Jenny Lefcourt, General Partner at Freestyle Capital joins Nick to discuss Founder to Forbes Midas List, Behind the Scenes of an Intro Call, Why B2B2C is Best and Avoiding the Leaky Funnel Trap. In this episode we cover:
Making the Switch from Angel to VC
Tips For Founders Pitching Jenny and Freestyle
How to Reach Conviction without Consensus
Burn and Learn Investing
B2B2C and Avoiding the Leaky Funnel
The host of The Full Ratchet is Nick Moran, General Partner of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area. To learn more about New Stack Ventures by visiting our Website and LinkedIn and be sure to follow us on Twitter.
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Transcribed with AI: 0:00 Jenny Lefcourt joins us today from San Francisco. She is a general partner at Freestyle Capital. One of the first VC firms to specialize exclusively on seed stage companies that is composed of founders turned VCs, and proactively works to improve diversity in the industry. Jenny started her career as a CPA in New York City worked in Product prior to co founding and exiting two companies WeddingChannel.com and Bella Pictures. She’s made angel investments into companies including Discord and Minted and in 2014, Jenny joined Freestyle and early stage VC firm with 565 million in assets under management and investments in 125 plus tech companies, including Airtable, Patreon, Better Up, Navarre and Embark among others. Jenny successes have earned her a spot on the Forbes 2022 Midas list in the 50 over 50 list. Jenny, welcome to the show. 0:53 Thank you. Thanks for having me. 0:55 Yeah, you know, tell us a bit about your background and your path to venture. 0:58 I went to Wharton undergrad and follow the path of least resistance where all the firms came knocking on our door and offering us great offers before we even close to graduating. And so I said yes, never really thinking, knowing I want to live in New York and the day before I started my job at Arthur Andersen as a CPA I cried to my then boyfriend now husband, say “What did I do? I forgot to think, I forgot to think about what I want to be when I grew up”. And so I did the job literally two years to the day. Because I’m goal oriented. I wanted to earn my CPA, and that’s what you had to do back then you had to pass the test and work two years to the day and went to quit and told them I was quitting. They asked me why I said, “Well, I’m gonna go backpack with a friend of mine all around”. And they said, “Great, take a leave of absence”. And I said, “No, no, I really want to quit”. And just like a young HR woman, she said, “No, no leave of absence, there’s no guarantee you’re gonna come back. It just leaves the door open”. And I said, “I understand that I need you to shut the door because I’m gonna come back and I’m gonna be broke, and probably have no idea what I want to do with my life. But I know I don’t belong here”. It’s probably like when I’m a braver, one could argue stupid, but it was not stupid for me know thyself know what doors have to be shut and sealed. And so I took off a year to backpack and then I ended up to be with my now husband, then boyfriend, who is at Stanford for law school, had no idea what I wanted to do got access to the Stanford Career Center. And for anyone listening, it may be hard for you to believe this. But there was no internet then. So I literally would go to the career center and pull off binder after binder of all these different industries, reading job descriptions, trying to figure out what the hell I wanted to do. Assuming it wasn’t business, I thought, “Oh, I did business. I didn’t like it”. Well, I didn’t know Silicon Valley business. And so I ended up finding a job description I thought looks super cool as a marketing intern at a software company. And I applied and I couldn’t believe, I went into interview, Everyone was wearing like shorts and tank tops. And they were all super smart and excited. And it was like “Wait, this is not a world I knew” Right! In Arthur Andersen. I wasn’t even allowed to wear slacks. I had to wear skirts and pantyhose. I was like, “Wait, what? This is business”. And so I fell in love with the company got the job, as much as I was willing to do they were willing to have me do and it was at the beginning of the internet. And here we are. We’re in Palo Alto, a software company in Palo Alto, everyone’s gone to Stanford, basically, the whole company. Everyone’s like, what, what’s the internet is that the same as AOL is that different? Every we had no idea. So it was like, I’ll go figure it out. And then because I went and figured it out, I became the head of our internet division. I mean, that’s kind of the times we were in. So, anyway, from there, I just felt like if I’m, I kind of had this huge crush on Stanford. I know that’s a weird word to use for a university. But it just felt like such an incredible institution. I was living right by it. My husband was in it. All the people I worked with just talked about it in such a way that I felt like if I’m ever going to go back for business school, a) I would love to do it there and b) Now is my time, I was a little bit older than probably their average business school student. And so I did. So I went there for a year. But while working, while going there, I joined a Business World contest and then dropped out after the first year because we had funding from Kleiner Perkins, after the first year, and that’s, that’s what we all know of is the “.com” days. Yeah. So that I started our first company, which is now called WeddingChannel.com. 4:35 This was around 2000 timeframe? 