Pod Insights Summation with Auren Hoffman OpenGov CEO Zac Bookman - GovTech, data access, and AI transformation About this episode Zac Bookman is the co-founder and CEO of OpenGov, which provides cloud software and AI solutions to over 2,000 government agencies across the United States. In February 2024, OpenGov was acquired by Cox Enterprises for $1.8 billion. In this episode of World of DaaS, Zac and Auren discuss: Making public data truly accessibleGrowth vs sustainability in GovTechHow COVID transformed government digitizationAI's potential in local government operations Looking for more tech, data and venture capi...
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:02 Auren Hoffman? Hello, fellow data nerds. Welcome to World of DAS. I'm your host, Orin Hoffman, CEO of Incubate and GP of Flex Capital. Discover more episodes, get weekly data as a service news, original content, articles on data and more at worldofdas.com. That's worldofdas, D-A-A-S, dot com. Hello, fellow data nerds. My guest today is Zach Bookman. Zach is the co-founder and CEO of OpenGov, which provides software to over 2,000 government agencies across the country with a vision of creating high-performance government for every community. As of February 2024, February 24, OpenGov sold to Cox for $1.8 billion, which is freaking amazing. Zach, welcome to World of DAS.
0:47 Speaker 01 Thank you, Orin. I'm super excited to be here.
0:50 Auren Hoffman? I'm super excited as well. This is awesome.
0:53 Speaker 01 Longtime listener, first time caller, I think, as they say.
0:56 Auren Hoffman? Yeah, we're longtime friends, you and I. So I think this is going to be a lot of fun. Now, what's like the landscape of GovTech? There's a lot like when you were originally in it, it was fairly new and weren't as many. But now it seems like there's more and more players that are coming in on, obviously, there's national security, there's public safety, and then there's like all the other guts of things like you guys do.
1:17 Speaker 01 The easiest way to understand, so there's all these private equity firms in the space now, and there's bankers and they map the space. And the easiest way to understand it is there's public safety. Some people might have heard of Flock Safety, which does license plate readers.
1:32 Auren Hoffman? That company's amazing.
1:33 Speaker 01 Yeah, Garrett leads it, and I'm very lucky to have gotten involved actually through Trey at Founder's Fund early. And it's catching crime and preventing crime, and it's really impressive. People have probably heard of Axon, which is a very hot company now. So the world over there is public safety. And I can go into that space. There's computer aided dispatch systems. There's records management sys- so computer aided dispatch is 911 centers. There's records management. That's the cop car and the thing in there that pulls you over. It's all this stuff in there. Then there's public administration. Okay. So this is literally like the guts of our nation's local and state governments.
2:15 Speaker 01 This is accounting and budgeting and permitting and procurement and tax collection.
2:21 Auren Hoffman? And someone that you could use just like the regular software that other people use, like, I don't know, NetSuite or SAP, but someone that has to be like very specific to government.
2:31 Speaker 01 Correct. I'll go into that. So there's public safety. There's public admin. Open Gov plays in public admin. We're becoming, I'd say, one of, if not the leaders in public admin. And there are companies in, I'd say, intelligence or military or defense and Palantir and One Brief and Andro and that kind of stuff. That's federal, really. And then there's education. So like school information systems and even curriculum and stuff like that. Consider those four main categories. Within each of these categories, you have horizontal players. Think of Oracle or SAP
3:11 Speaker 01 and that kind of stuff. And they basically shoehorn old, you know, 1990s, 2000s systems, PeopleSoft and other things, the IBM stuff. And they just like ram it into government, maybe with some consultants and lots of professional services. And then you have vertical software players. Open Gov is a vertical AI-first cloud software player. And we're coming in and munching at the vertical incumbents primarily. We love to rip Oracle out of government. It's one of the reasons we started the company. But in this space, there's a company few of your listeners probably heard of. You maybe have because you're an investor as well called Tyler Technologies. It trades for about 25 billion on the S and P 500. It's been
3:55 Speaker 01 a Wall Street darling. I think it's been the 10th best performing stock of the last 20 years. They print 300 or 400 million of free cash flow and do more than 2 billion in revenue selling software and services to state and local government. They have public admin and public safety. And in the duopoly spirit of things, they have a secondary incumbent called Central Square, which does about 500 million in revenue and is bigger in public safety than public admin. It's owned by Bain Capital and Vista. So there's some of the landscape and you've got OpenGov coming into the charge. And now we've got, since OpenGov's attaining some
4:34 Speaker 01 scale, there's, you know, Y Combinator-backed, ramen-fueled, five-person teams trying to kill us. And so it's a big competitive thing. Private equity firms are all over. It's a big fight and it's all for the good of our country.
4:48 Auren Hoffman? It's one thing to sell into like New York City or something, which is like a massive government. And but there's a lot of these towns that have 10,000 people and then that one has to sell to. And I imagine it's just like super hard to like sell to each one of them.
