20VC: Retool Founder, David Hsu on Why YC Is Helpful Pre Product-Market Fit but Not Post and Why VCs Are Not Helpful Pre-Product Market-Fit but are Post, Why it is Difficult to Become Unprofitable if You Set Yourself Up For Profitability Early & Why VC Th

David Hsu is the Founder & CEO @ Retool, the company that allows you to build internal tools, remarkably fast. David has raised over $69M with Retool from the very best in startups including Sequoia, YC, Patrick and John @ Stripe, Henrique & Pedro @ Brex, Paul Graham, Nat @ Github, Peter @ Segment, Tomer @ Gusto and Elad Gil to name a few incredible names. Today Retool works with some of the biggest companies in the world from Amazon to Volvo to Mercedes Benz. In Today’s Episode You Will Learn: 1.) How David made his way from studying philosophy at Oxford to creating one of the valley's hottest companies in the form of Retool? 2.) How does David analyse pivots today? How does one balance between vision and persistence vs realism and knowing when is the right time to pivot? How did a conversation with John Collison change the course of Retool? What advice does David have for founders on pivoting? 3.) Why does David believe that YC is useful pre-product-market fit but useless post-product-market fit? What elements are so helpful vs not about YC? Why did David raise his Series A as a split between Sequoia and prominent angels? Why was that transformational for the company? 4.) Why was David sceptical of VCs for a long time? Why does David believe VCs are useless pre-product-market fit and useful post-product-market fit? What have been David's biggest takeaways from working with Bryan Schrier @ Sequoia? 5.) Why does David believe that once you are profitable and growing it is actually quite hard to become unprofitable? How does David advise founders considering raising VC vs bootstrapping? How does David know when to allocate resources more aggressively to a segment? What are the signs? Item’s Mentioned In Today’s Episode David’s Favourite Book: Godel, Escher, Bach: An Eternal Golden Braid As always you can follow Harry and The Twenty Minute VC on Twitter here! Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC.

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

• 0:00Harry Stebbings?

  The 20 minute VC here and to our episode today and I have to say I just so love doing this show. I have to give an award to my favourite accent ever on the show here with a fellow British twang. And so with that, I'm very, very excited to welcome David Su, the founder and CEO of Retool, the company that allows you to build internal tools remarkably fast. David has raised over $69 million with Retool from some of the very best in startups, including Sequoia, YC, Patrick and John from Stripe, Enrique and Pedro at Brex, Paul Graham, Nat at GitHub, Peter at Segment, Tom at Gusto and Elag Gill to name a few incredible names. Today, Retool works with some of the biggest companies in the world, from Amazon to Volvo to Mercedes-Benz. And I do also have to say a huge thank you to Brian at Sequoia and Enrique at Brex.

• 0:42Harry Stebbings?

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• 1:22Harry Stebbings?

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• 2:04Harry Stebbings?

  And simply put, they're two of the best founders I've met and they're creating the most intuitive financial software you've ever used. Used automatically analyzing your company's spend and visualizing it for you as it happens, allowing you to hone in on recent activity, trends, anomalies, or any question you have in just a few clicks. And unlike every other financial software, their integration, it's not weeks, it's just a few clicks. I have to say the product is just beautiful, which is not something I ever thought I'd say of financial software. You have to check it out and you can do that at digits.com. But now I'm very, very excited to hand over to David Su, founder and CEO at Retool.

• 2:44Speaker 01

  You have now arrived at your destination.

• 2:47Harry Stebbings?

  David, it is such a joy to have you on the show today. I've heard so many great things from Enrique at Brat, it's from John at Strive, from Brian at Sequoia. I basically stalked the shit out of you for the last 24 hours, but thank you so much for joining me today.

• 2:58Speaker 02

  I'm so excited as well. I'm a long time listener and cannot be more excited to come on the show.

• 3:02Harry Stebbings?

  Well, that is very, very kind of you and an ego boost to me is always welcome. But I do want to kick off with a little bit on you. So tell me, I hear that Dulcet British tone is lurking beneath that. So how did you make your way into the world of tech and how did you come to found Retool?

• 3:15Speaker 02

  Yeah, it's funny. So I grew up in Palo Alto, actually, but during high school, somehow it got the idea in me that I wanted to study philosophy. And so my parents weren't really a big fan of philosophy and so they recommended that maybe I pair it with something else, perhaps, you know, computer science or something like that, basically. And then I was like, oh, computer science sounds kind of interesting. Let's go take a look and see what's out there. And then I actually found a sort of a degree actually in the UK at Oxford that is both philosophy and computer science together. And it's actually one degree, which is really interesting. And that is pretty much the only reason why I ended up in the UK for three years, finally, Brad. But it was so much fun.

• 3:49Harry Stebbings?

  Got you. No, I mean, listen, I love that. As I said, I welcome any British accent. How did then like philosophy and CS degree at Oxford, how did that lead to Retool?

