O'Shaughnessy?

  It makes a lot of sense. And like you said, simple but not easy, maybe in implementation in terms of how the problem gets solved. I'd love to talk about the sequencing of how you've built your business. So what was sort of the V zero version of Athena? How did the original idea come together? And what lessons did you learn about bringing something from an idea stage to a reality that people actually used and valued in their earliest days?

• 18:51Speaker 02

  What's inconsistent for us is we thought there's no reason training has to be this bad. Our V zero was we actually got together with a VC firm in New York, Primary Ventures. They had a really thoughtful people ops leader. And one of the, I guess, lessons of thinking about early stage building that I found useful is have conversations with smart people who really know the space. I was talking with someone recently and they said, have conversations until the marginal value goes to zero, meaning you just keep hearing the same problem statements over and over. I thought that was just a great way to think about it, like just go talk to smart people and they like have this idea and are all saying the same thing and they're not learning anything else. Cool. Maybe it's time to.

• 19:35Speaker 02

  Try something out. So what we did is talk to this People Ops leader. So we had this idea for training and we'd like to roll it out. And it happened to be around the time that New York was changing its sexual harassment training requirements. It went from, I believe, no requirements to actually requiring every company with one or more employees to train annually. And so that's like a huge shift. It means that every company needs to train. And the People Ops leader was smart and said, hey, this definitely impacts our portfolio of companies. And so I want to make sure that they have gotten the memo and that they have a good tool to use to solve this pain point, which is they need to get compliant by October of 2019. So what we did is just conducted a pilot where we offered, V zero is an excellent

• 20:19Speaker 02

  way to describe it because it had very little functionality to these portfolio companies and said, basically, the exchange of value was we'll get you compliant in a way that we think is much better than any of your other options. And in exchange, we would just love to know how bad our approach was. So we launched, I think this was about three or four weeks after my co-founder and I had actually gotten together. So it was really quick, but we thought we should be able to demonstrate if what we're seeing is that the space is so bad, we should be able to demonstrate value really quickly. And the classic launch such that you're embarrassed by your first product kind of lesson, like I would definitely say, I don't enjoy looking at that first product now. But what I'm really glad we did is launched it early enough such that we started to refine

• 21:04Speaker 02

  our hypothesis. So our hypothesis was digestible training is better than all at once because people have really short attention spans. The training also needs to be really good because these topics are inherently fascinating. So let's give them, do them justice by addressing them as such. And around that time, the Harvey Weinstein case was going on. And so we used that in one of our nudges and said, there's no reason we can't explain quid pro quo harassment with something that's in the news, something that people are already paying attention to. And we saw that people really liked that. And we took this feedback on what was working, which was people liked digestible and good content and what wasn't working, which is we didn't really have any of the backend functionality for admin built out and took that into our V1.

• 21:47Patrick O'Shaughnessy?

  So I love this idea. I think this is an important point at the end there that part of the benefit of your product, at least from the outside looking in, is that it's sort of like an end-to-end solution that makes it better for the consumer of the compliance training, but also for the administrator of it. Those are different clients, so to speak. Obviously, you need both. But how do you think about setting a north star of who is most important to serve first? Because I often find that when businesses focus on trying to serve multiple stakeholders at once, it's just hard to do well. So how do you think about that? Like the administrator and the software for them versus the consumer of the content, the content creators? You've got an interesting set of stakeholders.

• 22:24Speaker 02

  I think it's probably similar to like healthcare or something. Who's the payer versus who's the end user? For us, when we train a company, we train all of their employees because usually things like code of conduct, harassment prevention are required by the whole company. And that's really neat because it means we're training a 6,000-person company. We train 6,000 people, not just a subset. But our user and who we think a lot about and the problems that we're trying to solve are truly those of the administrator, which is usually legal, sometimes shared between legal and people ops. What's nice is that the issues aren't antithetical. So when we solve a problem for an employee, that makes, I'll just use legal, let's say that the employee relations council is the buyer at

• 23:06Speaker 02

  a company. That makes that lawyer's job a lot easier when employees are happy. So the linkage for us is that if our training is really hard to access and you have issues with login or whatever, the employee is emailing that lawyer at the company saying, this is terrible and I'm really pissed off about it because not only are you making me take training, but also I can't even get to it. We solve that with magic links and delivering. Training via Slack or email, so meet the employee where they're at. If the employee is receiving training that is intellectually insulting, or even sometimes it's against the values that the company claims they have, that employee is going to complain to the administrator.