5:03 Speaker 01 It's very expensive to distribute this stuff. And it's one of the reasons, to give you a bit of a contrarian take, I get called a lot of, hey, have you heard of this new company? Or do you want to invest in this thing? And I'm just not quite as bullish on GovTech as a venture-backed space as has become, I don't know, almost normal or hot, given some of the successes of OpenGov or Flock Safety or even Palantir or others. It's because it's so expensive to distribute. You need so many products. It's a little more of a private equity oriented space. The growth is a little slower. Gross retention can be high. But to go, how are you going to go visit 4,000, 40,000 person towns? There's
5:45 Speaker 01 3,000 counties, 13,000 school districts. There's about 19,000 cities and towns. There's a lot. And they all think they're king of their castle and they want to be sold to ideally in person. It's very expensive to distribute. And there's the best of breed versus suite dynamic, which you see in enterprise software. That's why we have Oracle, SAP, Workday. They sell suites versus, you know, maybe a point solution like Zoom or something. Governments prefer suite, but it's so expensive to build this much software. Maybe AI changes that, but I think we're a bit away from AI. Building out zillions of features really, really fast with no subject matter expertise input.
6:29 Speaker 01 Anyhow, this is the dynamic. You got sweet versus best to breed and you got all these different tiers.
6:34 Auren Hoffman? Do you remember Granicus 25 years ago?
6:36 Speaker 01 I'm friends with those guys today. Granicus now is a perfect case study. So Granicus started as a couple of great entrepreneurs, Tom and Javier. And they did agenda management and online meetings. And they were very mission driven and they got it to maybe, I don't know, 20, maybe 25 million in revenue. And it was quite impressive, but it was at a time where, you know, things traded at normal multiples. They think they sold it for 70 million bucks to a private equity firm called K1. K1 repotted the company and literally issued everyone notices that we're moving it from SF to Denver. Let us know by Friday if you're joining. They lost like 80% of the company, cut costs.
7:19 Speaker 01 They ended up selling it to Vista, if I remember correctly. And then they started buying a bunch of other stuff. Granicus now is a collection of probably 15, 20, 25 different companies bought. It's owned by Harvest, kind of a no name-ish generic PE. It does about 400 million in revenue and it's just legacy like crazy. And customers were angry and can't get off it and.
7:46 Auren Hoffman? Classic software stuff. It's interesting because like when I met Tom Spangler in the 90s, he was 22 year old guy and he would literally, he would just like fly to like the middle of Texas. You couldn't even fly there. You'd have to like fly somewhere in Texas and then drive for like four hours. And then he'd spend like a month just going from like tiny city to tiny city. And he would get like $4,000 contract here, $3,000 contract here and $8,000 contract there. It was hard and you could only do that if you were like living on ramen.
8:18 Speaker 01 This is our founding and honestly, we still do it today. I mean, we don't sell too many $4,000 contracts, but my first contract was 1,800 bucks to Lone Pine, California, 3,000 person town in the eastern Sierras. It made no financial sense.
8:34 Auren Hoffman? I know where Lone Pine is, yeah.
8:36 Speaker 01 Yeah, it's gorgeous country, but it probably has one stoplight, maybe two. And we call it Donuts and Doorbusters. We literally go around, we show up with donuts, we'll kick your door in, and we meet everyone in this town and we build relationships and we help modernize our nation's cities and counties.
8:53 Auren Hoffman? In some ways, there was like two big events in the last 20 years. I feel like that really kind of redefined GovTech. One was 2008 crisis, and then the other one was COVID. Walk us through both of those and how those kind of changed the game in the GovTech world.
9:09 Speaker 01 So, post the Great Recession, I mean, it's actually kind of was the impetus for us to start this company. Joe Lonsdale and me and two young technologists from Stanford had been with a nonprofit studying the California budget crisis. We saw three governments in California go bankrupt: Vallejo, San Bernardino, and Stockton. And we said, how does a city even go bankrupt? How could they not have predicted this? And we started talking with the city of Palo Alto. They paid 10 million bucks for an ERP system that was delivered on 20 disks and had green screens. They bought it from the German software conglomerate.
9:43 Auren Hoffman? Palo is not a big place.
9:45 Speaker 01 It's bigger than you think because they run an electric utility. And so they have quite a big budget. But no, it's not that big. They bought it from SAP. They were extremely frustrated for many years. They probably were paying a million bucks a year in maintenance. And we said, give us your budget data. And they said, how do we do that? And we're like, you're the friggin' budget director. What do you mean? How do you get us your budget data? And then they said, this guy named David, he said, come on in and let me show you what I'm dealing with. And we sat with them and we were like, oh my gosh, there's problems in government. There's politics, institutional incentives, bureaucracy. We all know that. But we saw a big tech problem. And we thought, we can't solve every problem, but that's something we could solve and there's probably a really good business there. The state of California at the time was using an accounting system that ran on Cobalt.
10:27 Speaker 01 The programming language most popular in 1960. So anyway, we got started after the Great Recession in 2012. Anyway, we grinded and grinded. Covid hits and we were freaked out like everyone else. And then our business started working even better. Cities were putting a box out front saying, drop off a printed permit application with a check, paper clipped to the application. We'll mail you our thoughts. And it's in a cardboard box out front. And I talked to a city manager and he had ordered like $300,000 in computers. And he said, Zach, I gotta fire my IT guy. I said, why? He said, we're in the middle
11:08 Speaker 01 of Covid and this guy orders computers that are desktops and no one's even allowed to come to work. So they can't work at home. And we just wasted 300 grit. And I'm like, cities are struggling. And so we have to help these organizations get virtual, get remote, get distributed, get online.