• 3:57Speaker 02

  Yeah. Okay. So this is kind of a, you know, a long story at this point. It's a bit of a detour. And so what happened was when I was in Oxford, I was American. And so one of the major, I was working on one of the side projects, basically. And one of the major side projects that we ended up working on was basically something like a clone of Venmo, basically, for the UK. Because I mean, as you know, in the UK, you said money via. Faster payments, probably, you know, use an account number, use a sort code. And I remember back, you know, when I was an undergrad there, this must have been twenty thirteen or so, twenty fourteen, something like that. The mobile apps were actually pretty bad. And so if you use, let's say, Santander or Barclays or whatever else, it was actually quite difficult to send money back forth. And so to me, this seemed enormously stupid. You know, clearly, this is something that tech, you know, it's not that hard to solve.

• 4:42Speaker 02

  There's changing sort of a number of the database and moving some money back and forth. How hard could that be? And so we decided to start working on basically a clone of them, basically. That actually went reasonably well. It actually got a bunch of users and we actually got into Y C doing that. But then it turns out it's actually a terrible business in the sense that every time someone sends money, we were losing money. And so the faster we grew, the more money we actually lost, which was a tremendously scary, scary thought for us. Even though we hadn't really raised much money, we had to raise what, the one twenty K from Y C. And then we had some money from previous tech internships or something, that was like thirty K or something. It's fifty K in total. And I think we're burning something like one or two K a day, which we had something like seventy days of runway left. And it was quite scary. We were always kind of living life on the edge, basically.

• 5:26Speaker 02

  Then we were like, okay, you know, this seems like a pretty bad business. You know, maybe it's time we should consider pivoting. And what's interesting, I think, is this we're quite lucky with is that when you work on a sort of P two P payments app, you yourself have to go build a lot of internal tools. Probably sixty to seventy percent of our time actually was spent developing internal tools for regulatory purposes, for fraud purposes and stuff like that. You know, so when someone signs up, you have to sort of verify they are what they say they are by K Y C things. After when they send money, you have to do some A M L kind of things. People are withdrawing large amounts of money. You have to sort of really be careful when you send money out of the system. And so we had a lot of fraud tools, et cetera. So anyhow, we've built a lot of internal tools and we were like, there maybe should be a faster way of building all this stuff. Instead of building it every time from scratch. And that's where the idea of a detour, but that's how we ended up in retail.

• 6:11Harry Stebbings?

  Totally makes sense. And I agree with you in terms of like not building from scratch. It seems ridiculous to have thousands of teams around the world continuously rebuilding the same tools that could have just been kind of built and customized kind of over and over again. So question for you though, and it's a big one for me, which is like, when you think about pivots, like, how do you think about giving it enough time to get enough data? We often hear that best founders follow their vision through the toughest of times. How do you think about sticking to the vision versus actually just reacting to when something's not a good business or doesn't have the demand?

• 6:40Speaker 02

  Yeah, so I think conviction is very important. And so I think when choosing ideas, I think conviction probably is sort of highest order you have to care about, basically. Do you actually think about the idea? I have a bunch of friends now, and I'm sure you have many too, and maybe sort of seen many of these as investments where people don't really know what to work on. And so what they do is they just sort of throw ten ideas against the wall, they go build ten landing pages, and they go buy Edwards for ten of them and sort of see what does best. I think that very rarely works. The only case where I know this might potentially have worked was, I think it was Palo Alto Delivery dot com or something, which then became DoorDash. I think is the only sort of recorded case of this ever actually working. But if you look at all the other sort of major companies like Airbnb, Stripe, et cetera, I think all of them were sort of very conviction based.

• 7:23Speaker 02

  That said, I think when you have conviction, you also have to be fairly open minded regarding what is and what isn't going well. And so it's funny you mention this because it brings me to a story. When we were working on the sort of demo clone for the UK, I think I would say we were fairly sort of hard headed and fairly convicted that it was going to work, right? And, you know, despite sort of, you know, the fact that we're losing boatloads of money every day, we were still fairly convinced that, you know, hey, you know, we'll sort of be unprofitable for a little bit, but then we'll raise money or whatever, things will work out in the end. I remember at one point, John Collison from Stripe was offering some office hours to Y C companies. And this must have been maybe March, maybe April, something like that of twenty seventeen. And of course, you know, we were a fintech company and so we said, you know, let's sign up for it and see what happens, right?

• 8:07Speaker 02

  And so we signed up for it and I remember the office hours was scheduled for, I think, thirty minutes. And then sort of we came in, was pitching him, you know, well, we're working on this idea, it's kind of like a P to P payments and kind of like demo. Except there's this regulatory thing called the Open Banking API, it's going to make sending money free and easy. And so we're going to be a layer on top of that. He was like, no, it's a terrible idea, don't do it because of X, Y, Z reasons. And we were like, well, how about this? How about that? He's like, nope, nope, nope, nope, nope, et cetera. I think maybe something like eleven or twelve minutes in to the office hours, there was nothing more to say. Because he had shot down sort of every idea and he actually had good reasons for shooting down sort of every one of our potential. Sort of paths out or outs, I guess. And it was, you know, it's not quite depressing because it certainly weren't clinically depressed, but you know, it was sad, right? You know, sort of all of our ideas got shot down by somebody who knew a lot about fintech.