4:37 This was 1998. So started working on the business plan in 97. Got the funding in 98. 4:43 Amazing! 4:44 it dropped out. We were the first to drop out. It was before it was the cool thing to do you know, and people thought we were crazy. But I mean, it was an opportunity of a lifetime and it wasn’t going to be there in a year. And so it felt really clear to us that was the right call. But yeah. Since then Stanford has changed their attitude towards it. A lot of people did it, you know, so it’s less taboo than it was when we when we told them. 5:09 Sure. And how did things play out with the business? And how did that ultimately lead to, you know, your experience here at Freestyle? 5:16 Yeah, so it was a wild ride, right? It was… we worked 24/7 You know, maybe it took a half day on a Sunday, we grew super fast. And we it was fast and furious. And we were integrating the registries of all the major retailers, which at the time, when we pitched Kleiner Perkins, by the way, they thought that was crazy. They said, why not get 50% margins and sell the china and the crystal and your warehouse? And we said, well, brides aren’t going to change that quickly. So that will work in a decade or two. But right here, right now we need to aggregate the data work with the retailers and that way gift bar could go on and say “Oh! Jenny wants that vase. It’s $100. Perfect. Click buy, I don’t need to touch and feel it”. It was like you saw what we’re selling on the internet. And we’ve seen people felt really confident they didn’t have to touch our feel. And this was perfect. The brides would go into the stores they knew and loved, register for what they wanted. So it was really a great thing for gift buyers, and for brides and grooms. So we raised a silly amount of capital, which ended up being a godsend because if you remember, 2000 is kind of like what we’re living in now. It was ugly. And you just saw companies dying, you know, left and right. And everyone was cutting and trying to figure it all out. But we had the cash to see the business through and we ended up at the time we were called Della & James. And we just aggregated the gift registries of the major retailers. We did a 50-50 merger with Wedding Channel, we kept their name because it was a better name. They had the Federated Department Stores, they had all the content. So it really was like a one plus one is three. And so that company actually still lives today ultimately got purchased by The Knot 6:54 Amazing! 6:55 Yeah, it was wild and I learned a lot in record time, I was really exhausted at going at that speed, got pregnant and sort of just wanted to breathe a little bit before the child, had child number one, my husband works a lot, which is relevant, and so wasn’t really looking to go full time. And so started doing some part time had child number two, so it was looking for more part time, and ended up falling in love with another business idea. It was just two or three people out of someone’s literally garage. And it was, unfortunate it was weddings again, which I didn’t do purposely. But it was called Bella Pictures and we were the first national photography company. And that’s an area that had no brand, everyone would hope that their photographer was good hope that photographer would show up. And it was like “if you miss, you miss big”. And so, it was an area that was big, and so right for a brand. And we went up like a rocket ship. We were VC backed, and it was like everything in our favor. And then 2008 came. And we never wanted to limit on the macro. But every single metric of ours was cratering. So while we weren’t declining, we just weren’t growing anymore and start a plan that is death. And at that point, we’re probably post a Series C, we had raised a lot of capital and lived through something that I feel like now gives me so much wisdom, as I’m working with founders, which is the game had changed, it changed very quickly. We had to make layoffs, we had to find kind of new product market fit, we had to change the metrics. And I remember and we recruited a top tier CEO to run that to run it. And I remembered he had come from a bigger company. And I remember saying to him, “Man, we got to cut deeper” because you never want to do second cuts. And he’s, you know, he had different reasons he had come from The Gap and Safeway, it was just, whatever, it was just a different bringing up. But we lo and behold, we weren’t, we were too optimistic about our future. And we had to do a second round of cuts, which was basically the beginning of death. Because the moment you do second round of cuts, there’s a lack of trust in the organization that there will be a third or a fourth. And so it was really… When I work with founders now I, sort of, it sounds terrible, because it’s so hard. But cutting is hard, no matter how many you cut and going deeper, allows the people who are there to be safer and allows morale to be good and culture to be good. A second cut is like it just doesn’t allow that. 9:28 Right. 