11:24 Auren Hoffman? I mean, in some ways like Covid was like, things have gotten so much easier to be a citizen since Covid. It forced probably international too, but it forced so many different cities and governments and state governments to just get better at servicing their customers. They couldn't just rely on the fact that you'd go in, you'd wait in these long lines and you'd get like the stamp or something, you know, which was 2019. Like that was still happening.
11:50 Speaker 01 It still happens today, too. It's complicated. And here's a different take on it all. We love to bash government. Everybody loves to bash government. But very few people realize we are the government. You can raise your hand and run for town council.
12:05 Auren Hoffman? No, thank you. I'm not doing that.
12:07 Speaker 01 Well, everyone says that, including all the venture capitalists who live in Woodside or Atherton or San Francisco. And it's like, so you just want to sit on the sidelines and say how stupid everybody is, but you don't want to participate.
12:19 Auren Hoffman? That's exactly what I want to do.
12:22 Speaker 01 Even further, you could go work in government. Here's the reality is we create the rules that these governments abide by or try to abide by. And so it's really hard to procure software. You got to go through committees. You gotta sometimes get board approval. Could you imagine, by the way, running one of your companies, Orin? And you want some more Salesforce licenses and you need to hold a board meeting to procure more of your Salesforce? It's crazy. And yet that's not because the town manager or the CFO says, you know what? Let's create up a rule on the spot that says, I need to go to the board. It's because the board, who are elected residents of town.
12:59 Auren Hoffman? It's a legacy because like at some point someone did it wrong. And then the board just felt like I have to have my own. She's kind of crazy, but I can see why all these things happen.
13:09 Speaker 01 Every time there's fraud, every time there's a little scandal, we create a new rule. And now the people working hard in government have to go follow that rule. And then we all complain that they're so stupid that they have to follow the rule. And it's like, you know, there's fraud in companies too.
13:23 Auren Hoffman? It's crazy. By the way, this happens in companies as well. And then maybe not to that same extent, but companies have all these different rules about what you can do. And has to get to this level for this approval or this type of thing or.
13:34 Speaker 01 If you're selling enterprise software, enterprise solutions to big hospitals or banks or construction firms, it's probably close to as painful as it is to sell to governments.
13:45 Auren Hoffman? I doubt it's as painful, but it.
13:47 Speaker 01 I say it's 20% more painful in government. 10 percentage points is the extra committee approval and 10 percentage point is the contract vehicles you have to figure out.
13:57 Auren Hoffman? World of DAS isn't just a podcast. World of DAS membership is a private invite only community for founders and executives of important data and AI businesses. It's a place for off the record, high trust conversations focused on the biggest questions data leaders are facing. The community is about peer learning, curated intros and access to private events. Everyone in the group is building or leading something meaningful in data. If that sounds like you, apply to join at worldofdas.com. That's world of D A A S dot com.
14:39 Auren Hoffman? A lot of our companies sell to the federal government. And even within the federal government, there are many different ways of selling and many different. And so if you're selling to the Treasury Department or something, it is significantly easier than selling to the Defense Department.
14:56 Speaker 01 Or the VA probably.
14:57 Auren Hoffman? Defense Department just is like way more bureaucratic and partially just because it's way bigger. And these things are a function of their size and stuff. And so you sell something to the Commerce Department, it's smaller, it's nimbler, it can make decisions quicker. And then Congress people probably have just more rules because there's probably been more fraud and more waste in Defense Department over the years. So they just have more rules about what you can do and what you can't do. There's this weird paradox because government does desperately need technology, but they're also this kind of like somewhat risk averse buyer. How should we be helping them navigate this kind of transition?
15:34 Speaker 01 The first thing that comes to mind, it's a little bit related to what I was talking about, we don't want government to move at light speed. You ever seen the show, the episode in The Simpsons where like the monorail guy comes to town, does a good song and a dance, and then sells the town on building a monorail? When in fact, it's never going to work and no one really wants the monorail. The spoof on that is you don't want that to happen in every town. Some good looking showman or a sport jacketed salesperson comes in and rigs up some solution that's never going to work and town corpse over a ton of money. So we want governments to think long term, to not act on quarterly goals like a company. And the other thing we need to understand is the government's job is not quarterly profit.
16:14 Speaker 01 The government's job is to elucidate the priorities of the community and then execute on those. And what Los Angeles wants, hosting the 2028 Olympics, and they're a customer, we're helping them get ready for that, is very different from what like Stowe, Vermont might want. Stowe, Vermont might want to be a sleepy ski town that preserves the environment. People move there and they're like, don't build anything. So who's to say that the residents of Stowe, Vermont are stupid because they don't want to have new shopping malls built all over the place? You can comment on them, but you could also go move there and say, let's build a shopping mall. And your neighbors might be like, screw you, we don't want that. So we got to understand there's different communities and we're a nation of democracies.
16:59 Auren Hoffman? Which is great because like we have all these little experiments running, which is amazing.
17:02 Speaker 01 It's one of the coolest things about America is we have a federal government, we have state governments, we have local governments and we have the de Tocvillian experimentation of like what works, what doesn't across different states, different rules, regs, different communities. And if you don't like SF, go move to Jackson, Wyoming and you'll have a very different environment.