• 8:51Speaker 02

  And so that was actually sort of one of the major reasons we ended up changing our minds and saying, hey, you know, maybe this actually isn't such a great business. I think at one point, I don't remember the Johnsons, I think John may have said something along the lines of, we thought about doing something like this, and Strubbe decided not to do it. And so in our heads, we're like, well, Strubbe decided not to do it, like probably a pretty good reason for them not to have done it. That said, I think you do have to remain convicted, but oftentimes you don't want to sort of be delusional. And I think for us at least, we had been convicted to the point where we were probably delusional. I think having, you know, a trusted advisor, let's say like John, who could then tell us, you know, actually this is not going to work, to sort of be fairly straight with us, you know, actually have good reasons to back everything up. I think was tremendously helpful. Without him, we might still be working on it. So, well, we'd probably be out of business at this point, but we probably would have worked on it for another year or two.

• 9:35Harry Stebbings?

  I mean, burning the money that you probably were, if you scaled, you probably would have been out of business, but thank God for John and thank God for his very direct feedback. I do have to ask that, you know, having access to John and having access to that kind of mentorship, I guess, in the early days, you know, came through the Y C network. And when we chatted before, you said something that was really interesting to me, which was you said Y C is useful pre-product market fit, but useless post-product market fit. So what makes you say this? And I guess what makes you say this? Let's start with that.

• 10:03Speaker 02

  Yeah. So I think the most surprising thing about Y C is actually that there's nothing really surprising about it. You actually don't learn anything new going to sort of all the dinners or even demo day, whatever else. Almost everything Y C tells you is available online. If you just go read every P G essay, you know, you could probably become a Y C partner, basically, if you read every essay. And just maybe that's being a little bit uncharitable, but you know, I think you could sort of get most, maybe 95% of the advice you get from Y C just by reading the essays. That said, I think the the advice is not particularly helpful, but the networks that you build, I think are quite helpful. But those networks really are useful pre-product market fit. When you're trying to get, let's say, advice from potential customers, you're trying to figure out what the product should look like, all that kind of important sort of early day stuff.

• 10:48Speaker 02

  And that's the kind of stuff that. It's helpful to have sort of other people next to you where you can sort of bounce ideas off of them, get their thoughts on et cetera, stuff like that. Once you have product market fit, you don't really need to be talking to anybody. You just kind of heads down, just executing, just writing code, talking to customers, you know, for as many hours a day as you can, really. And so, once that does happen, yeah, YC doesn't really add any particular value at that point in time, at least in our experience. In fact, I think they may actually sometimes give suboptimal advice, actually. And so, there was one time when, this is when we were raising our Series A. We had a slightly strange structure for the Series A. We raised a split round. It was split between five angel investors as well as Sequoia.

• 11:29Speaker 02

  And I remember asking YC partners about this, and I think most YC partners thought it was a terrible idea. They said, you know, if you look at sort of every successful Silicon Valley company, all of them would raise traditional Series As. And so, you should go raise the traditional Series As, raise a whole ton of Sequoias, move on, basically. And in retrospect, I think that's actually been one of our, maybe top three decisions we've made in the maybe last three years of Ritual. Because by raising from these five angel investors, we now have sort of them very close to us and them sort of very able and willing to give advice very frequently. And then I think that that advice is actually, it's not necessarily better or worse than Sequoias, but it's definitely different. I think having multiple viewpoints of the issue has helped us tremendously over the past year and a half since the Series A. And so, anyhow, I think YC really optimizes for

• 12:12Speaker 02

  true product market fit, but also for giving probably correct advice to probably good companies. But if you are, let's say, a, I don't want to set us in the sort of rankings of, if you think you're a very, very good company, I think sometimes you can ignore the advice YC gives you. And sometimes you're actually correct because they sort of tailor the advice to, if I were, you know, too specifically regarding your one company, we're giving you advice. They really think about, you know, well, assuming this is an average YC company, what should they do, basically. And, you know, oftentimes that is correct, but sometimes it actually isn't correct. In that case, I'm glad to have ignored their advice, so.

• 12:47Harry Stebbings?

  No, listen, I totally get you. I mean, there's some points that, which I just think are like, too good for me to pass up on asking about, because like, on the YC advice around the round, I would have honestly totally said the same. I would have said, well, you know, Sequoia won't get their ownership that they need to really be incentivized, to really give you the time. You'll then have five angels that have one or two percent, and are they really incentivized? You know, they're probably going to be, you know, OGs of the industry, which they are. Is one or two percent going to really incentivize them? Like, why was I wrong?

• 13:16Speaker 02

  Hmm. So I think when it comes to, let's say, so on the first point, sort of regarding ownership percentages, I think this is mostly not true. I was gonna say bullshit, but I think it's mostly not true, I think. I think there's obviously some truth to it, obviously, right? You know, if you froze up on 2% of a company, certainly you're less incentivized than if you're like 10% or something. In our case, I think Sequoia probably owns, I think it's either 15% or 17%, something like that, or in the Series A at least, something like that. And 17% is not radically different from, you know, 20% or whatever it is, 25% or whatever the typical Series A is. It's not radically different. And so I think ultimately, and I think this is probably true for you as well, if one of your companies does extremely well, you want to help that, you know, you sort of, you're not doing the math in your head about, okay, well, you know,