9:28 So I’m a big believer and I’ve been working with my companies. I know we were going to discuss this later. But cut deeper cut to the bone. Maybe bleed a little bit. No, you have the resources to add bandages, right! You can always scale up. But if you don’t cut deep enough, then what comes is something that is really hard to ever heal from. 9:48 Interesting. You mentioned earlier that you think this downturn has some similarities to 2000. What do you think are the major similarities and differences? 9:56 Well, I think there’s similarities now to probably what I lived through as a founder in 2000, and probably what I lived through as a founder in 2008, which is a very quick change of what the game is, right! “Growth at all costs, go go, go go higher, higher, go faster rate, cut, cut slash, get your burn down, survive”, right. I remember as a founder feeling like “Wait! I was just playing one game here. And now I’m like, a few weeks later, I’m being told something very different, very much like Whiplash”. And I’ve had a few founders, especially the ones who have really scaled up and fought and work so hard, not only for, to hire great people, right, and then be told all that hard work. And these people who are humans that you care about, now, you’re supposed to let them go at probably the worst time. So it is, it’s a very, very hard time to be a founder. And the way that I work with founders is just kind of first principles like first and foremost, you have to do what’s right for the baby. And by the baby, I mean, the company. And it’s like, if you get your burn down now and fast, you have a shot to survive and thrive. And if you don’t, you likely won’t make it to the other side. So it’s, some got it quick and responded really quickly. And then others, it’s just a little bit slower or harder. And some still don’t have the same headwinds and some are growing into and it’s not that everyone has to cut. But I think the vast majority are pivoting, cutting, reevaluating. 11:26 So, Jenny, you ran hard and fast for a long time founding these businesses in then you had a child, it sounds like you maybe did some angel investing. And then you joined Freestyle, tell us a bit about joining Freestyle and then the thesis at the firm. 11:41 I have three children. And so after the third that when he was old enough, I was like, “Okay, I think I’m ready for like actually real intense work again”, I was advising and consulting at that point, it was post Bella Pictures, and luckily, got invited into Freestyle, which were these two awesome guys who were, you know, ex serial entrepreneurs, trying to be very founder friendly, great VCs, and we shared the same values. So they said, “Hey, come try it out over here. And if it works, great, if it does it, no harm, no foul”. So I joined just as an employee, I think I was even part time for the month one and then became a partner, then I became an equal partner, then it became one of the two GPs in the management company. So it’s been a nice sort of trajectory in a nice way to kind of date before we got married. But angel investing, it’s funny, I would hear a lot of VCs, especially back in the day when people were just starting to think about diversity, saying, “Hey, we’re looking for a woman like you, you know, a woman, but we want someone who’s done a lot of angel investing”. And I was thinking, Okay, why? Because like Angel investing to me is night and day from what I have to do as a venture capitalist. And so when I was angel investing, I would get lucky on access to great companies, and typically was following tremendous lead, right? So like, there are times where I did diligence, but actually, my greatest investments were when I did it, I was following someone, and they were making room on the cap table for me, for my unique value out of whatever that may be. And so I do find it to be well, I thought I understood venture capital, because I had raised so much of it and had spent so much time with VCs and had been an angel investor, it was totally different being on the other side of the table. 13:21 What would you describe as some of the primary differences? I know that here on our team, I started out as an angel, and I went from being an angel investor to sort of a co investor or follower, and then we went from a follower to being a lead investor. And I think each one of those transitions has been equally more challenging. I mean, there are very big differences between all three, can you highlight some of the differences that you’ve observed in being an angel versus leading deals? 13:48 Yeah, I guess I would say for me, and it’s always different depending on how people, you know, role in their angel investing or their venture capital, you know, playbook. But for me, as an angel, I was happy. I knew I was going to make up, you know, a handful, maybe two handfuls of investments. And if I liked the premise, and I liked the numbers, and I liked who was leading, and I liked the team, I’d throw in, right? I didn’t do a ton of diligence. And it was my money. And I was really comfortable betting with my own money, if you will. When I became a VC, I felt like it is my duty, right? We have LP money, my money is in there too. But primarily it’s LP money. And I had to really understand the market, really looking at everything else under the sun that’s serving that problem. Really spend time with the founder knowing I’m going to be working closely with them, can I add value? Well, I work well with them. And so it felt like a very, very different job to me, because