17:21 Auren Hoffman? Basically, it's the same people, by the way, between those two.
17:23 Speaker 01 That was a bad example, maybe. I think it's the spirit of partnership. I think AI presents a huge opportunity. I see governments interested in AI and adopting AI almost as fast as I see many friends who are running startups and companies. And I think it has the potential to kind of leapfrog. Governments designed to run 10 or 15 years behind the private sector. AI holds huge potential for all sorts of processes from building a budget to like processing invoices and doing accounting to getting a permit. And I'm seeing governments very curious and saying, hey, could agents do this? Can we save time? Could this help fill our hiring shortages? They're having trouble recruiting people like you or me to go work in government.
18:08 Speaker 01 Maybe we need to recruit less new roles. So I think AI holds tremendous promise, but vendors to government need to have the spirit of partnership. If you go in like, hey, you're fools, I'm a savior, it's not going to work very well.
18:21 Auren Hoffman? Government has a lot of really interesting data. And over the last 20 years, more of that data has been made public, more of that data is accessible for people, but still it's only a small portion of the data. I would have thought a higher portion of the data would be available today than it is across governments. What's stopping this data from becoming more accessible?
18:45 Speaker 01 This is DAS, okay? Let's talk about the different types of data. If you're talking at the federal level, okay, if you're talking DOD or Intel. Confidential or it's classified data. What's so cool, particularly about our business is OpenGov, is we primarily, if not almost exclusively, work in areas where the data is completely public. And people don't seem to understand that. It's not like the first thing that comes to mind, but these cities, these towns, these counties, these school districts, special districts, state agencies are yours. The data is yours. It's public. You want to know where the money goes? Just ask.
19:26 Speaker 01 In fact, we work with people all day, every day, who are trying to figure out ways to get it out there and to communicate, ideally in machine-readable format, ideally clean and usable for everything from computer scientists to academics to just interested and concerned citizens. What's interesting is people come up and they're like, oh, what about sensitivity? What about privacy? And I'm like, we're all for privacy. We're all for protecting data. The reality is, most of the stuff we're doing, the government is trying to get it out. You want to see where all the permits are issued? You want to know, you know, the condition of your roads? You want to understand electricals?
20:02 Auren Hoffman? By the way, yes, yes, yes, yes. Crime, statistics, like, I want to know all of this. I want to be able to get access to everything easily. I want to be able to get tax assessments on all the properties. I want to understand who's in violation of what. Again, sometimes you'll go to a city and it's like, it's right there and it's like beautiful. And then you go to another city and it's like, what the? It's like they're back in like the 1990s or something.
20:27 Speaker 01 You have a few things. One, just understand, most of this government data is public and it actually belongs to you. And we have a Freedom of Information Act passed in 1972 and there's state rules and like, you can go get it, you can drive up, you can ask for it. Number two, though, is what you're saying, is a lot of it is in junk quality condition. And this is because bad tech, bad vendors, including the do lock-in. It's also because of loads of human errors. You've got people entering invoices or entering GIS coordinates and oops, they fat finger something and they're fat fingering four things a day for 10 years. And you've got like fire stations that are located in the Pacific Ocean. We've seen that in the data. And that's a problem. And so how do you clean up this data? It takes a lot of effort. Number three is,
21:10 Speaker 01 And this one is complicated. I frequently talk to government executives and they're like, "Hey, I'm trying to build a budget for 2026 or 2027. I am working literally night and day. I'm missing kids' ballgames and I'm in the middle and some guy drives his F-150 up, walks in and says, 'You idiots, where did all the spending go in the police department? I want monthly overtime reports for the past 10 years on for every field service professional.' They have the right to ask that. Now the person is like, 'Oh, my gosh. Okay, we'll take in a FOIA request. What do I do? I gotta go spend like a day collating all these reports.' If they had open source software, they could probably do it in 10 clicks, but-
21:51 Auren Hoffman? Or the guy could do it himself.
21:52 Speaker 01 Yeah, but we have people, they're losing hours a day in productivity answering basic questions because some system is old or because they don't have the data ready. But so these are trade-offs that have to be made all the time. You don't get that in private companies. Somebody doesn't come in off the street or even a sales guy doesn't get to go to the CFO and say, "You know what? I want to inspect income statements for the last four years and I want to do..." So this is some of the cost of running a government, running a public. And we want that cost.
22:17 Auren Hoffman? But that is one of the benefits of government. It's like this data is really valuable. It's valuable for companies. It's valuable for individuals. It's valuable for academia. It's valuable for like civic society.
22:29 Speaker 01 It's valuable for trust.
22:30 Auren Hoffman? Yeah, they're producing this data to help all of us. By the way, there's like, my favorite is like, the New York City has this guy and he like works from a home. I think he lives in Queens and it's just like one guy and all he does, he's like super anal, but he does a great job. All he does is he tries to figure out every single like random address in New York City, like every other address that could also represent that same address. So sometimes like 24 West Broadway is also like 32 Spring Street or something because the building's on the corner. Or some of these streets have like 15 names because they've been named, you know, after famous people or something like that. The Avril Harriman
23:13 Auren Hoffman? Street is also West 34th on this block. This is like one dude who like maintains all of this. Like if he gets hit by a bus, New York City is like screwed. It's little is one guy.