• 23:50Speaker 02

  And so when we make content that's inclusive, thoughtful, brings in great research, instead of receiving complaints, that administrator gets to feel like a hero might be a bit hyperbolic, but they get to feel like, hey, I brought something really thoughtful and put it in front of employees. I think for us, what we've tried to think about is where is the win-win? Or where are these things linked? You're absolutely right that we have to pick which problems are more important and prioritize them. And to that extent, we've actually spent a lot more time thinking about solving our admins problems because we just recognize that getting those right allows us to think about the employee experience. So ideally they are linked and you can focus on things that improve both buyers' experience.

• 24:36Patrick O'Shaughnessy?

  What have you learned just generally about building good software? It's such an obvious, big, important trend in the world. Something like this is a great example of an antiquated process that sucks that everyone has to go through. That's now moving into software. What have you learned, just generally speaking, about doing this effectively? And being able to move quickly enough and adjust on the fly and build a good product in software specifically?

• 24:58Speaker 02

  Three lessons are coming to mind. One is have a great co-founder. For me, at least, that was really crucial. My co-founder Anne is a CTO. And I think having complementary skillsets for us has worked out really well. So she is just such a product-oriented builder. And being able to turn her loose to these sorts of problems and let her noodle on them and make sure she has time and space to do it has been probably the biggest advantage we've had. The second is still like having a lot of conversations with the end user. So for us, again, legal, they've just pointed out all of these sorts of things that like don't make sense. For us, the software has to be intuitive, ideally. Fun, which in a compliance space is is mind blowing, but having a ton of conversations

• 25:43Speaker 02

  with users is really important. And I've learned that not everyone likes to talk to customers, but I really, really like it. So making our team feel really accessible such that sometimes I'll get a weird 2 a.m. email from an admin thinking about this space and saying like, hey, have you looked into this other feature because I'm dealing with a CSV right now and it's really upsetting me because I have to use a legacy player for this. So I think those conversations are crucial. For us, we have tried not to build things until we're confident that it's right and instead simulate with things that are sort of held together with duct tape in particular early on. So that V zero being an example, we weren't sure if we should send notifications weekly or monthly, just

• 26:25Speaker 02

  as one example. And so we wanted to keep as much flexibility in our system until we had had enough users go through this training and then we thought, okay, got it. People get annoyed if you contact them too frequently. So let's have a dial where admins can turn it up or down, but as a default, we go to monthly, just as an example. And if we had built all of this complicated infrastructure around a hypothesis that turned out to be wrong, obviously that would have been a pretty big bummer because it would have been wasted work.

• 26:53Patrick O'Shaughnessy?

  One of the things that's really unique about your business, I like this theme generally speaking, you often find new businesses effective when there's a change in regulation or where there's some regulatory aspect to where the product butts up against. So even if you go to your website, one of the first things, I like how you presented it says in parentheses, like because we know you have to ask, we meet all these state requirements. And there's a bunch of, you know, like alphabet and number soup there. Say a bit about that. What has it been like creating something that is a better non-sucky experience where the sucky experience probably is rooted in the fact that there's all this regulation that plays a part? What have you learned about working with and around regulation as a business?

• 27:33Speaker 02

  Did you read the Paul Graham schlep?

• 27:36Patrick O'Shaughnessy?

  Yes, yes.

