20VC: Notion's Fundraise with Index: The Most Anticipated Deal in The Valley: How It Came To Be | The Future of Remote Work |How Notion Approach The Balance of Growth and Profitability

Sarah Cannon is a Partner @ Index Ventures, one of the world’s leading venture funds with a portfolio including the likes of Dropbox, Skype, Figma, Bird, Slack and many more incredible companies. As for Sarah, at Index, she works with groundbreaking companies including Notion, Slack, Pitch, Quill and Instabase. Prior to Index Sarah spent time at CapitalG, Warburg Pincus and even worked in The White House as Policy Advisor for the National Economic Council. Akshay Kothari is the COO @ Notion, the company that has taken the modern working world by storm as the all-in-one workspace to write, plan, collaborate and get organised. Just last week Notion raised a $50M round led by Index at a reported $2Bn valuation. Prior to Notion, Akshay spent 5 years at LinkedIn following his prior company, Pulse News, being acquired by LinkedIn in 2013. In Today’s Episode You Will Learn: 1.) How did Sarah make her way into the world of venture from The White House and come to be a Partner @ Index today? How did Akshay parlay his angel investment into Notion into joining as COO the company 5 years later? 2.) With such a proliferation of collaboration tools today, how does Sarah see the remote work/collaboration tools landscape playing out? Are wein a phase of bundling or unbundling? Will we enter a phase of heavy consolidation? How does Notion think about the transition from an application to a platform? What are the challenges in doing so? 3.) What have been some of Akshay's core observations and learnings from watching the world move to remote work overnight? What behaviours will remain post COVID? What behaviours will not? What sectors will be forever changed due to the crisis? What opportunities does that bring about? 4.) Why did Notion decide to keep the team so small for so long? What are the advantages? How does Notion think about maintaining quality when hiring for scale now? What have been some of Akshay's biggest learnings in what it takes to attract A* talent to Notion? 5.) Why did Notion choose the route of profitability over the more conventional early path of the VC treadmill? How does one's mindset change when suddenly raising a large round of new financing? What becomes possible? What guard rails still need to be set? Items Mentioned In Today’s Show: Akshay’s Fave Book: Order without Design: How Markets Shape Cities Sarah's Fave Book: Guns, Germs and Steel: A short history of everybody for the last 13,000 years 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. Carta simplifies how startups and investors manage equity, track cap tables, and get valuations. Go to carta.com/20vc to get 10% off. More than 800,000 employees and shareholders use Carta to manage hundreds of billions of dollars in equity and Carta now offers Fund Administration so you can see real-time data in the Carta platform and work with Carta’s team of experienced fund accountants. Go to carta.com/20vc to get 10% off.

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

• 0:00Harry Stebbings?

  This is the 20 Minute VC and my word, do we have a special show for you today, a double guest episode and so relevant on so many different levels. First, just last week, the company being featured raised an incredible $50 million round at a reported $2 billion valuation. Then second, the fund being featured not only led that raise, but also announced the raising of $2 billion in more funds for them to deploy. So with that, I'm thrilled to welcome two amazing guests. First, Sarah Cannon, Partnered Index Ventures, where she works with some truly groundbreaking companies, including Notion, Slack, Pitch, Quill and Instabase, to name a few. Then I'm also thrilled to welcome, joining us from Notion, Ashay Kathari, CEO of Notion. The company that has taken the modern working world by storm was the all-in-one workspace to write, plan, collaborate and get organised.

• 0:44Harry Stebbings?

  Prior to joining Notion, Ashay spent five years at LinkedIn, following his prior company, Pulse News, being acquired by LinkedIn in 2013. I do also have to say, this really was a team effort in terms of the questions. So a huge thanks to Idin Sankut, Locky Groom, Daniel Gross, Elad Gil and Notion's own Ivan Zau for some truly fantastic questions, suggestions today. I really do appreciate that. But before we move into the show today, I'm sure you've heard about it, but my word, this is a product I love, Carter. Carter simplifies how startups and investors manage equity, track cap tables and get valuations. Go to carta.com/20vc to get 10% off. More than 800,000 employees and shareholders use Carter to manage hundreds of billions of dollars in equity.

• 1:25Harry Stebbings?

  And Carter now offers fund administration, so you can see real-time data in the Carter platform and work with Carter's team of experienced fund accountants. Simply go to carta.com/20vc to get 10% off. And speaking of equity for amazing team members, you have to check out Switch, a great startup initiative to send laid-off talent amid the coronavirus crisis directly to vetted top startups still hungry to hire. Switch is free for all parties. It's just here to help. It's a free platform by the team behind Want It. The big idea was to create a shortcut between companies firing and the startups that are still really hungry to hire. So companies can upload their laid-off list for other startups to hire them on the spot. And VCs play a crucial role by letting their portfolio companies know of Switch, hence we're featuring them on the podcast.