not only was I making the investment, but then I was working so closely with them. The way the Freestyle works is we work sort of high conviction low volume investors and so we typically lead will co lead but we typically lead and then we work really closely with our founders in that sort of seed to series A and stage. And then we pass the baton, ideally to a great series, A investor where we’re still involved with joint board meetings as an observer or, or not. And we do one on one calls. But less frequently, we’re less involved in the operations and become more of a trusted adviser. So, spending the time and really supporting the founders on whatever they need. And sometimes that’s like, they need real help, like, I can help a lot with go to market and sales strategy and how to get the sales pitch. And there’s a lot of skills I have that I can do. But a lot of it is just strategy, and also helping them with the head game of it. All right. It’s hard. Being a founder. It’s big, and it’s scary, and it’s sometimes is lonely and media is glamorized it, but it is not a glamorous job is a hard job. And so almost becoming a coach a bit. And in fact, when I started the role at freestyle, I realized, wow, there’s a lot of coaching in this role. And I’ve never been, I love professional development. I’m thinking, “Oh, I’ve never taken a class on how to be a coach that can be interesting”. So a friend of mine, who is the very best CEO Coach, I know of Co-Led, I asked him, I said, “Hey, would you, can I gather a group of women, and we’ll go to sort of like a retreat, and you’ll teach us kind of coaching 101 because all of us are coaching, but none of us had been trained how to do it well”, and he did. That’s, that was really helpful. So I feel like it’s an area that I’ve gotten better and better at, because really, our job is to get behind these founders and try to help them be the best they can be as leaders be the happiest they can be and build the most valuable companies. 16:36 Amazing. You know, Jenny, I want to hear more about your engagement process with a founder prior to investment in starting even with the pre meeting stuff, when a founder reaches out to you over email, whether it’s referral or cold, what specific things maybe non obvious things? Are you looking for that stand out and get you to lean in and take a meeting? 16:57 Yeah, I often tell founders, you have to know that, you know, the old cliche, like it’s not you, it’s me. A lot of times it does depend what’s going on? How busy is my schedule? Am I in the process of like, signing a term sheet today? Or am I’ve been on the hunt for something that looks just like what they’re building, right? So a lot really is about the VC. And where they have scar tissue, what their schedule is, what their mood is. I mean, that’s just the reality. But putting that part aside that I feel like a lot of people don’t say out loud, I definitely have a higher hit rate. If it comes in through a warm intro. I know that there’s a lot that helps with supporting diverse founders, or having diverse founders in our portfolio if we’re more open, so I do read cold ones as well. And the more custom they are, and like I’ve done their homework, the more likely I am to say yes. So it’s not that it never is a yes, but it’s typically the ones that we’re all getting that you can feel the spamyness of it all, there’s just I hit delete, and I’m gonna get back to, and then the custom was, I tried to get back to but I would say that it’s a little, the hit rate is lower. So let’s just say it’s coming in from warm if someone says his a great founder. And here’s, you know, could be someone who did the precede or someone who worked with them or an angel, and I am given a blurb and or a deck, and I really get it and like it. And I’m intrigued. I say yes, if I don’t, I don’t because it’s a waste of my time. And it’s a waste of their time. So I lean towards saying yes. But once again, schedule also impacts that because if I’m super booked, then I, you know, and I don’t think it looks likely I say no, if I’m wide open, it doesn’t look likely I’ll say yes. Right. So I’m sort of trying to balance that. And then typically, the first meeting is a 30 Minute zoom. And I’m really trying to get this. They’re telling me a story. And we’re having a conversation. Ideally, they’re not quote unquote, pitching me. You can see I’ve written blog posts, I’ve done videos on how to pitch VCs. But most VCs want to have a conversation with the founder, about a market about macro trends about what the world needs to exist, and how they’re building that and why it’s kind of wide open. And so if I can have that type of conversation with a founder, who isn’t just selling me, the but is is telling me their story, and they’re thoughtful. And if I ask questions, they really answer the questions and they’re open to say, “Yeah, we don’t know the answer to that. Here’s our hypothesis. And we’ll know more in the next few months as we do A, B and C”, I do way better with that than everything is all known and figured out and really trying to assess and my more excited about the opportunity than I was when I got the blurb Is there’s a founder that I feel like I could add value to their business and I would enjoy working with and they would enjoy working with me. And a lot of times I’ll tell founder, I just need to think because I’m not sure, if I know