• 27:37Speaker 02

  So I definitely think a lot about that when I think about regulatory spaces. And I also remember an interview with, I think it was like the Checker CEO or founder, saying, if I had known all the details of the space before I entered it, like, maybe I wouldn't have. I think there's a real benefit when entering a space that's complicated to come at it with fresh eyes and think there are different ways that we could address this. Regulatory spaces just have a lot of schlep of like, how do we figure out what these regulations are? Taking sexual harassment as an example, there are six states that regulate the training. And I'm kind of convinced that the e-learning lobby had a hand in these regulations because they're just different enough that you can't use the same training from New York to California to Connecticut.

• 28:22Speaker 02

  There's no reason, that's silly, sexual harassment is not like, there's nothing in the state water or air system that means that it is different in that state, but it's just the way that the regulatory environment was built. Of course, for us, if we can do the work to solve this problem that companies have, well, of course, I have employees in multiple states and I don't want to have multiple vendors or a complex system of assigning different training based on different states. If we can figure out the regulations and kind of a smart approach enabled, of course, by a seamless admin experience, then we take all of that mess and it becomes an advantage for us because we're able to say, like, you know, this pain point, you know, it's very difficult, we've solved it.

• 29:04Speaker 02

  It's not hard in explanation, but pretty tricky in execution. It's working with law firms, so we worked with Latham and Watkins to demonstrate in excruciating detail, a 25-page memo, how we meet these different state requirements, how we train the way the EEOC in a 2016 report says you're supposed to train. It is not a silver bullet, you know, one line of code that suddenly we've solved this problem. Instead, it's just a lot of messy work, understanding both what are the regulations? What are the intents behind these regulations? And then how do we, through content and through the admin experience, exceed them?

• 29:42Patrick O'Shaughnessy?

  Yeah, I love this idea of just the way you tend to present things, the peace of mind is part of what you're selling. Like, yeah, we've done all the schlep work behind the scenes. You could almost think about this like the API business model where like you just want a simple interface and trust that whatever's behind it has been thoughtfully built and works. You're outsourcing the difficult aspect of something. I guess that same kind of idea in mind. You've partnered with a lot of well-known firms, often technology firms, to adopt your solution early on. What have you learned about that process too? So you've got the product process on one side, you've dealt with the legal headaches, you put all the schlep stuff behind the walls and no one else has to deal with it. What have you learned about getting that effectively deployed in other companies? This is a sales and marketing question.

• 30:24Speaker 02

  Yeah, I've learned that the single most valuable thing that I can be doing is talking to customers and especially our early adopters, the innovators. That's really how we have honed our sales motion. We were incredibly lucky early on to have this magical moment happen where we had an article come out about Athena and we had a pretty rudimentary CRM at the time. And so I was just looking at, you know, the folks who had come through that day and I see among some pretty exciting leads was first name at Netflix. And obviously freaked out, got very excited, immediately emailed back and hopped on some early calls that candidly were way more about product learning and development than they were pure sales. It

• 31:07Speaker 02

  was almost these like nerd out sessions where my team could explain, here's what we were thinking about for how training should feel different, this digestible model, here's a calendar. And John, who was our early champion there and has just so informed the product, we could see from his visceral reaction that we were on to something and in the general right direction, even if all of the features weren't built out yet, like the main thing of build something that he And you know, his colleagues want, we were in that right direction, which was just huge for us. We later found out that the like origin of it was that Reed Hastings had seen the TechCrunch article on us and had forwarded it to his

• 31:49Speaker 02

  legal team, which was just really exciting because I can't think of a company whose culture like more closely aligns with what we're all about, which is instead of performance theater and check the box and processes for process sake, it's like really about impact and why are we doing this thing? We're doing it to prevent bad issues. And so that was just like a really special for us. And it helped us think about how our early sales motion really does need to be connected to product. We did this whole thing a second time when we expanded from harassment prevention into the suite of compliance training. So think code of conduct, anti-money laundering, anti-solicitation, all of that. Where we talked with the buyers who were in charge of that. Sometimes it was the same person. Sometimes it might be a different part of the department.