• 2:10Harry Stebbings?

  Switch has now over 10,000 talent. It's supported by over 100 VCs and 300 startups. You really must check it out. That is switch dot help. And once you get that incredible talent through Wanted, they have to be properly equipped. And that's where Brex come in. Brex is the company which built the corporate card for startups and who's the fastest company to reach unicorn status in history. Brex founders Henrique and Pedro built a payments business in Brazil, but kept getting rejected for a corporate card in the States. So they built Brex with no personal liability, up to 20 times higher card limits and huge rewards like 7X points on Uber and Lyft, 4X on Brex Travel and 2X on SaaS software. If you're a VC backed startup based in the US, see if you qualify for a Brex card today at brex.com

• 2:53Harry Stebbings?

  and get card fees waived for life by entering the code HARRY during signup. But that's quite enough from me. So now I'm very excited to welcome Index's Sarah Cannon and Notion's Akshay Kathari.

• 3:08Speaker 01

  You have now arrived at your destination.

• 3:12Harry Stebbings?

  Sarah and Akshay, it is so great to have you on the show. I've wanted to do this one for such a long time, but thank you both so much for joining me today.

• 3:18Speaker 02

  Thank you for having us.

• 3:19Speaker 03

  Thank you very much for having us, Harry. I remember talking to you years ago about Lloyd Tabat at Looker, and I was interviewed. So I'm very happy to be a guest and thrilled to have Akshay here with me.

• 3:30Harry Stebbings?

  Akshay, it is so good to have you here too. I have to say, I've been the biggest fanboy of the Notion product really for quite a long time now. So yeah, thank you so much, Akshay, also for joining us.

• 3:38Speaker 02

  Thank you, Harry. I've been listening to your podcasts for many years now. So it's good to be on your podcast.

• 3:44Harry Stebbings?

  I mean, that is so kind of you to say, but I want to start with a little bit of context on you. And so if we start with you, Sarah, how did you come to be a partner at Index? An incredibly challenging question to summarize your career into about a minute, but I'm going to go for it.

• 3:56Speaker 03

  It was a very untraditional path to venture capital. I spent some time living in West Africa, worked on Obama's economic team during the last recession, was trained to be an economist and then actually decided to join Google's Growth Equity Fund and picked a fight with my now partner, Jan Hammer. And that's how I ended up at Index.

• 4:15Harry Stebbings?

  Never wise to pick a fight with Jan Hammer, but you did also just lead the deal into Notion. And so Akshay... How did you come to be at Notion and be COO today?

• 4:23Speaker 02

  Yeah, so I've known Ivan for almost a decade now. Ivan, who's the CEO of Notion, I tried to hire him for my previous company at Pulse and I failed. So a couple of years later, when we sold Pulse to LinkedIn in 2013, I had this newfound money that I didn't know what to do and Notion was my first investment. And for many years, I thought I lost all my money in Notion because it hadn't launched a product for, I think, four years. And then when it did in 2017, it took off. A year later, I found myself having breakfast with Ivan and just looking at just how the market was pulling Notion, just like how much demand there was. I thought it was a really good time to jump in and help scale the business. So I joined 18 months ago as the ninth employee. It's been so much fun building it up.

• 5:08Harry Stebbings?

  I mean, what an incredible 18 months it has been. And as I said, I use the product and love it every day. But I do want to talk and start on the deal itself because obviously Index recently led the most recent round into Notion and partnering up. And it's always an interesting story in terms of how it came to be. This is the deal that every VC in the valley wanted for so long. So how did it come about in terms of the deal? And whoever wants to take this one can roll with it first.

• 5:29Speaker 03

  I'm happy to start since I was the one in pursuit. So I first discovered Notion's product in early 2018 and it really was kind of love at first sight. As I've told the team, it's the first product I opened in the morning and the last I use at night. And so really was kind of fell in love with the product. And I was very fortunate to be a board observer at Slack at the time. So I both fell in love with Notion itself as a product and at the same time realized the market opportunity, given the perspective I had at Slack, really there being a need for if Slack was the flow of information, Notion was the stock. Or if Slack was kind of synchronous communication, then Notion was the place for asynchronous communication. So it was those two things.

• 6:12Speaker 03

  So I naturally, as an investor does, reached out to the founders and of course, no response.

• 6:17Harry Stebbings?

  What did you say? Was it a really detailed, long and thoughtfully male about how you love the product intricacies?