23:24 Speaker 01 Single points of failure are a big problem. Institutional knowledge is a big problem. Apparently about half of the baby boomers are all retiring and half of executives in local governments are retired.
23:35 Auren Hoffman? But thank God, I'm so happy.
23:37 Speaker 01 And we could talk about that too, but it's a serious issue because these people are walking out the door with massive institutional knowledge and they don't have the systems and the processes for real resilience. So that's one of many serious problems facing our nation's local governments.
23:52 Auren Hoffman? Now, there's other data out there that is sensitive data. So let's say the year of mine IRS records, our Medicare or other types of things. So it's like, it's very, very sensitive.
24:03 Speaker 01 Credit card data, confidential informant data, your police department.
24:07 Auren Hoffman? Yeah, well, that would be a separate type of thing, but even things like IRS data, it would be great if we could query overall questions of the data without seeing the underlying data.
24:19 Speaker 01 Could not agree more.
24:21 Auren Hoffman? It'd be great to see like, okay.
24:23 Speaker 01 Anonymize some basic stuff and do real analysis.
24:25 Auren Hoffman? Yeah. For people who made a hundred thousand dollars last year in the state of New York, what are they making this year? Just like ask these like broader questions, right? And today I think there's like four academics that have access to the IRS data and some of the most interesting academic papers by like Raj Chetty is one of them. And it's kind of unfair because it's like, well, only four people have this like, it's longitudinal data over 50 years, over a hundred million people, right? Of course it's going to be right for amazing papers. Like, why doesn't every academic have access to, again, not the underlying data, but to ask like these deeper questions, same thing in the Medicare, same thing, all this other stuff. Can we have our cake and eat it too with some of this like more sensitive data?
25:08 Speaker 01 I would like to think so. I share your interest, the IRS in particular. If I was going to go into government, if somebody was like, do you want to run something? I actually think that'd be a fascinating job and one where you could make a really big impact on our country. What could be more important than revenue collection? I mean, I suppose defending the homeland, but you know what I mean? Revenue collection seems really important. It's one of the things that differentiates the United States from so many countries in the world. Like we have a borderline functional revenue collection system where people more or less on the honor system, pay their taxes. That's pretty powerful, but we could do so much better than we do.
25:43 Auren Hoffman? I would bet you that the US has the highest tax compliance in the world.
25:48 Speaker 01 I actually have read about this. I don't know the answer. I wish I could go look this up and like, come right back to you, but it is wild that we essentially self-report and it like, more or less works. I think it could work way better, as I said, but.
26:01 Auren Hoffman? Yeah, I assume it could work better, but I bet you like, we have way higher than like France or something like that, like some sort of equivalent country or something. Maybe it's harder to evade your taxes here than it is in France because you just like, move your stuff to Switzerland and France or whatever it might be. What are some of the next frontiers the government can do with all this data? Like, as the data becomes more and more accessible, like, what can we do? How can we make government better?
26:26 Speaker 01 I think you highlighted a couple of things. I think getting it out there, promoting studies on it, academic work. I think startups that want to use it would be maybe one of the most impactful things we could do and encourage a startup ecosystem. So when people are like, are you bullish on like the venture capital ecosystem of startups and local government? I'm like, kind of. I think it's very good for governments, more competition, so on. I think it's probably less good for the venture capitalists. I do want to push back on you a little bit. I love your, I don't know, is it a recantation of your entire data as a service thesis? I'm an Oren Hoffman follower and I wouldn't want to overblow, like, I don't think all of government's problems are data problems.
27:10 Speaker 01 And I guess I just push back and say, look, we have a broken political culture. This is probably not the place to like, go super into it, but like, it's pretty clear our country is going through a set of political fights and conflict, the likes of which I don't know if we've seen since maybe the 60s or something. And that's a real problem since so much of government is in fact us. It's we, the people. Number two, I think the underlying systems are bad. Is that 10% of the problem or 40% of the problem? I don't know. We could have a debate on that. I think our institutional incentives, the regulatory environment is a real problem. It's very hard to innovate in government.
27:52 Speaker 01 It's very dangerous to be an executive in government trying to innovate for fear of losing your job. They basically have to operate in glass houses and all the residents or all the community members get a nice rock and they get to throw it. And that's a very difficult environment. I don't quite know how to solve it, but if we could fix some of the incentives there, that would help. And I think we have bureaucratic problems ranging from our pension systems to these huge organizations that may need to be realigned or reorganized. So I think all of those are more important problems than the data problems, if you will.
28:26 Auren Hoffman? Absolutely. Now, one interesting thing about OpenUp, to me, just watching it, you and I have been friends for a long time. Watching you, it was like, if I had to just kind of like give your career arc at OpenUp, just knowing you and talking to you, it was like slog, slog, slog, suck, suck, suck, suck, suck. Slog, slog, slog, you win, or something like that. It didn't seem like it was like an easy path to doing well.