• 32:35Speaker 02

  And it makes me think of this concept of earning the right to sell other things. When we as a company really deliver on our first launch, we actually get to see almost a bottom up sales adoption where like the whole company receives harassment prevention or whatever our big first launches. And so a lawyer in another department recruiting or something will see it and say, hey, this is really cool and email us. Could I use your platform for like my particular use case, which might be hiring manager, training or anti-bribery or something like that. And we're now in the early stages of our third iteration of this sales to product motion. The first, you know, was around harassment prevention. The second was the suite of all compliance training needs.

• 33:19Speaker 02

  And then the third is this idea of a compliance operating system, a compliance OS, which is basically our buyer saying, great, you all fixed my biggest pain point, which was training, having to administer it and all of it. But let me show you all of these adjacent issues that I have that really suffer from the same issue of being reactive instead of proactive, being very clunky and hard to administer lawyers. And excels at 2am trying to find the right cell kind of problems. And so there's been like just really neat examples of this. So whistleblower hotline would be one. Another may be around insider trading. So often a company might be like emailing people every week. A net new list of stocks you can't trade.

• 34:04Speaker 02

  And you can just imagine how painful that is for everyone involved. Wouldn't it be so nice if at the point of action, so when I'm about to, you know, I go into Charles Schwab or whatever, and I'm about to do something. I get that notification, that nudge that says, hey, remember X, Y, and Z. Political donations, given this most recently, the election cycle being an example of where often companies are getting emails from third party folks saying like, hey, did you know that a couple of your folks donated to the Biden campaign? And, you know, all for civic engagement here. But often that might be violating the company's specific policies around pre-clearing these things. Wouldn't it be great if when instead you went to ActBlue, there was a pop up that reminded you about your company's policies?

• 34:45Speaker 02

  Like those are all sorts of examples of how we could build a much more proactive, impact oriented compliance OS instead of this candidly very clunky system that we have now. And I think the big lesson from all of this is that I will always make time to talk with our customers because they point us in directions that are almost always incredibly valuable.

• 35:08Patrick O'Shaughnessy?

  It's such a fascinating thing to go to market with and the idea of it being boring or obligatory. I think this is only strengthens the story that you have to tell. And that brings us to the content piece of all this where the rubber meets the road is people actually doing the training itself. You hinted at it earlier, which is make this more bite sized, more digestible, a little bit more modern, even potentially heaven forbid fun to go through. What have you learned about creating effective content? And how do you measure effectiveness? Is there a data feedback loop behind the scenes of how you decide whether or not you've done a good job? What have you learned about the actual content creation?

• 35:45Speaker 02

  I mean, really similar in the Schlepp thing of early on, I think when we were talking to investors, they're like, do you just see a platform where you connect content creators to companies? And we're like, I don't know, that seems like you lose a lot of control. And for compliance, that's not a great idea. Figuring out the muscle memory of how to build great content in-house was a lot of work, but I'm really glad we did it because now it becomes much easier for us to expand into another vertical or push the envelope on content, meaning experiment with a different type of short form video or whatever it is. What we learned is that we should approach content like product people. That feedback loop that you mentioned is crucial. We're not poets here. We aren't making art for art's sake.

• 36:29Speaker 02

  And instead, we are making content such that our end learners can understand these complex issues better. And I should back up and say the way we deliver content is via five minutes or so a month nudges that are designed to be consumed over the course of the year typically. So either monthly or quarterly, just depending on how much stuff you need for any given course. A course being something like anti-bribery or code of conduct, et cetera. So the way that we make great content is that learners either tell us it's great or tell us it's not great, and then we quickly fix it. For us, we have over 150,000 pieces of learner feedback at this point. And the way that we get it is that in-app, we just put it right after any nudge.

• 37:12Speaker 02

  And you can also, at any point in a nudge, rate something thumbs up, thumbs down, or question mark, question mark, meaning I don't get this particular reference. And then our content team weekly is looking at all of that data and seeing like, interesting. We had one on inclusivity in pregnant colleagues. And if I'm remembering correctly, that nudge was performing less well than other nudges. So then they dig into the free text feedback that is optional. We don't require it from employees, but we actually see that about 30% of learners on our platform are willing to give us feedback. And we think what's happening there is we're just being really honest and saying, look, our whole intent is to make content that resonates. That is really tricky because you know your workplace best. So tell us if we've got it right.