• 6:22Speaker 03

  No, the first email I hope was thoughtful. I always aim to say how much I love the product, which I'm sure I did, and it was true, but it was definitely not the magnum opus that I have sent to the company on multiple occasions since. So I think it was definitely a more generic note, if I'm honest, and no response, which many other investors had tried. And I thought, okay, well, I'll talk to the existing investors. That was not going to be a channel for me either. And I just really have never felt this way about a product and the little bit I could learn about the culture of the company. And Jason Spinella, I should give him credit. I realized he was the one who said, well, why don't you just go to their office? And I was like, I can't do that. And he said, well, why not? And so we looked up, we couldn't find the address. It was

• 7:06Speaker 03

  obscured. One of our assistants had someone, I don't know, found the address in the Mission, and I decided to go over there. And I brought with me an invitation for Ivan. I could glean that he was interested in photography by what I could read on the internet, on Twitter. He asked me how I figured this out, but it was on Twitter. And I'm a lover of art myself and have gotten very involved in the art scene in San Francisco. And there's an art gallery called the Frankel Gallery that has a lot of great photography. So I showed up at the office with an invitation for Ivan to go to this show with me. I was like, well, at least I'll try to get to know him. And I put on top of it, without thinking, a postcard by my favorite artist, Marcel Duchamp, and I just wrote the details of the, like, Ivan, I would love to invite you

• 7:50Speaker 03

  to join me, in case I didn't find him. So I find the office, I'm very proud of myself. I walk in, and then I realize I don't know what Ivan looks like, because on the internet at that point, he was just a drawing. And so he comes down the stairs, and I'm like, I think that's him. I'm going for it. And I went up to him, and I just kind of handed him this thing and said, would you like to come to this? And he was kind of like, well, who are you? And I said, I'm Sarah Cannon, I'm at Index. And he kind of says, well, we'll take off your shoes, because in their office, they don't wear their shoes. And so I took off my shoes and then realized it was like awkward. I didn't have a plan for this exchange. But Ivan says, oh, is that Marcel Duchamp? I said, yes, my favorite artist. And he said, Roman on our team is putting together-

• 8:32Speaker 03

  Graphic novel, Let's Find Roman. And so I'm on a tour of the office. Sadly, Roman wasn't there. I ended up leaving Ivan to continue to do his work. And I was like, boy, I hope he comes. Sure enough, definitely did not come to the gallery. And that's when I wrote A Longer Letter, which was about like what specifically I loved about the product and what it meant to me personally. And I didn't get a response to that for at least a week. I remember the moment Ivan wrote back. I was thrilled. And I think that's when Akshay, I got introduced to you. It was kind of like, all right, I'll let Akshay deal with her. But I think the note resonated. Anyway, I got to meet Akshay over email and just kept trying to help. And I would just, at the beginning, I was guessing what they wanted or might need,

• 9:14Speaker 03

  what I was learning at Slack that I could share about hiring or pricing or anything I could really think of. And then over the, I think it wasn't even until a year later that I actually got to meet Ivan and then Akshay in person. But really got to develop so much respect for them and was really working for them as I would for the companies I'm on the board of. Akshay kept saying like, Sarah, we're not going to raise money. And I was like, I understand that. And I promised not to ask again. You know, then the crisis came and it changed, obviously, the way the company was thinking about fundraising, which I'll let Akshay obviously speak to. But I was very grateful to be a recipient of that call. And we've been doing work on the company for two years. So I'm thrilled. It was really a passion project.

• 9:55Speaker 03

  I have to admit, I didn't think it was actually going to happen. And I'm hoping now they'll let me into the office rather than me having to break in.

• 10:02Harry Stebbings?

  I mean, I think that's testament to you being an absolute stalker, but I think that's also persistence. And so that's amazing to hear. Can I ask, Akshay mentioned that kind of the changing mindset on the fundraise. What was the internal discussion and what was the changed mindset from your perspective?

• 10:15Speaker 02

  I would say like the velocity of how things were changing was pretty apparent, that the macro was shifting very fast. And then I think the other thing that's very tricky about this virus is there's a little bit of uncertainty around when this thing ends. With a small company, with a small team, I think one thing that allows us to do is be very nimble around these things. And I think we were thinking about maybe raising a small round in the summer and we just pulled it up about four or five months earlier. Try to get ahead of the macro. And so part of it was getting an insurance policy around just like what happens to the market and what could happen in the business. But I think the other part that was equally important for us was making sure that we're

• 10:56Speaker 02

  able to continue to hire the best people, we're able to show to our employees and our customers that we're here for the long run. And I think that really, as soon as the news came out a couple of weeks ago, you can already see that in the market. I think so many customers have reached out feeling so much more confident about expanding with Notion. So much of our employees are excited about wanting to continue doing their best work. And it also gives us some power to just kind of continue to hire in this relatively tough environment.

• 11:24Harry Stebbings?

  Yeah, absolutely. I saw the hire with Christina. Christina is fantastic, so that made me very happy to see.