it’s on it. I’ll pass in the meeting because as a founder, I know that a quick no is really appreciated. And so I will pass in the meeting if I know it’s not a fit, and I’ll give him as much information as to why. And then sometimes I’m super excited. And I’m like, can we schedule a follow on reading? And if we can do it in person, it’s great. If it’s zoom, that’s sometimes fine too, depending on where people are located. And then, if I’m a tweener, I said, I just need to sit on this, let me think. And typically, if I forget about it, it’s a bad sign. And if I started obsessing about it, and I’m talking about it at the dinner table, then it’s a good sign, so sometimes it just takes me a few days to kind of see, yeah, where I net out. And then from there, let’s assume I’m not interested at that point. I am just our processes, I have to have conviction, right, so I have to learn more about them. I have to learn more about their plans, I have to learn more about the competitive landscape. Sometimes they speak with customers or potential customers. So every time it’s different when people say how long does it take, it’s like, it takes me as long as it takes to get to conviction. Sometimes I can do it in a week. Sometimes it takes me three but Freestyle, because it’s just me and my partner, Dave, were really low on process, you know, so I’ll use him as a thought partner, if I’m on the fence about a founder or have a concern, I’ll say, “Hey, will you meet with this founder? Here’s my concern”. If I’m like, “I’m all good. I don’t need anything. Let me just walk you through my thinking”, then I’ll use Dave that way. Yeah, so that’s our process. We do have a CTO at Freestyle. And he does kind of attack check, because I’m not in a position to do that. 21:34 Amazing. You know, I know you look for this true growth mindset. You’ve written about that before? Do you have any tactics or techniques that you use to sort of pressure test and evaluate whether somebody has that mindset? 21:47 Yeah, so one of the biggest things I feel like, and I have not nailed it, I’m constantly trying to improve on it. But one of the biggest things is, are they coming to the meeting? And they’re curious, first of all, are they great listeners? And then, are they curious? Or are they just in cell mode, so that’s a big one. And then I also just hearing the way that they speak, I didn’t know how to do ABC. And so I did research here. And what we did was this, and I learned this, and they’re sort of, they’re very comfortable talking about what they know, what they don’t know, their thought process for figuring it out is way more sort of growth mindset ish, versus having all the answers and knowing everything. If I say, “Gosh, it’s interesting, I wouldn’t have thought it’d be like this”. If they’re like, “No, it’s like this”. I’m like, “interesting” like that, you have an opportunity to say, Why would you think that? So like the one of my favorite words, ever, that I use a lot. And I recommend that everyone does is the word “Why”. Because it doesn’t really matter what people say at level one, the learning is in the “Why do you think that” I tried to get there. And then when I do working sessions with them, which luckily, this market, I can kind of go back to doing I’m a Type 8 on Enneagram. So I’m a challenger. I like to hopefully not a jerk challenger, but I feel like I can serve my founders by challenging their thinking. And I know that I am served well by people who challenge me that like make me better, either. I’ll have more conviction what I thought or I’ll have an Aha moment. And if I sense any kind of defensiveness, it’s usually a sign that it’s not a good fit for me to work with them. 23:21 Yep! Enneagram 8 over here, too. 23:28 Oh, are you? 23:29 Yes, I am. So I know you’ve invested in some breakouts that are up in our bar. And often when you’re investing in businesses, others are passing, right? Or maybe they’re finding conviction at the same time, and it gets competitive. How have you found your conviction, you know, especially when you see other VCs passing? 23:47 I learned this the hard way. And I’m so glad I did. So I was brand new at Freestyle. And really like this company, Narvar, he didn’t pitch well, but I loved his business. And I thought he was incredible. And because I’ve pitched so much, and I had, as a founder. And because I used to advise people on kind of coach them how to pitch, I can tell the difference between the business and the pitch, which I’m not sure if all VCs have that skill, you didn’t pitch well, but I loved the business. I loved sort of his vision, and I thought he was the one to build it. So I did a ton of diligence, speaking with retailers speaking, you know, really understanding the competitive landscape, etc. But I didn’t know that VC spoke to other VCs, so I didn’t whisper it to any VC. So I found my full conviction, doing a lot of work and agreed to terms with this founder. So then I went to syndicate it out, because we don’t do, you know, we’ll lead but we have other great VCs and angels during the rounds. And everyone’s like, “Oh, no, I pass on that. That’s a feature. Oh, no, I pass on that”. And I was like, I had bile in my throat for months. And what did I do? I didn’t know I was supposed to like sort of discuss it with other VCs to get their point of view. So that was a blessing in disguise because I think being