• 37:53Speaker 02

  And that's where the thumbs up, thumbs down, and then more nuanced feedback that we ask for at the end of each nudge. And that's things like, was this engaging, dated, boring, relevant? All of that, just having a ton of opportunities for learners to tell us where we get it right and where we get it wrong. Looking at that feedback and then improving content, both content we've already released, meaning we will go back and edit a nudge based on how learners are engaging with it. So the next folks that get it, get a better experience. And then also forward looking, meaning we released a nudge a couple of months ago that was done via graphic novel. It was a very fun office romance. It was for February and it just had a really positive feedback. And we're like, okay, got it. People liked that, like we should do that more.

• 38:37Speaker 02

  So I think it's taking that product approach to something that might historically have been more of a art for art's sake. And having that feedback loop be really tight.

• 38:46Patrick O'Shaughnessy?

  One of the things that strikes me about your story too, and I know you've written about this is I'm sort of a optimistic to a fault type of person. I assume most people are good people and I think most people are good people. But nonetheless, the reason for the existence of compliance requirements is that bad things happen. You've had a particularly interesting time as a female entrepreneur, both getting the business going and raising money. And if you're willing to sort of share that experience and some of the darker sides of it. I just think putting a personal point on it brings it to life and makes it so that this isn't something that we view as what sucks, but actually is something that's happening in a lot of different ways all over the place. I'd love if you'd be willing to just share your experience, starting a company, raising money and going through that process.

• 39:27Speaker 02

  Yeah, certainly happy to talk about it. I think the most recent survey of venture capital going to all women founders, it is down from a whopping high of something like 2.9% down to 2.2% of all venture capital. I think from this past year has gone to all women founding teams. So I'm totally with you that I want to be optimistic and think the best in people, but I can't look at that stat and think that the entire VC market is fairly evaluating women. Otherwise you would just have to think that women have way worse ideas. There's just sort of no way to square that stat with an efficient market. And I'm sure some people will have thoughts on that, but

• 40:05Patrick O'Shaughnessy?

  It's a stark statistic.

• 40:06Speaker 02

  The only silver lining is it can't go below zero, but this is just not good. If you recognize that that's the current status, then you have to wonder like what's happening. I had a story I wrote about in Medium about when I was fundraising for our, I believe it was our pre-seed round. I just had an investor ask me if I was pregnant and it was over the phone. There was nothing I had said before that would in any way indicate that that would have been an appropriate question. We weren't talking about my family or anything like that. It was apropos of nothing. And it quickly said, no, and then pointed out because of the space that I exist in, that that is not an appropriate question and can actually be illegal depending on the context.

• 40:50Speaker 02

  And he said, well, it's not a job interview, so it's not illegal, which indicated that this wasn't a knowledge problem. He knew that it is inappropriate to ask, you know, an employee or someone you're having a financial relationship with if they're pregnant for the purposes of essentially evaluating whatever it is you think that that evaluates. So he knew that this was wrong, but he did it anyway. And the best I can understand was some sort of ambition check. If I'm going to give you money, I want to make sure you're really dedicated to this. And therefore, if you're pregnant, somehow that indicates that you have competing priorities. I joke that if I had been a really passionate rock climber, nobody would look at me as a founder and say, like, I'm worried about your dedication

• 41:34Speaker 02

  to this company because you really like rock climbing. But somehow if it's a child, that's an issue. And talking to my husband, he has not received those types of questions in any of his professional experience. It's one anecdote, and if it weren't coupled with data, I would say it's exactly that. But a prevalence of these sorts of issues in venture is just unfortunately Still very common. There are certainly things that are getting better about it, but I think in particular, at the early stages, what's tricky is like venture is so ripe for bias because what you're asking is do I think somebody can do something amazing based on very little data? That's just the question you're asking at pre-seed and seed. There's no like, could I see your financials to evaluate whether or not?