• 11:30Speaker 02

  Yeah, I know Christina was on your show. Christina is an example of like someone we've been trying to hire for 18 months and it finally came together in the last month. So we're really excited about both being able to work with Sarah and as well as being able to hire people like Christina.

• 11:44Harry Stebbings?

  Totally with you there. I guess my question is from a more meta macro landscape perspective, and again, open floor here on this one, but there is a plethora of companies in the space of a terrible catchall phrase, but you know, remote tools, collaboration tools. There are so many companies now in this space. Do you think we're going to see a consolidatory period with the large incumbents acquiring heavily, especially in this time where fundraising for the majority will be also much more challenging? Do you think we'll enter this consolidatory phase?

• 12:09Speaker 03

  I absolutely think we will see consolidation. So I think there has been kind of an unbundling, there's an unbundling of Microsoft Office's suite into like best in class products. I think the same is happening for Adobe and for Atlassian. And I think what we're seeing is kind of next generation best in class products in each category. So Slack taking on Teams, Notion taking on Docs, Zoom obviously providing video conferencing. And I think the key elements of those next gen players are that they're designed first, collaborative and integrated with others. So I think there's only so many. I think there will be a leader in each product category. I mean, Zoom and Slack now, especially.

• 12:52Speaker 03

  In these times seem obvious and our view is that Notion is really the third great collaboration platform. And I think there are a number of others, Pitch, Airtable, Quill, Figma, Linear in that bucket. And I think what you'll see after that will be a rebundling. So I think you're going to have these best in class products and I think Notion is very well positioned to do that. We'll rebundle some of these services down the line. But I certainly think you're going to see the next kind of generation of best in class leaders being decided now.

• 13:22Harry Stebbings?

  It's really interesting you said there about rebundling because my thought actually was, I was chatting to actually Howie Liu at Airtable the other day. And he was talking about moving and making the transition from application to platform. And I was thinking the same with you and with Notion, which is how do you think about this kind of very core transition of moving from application to much broader platform and ecosystem play? And how do you think about that over the next two to three years?

• 13:44Speaker 02

  Yeah, so building on kind of what Sarah said, I would say the one thing that if you kind of look back, you know, take it back all the way to sixties. You know, we were using paper as like the single medium to do our work. And at some point in the eighties, we moved to floppy disk where, you know, different software where these small disks that we would have to put in and just use them, it just kind of fragmented the market really broadly. And then in the nineties, I think like Microsoft really bundled a lot of this together in Office. And so there's probably five, six different pieces of software that they packaged it into a single suite called the Office. And they became really dominant. That was kind of the dominant way of doing your work in the nineties. And then in the next decade, I think with the internet, it fragmented again.

• 14:27Speaker 02

  It's so easy to start a new software tool today and it's so easy to distribute it on the internet. And what that means is in some ways, it allows people to have like five person teams to build a very specific software and be able to just sell that and be profitable and so on. But what that's doing to the work environment, and I faced this when I was at LinkedIn, is just to do the basic work, I would have to touch 20 pieces of software. And this is not just large companies, even if you talk to startups, I recently talked to a 30% startup that was already using 75 different pieces of software to do their work. And if you just think about how How much time is lost just in switching between these different tools? I think the pendulum has to swing back to fewer tools that allow you to do your best work.

• 15:11Speaker 02

  And I think Notion is definitely trying to put these pieces together. The one thing that differentiates Notion from other companies, you know, we're not trying to do this in terms of creating like seven different pieces of software and then packaging them into the Notion suite. We're trying to do this back to how paper was, a single medium that allows you to do all of this different kind of tasks you have. And so I think that's probably what differentiates Notion most. And I think the rebundling will happen with or without Notion. I think the thing that's really, really important for us at Notion is to not just rebundle as just like a packaging thing, but also as a single medium that allows you to not only take notes, but also create your company wiki, also create your task management, project management. People are building their own CRM tools on Notion.

• 15:55Speaker 02

  They're building application tracking system on Notion. And to us, that's the future. And so as we think about like the platform, we think a lot about just like how different people are using Notion. And it's everything from a single person who's trying to like organize their life on Notion, all the way to a big enterprise with 5,000 people connecting all their services they use on Notion. One thing that's really interesting on our end is, you know, we look at just what people are asking for. Interestingly, the number one thing that individual users ask, the personal users ask, and the number one thing that large enterprise asks right now for Notion is our API. And people want this because they want to connect Notion to all the other things they use. And so this is actually the thing that I'm really excited about for this year.

• 16:38Speaker 02

  And actually, this is what Christina is going to lead in terms of really building out our platform and partnerships, is really kind of launching our API that will allow people to not just put content on Notion, but also to like automate so many different workflows that companies have and individuals have. And so this is something that hopefully we'll be able to kind of roll out this year. And I think the creativity it's going to unleash in the market in terms of people feeling the power that they can actually now build entire pieces of software in Notion will be amazing to watch. So I think that's the thing that really gets me fired up and excited about Notion this year.