• 13:58Speaker 02

  actually, this company's doing well, but I only own 15% of, 17% or 20%, therefore, you know, sort of on a per hour basis, I mean, uh, my, my time is actually better spent in this company that owns, where I own 20%. I think the delta between sort of two companies that you have is probably greater than 25%. And so you'd probably much rather help the sort of company that's doing incredibly well, rather than the company that is doing probably quite a bit less well, where you own, let's say, 25% more or something. So that's a brief thought on the ownership thing. On the angels thing, I think it's true that angels are busy and, you know, aren't likely to help out that much. That said, I think if you're able to build a very deep relationship with, let's say, two or three angels, I think it is quite helpful. And so the, in our case,

• 14:41Speaker 02

  actually, we, you know, raised, maybe called it party round or something, where we raised from a bunch of founders. And, you know, these are the founders of, for example, Brex, Segment, Stripe, Asia Duty, Gusto, and a few others. And I probably don't talk with them. I don't think I've talked with any of them, actually, in the past, besides, you know, maybe three specific ones that I talked to quite a few. There is very much a sort of, you must invest a lot to get a lot, and you can only invest a lot, maybe two or three people. And so in our case, of the five angels that co-led the A, we've been very close with maybe two or three of them or something. And that has been quite helpful. And some would agree in the sense that for as of 40 angels, I don't think it's going to help me very much. But, you know, if you raise from, let's say, five, and are particularly deep with three, I think they can actually be quite helpful.

• 15:23Harry Stebbings?

  I agree with you, Buddy. And I think if you have that constrained They still like the ownership for them actually is still pretty meaningful. If you're looking at high to close to one or two percent, then it's it's meaningful on an individual basis when you get to a billion dollar company like Retool is now. I do have to answer, you know, because you mentioned there about, you know, when companies are going well, you know, you want to spend your time there as an investor. What I find honestly is the companies that need you are those that are not doing well and

• 15:48Speaker 02

  I completely agree.

• 15:48Harry Stebbings?

  And your retools of the world say, thanks, Harry. Obviously, I'm not an investor in Retool because you never invited me.

• 15:54Speaker 02

  Right.

• 15:54Harry Stebbings?

  No, I'm joking.

• 15:55Speaker 02

  Be the next time, yeah.

• 15:56Harry Stebbings?

  Um, but like you don't need the help that the VC would bring, which it brings me to something else that you said, though, which is like VCs pre-product market fit aren't so helpful, but post they're very helpful. So I'd love to hear your thoughts because that kind of flies in the face of like my experience of like post-product market fit, they don't need you. How do you think about that?

• 16:16Speaker 02

  Yeah, so Retool has not always been going, you know, that well, right? We certainly sort of had our struggles, you know, in the early days, right? And during those days, I would say what VCs did for us did not necessarily make that big of a difference. I think, you know, it is true that when companies are not doing well, they'll sort of ask for more help, ask for more advice or whatever else. But I think in the end, it doesn't actually make that much of a difference. You may sort of spend more time with the company, but that doesn't actually sort of translate into more results or anything, or does it translate into sort of value creation or whatever else? That's one thought there. On the pre and post-product market fit thing, yeah, it's interesting because it's the opposite of YC, where I think VCs where they can add a lot of value was not really sort of telling you what to build typically or or how to build it.

• 16:57Speaker 02

  It really is, you know, something's working already. How can we scale this thing up and how can we grow faster? How can we sort of see around the corners that you might not see? And in that case, Sequoia has been tremendously helpful. So I remember maybe a year and a half ago or so, Sequoia, for example, kept on pushing us to go hire more leaders for the company. And I was very skeptical of this. I was thinking to myself, the company's going pretty well, sales is going well, engineering is going well. What could leaders possibly do to us? You know, it's not really going to do anything. And of course, today, you know, we've hired many leaders and they've been tremendously impactful to the company. And I think these are the kind of corners that Sequoia can help you see around, or as, you know, I was a first time founder, had never

• 17:35Speaker 02

  Really encounter the value or the value add you would get from a really great, let's say, head of sales or head of marketing, head of recruiting or whatever else. Basically, so I think VCs help you see around many of those corners. I think pre product market fit, I would hope you know your market better than your VC does. If you don't, you probably have some problems and it's got other issues. And so in that case, I really don't think the advice that a VC offers you is going to be that helpful. You know, if a VC says, actually, I don't remember, here's a funny anecdote. There was one VC who really believed, after I showed them Retool, who really believed that Retool should become something like a BI tool, but specifically that's one that you could use on iOS and Androids.

• 18:18Speaker 02

  So you sort of check your dashboards on the go. And I was like, what the fuck, right? What did you just say to me? Kind of. And that's like, not at all what Retool does. But of course, you know, for this person, this was kind of their, they had, you know, pre-expect previously at a large company. And this is one of their sort of troubles they had was they couldn't view dashboards on their phone. You know, looker maybe doesn't work on their mobile device or something. And so they really wanted to push this direction and the device is totally useless. Like, I know my market much better than they know their market. I know our customers much better than they know our customers. That's not what our customers want, you know, and that's not the value we deliver. And so that's an example, I think, of maybe potentially misguided VC advice. And that stuff is just not that helpful, I think. But once you have product market fit, it's great.

• 18:55Harry Stebbings?