• 42:18Patrick O'Shaughnessy?

  Yeah.

• 42:19Speaker 02

  Yeah, like there's nothing there. You're just making a bet on the person. We know that that can be flawed in so many ways and women is just one example. People of color, the stats are atrocious and the stories you hear are totally unacceptable to seem sort of issues around biases in evaluating their companies. I certainly see it less as we grow because now I get to just show this traction of less than a year. We closed massive enterprises. We have something like 22,000 employees on the platform. Our growth has been phenomenal. And suddenly people are like, wow, that's great. And I've noticed an interesting phenomenon. And then painting with a very broad brush, we have incredible investors who've been with us since the beginning. And for them, none of this holds, but certainly

• 43:03Speaker 02

  as a group, again, that 2.2 stat just speaks for itself, that there's a desire to have funded women, but not to fund women, meaning as soon as there's a breakout success story, suddenly we see a lot of interest because I think investors recognize that they're being called to task for the lack of diversity in their portfolio. So it's just been fascinating to see that evolution as our company has grown from it being a liability to in some ways it being an asset while still recognizing that there's just folks like that investor who are out there who will continue to have questions about my ability to lead or to be bold or ambitious based on gender.

• 43:44Patrick O'Shaughnessy?

  I feel like you've summed it up incredibly well, especially pinpointing the problem pre-seed and seed and just the conditions themselves of the nature of the style of investing lend themselves to bias or negative things like this. Do you have any views on a path forward? This is obviously a big modern issue. I think it's pronounced in investing in finance, but it's prevalent in a lot of places. Maybe sticking to our circle of competence here and what we know, what do you think the path forward is? Can this get fixed quickly? Is it something that it just gets fixed slowly? It's like progress happens one death at a time. Who said that? Thomas Kuhn or something? How do you think we get out of this 2% ridiculous reality?

• 44:24Speaker 02

  What kind of blows my mind about this is there's data on what the problem is and there are actually actionable steps that folks could take. So one study that's coming to mind, I think was a researcher at Harvard Business School who did a study on the types of questions that women founders get. She had a better framing than I'm going to remember, but it was something like defensive questions versus opportunistic questions. So defensive question being something like, how are you going to deal with competition, questions on mo, what are good arguments for me not to invest in you, versus the opportunity type questions, which are, how does this become a billion dollar business? What's the secret sauce? Asking those types of questions that allow a founder to have the dream with me moment. And she found that women founders who are pitching get asked

• 45:09Speaker 02

  majority defensive questions, whereas men founders who are pitching get the majority opportunistic type questions. And the reason that matters is there's a mirroring effect. So a founder who gets a defensive question tends to be put on their back foot, is just more likely to be cautious, scared, et cetera, and therefore not give these really bold answers. Whereas if you allow someone to dream with you, they will do that and they'll paint this really cool picture. It was very funny because early in our funding, I was trying to show this idea about how training should be relevant to the workplace. And we were pitching to VCs and I thought, oh, well, what if we just made a particular training nudge that was specific to venture capital, meaning harassment manifests itself in venture

• 45:51Speaker 02

  capital in a really unique way. So let's just make a nudge that we would only ever send to people who are in the VC business to demonstrate what this idea of training that's relevant would really look like. And someone told me it was the perfect screening device because anyone who got that nudge and did not want to see that probably would also not be a great investor for us. The point of that nudge was, as investors, what you could do is be data driven about the types of questions you ask founders and make sure that if you tend to ask majority opportunity dream with me questions, you do that for all founders who come in the door, not just ones who happen to look like what you think a founder looks like. And that's just one example of the very actionable steps that

• 46:33Speaker 02

  people can take. It's interesting in startups because often people are so bold and visionary and then you bring an issue like harassment and suddenly there's a lot of hand wringing and like, well, we'll never solve this. How can these companies who say we're going to go to the moon and do all of these visionary things and then suddenly presented with a type of problem like, how can we have our recruiting pipeline more diverse? It becomes, gosh, I don't know. Apply the same principles that you do to building a great company to these problems and certainly some solutions will present themselves.