28:51 Speaker 01 That's pretty much right. I mean, I have a funny story. I mean, so you're exactly right. It's just been one long series of failures, mistakes. Some of that is just human error and bad execution, but some of it is like, it's a very tough market. It's very expensive to build a distribution machine. It's very expensive to build these products, to build the best products in their categories. And right up until I'd say, so 2023, late 2023, I started working the deal with Cox Enterprises. Cox Enterprises, by the way, owns the cable system that people know about Cox Communications, and they own many other businesses. And started working on it and I had an investor that was open to getting off the cap table. And I was happy to have them off.
29:35 Speaker 01 And I had another investor, a friend that wasn't on the cap table that wanted to be. So I said, look, you could buy these folks' shares on secondary. They did their analysis and said, ah, the company's probably worth like 800 million. So we'll offer 800. I said, that's not going to get the deal done with this other investor. The other investor came back and said 900. I went back and said, they want 900. They said, I'll go to 850. I said, 900, I'll go to 875, I'll go to 900. I said, guys, I'm not going to play low level investment banker anymore. Last shot, either you flex or you flex. Here it is. And they didn't flex, didn't do the deal. And two months later, company's 1.8 billion. I knew that, couldn't talk about the transaction, but it's an example of just underestimated virtually the entire time.
30:19 Speaker 01 And I have to be honest, it kind of sucked. I'm trying to recruit top talent. And a lot of top talent was like, I don't know, it's kind of a sleepy market. I want to do hot, sexy, high-speed enterprise software stuff underestimated by investors who are like, love the mission. It's open.gov? What'd you say? And I'm like, nope, we're not a government, not a nonprofit. And they're like, I don't know. And then underestimated by whatever is the social dinner party environment where it's like, who gets invited to the cool stuff? And we had plenty of sizzle at times. We were a World Economic Forum, tech pioneer and a Goldman Sachs builder and innovator and blah, blah, blah. But like,
31:00 Speaker 01 especially in ZERP, when other companies are growing 80%, we're chugging along at 25 or 30. When Marc Andreessen was like, you're the little engine that could, Zach. I'm like,
31:11 Auren Hoffman? I don't know if that's a compliment.
31:12 Speaker 01 I don't think so.
31:13 Auren Hoffman? Girls are like very candid that raising too much money is, it can be a real, real problem. Like, how do you think about that? What advice would you give to other people who are 10 years behind you?
31:24 Speaker 01 We raised a lot of money in many respects, too much. I think if you don't have a tight product market fit and you pour the capital on, you exacerbate the problems that are there. The Founder Collective guys write on this. They were involved early. I almost lost the company in 2019. At that point, we were big enough that losing the company is like selling to a private equity firm for barely above the preft stack. And none of the common stock makes any money. And the investors are all kind of pissed because they've been in for eight years. And so it would have been really bad. I got some religion on cost discipline and started reading all their stuff. And I've come to just so admire the bootstrappers, just so admire people who can build a company through series A or B or forever. They also end up way richer.
32:09 Speaker 01 You know, if you could be a Michael Bloomberg or something like that. I mean, maybe I suppose not, I don't know, although I think Zuckerberg missed a bunch of rounds because his company was working and the Microsoft guys did too. And Bezos took debt in a couple of key places. So I just admire the bootstrappers for their resilience, their commitment, passion, all that stuff. And they just end up owning so much more of the company. I think lean, it's true. And I don't know the law of physics, but like you spend less, you grow faster. You spend less, you have like less noise in the system and less smoke coming out of the gears. We started cutting costs and this grew faster.
32:47 Auren Hoffman? Honestly, there doesn't seem like a correlation to hiring more people and growing faster.
32:54 Speaker 01 And I think AI is pulling some of that out. And people are like, you know, there's these companies with 10, 20 people that are like really working.
33:00 Auren Hoffman? Even before, I mean, I was seeing these companies and they'd cut their sales force in half and their revenues would go up faster. Their salespeople were more busy. They got more reps in, maybe the better salespeople were getting the deals. They were happier because they were making more money. You just said all these different kind of like weird compounding things. They got more motivated. Every time you get a sale, you get even more motivated, make the next sale, right? So winning begets winning. So there are just a lot of scenarios like that.
33:27 Speaker 01 We're still hiring like crazy for what it's worth, but we're keeping the bar really high. So we have a lot of open roles and the company is constrained and we're quite profitable now. And it's just a much different, we stay frugal and we still get the joke every now and then, but frugal culture is just so much better. Things work better.
33:47 Auren Hoffman? Hard to do in San Francisco though, right? Because people are so used to other stuff.
33:51 Speaker 01 It's very hard. We have offices in Chicago, Boston, Atlanta, and Dallas.
33:55 Auren Hoffman? A little easier there.
33:56 Speaker 01 We sell in all 50 states and that is easier. The other thing that's cool is like winning. And if you want to go stay at the Ritz Carlton and some company has fish tanks in their lobby and they're pouring money into free lunch, breakfast and it's like, good luck. That company might not be around. And if they are and they have some monopoly on advertising revenue or something like, good luck if that's where you want to be. But if you want to be on a winning team or the winning company and build skills and build a career, that's a value prop that I think is worth more.
34:26 Auren Hoffman? A few personal questions and we go back forth on anything, but people who are listening may not be able to see this, but you've rocking a mustache. It's not November.
34:34 Speaker 01 Oh, the stash.
34:37 Auren Hoffman? You're rocking the mustache. I think you look great, by the way.