  It's also just like so much VC advice is rooted in past experience, past portfolio work. And as you said, that came from a big company where that was a problem and just kind of supplanting that on you. One thing that's really interesting, like so many things are really interesting about the journey. But, you know, the 25 million A, when you were at a millionaire R and you had four people in the team, it's a chunky round and it's a chunky A. What was your thinking around around that? Were you nervous about taking on such a large capital kind of injection? And what was the thoughts there?

• 19:21Speaker 02

  Yeah, I think really interesting is this sort of the divide between bootstrapping or raising VC. I think there's actually less of a divide than many people think. And so in our case, we could have, well, we did raise, as you could see, and we also could have not raised, actually. Yeah, at that point, we were four people. I think we would raise maybe 1.3, 1.4, something like that in the seed. And so I think when we were raising our A, I think we'd burn maybe 100K of the 1.4, something like that. And, you know. For people doing a mill in ARR or a software company already profitable, and so we didn't need to raise at all. But the fact that we didn't need to raise and could bootstrap actually then caused us to be able to raise a lot. Because, you know, VCs I think are quite excited by businesses that are actually working as opposed to ones that, you know, need VC money to work and, you know, may or may not work.

• 20:03Speaker 02

  And so in our case, and this has to date still been true, is if that if you sort of are on the precipice or are already profitable, raising money actually becomes substantially easier. And I think one key point here too is once you become, once you set yourself up for profitability in the early days, it's actually quite hard to ever become unprofitable, actually. And so if you do the math, right, you know, let's say we're a million dollars for people. And next year, let's say we grow four X, let's say four million dollars and sixteen people. The next year after that, let's say you grow another four X, you know, let's say sixteen mil and what is it sixty four people or something. It's actually, if your revenue is growing quickly, it's actually quite hard to grow headcount faster than revenue.

• 20:44Speaker 02

  And so if you sort of hire very slowly in the early days and build your way up to profitability, it actually becomes quite difficult to ever become unprofitable. Because let's say, you know, you grow from sixteen to sixty four in one year, that's actually pretty hard. Yeah, it's sort of hard to keep the talent bar high, hire all the right people, et cetera. And it's maybe actually possible to grow much faster than that, actually. And so I think it really, by sort of planning to bootstrap and then raising VC, not as sort of a backup option, but sort of raising VC to accelerate your growth, as opposed to needing VC to accelerate your growth, I think that's a pretty critical distinction. And if you play your cards right, I think you can sort of consistently raise on extremely good terms while having a very healthy business.

• 21:22Harry Stebbings?

  How do you think about kind of the traditional levers of growth versus profitability? I understand everything you said there, but a lot go, ah, but with VC dollars, I can really be very expansive in terms of my sales and marketing activities. I can really be aggressive, multitask on marketing channels and just be a lot more aggressive. Like, how do you think about that growth versus profitability and kind of also the marketing and aggressive sales spend?

• 21:45Speaker 02

  Yeah, so I think, Alex, in our case, we want to be profitable in the sense that sort of we have a basic business that's going pretty well, right? And then by having this business that's sort of fundamentally Working, we can then try new things that we can afford to take more risks because we know if the risks don't pay off, we still have the fundamental businesses growing, you know, sort of many multiples here on here today. And so for us, that's the reason why we raised is, you know, if we had not raised theoretically, we could have been more like Zapier or something. And I think Zapier is now at maybe fifty, eighty, a hundred million or something like that. And to my knowledge, they've never raised around after the seat. Having raised in the Series A, I think did, well, trying to think whether it actually made us grow faster or not. I mean, when we raised the Series B, I think we've spent a million dollars in the Series X.

• 22:28Speaker 02

  So, so, you know, I guess we haven't really deployed the capital very much. That said, I do think it really upped our ambition. And I think this is one that the VCs could help a lot with because if you bootstrap, there's kind of always a sort of nagging thought in the back of your mind that if everything goes to shit, I can always move to Hawaii. And, you know, we have a business that's profitable and life can't be that bad, right? To some extent, raising money does to some extent close that off, right? You know, you're now sort of, for me, actually, the pressure doesn't come from the VCs, it's actually more from the team that we've recruited and everything and from our customers. But you now do have this, you are making the explicit decision that sort of want to build a really great and really big company, right? And so I think in our case, that has been quite helpful for us, this sort of wanting to go big.

• 23:13Speaker 02

  That said, I think most of the value in the investments or in raising the money that we have raised is the ability to make big investments when the time does come. I do think to your point, regardless of scaling sales and marketing really quickly, maybe, maybe fifty percent disagree on that, maybe fifty percent, fifty percent disagree. In the sense that I think with almost all marketing channels, you do want to kind of make sure it's working before you dump money in. You don't want to sort of dump two million dollars into, let's say, Google Ads to only find out that you have sort of a very negative return on ad spend or something like that, right? Ideally, you could find that out very easily by spending ten or twenty K in Google Ads. And so do you think that in most cases, especially for a sort of fairly stable company, that's a SaaS company? You do actually want to be much more measured in your investments. And, you know, today, for example, we're hiring salespeople very quickly.

• 23:58Speaker 02

  That's only because we've hired a few salespeople that have done phenomenally well. We would not have hired ten salespeople right after the Series A. I think it was probably still me doing sales, actually. Back in those days. I mean, so I think it's quite important to prove things out. The ones things haven't proven out, go raise money and then go spend that money, knowing that you'll probably get a pretty good return on that one. So maybe one more conservative, but that's.