• 17:12Harry Stebbings?

  As a user, I cannot wait for the Notion API and the kind of the rollout of that. I do want to ask you, because you mentioned kind of the rebundling. And with that, you cover just such a broad swathe in terms of kind of the customer population. And you have this unique vantage point in terms of how teams behave and operate. And so what have been some of your core observations as people move to remote work fundamentally overnight?

• 17:32Speaker 02

  Yeah, this isn't really our time to be building a collaboration tool. Because at one hand, we are building a tool that so many people are using to do their work. But on the other hand, like we've all been pushed into probably the biggest A B experiment of our lives, where we all have to work from our homes. And ironically, like, you know, we're building a tool that is so useful for distributed teams. But Notion as a company, we're only forty people. So we very much focused on building this small team in our small office in San Francisco. And we had never really worked distributedly before. So it's been a great experiment and it's actually forced a lot of our thinking. And we've gotten more empathy around just how people work distributedly. And it turns out that, I think, as Sarah mentioned, like Slack and Zoom are fantastic for synchronous communication

• 18:17Speaker 02

  that allows you to just chat real time or talk real time or video. But a big portion that's left out from that is actually doing your work. Like actually writing documents, like actually being able to collaborate on that and see real time how people think and what kind of ideas they have. And this is where Notion becomes really handy. Because we're a small team, we actually put almost half of our team working on features that allows people to be more productive in this unique environment. I think two weeks ago, we launched an update where you can now see other people who are looking at the same document at any given time. And you can actually just click on their avatar and actually jump to where, you know, the other person is seeing. And we're also just improving all sorts of asynchronous communication, whether it's notifications or commenting.

• 19:00Speaker 02

  And what that does is allowing people to think about, well, there's obviously benefits of like all being in the same office. But there's also interesting upside in being able to do focused work from their homes. And so in many cases, we're hearing from people that they're realizing that Notion has become so handy in terms of even avoiding meetings that they have, because they can actually now just start a document and start. Collaborating and get the document in a good shape before they even have to talk about it. So that's been really fun to watch. And I think the last thing I would say there in this environment is also just how kind of the long term vision of Notion is to allow people and organizations to shape the tools that they need to kind of do their best work. So we're not kind of working directly in solving the virus,

• 19:41Speaker 02

  but we're seeing so many teams and companies around the world, so many nonprofits that are using Notion to just organize their work. We have first responders in New Orleans who are using it. We have individual neighborhoods who are coordinating their needs on Notion. We have hackathons being organized. And so that's been really fun to watch. It really warms our heart to see a tool like Notion being used to really organize and help solve the world's largest problems.

• 20:05Harry Stebbings?

  I mean, that is very unique scene. As you said, such a unique time. I do want to flip it on you, Sarah, and kind of maybe going a little bit more macro perspective, but as I actually said, such a unique time, Covid has had such a kind of dramatic behavior change. What behavior changes, I guess, do you think will remain post-Covid? And in your mind, I guess, what are much more purely short term pandemic responses?

• 20:24Speaker 03

  Yeah, absolutely. So I think the thing that is very unique about this crisis is that it's a global shared experience. I mean, in the past, a lot of these crises have been limited to geographies, or at least happened in sequence. I was talking to a good friend of mine who's Senegalese originally, living in London. And she said, you know, this is the first time my family in Dakar, my coworkers in London, and my friends in San Francisco are facing the exact same thing at the same time. So I think this is moving us into kind of a new equilibrium of behaviors around the world. And to your question, you know, what will stick? And my hypothesis is that we will go back to kind of eighty percent of what we were doing beforehand. Obviously, this varies very much by the behavior that we're talking about.

• 21:09Speaker 03

  But I think the most obvious, which Akshay had talked about in what they've seen at Notion, is digital collaboration. Like, we had, all of us, to learn to collaborate as distributed teams. We had to start using the tools if we weren't already. And we also developed the behaviors, norms, and workflows around them as organizations. So I think you're going to see a lot more people being, or businesses, open to work from home, which by the way- I'm very supportive of because I think it allows for a far more diverse workforce when companies open their mind to having some fraction of work being distributed. Second, I think this applies to a broader set of behaviors in my new equilibrium, which is business travel. I think a lot of people have said, do I really need to go to the other side of the world for a board meeting every quarter?