brand new as Vc and hearing all the quote unquote great VCs pass, because for all these reasons, I probably would have gone conservative and pass. And I’m glad I didn’t. And like, you know, he’s done wildly, wildly well. So, it was a lesson that I learned not on purpose. And instead now, I asked other people what they think, and they can hate it. They can absolutely be like, That’s the dumbest idea ever. I’m like, interesting. Tell me why. So I remember a VC who I really admire. She is one of the greatest track records for better wrap told me it was just she was stupid idea would never work. And I was like, “Oh, interesting. Tell me why”. She gave me her reasons why. And I understood them. But it actually felt like, “Oh, I can work with that. I still believe given that”. So I don’t mind when I do diligence when people vomit all over it. As long as I can understand the wisdom under the vomit, under the No. And that’s where interesting things come out to, like, with BetterUp, I remember speaking to head of people, or Chief People Officer about the premise. And she said, “No, no, I would never want that”. I so “Okay, interesting. Can I talk more about your business?” And so as I got in, it’s like, “So are you, is retaining your employees and making them really happy. A top concern? Oh, my God, a top concern. It’s everything. And do you have a big l&d budget? Yeah, it was huge. Okay, and you’re sending them to like Chicago Hyatt for leadership training for three days? Do they like it? Now? They don’t like it. And is it hard to do and cost a lot of money? Yeah, does it but does it stick? Does it make them better? Not really.” And I’m like, okay, she does. She’s not ready for BetterUp, but she will be one day, right? Because it’s like hearing all her problems and her priorities. So sometimes she will say no, that’s why I never trust when a customer of any kind says, oh my god, I definitely buy it. It’s like half the time, then they’re like, “Oh, can I have your credit card? Oh, no!” Right? Or the flip side? Like, “Oh, I wouldn’t buy that”. And then you understand their business, their priorities? And you’re like, “Oh, you will you’re just don’t know it yet”, and so I work hard to get my conviction by, almost like, being a detective a little bit to really understand, like, read the tea leaves of underneath. 27:13 I think part of our jobs and part of the founders jobs has been very open minded and very flexible, right? Whereas a lot of people will hear something like CEO level coaching, and they get locked into this idea that, Oh, it’s incredibly expensive. And that’s never something that, you know, would apply to mainstream employees, for instance, and it takes some leading them by the nose in coaching and some time to get them to understand that it can be a much more accessible price point at scale. 27:42 Yeah. Well said! 27:43 Jenny, you and I have spoken previously about your focus on b2b to see models, why spend so much of your time and effort on b2b-to-c? 27:51 So the reason I love the b2b-to-c model is because ultimately, what really gets me excited is that end user, right? So I like end users that are humans versus role. So you know, selling into the CIO or the CMO. Not as interesting to me as much as employees, consumers, they’re people. And I feel like I can really think, wear that hat and say, okay, if I’m them, what would I want, right? And if they have a tremendous value that they can get from this new experience, and they have a business stakeholder who it behooves them to thrill this end user, and that business has money to spend to throw them, it’s kind of the best of both worlds for me, because now I get, like, that my heart is all about the consumer. And I can geek out with the founder on that consumer experience. But you can really sell to businesses and say, “You know what your consumers are going to demand, they’re demanding it already, you don’t know. But they want this. And that’s why they’re shopping at Amazon and not shopping at you, you just don’t know”. So you better have this experience if you want to keep your customers and not have this leaky funnel. And so if you can use their end user, their stakeholder to hit a big budget, I love it. And so some people are great consumer investors, I’ve done a few consumer investments, they have to be pretty unique, but I’m not great at the LTV to CAC grind. And what I love about that are up is b2b-to-c in that case, the C is the employee Narvar is b2b-to-c, the end shopper consumer who wants to know, when’s my package coming without having to click on a million links and figure it out or have easy returns. And then well, actually, now it’s called Arterra is b2b-to-c but it’s a patient and as a patient, I actually as a mother of three who was working, I needed to be able to touch with the front office and they wouldn’t do it. I switched pediatricians because they wouldn’t do it. I couldn’t work that way. So anyone who wanted to keep and I’m granted a sample size of one but I knew that it wasn’t just me. To keep your customers we have to start treating them like consumers, patients like consumers. So in all those cases there were big budgets, big businesses that had to really make that end user happy. And the end user experience was downright delightful. And it sticks. And typically it grows, right? And so where are the CAC to LTV? I have a bias that consumers are fickle, and they try the next thing. And it’s just hard. Some do it. Well, it’s just harder. 