• 24:16Harry Stebbings?

  Listen, I love that in terms of kind of, you know, you can iteratively test and then measure and optimize and then like double down aggressively when it's working. I guess my question to you is like, how do you think about when's the right time to double down? And what I mean by that is like, I often see very optimistic founders who go, it's working, it's working. And actually, we've had three days of positive cat data and it's not exactly a sustainable indicator that Facebook is going to be this incredible kind of positive ROI channel moving forward. So what's enough to make you go yes?

• 24:47Speaker 02

  Yeah. So this is an interesting personality trait. So I think I'm always, well, I think overall I'm fairly realistic. They are too realistic, actually. That's problematic sometimes. I think up until maybe three, maybe four million dollars in ARR. I I don't think even up to three or four million dollars in ARR, I was fairly convinced we did not have product market fit. I was thinking that, you know, every customer we sell, you know, this guy must be really weird. I can't believe he's using a retool. It doesn't make any sense, but he's buying a retool, you know, let's celebrate, but you know, we don't have product market fit yet. And it was only maybe, I think we hit, I'm trying to remember, maybe a few hundred, maybe a thousand, you know, a few thousand, something like that customers where it was fairly clear that, you know, probably we do have product market fit now, probably.

• 25:28Speaker 02

  And so I think to answer your question, I think sort of being fairly pessimistic or being sort of fairly realistic about things is quite helpful in doing a startup. I think of most of these sort of really great founders I know, almost all of them are at least realistic with themselves. I think many are maybe, let's say, quite optimistic with talking to the press, talking to investors or whatever else. I think that's an important quality as well. But I think incredibly critical that you are, very critical, self-critical or very honest to yourself about what is and what isn't working.

• 25:57Harry Stebbings?

  Yeah. No, listen, I totally agree with you in terms of being very honest with yourself. You mentioned that kind of the best founders that, you know, you know, and you've kind of grown alongside. We spoke about kind of Enrique at Brax before we spoke about John at Stripe. When you think about kind of commonalities and lessons from them, have there been some takeaways from watching them scale Stripe and Brax that you've really? And taken with you in terms of how you think about your operating mentality.

• 26:19Speaker 02

  Yeah, so this actually came up recently is we're looking for a head of engineering now and our head of engineering, you know, profile, we've been looking for it for maybe six months or something. And the profile has shifted a little bit as you know, every tool engineering team has grown a little bit as we've gotten more successful, et cetera. The profile has shifted a little bit. And what's interesting about if you look at, you know, let's say both Enrique and John is that they're both incredibly bold. And so this is, you know, kind of goes against what I was saying a little bit, you know, a minute ago or so regarding sort of being fairly measured, sort of being fairly realistic with yourself, et cetera. They both actually sort of dream incredibly big. And so, for example, John told me once, when we're sort of thinking about head of engineering profile, who's like, you know, all these candidates are not good.

• 26:58Speaker 02

  You know, you should be going after something more like this. And then he named someone who is the CEO, I think of a maybe $10 billion company right now in Silicon Valley. And he was like, there's a 10% chance you can get this person as your head of engineer. And I was like, wow, that's like no way what I've ever thought I could get, you know, the CEO of a $10 billion unicorn in Silicon Valley to come be your head of engineering. And John said something along the lines of this, you know, one of the most exciting jobs in Silicon Valley right now. You know, you should, this is a huge opportunity for anyone to come in and really run the engineering team at Retool. And to me, that I think is a good example of sort of the boldness that I'm talking about where I would have been like, there's no, there's no fucking way, there's no chance we could possibly get someone so eminent to come on engineering at Retool. And yet, you know, that has really sort of motivated and inspired me to go find really great candidates for this position, right?

• 27:43Speaker 02

  And so I think that's one lesson I've taken away is just be bold. I think Enrique certainly is extremely bold. I think I'm sure you know, the fun is in history. If you talk to him, I think it's.

• 27:53Harry Stebbings?

  I don't think Enrique ever lacks courage, let's just put it that way. Final one is like, you mentioned before about kind of the top three decisions that you made and how pivotal it was in terms of Sequoia and the Angels. When you think about the other two, if you were to choose one, what do you think another one is? And how did it have such a transformational impact on Retool?

• 28:12Speaker 02

  I think the other one is, we've been talking about already, I think it is hiring slowly and sort of building the fundamentals. I think if you look at Retool, you know, I think the company is what, three and a half years old. So, you know, by all sort of means, it doesn't. Like it was that slow, you know, reached a billion after valuation at least at three and a half. And yet, if you look at the first year and a half, the team was less than, I think, three people, something, myself included. It was a tiny team for the first year and a half. And it was only until, you know, year one and a half, year two or something, when we really started sort of pedal to the metal, really started higher. That has a lot of effects or second order effects that you might not think about. So one, I think by doing everything yourselves, you actually learn a tremendous amount about all areas of business.