34:41 Speaker 01 I think you should get one.
34:42 Auren Hoffman? My wife does not want me to have a mustache.
34:45 Speaker 01 Well, my wife, her name is Julia. She's incredible and she also maybe is a little bit freaky or different. She encouraged this in July. We were on vacation. She's like, I think you should do it. Anyway, we're on vacation. I was like, okay. And she loved it. And you know, I had hair down to here, like down to my shoulder practically where we were building the company, you know, little whatever, long haired crazy founder. So I don't know, trying it out, having some fun and that's what the stash is about.
35:13 Auren Hoffman? And have you found like people react to you differently with the mustache? People have beards now. It's pretty common to see beards. It's not as common to see the stash.
35:21 Speaker 01 I had John Chambers on our board for many years. He's a dear mentor and he's a clean cut, classic sales guy.
35:28 Auren Hoffman? Yes, clean cut as you Mississippi.
35:31 Speaker 01 West Virginia. He gave me like so much grief for the beard, the hair. And Pierre Lamont was an investor and he's like, cut your hair. What's wrong with you? So I don't know, but look, we have fun here. You can be yourself and we find that folks in government that we sell to are real people too. They like real talk and real partnership. So I don't know, the stash is what it is. Maybe it won't be there in a couple of weeks, but.
35:55 Auren Hoffman? There's a point where you like bike to cross the country doing a customer tour and stuff like that. I imagine actually like on the ground, like you're seeing a city very differently when you're like biking through it, when you're walking through it. Cause a lot of times in sales meetings, even when I'm visiting a customer and like I'm flying in, I'm not seeing their office and I'm like going in quickly, you make the sale, you run out, being on the ground, staying, you know, going to the local shops, you probably get a different appreciation of their culture, of their city.
36:24 Speaker 01 Of our whole country. So yeah, we did this crazy stunt. We called it Open Gov Across America. I biked from the San Francisco Bay to the Chesapeake Bay. I was ignorant and underestimated. I love an adventure. I thought I could do this in like 35 days. It ended up taking like, it was 41 days of riding, but I fell behind. We had a flash flood in Hanksville, Utah, outside the Capitol Reef National Park and cloud cruiser. We took my brother's Audi station wagon, wrapped it in Open Gov blue and put our logo and power more effective and accountable government on it. And it washed away 80 yards in this flash flood. Fortunately, everyone was okay in the town and so on, but like that was a disaster. It
37:07 Speaker 01 was on the local news talking about it. But you see the country in a different way. You see the diversity of the country. You see towns and cities, large and small. You see the regional differences. And we promoted Open Gov and visited customers and did local PR and blog posts. It ended up being not as successful as I hoped it would have been, but I think it captured some, our customers had some interest and the chairman and CEO of Cox referenced it when we closed the sale. He's kind of an adventure outdoor guy and wouldn't shock me if it added 50 or a hundred million in market cap to the company just for being nuts.
37:46 Auren Hoffman? Now, a couple of personal questions we ask all of our guests. What is a conspiracy theory that you believe?
37:51 Speaker 01 Well, the common conspiracy theory is the government's trying to like screw you and steal from you. I don't know if it's a conspiracy theory, but I think most governments and most people in the governments are actually trying to do a good job and work hard for their communities and they are kind of mission driven. So there's my conspiracy theory.
38:11 Auren Hoffman? Your conspiracy theory is that there's not that much of a conspiracy theory.
38:15 Speaker 01 There's not that much. I mean, I lived in New Haven, Connecticut. You can kind of smell some mob activity in Rhode Island, New England, whatever. But no, there's not as much as people think of rank fraud and corruption and all of that. There's more complicated enterprises that are overregulated, tough institutional incentives, heavy bureaucracies, unions, pay scales, all these things. And it's like, I look at the city and county of San Francisco, where I live, Mayor Lurie has come in with a mandate, public safety, overhaul the regulatory system. He announced on Instagram and LinkedIn and I think his X feed that Open Gov has been selected to lead the Permit SF, the permitting and licensing overhaul of all the city's
38:59 Speaker 01 systems. And this place is very tough to do business with 40, 50,000 employees, variety of unions, very complicated entrenched departments. We think of this as the tech capital, but this used to be an old line industrial city, probably has more in common with Philadelphia or Baltimore than it does with people's image of just hot digital tech. And he is having to deal with all of this and wrangle a council, department heads, bureaucracies, unions. It's very complicated. And the reality is, these things are just really complicated. It's not just some big conspiracy.
39:32 Auren Hoffman? All right, last question we ask all of our guests. What conventional wisdom or advice do you think is generally bad advice?
39:39 Speaker 01 Two things come to mind. One, the idea that in, at least in our vertical, in Gov tech, that you need to go hire like government expert salespeople, for instance. We train from the inside. We want people who are hungry, courageous, extremely hardworking, curious, disciplined. We will train in how to talk to governments, how to learn, how to understand the organizational structure. I can't tell you how many times like, hey, I got a great person with 20 years' experience doing Gov tech sales. It's like, maybe they're great, but we're just as interested in somebody who has been selling mediocre product in some other industry and fighting it out and who's young and wants to learn and grow.