• 21:52Speaker 03

  Maybe I do it every other quarter. I joke with Pitch, a company I work with in Berlin, that like Greta. They're like, Sarah, we'd love for you to come, but Greta will be really happy about its impact on the climate if you don't come. Maybe I should get the memo. But I think that will be eighty percent abnormal. And I think, you know, Dylan at Figma and I were discussing this two weeks ago. I think there's also a different level of empathy and vulnerability that has shown up in the workplace. I mean, for people who have young children who are jumping into the back of the Zoom, I think there's a lot more appreciation for people's full lives. And so I'm hoping that that shows up much more in the future. And then more macro, there is a lot of change in a lot of other sectors. So two examples, one in grocery, I think people have had to have through the behavior of getting food delivered. So I think there'll be a lot more order at home on demand.

• 22:37Speaker 03

  I think there will be a lot more telemedicine. So we're seeing adoption, obviously have a lot more telemedicine, I think that will stick. And I think you'll see a lot less cash and a lot more part, you know, cashless transactions or digital transactions. So I think there'll be some impactful changes over the long term.

• 22:53Harry Stebbings?

  It's really interesting you said that about the increasing empathy within the people themselves. And actually, I did want to ask, because when you look at the team today, I was chatting to Camille before on your team. And she said about the team being forty today, which given the impact of Notion on society, it's still a very small team, bluntly. But also it stayed small for quite a long time. So I guess my question to you, sticking on the people element, was why did you guys decide to keep the team so lean for so long? And how do you think about maintaining that hiring bar now scaling so fast?

• 23:21Speaker 02

  Yeah, it's a great question. It's one of the reasons I was really excited to join Notion. When I joined, I think a lot of Notion that you and I play with today was built by just three engineers on the team. Actually, a year ago, we were only ten people. And so I thought that was just extraordinary that three people could build so much of the platform that we use. And I think Biggest reason we've tried to stay lean is it allows us to move fast is one thing which is allows us to just remain nimble and just move fast as can be seen in just like, you know, the fundraise we did or just new features we're launching fast. But it also allows us to be very creative. I think everybody at Notion wears different hats. And I think the founders, Ivan and Simon, really push our thinking around every additional hire that we're making.

• 24:05Speaker 02

  They ask questions around ways we could be doing it better. And I think there's a huge culture around just building systems as opposed to throwing people on it. And it applies to every function at Notion. I think one of the first things I did at Notion was for the first three months, I just did support at Notion just to see all the different use cases people have. And even within support, we build all these amazing systems that allows each of our support reps to maybe do two, three times the number of tickets with the industry averages. And so keeping it lean has really helped us kind of move fast and keep it very efficient. And one of the byproducts of that has been it's allowed the company to be profitable over the last two years. And initially, we kind of became profitable accidentally because it was such a small team.

• 24:47Speaker 02

  But over the last two years, you know, being profitable has given us so much optionality in terms of really kind of owning our destiny and being able to build a company in an idealistic, romantic way. And so, you know, we're at forty people now. We're obviously increasing the velocity of hiring because of the amount of customers and the business is growing so fast. But we still have the same values of efficiency and keeping it tight because I think it allows every person at Notion to be creative and to be able to wear different hats, which is a big draw for working at Notion.

• 25:17Harry Stebbings?

  Can I ask, in terms of the profitability element, it is such an interesting kind of piece because it's it's but only so rare. I guess, Sarah, my question to you here is like, how do you think about the levers of growth and profitability? Are they opposed? How does one make the balance healthy and really work in tandem so well from your perspective?

• 25:34Speaker 03

  I don't think they're opposing. I think this is the fundamental premise of why venture capital exists is that for companies that are growing remarkably fast, even no matter how profitable they may be, even if they're small scale, they need capital to grow more quickly. So the example I was thinking, if you have a business that has product market fit and has five million in revenue, even if they have eighty percent, let's say, EBITDA margins, you're going to get four million to invest in the business. And when you're on an opportunity that's as large as, let's say, the ones that Notion is on, it makes sense to invest behind that growth and you're not going to be able to get loans from traditional banks. So this question you ask gets at the very core of why venture exists.

• 26:16Speaker 03

  So I often think it's sequential, that you're growing first and then you become profitable. Rules are made to be broken and Notion is certainly an exception in being so profitable so early with such high growth. But I think as a growth investor, the question you're always trying to answer is, is this a good business to be in? It doesn't need to be profitable usually at the earliest stages, but you need to understand that the business is on a path to that profitability. But more importantly, that they're in an industry where their margins will be really attractive at scale. So it'll continue to be a valuable business for generations. That's what you're looking for.

• 26:53Harry Stebbings?

  Can I ask, Asher, is it quite challenging, given the new round and given the fact that you were so lean and so efficient for such a long time actually as a business, is it challenging to make that mental transition from lean and extremely efficient in terms of spend to actually now having fifty million with the new round and being more aggressive? How do you think about that transition mentally?