• 28:55Speaker 02

  And so I think I now have a much more of respect for, let's say, sales and marketing, all the good and market functions, which I think are incredibly critical to the company. Whereas before I might have been like, oh, you know, sales is really easy. It's like call some people, right? And, you know, deals closed. In reality, of course, it's substantially harder than that. If anything, it may be harder than engineering to really do sales properly. And so I think you sort of gain a lot of respect and knowledge, which then helps you hire for those roles later down the line as your company becomes more successful. So that's one. Second order effect that we've already talked about is if you can get to profitability very early and you can keep your growth rate up, you're just in such a great position. Your business is just so healthy since that, you know, it's very hard to ever become unprofitable and raising money becomes so easy. If you do decide to raise money or you decide not to raise money and become like a zapper as well, which is also a great output.

• 29:38Speaker 02

  Those are probably the two lessons I would say from growing a little bit slower in the early days.

• 29:43Harry Stebbings?

  Can I ask one final one? I promise it's the final one, but it's like, when I listen to you, everything is so rational, methodical, logical, and it's also so calm. Do you ever lose your shit? And how do you deal with like shit hit the fan moments? What's your coping mechanism?

• 29:56Speaker 02

  Hmm.

• 29:57Harry Stebbings?

  Like I lose my shit a lot.

• 30:00Speaker 02

  Yeah, yeah, yeah. Thanks for admitting that. I maybe lose my shit maybe once a year or something on average. It's not that frequent. I think part of it also is a SaaS company is just fairly stable in the sense that nothing really goes that wrong really for us. Hmm. Yeah, I'm trying to think of a better answer. So I might want to cut this one. Yeah, I'll think about it for a bit longer. Maybe we can return to that at the end of the episode or something where I can try to give you a better answer. That's interesting. Yeah. So instead of having, let's say, a particular sort of very acute feeling of losing my shit. It is really existential angst, maybe, that keeps me sort of this dull thudding. Pain rather than sort of this acute, you know, sudden pain. The dogfighting pain really is, I think we're not moving quickly enough.

• 30:41Speaker 02

  I think, you know, Rital should be operating substantially faster as a company in all areas. I think, you know, in sales, marketing, engineering, everything. I think, you know, to be clear, we're moving pretty quickly for a small team of forty five or so. But I think we could be moving substantially faster. And I think a lot of that comes down to sort of the culture that is internal to a company. It's sort of the clock speed at which it runs. I think there are actual sort of a lot of easy ways to make the clock speed run substantially faster. I think it's actually surprisingly sustainable as long as the progress is really being made. I think if you try to really increase the clock speed and sort of cadence of which you move, but there are no results, I think that leads to burnout very quickly. But at least for me and potentially for you as well, and for many people I've talked to, working hard is not the issue, right? It's working hard and not seeing results is the issue.

• 31:24Speaker 02

  But if you work hard and sort of see results very quickly, then it's actually quite motivating. You know, it's actually quite fun to work on something like that. And that really keeps me up at night right now is how can we move sort of quickly or move extremely rapidly while keeping the quality bar high?

• 31:38Harry Stebbings?

  Okay, this I promise is the final one. But it's like you said about kind of the moving as quickly as you are. My question to you is like, you know, you said there are three people after a year and a half, forty five now, three and a half years in. With scaling that fast, things break. What's broken, and I'm sure you fixed it very fast, but what's broken in the past? And what have been some lessons in terms of scaling as fast as you have done?

• 31:58Speaker 02

  Yeah, I think the hardest one has been hiring for us. I think in the end, most problems that we've had at Rital, I think most problems in business or who's in business is to some extent a people problem, right? I think, you know, engineering problems can be solved with the right people. Sales problems can solve the right people, marketing problems, the right people, et cetera. And so really yet at this point, and the challenge for Rital ahead of us is finding the right people to really help us build the company. And most of the mistakes we've made have been regarding hiring, not hiring the right people, sometimes hiring the wrong people, and then sort of having to crack those mistakes as quickly as possible. I think a lot of them have to do with sort of cultural misalignment. And so for a while, I, as a technical founder, I think sort of underweighted culture, where I thought culture is the sort of fluffy thing that's, uh, doesn't actually really matter that very much. But I think now it's absolutely critical.

• 32:43Speaker 02

  It may be sort of one of the three defined. Finding features of rituals, sort of either if we succeed, culture may actually be one of the three reasons why we did say. And today it's become incredibly important and something that we really squint for during the interview process. But this is not always the case. In the early days, we certainly made many mistakes. Either wrong person or it was bad culture fit, we had to part ways.

• 33:02Harry Stebbings?

  Yeah, no, listen, I totally get you. I think regardless, even with emphasis on heart, like culture in the early days, it's so challenging when you're bringing that many new bodies in to maintain culture fit and to be aware of it in such an acute way that one has to be. So totally understand and see that. I do want to dive into my favorite though, which as you know, is the quick fire. So I say short statements and then you hit me with your immediate thoughts. How does that sound?

• 33:23Speaker 02

  Sounds good, David. Let's go.

• 33:24Harry Stebbings?

  I mean, so you've got your own library I can literally see in the room with you. What's the favorite book and why, David?

• 33:29Speaker 02

  Probably favorite is Gödel Asher Bach. It's a philosophy kind of comp sci kind of book. It's actually what got me into philosophy and computer science and led me to study and sort of led me down this path. Without it, I don't think I want to study philosophy nor computer science. It's a, it's a very difficult book to read, but so rewarding when you do actually read it, work through it, report it.