40:22 Speaker 01 That's one. Two is, I talk to loads of investors and they're like, don't compromise. Don't ever compromise on a hire. Don't ever compromise on your principles. And I'm like, I've been building this 13 years. It's been one long series of painful compromises. You've got to get the talent here and then get this sale and price it this way to get to here and then punch through that plateau and then go there. And it's like, I suppose if I was a better, more famous entrepreneur, or we had done things in better sequence or executed better. And we're just perfect the whole time. I can hire whoever I want. I can select my investors. I can select my customers because the demand is through the roof. And I'm like, I don't think most companies work that way.
41:02 Auren Hoffman? Yeah, it's a good point. It's a good reminder too, to kind of think all those things through.
41:07 Speaker 01 You've got to get a year or two ahead before you're going to get five or 10 years ahead. You've got to have the vision. You've got to have your values and mission. Ours is to power more effective and accountable government. That has to guide you, but like you've got to get to the next level to earn the right to get to the level beyond that.
41:21 Auren Hoffman? You've been really good about growing your people. Is there some sort of non-obvious thing you've been doing to get people to grow?
41:30 Speaker 01 I think one of the jobs of a leader and leaders, we're having a management training. 70 of our managers are in the room, basically through that wall behind me. Training on who we are, what it means to manage at Open Gov, what it means to lead. And if I had to boil it down, it's like, how much energy can you give? How much energy can you give to your people to invest in them, to help them grow, to your customers, to the market, to evangelize? It's just energy. And that's why these things are so hard because can you wake up every morning and pour it all out on the field? And do it all day and night and get up and do it again and again and again. So that's the best I got. It's just raw energy.
42:12 Auren Hoffman? I find that the best hires are generally the ones with highest energy.
42:16 Speaker 01 This was written about in the Dale Carnegie era. I think it's 30s or 40s. There's a book called How I Raised Myself From Failure to Success Through Selling by a guy named Frank Betcher. He's like a minor league baseball dropout, started selling probably like life insurance. And the number one thing in his book, I read all of these inspirational and business books, or it's a little embarrassing secret. Number one thing in his book, enthusiasm.
42:43 Auren Hoffman? I would agree with that. It's infectious.
42:46 Speaker 01 People want to buy from winners. They want to feel the momentum. They want to go work at a place that's filled with enthusiasm. It's just so powerful. And so all these people show up, they're like, "Hey, how are you doing?"
42:57 Auren Hoffman? That contagion gets everyone else excited. It's funny. So I have a friend who's like very enthusiastic whenever we go out eating together. He's just like a normal guy, but when we go out eating, he gets so excited.
43:10 Speaker 01 Let me guess, Tyler Cowen?
43:13 Auren Hoffman? Oh, that's one of them. He's also that way, for sure. Yes. I was thinking about someone else, but Tyler's definitely this way as well. And this guy will get so excited and he will get you. He'll be like, "This dumpling is unbelievable." And then all of a sudden, you taste the dumpling, it tastes better.
43:30 Speaker 01 That's so cool. I want to go out, eat with you.
43:33 Auren Hoffman? It tastes way better because you're seeing it with him and you're eating it together. And it's like, "Oh," and then you get into it. And then I've gone back and had that dumpling. It's average, right? But when I'm with this guy, it's like everything tastes better. Everything is so fun to eat with this guy because he gets so excited by it and it makes everyone else so excited. Those people are amazing. We need more of those people.
43:57 Speaker 01 It helps build culture.
43:58 Auren Hoffman? Well, it's also just not cool to be like positive about stuff. Like a good critic would be like, "Oh, yes, I wish the dumpling was like a little bit, you know, it's like in my French school, the way they create the dumpling is like, you know, it's like this." Just be like super positive.
44:15 Speaker 01 If only more journalists wanted to do that. Maybe that explains the rise of podcasting. It's an organic growth of basically journalists who aren't journalists and who just want to be positive.
44:25 Auren Hoffman? Podcasts are often a little bit more of a love fest.
44:28 Speaker 01 Yeah, it's just positive. It's fun.
44:30 Auren Hoffman? I'm not like trying to ask you gotcha questions. Like, I just want to learn from you. Like, let's learn together, just like you would if you're hanging out. This has been awesome. Thank you, Zach. And by the way, for people who don't know, it's Zach, Z-A-C. There's no K there. Zach Bookman. For joining us on World of Death. I follow you at Zach Bookman on X. I definitely encourage our listeners to engage with you there.
44:50 Speaker 01 I'm a little more active on LinkedIn and other stuff, but I need to get my stuff together.
44:55 Auren Hoffman? Okay, LinkedIn. I also follow you on LinkedIn.
44:57 Speaker 01 Orin, what a treat to be with you and admire what you're doing. And we miss you out here in SF, so come visit. Thank you for spending time with me. Thank you for having me.
45:08 Auren Hoffman? All right. Amazing.
45:12 Auren Hoffman? Thanks for listening. If you haven't already done so, please subscribe to World of DAS wherever you consume your podcasts, YouTube, Apple, Spotify, and more. And please help us get discovered by leaving a review. And check out worldofdas.com. That's worldofdas, D-A-A-S, dot com. And of course, connect with me on Twitter, at Auren. That's A-U-R-E-N. Would absolutely love to hear from you.
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