• 27:11Speaker 02

  I don't think it has changed anything in our thinking. Profitability has never been the goal for Notion. I think the goal for us has always been to build the largest company and to be able to have as much impact in the world. I think that's always been the primary goal for us and I think that will continue to be the goal for us. So I think even if we, let's say, the next couple of quarters, we invest in the business because those are the right investments we need to make. And if we became unprofitable, I don't think it would have really bothered us because we're trying to build a large company here. And so in some ways, fifty million dollars, I think the only thing it changes is maybe allows us To dream even bigger on some of the investments we could be making. But even before the virus happened, it just modeled out different scenarios in the in the year in terms of like heavy investments and lighter investments.

• 27:55Speaker 02

  And it seemed to us that we could continue to have the business fund that growth, which is why we never looked for financing because money didn't feel like a blocker for the investments we wanted to make. Now, obviously with the macro changing, one of the things we're seeing right now is record signups every day. It just continues to grow up very similar to how maybe some of the other communication platforms are seeing. And it's happening around the world, not just US. I think signups in China are up three X. Signups in Korea is up two, three X and just in the last week. So that's actually like really interesting to watch to see how many people are trying Notion these days. At the same time, a lot of companies, you know, small, medium businesses may not survive this onslaught and that may have an impact to the business.

• 28:37Speaker 02

  And so from that standpoint, you know, we've given ourselves a lot of runway. We kind of did the math, probably, you know, even if our business were to go to zero tomorrow, we now have about a 10 year runway to kind of continue building Notion. And so from that standpoint, we can continue to dream big even in this fairly kind of uncertain macro environment.

• 28:54Harry Stebbings?

  Absolutely. And I think last year people were going 10 year runway? That's ridiculous. And this year they're going, that's a very sensible decision. So I think there's been a definite mindset transition to runway and runway adjustment. So I have to ask, we mentioned the 50 million round there and this is a little bit unfair of me, but just putting like an LP hat on, if you think about 50 million and reported two billion valuation, let's just say, this needs to be like a 40 X to return a $2 billion fund. Can I ask, how did you think about the structure and mechanics of the deal and how it converts back to fund return potential?

• 29:22Speaker 03

  Fundamentally, my job or our job as venture capitalists is to find exceptional businesses and partner with them. And, you know, our business is one of outliers. And so when you have the opportunity to partner with people like Akshay, Ivan, Simon, you take it, is my view. But specifically on valuation, you can think about it from both, or I did think about it, from both absolute and relative valuation. So relative is how we typically think about businesses. It's a multiple on revenue and we certainly looked at that and Notion is growing very quickly. And had engagement similar to Slack. So those are some of the data points that we thought about on kind of what is the business worth today and five years from now?

• 30:03Speaker 03

  And then from an absolute perspective, you're absolutely right. You only want to enter companies at this level of valuation when you feel the absolute size of the market is incredibly large and there are that could sustain, I mean, to your 40x math, an 80 or 100 billion dollar business. And I think this market actually can. There are more than a billion people who use Microsoft Office every day. And if they pay a hundred dollars a year, that's 100 billion in revenue just for Office, not to mention the potential to expand in a lot of ways that Akshay outlined earlier. I will say though, I mean, a 40x, I would be delighted. With no pressure, Akshay, but we do have two separate funds at Index. We have a venture fund and a growth fund.

• 30:45Speaker 03

  And our growth fund is a billion dollar fund. And for that, you know, in growth markets, you really do look to generate five to 10x would be a stellar performing growth fund. And so we really had to think about in a five year period. I mean, a hundred billion dollars would be extremely hard to achieve, as your math points out, Harry, in that time period. But I think, you know, a five to 10x return and Notion looking like Slack, or certainly even a fraction of what Zoom is today, we think is very much their their trajectory.

• 31:15Harry Stebbings?

  I totally agree. And I think, as you said, when you look at the knowledge work, landscape being a billion and the product that Notion is being what it is, I totally see the upside there. And so I could totally see it, but I had to ask that one. I'd love to dive into a quick fire round there now. So I say a short statement and you give me your immediate thoughts. Are you ready to dive in?

• 31:31Speaker 03

  Ready.

• 31:32Harry Stebbings?

  All right. So I promised myself I'd read more. So we're going to go for, Akshay, you start first on this one. Favorite book and why? And then Sarah.

• 31:39Speaker 02

  Recently, I read this book called Order Without Design by Ella Burtor, who is a French city planner. And he talks about just how economic markets play such a big role in how cities evolve. And so that would be my recommendation.

• 31:52Harry Stebbings?

  Sarah?

• 31:53Speaker 03

  Guns, Germs and Steel by Jared Diamond. It talks about why some companies are rich and some companies are poor. And it's something that's fascinated me my entire life. And I think that has the most thoughtful perspective. Ivan and I actually talked about this recently. So I'd recommend that one too as well, Harry.