• 33:48Harry Stebbings?

  Wow, that is a lot of credit to give to it. Next one, what would you most like to change about the Silicon Valley tech scene?

• 33:53Speaker 02

  Silicon Valley tech scene is quite insular. It's funny you ask this because to some extent, I suppose the tech scene of the UK. Tech scene of the UK is definitely smaller, but it's actually, I think, much more positive and uplifting to some extent. I think, you know, the rest of British culture maybe not, but the tech scene actually is. Because when you run into someone who is in tech in London, it's so exciting, you know, you're sort of so pleased to see them. And you can always sort of connect or bond about something, right? And you want to talk with them. Whereas in San Francisco or in Silicon Valley, you know, everyone works in tech and so it's not special to work in tech. You know, if anything, all my friends are telling me they don't want to have more tech friends. They want to find non-tech friends, you know? And I think that's a little bit sad. I think that sort of tech has got a such a bad rap in Silicon Valley.

• 34:34Speaker 02

  But also that the, I think the culture is quite insular to some extent. This is why Y C works. Because Y C can sort of bring you into default, sort of get you connected very quickly into the tech scene. But I do wish as someone who to some extent was outside of the Silicon Valley tech scene, at least when we first started, I do wish sort of there were less gatekeepers or it was sort of more open and people were more excited to talk about tech.

• 34:56Harry Stebbings?

  Listen, I totally agree with you and totally understand that. So I think that's a good point. I do want to ask, what's your biggest strength and your biggest weakness?

• 35:03Speaker 02

  I think the biggest strength is that I am fairly realistic, and I think that's actually the biggest weakness as well, because, so we've talked about already. I think it's important to be fairly realistic with yourself, to understand what is and what isn't going on with your startup. And I think that has led to better decisions overall for Retool. That said, do you think that there is this kind of boldness that we've talked about before, that let's say someone like Enrique or like a John has, that I think really is necessary in order to build a really great company? And I do feel that, you know, oftentimes I have to be pushed to think bigger, or sometimes I may be too rational sometimes, where I think, you know, at the head of engineering position, you know, we just fill it as quickly as possible and the profiles we're getting are pretty good already. Whereas other people might, for example, John can really sort of jolt me a little bit and say, actually, the profile we're looking for is substantially better than this.

• 35:48Speaker 02

  And really should, you know, be bold and sort of be courageous and go find really the best person for this role.

• 35:53Harry Stebbings?

  I love that and totally. Okay, interesting one here. Who's the best board member you've worked with and why? What's been the biggest takeaway from having Brian on the board?

• 36:02Speaker 02

  Yeah, I think initially I was quite skeptical about VCs. And I think part of it is because when you deal with VCs pre-product market fit, there's nothing for them to give you advice on, right? Besides the product. And so a lot of the product advice that we got, I candidly thought wasn't so great. And so I sort of developed a very sort of skeptical view of VC. That said, I think VCs really are experts in scaling companies. And the sort of advice Brian has given us regarding how to scale companies, what challenges we'll have in six months and a year's time, have been incredibly accurate. It's funny, if I could tell myself a year ago something, I'd probably say something along the lines of trust Brian a bit more or something like that.

• 36:38Harry Stebbings?

  I love that. I think that's a great title for the podcast. But I do want to finish on probably the most important of all, which is like, what do the next five years hold for you and for Retool? It'll be eight and a half years in. What does Retool look like?

• 36:49Speaker 02

  Yeah, well, we're still very, very, very, very far away from our goal. Our goal is to be the way software is built. And today, point, you know, zero, zero, zero, zero, zero, zero, one bits of software is built at Retool today. So we're starting with internal software. So the ideas for all these sort of internal business applications, we want all that to be built on Retool and then eventually we'll expand it out to other things. And we're so far away from there and sort of we need all the help we can get. So if anyone is interested in working at Reteal, please let me know. Email me at [email protected].

• 37:22Harry Stebbings?

  Absolutely. Love that. And David, as you can tell from me completely ignoring the schedule today, I've so enjoyed having you on. So thank you so much for joining me today and I can't wait to see the future ahead for Reteal.

• 37:32Speaker 02

  Thanks so much. Really enjoyed this as well.

• 37:35Harry Stebbings?

  I mean, I just love David. I love the accent. I love the energy. I love the realism. I think Reteal is incredible. As I said, it was one of my favorite episodes to record. I can't thank David enough for being such a rock star. If you'd like to see more from us behind the scenes, of course you can on Instagram at H. Stebbings 1996 with two Bs. Always love to see you there. But before we leave you today, I'm sure you've heard about it on the show before, but my word, I love the product that is Carter. Carter simplifies how startups and investors manage equity, track cap tables and get valuations. Go to carter.com/20vc to get 10% off. More than 800,000 employees and shareholders use Carter to manage hundreds of billions of dollars in equity and Carter now offers fund administration. So you can see real time data in the Carter

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• 38:56Harry Stebbings?

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• 39:40Harry Stebbings?

  As always, I so appreciate all your support and I can't wait to bring you a fantastic set of episodes in our last week before Christmas.