• 47:07Patrick O'Shaughnessy?

  Well, I appreciate you walking through it. I think every time I hear these stats, it's just incredibly depressing and sobering. And you said, there's just no way you can square a number like that with anything reasonable. So there's got to be something going wrong here. And I think especially what I've learned today, that the question set being something empirical that could be changed is just great. And it's a great excuse to talk about the future of Athena, too. As you think about the steps that you've taken to turn something that sucks into something that doesn't for administrators and for people consuming the training, how do you think about the next two decades of the business? Like, if you squint and look out 20 years, what do you see? Like, how do you present that to someone, maybe that's considering coming to work for you? How would you outline sort of the long-term mission and vision for the firm?

• 47:52Speaker 02

  I think where we're at is the first layer, it was really the low hanging fruit, which is, let's make a great compliance training. But the space that we're really solving is there are so many parts of the ethics and compliance landscape that are broken and dated and that there's just so much greenfield. The future of the company looks like giving employees and administrators tools that help employees to do the right thing. That's the space that we exist in. And how we get there is first through training, because it's the most common touch point that an employee has with these sorts of issues that happen yearly. Regulations mean it's increasingly common in a bunch of different areas. Our hypothesis for V2, if we take V1, let's just fundamentally redesign the training landscape suite of compliance training.

• 48:38Speaker 02

  And quickly on that, I want to call out that the approach we've taken isn't like, let's just make it 10% better, meaning, okay, you have to take a video once a year, let's make that video cooler or better. It's redesign it from the ground up. So again, digestible versus all at once. Make content in real time so that it's relevant, meaning we're addressing the issues that are happening in February of 2020. And there's not a scenario where 60 people go to a bar because 60 people aren't going to a bar in this point in time. One size fits all doesn't work, so training relevant based on someone's work stream, meaning a salesperson gets different training than an engineer because anti-money laundering looks really different based on what type of job you're doing.

• 49:22Speaker 02

  And that delightful design is important because signaling matters. So getting that right is this like V1 of our company. And then the place that we're going is that we're really hypothesis driven. We're very comfortable being pulled by the market. So the example of enterprise customers kind of on a phone call saying like, okay, great, we fixed this particular issue I had. But actually, what I really want you to do is go build a whistleblower hotline because actually this whole area just doesn't work. Or let's talk about all of the administrative tracking that's happening in the LMS space. This is just broken and your approach is so much better. Like, how can we get you to build that? Another example there is moments that matter.

• 50:04Speaker 02

  So instead of our V1 of training, which is digestible over time, personalized and relevant, what if we could send training based on particular moments that we know you're about to have? So an example from anti-bribery comes from this idea of like, let's say the pandemic ends and you're about to go on a business trip to China and you need anti-bribery training based on some sort of factor of your job, your company has said you need it. Wouldn't it be great if we could deliver the training on how bribery manifests itself in China a week before you take that trip? So this idea that training should be temporally relevant to particular moments in either your calendar or you're about to go into a block of hiring interviews.

• 50:45Speaker 02

  Let's make sure that hiring biases and hiring within the law gets released just in time. These are some of the the features and the spaces that we're thinking about in this long term vision of how do we make it really easy for employees and companies to do the right thing.

• 51:01Patrick O'Shaughnessy?

  I also like the concept of letting the product being pulled out of your customers. It's such a complex space and you guys have gotten good at building something. So that's just really exciting. How do you think about the thing about the future, generally speaking, can be Athena based or not, that you are most excited about?