• 32:11Harry Stebbings?

  Sarah, you've worked in politics before. We've seen incredible stimulus packages over the last few weeks. How would you recommend the stimulus should be different?

• 32:18Speaker 03

  I would do far more for individuals. So I think we've seen a lot on the macro level, interest rates. We have seen loans for small businesses, but I would be far more aggressive on cash transfers to individuals, paid sick leave and giving people benefits that are not necessarily tied to work so that individuals, regardless of their circumstance, would be better off.

• 32:38Harry Stebbings?

  Akshay, what's your superpower and then your weakness in company building? Thirty seconds on each.

• 32:43Speaker 02

  I'm really good at the zero to one part. I think you can throw me pretty much any problem inside the company and I could get you to a version of product market fit there. I'm a product guy, I've kind of done product things over the last decade, but in that Notion, I'm doing everything except product. And I think I can get ramped up really fast and solve company problems. I'm probably not the best at scaling, so the one to 10 is probably something that I don't enjoy as much. I probably get bored. And so the way I've solved that for myself over the last few years has just been surrounding myself with people who are extremely good at scaling.

• 33:18Harry Stebbings?

  Sarah, what would you most like to change about the world of venture today?

• 33:22Speaker 03

  Diversity of thought. I would like to have people with kind of more diverse experiences because then I think a broader set of great ideas and great early-stage companies would get funded.

• 33:34Harry Stebbings?

  Akshay, you mentioned your check into Notion seven years ago. Can you remember who was the first check into Notion and how that one came about?

• 33:41Speaker 02

  I believe I was one of the first few. I think the exact first one might have been Naval. I think he was the first one who put money in the company and then, but then a lot of other individuals were very close to him.

• 33:52Harry Stebbings?

  Absolutely. It's an incredible cap table around you for sure. Akshay, what's the most misunderstood aspect of Notion?

• 33:58Speaker 02

  Notion, I think for many people, is a note-taking tool. I think in some ways, we're excited about that because that's a single unit of work, which gets people excited about Notion. And then I think when people spend more time, they realize all these amazing things you can do with the product. And so in some ways, it's most misunderstood, but it's also a great entry point into the product.

• 34:18Harry Stebbings?

  Sarah, what single element of Notion makes you most excited to work with them? If you chose one?

• 34:23Speaker 03

  Okay, I'm gonna break the rules because there are three. Ivan, Simon and Akshay. I mean, truly, working with them brings me great happiness. Sorry, I'm gonna sneak in another one and break all your rules, Harry. But I think also, being able to have a product that could be used by a billion people. I mean, Paige has his toothbrush test. I mean, Notion really does have the power to be used and kind of improve people's working experience around the world. That's very special.

• 34:47Harry Stebbings?

  Don't worry, Akshay, she told me you were her favorite before the episode. It's absolutely fine.

• 34:53Harry Stebbings?

  Actually, let's finish with you and tell me, what do the next five years hold for you and for Notion? And paint that picture for us, for the exciting roadmap.

• 34:59Speaker 02

  Yes, I'm very excited to work with Sarah and the team at Notion to get to 4DX, as you kind of correctly pointed out, so very much focused on that. I would say we have this huge ambition of allowing people to shape their own tools that shape their lives. And it's a big dream that really got me excited as an investor. And it's a big dream that continues to be so inspiring to me as an operator at Notion. I also think it can have huge impact in society. We all use this $2,000 laptop and, you know, some people can build tools with it and the other folks are just using it as a fancy typewriter. And I think we can really make an impact where everybody gets the full power of computing. That's what we're focused on.

• 35:43Harry Stebbings?

  Actually, as I said, biggest fan and lover of the Notion products, so that makes me very happy to hear. But thank you so much for joining me today. As I said, I've wanted to do this one for a long time. So Sarah, thank you so much for bringing it together and it's been such a pleasure to have you both on.

• 35:54Speaker 03

  Thank you, Harry.

• 35:55Speaker 02

  Thank you, Harry.

• 35:58Harry Stebbings?

  I mean, such exciting times ahead for Notion and I cannot wait to see the 4DX there. If you'd like to see more from us behind the scenes, you can on Instagram at Hstubbings1996 with two Bs. I do always love to see you there. But before we leave you today, I'm sure you've heard about it, but my word, this is a product I love. Carter. Carter simplifies how startups and investors manage equity, track cap tables and get valuations. Go to carta.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 platform and work with Carter's team of experienced fund accountants. Simply go to carta.com forward slash two zero V C to get 10% off.

• 36:42Harry Stebbings?

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• 37:22Harry Stebbings?

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• 38:02Harry Stebbings?

  As always, I so appreciate all your support and I can't wait to bring you a fantastic episode on Monday with Mark Sustard, Upfront Ventures.