• 51:17Speaker 02

  I think I've been really excited by things that work from home has unlocked. Obviously, there's a bunch of things that are incredibly challenging about this era we live in, but seeing the fact that we had engineers up and leave to Colorado halfway through the year because that's where they want to be, recognizing that me as a new mom can work and then go and hang out with my four month old in a break between calls. I think that this really rigid barrier between personal and professional has just been blown up by the pandemic. And while I certainly anticipate that things won't look exactly like they are now in terms of work from home being so prevalent, I feel like this idea of just building for flexibility

• 51:58Speaker 02

  in people's schedules and lives and recognizing that real life is happening, which sounds obvious, but I think sometimes companies can forget that like employees are people with a lot of things going on in their lives. And if as a company, you can set up opportunities for that employee to like live their full life, whatever that may be, come to work. And if they need to have different setups in order to facilitate them being their best, I think a lot of cool stuff is hopefully going to come from that.

• 52:25Patrick O'Shaughnessy?

  You strike me as just like a perpetual learner. I was a terrible student in high school and in college. You were, I guess I would have to describe you as an epically good student. You were a Rhodes Scholar, Harvard, Oxford, it's kind of an incredible run. What do you take from the Rhodes Scholar specifically? What was most interesting, I haven't talked to a ton of Rhodes Scholars, what was most interesting about that program for those that aren't familiar with it?

• 52:49Speaker 02

  It was such an incredible opportunity and I was so grateful, just to say what it is, 32 students a year from the US go to Oxford and get to learn with an international cohort, you can study whatever you want. And what I took from that is it was so neat to be with a really diverse and like interdisciplinary group. It's not like a dorm where you have the science people are mixed in with the econ folks and you get to have these weird late night discussions. Now I'm in startup world and I interact with startup people, investors, you know, our customers, et cetera. And they're all amazing, but within a certain group. And it was just really neat to be able to spend time with people who are wired very differently than I am and have these learning moments of,

• 53:34Speaker 02

  okay, you're studying to be a doctor, like ethics, let's talk about that. I think the other thing that was an amazing gift from the Rhodes is that I ended up getting a platform for better or worse, and I'm not sure if it's totally fair, but as a Rhodes Scholar, typically I can open some doors and people will give me the benefit of the doubt and listening to me for a minute. And that's just an incredible gift of having a platform, but there's also, of course, a huge burden or responsibility that comes with it of trying to be thoughtful about things that can improve people's lives. And my peers are doctors and teachers, and I think they're just doing so much more for the world than than I am, but still being reminded of that responsibility. It's just something I really treasure.

• 54:19Patrick O'Shaughnessy?

  Well, I've so enjoyed talking to you since we first connected many months ago and learning from watching your business grow. I really appreciate the conversation today. I think there are just so many useful ideas and lessons to be applied, not just for entrepreneurs, but for people in their work lives and their personal lives. I asked the same closing question of everybody that I talked to, so I'll ask you too. What is the kindest thing that anyone's ever done for you?

• 54:41Speaker 02

  It's nice that you mentioned Harvard and Oxford. I think I've been the beneficiary of tons of kindness, but one that comes to mind is Marty Feldstein, a titan in the economics world, was just very kind early on. Took some classes with him, started doing some research and ended up serving as a mentor, a thesis advisor, and kind of a lifelong mentor until he passed recently. I think about college as such a formative time. I was just so grateful that someone who is a luminary in their field is willing to explain. I remember once he got out of pen and paper and drew a supply and demand curve for me because he was trying to explain some nuance of the impact of government spending on GDP in wartime or something.

• 55:22Speaker 02

  And it just really struck me that someone who's very important and busy demonstrates that he cares about my development and learning and did that throughout his life. And so I think that things that happen in college, because it's such a formative time, seem magnified. And so I was really grateful for that.

• 55:39Patrick O'Shaughnessy?

  I'm struck by both the story and what you said earlier about your lessons from the military, that sometimes it feels like nine tenths of this thing is just giving a shit about other people and caring and showing up, especially when you don't need to for someone starting out or young. It's amazing how common that answer is. So I love it. Thanks again for all your time. This has been a blast.

• 55:58Speaker 02

  Thank you.

• 56:00Patrick O'Shaughnessy?

  If you enjoyed this episode, check out joincolossus.com. There you'll find every episode of this podcast, complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations, and more, as well as share the best content we find on the internet every week.