30:21 Is it fair? You know, I launched the product long ago and sold the businesses but it was used by a different user. And I would always focus on sort of the metrics, both top line and bottom line with the decision maker, and I would focus on the workflow and the user experience with the user. Is that too much of a generalization? Are those some of the things that you focus on when you’re diligent seeing an opportunity? 30:45 I guess, when I’m doing due diligence for the opportunity, I am looking to really understand that end user, and do they really, really want this, not minorly want it but like are hungry for it? And what data or behavior do I have that actually it’s not just a gut, but like I know it to be true? And then are the businesses who have this stakeholder and have to keep them happy, do they have the budget? And are they aware? So I think retails a great example. So Narvar, every retailer is having their lunch at this point eaten by Amazon, right? So I’m talking about like nine years ago, and every people knew it wasn’t priced, right? Wasn’t Amazon Prime but was it? and I was like, “Listen, like when I buy from Amazon, I know exactly when I’m getting it. I know it’s easy returns”. Once again, mother of three, if my kid bought from a random there was like once they bought on Nike, before Nike had Narvar and returning it was a nightmare. And I had a little five year old saying, “When’s my backpack coming? And I’m like, oh, gosh, I don’t know, five to eight business days”. Like, I had no idea when the package was coming. And I had a very whiny child wanting to know, and I didn’t know, but if I bought it on Amazon, we knew. And then I also knew if it came, it was easy returns where I literally had to like stand in line, it ended up I’m embarrassed to say this, but I’ll say it on your podcast. I threw the backpack by way, because it wasn’t worth the line that I was gonna have to be. And to put it back on the mountain. I was like, Okay, this is ridiculous. And once again, I never count on myself. But I was like, I wonder what the data shows. And as I dug in, yes, it didn’t have a name yet. But post purchase is a thing. And consumers were kind of whitelisting and blacklisting retailers. And if they didn’t have a good post purchase experience, meaning I didn’t know where my package was coming, was it easy to return, they just didn’t shop there. Again, they didn’t complain, they just didn’t shop. 32:32 Yep. 32:32 And so, you know, I don’t know if you’ve ever read the Challenger sale. But like, if you then could go into a retailer and explain there is this phenomenon, and it is impacting your bottom line or your top line, but you don’t know it. They’re not complaining, they’re just leaving you, here’s best practices. And it doesn’t make sense for you to build this yourself. Like you have to work on your core competency of where you are unique and stand out. Let’s do this for you. And so once again, it wasn’t me it was the company doing it. I was helping them with that pitch. But anyway, that really landed and then lo and behold, you know the dominoes start to fall because every retailer starts to show you exactly where your package is coming and has easy returns, you can’t be the loser that doesn’t, then consumers will scream at you. And so I remember one year there was a retailer big retailer who said to Narvarr, “No thanks. If we want this, we’ll build it ourselves”. And a year later said “We’ll pay you extra we have to have it implemented before the holiday”. So like I think as a founder, you do have to understand you’re not going to get everyone at once the dominoes have to fall. So back to your initial question, one, doing the diligence to understand like, how much does that consumer care about this, Patient, Consumer, Employee, Right? How much do they care? Do they have power in the equation kind of overpower over the business that has a big budget? So, yeah, retailers need to make their customers really happy and keep them coming back. At this point. Employees really needed to retain their employees and make them really happy and professional growth was like. The number two thing, that number two attribute that they cared about. I think it’s still what they care about. And it actually made them better performers than the patient way. Yeah, people literally now that Co-pays are up so high, deductibles are up so high. A patient now acts like a consumer and some operations get that and they realize you’ll switch doctors if I don’t text you and some still don’t haven’t gotten the memo that you have to treat patients like consumers because it is coming. A lot of it’s coming out of their pocket and they do have choice. 34:39 Jenny, you know, there’s a lot of advice out there for founders about how to cut burn and focus on profitability in today’s market. How are you advising founders and what would you recommend the listeners that are balancing the growth demands of VC with prudent cash management? 34:54 I’ll just say that I have always been conservative with cash and my companies survived and then had a shot to thrive because we were conservative with cash. Because if you don’t have cash, if you don’t survive, you don’t have a shot at thriving. So first and foremost, cannot run out of money. And it’s way better to be a pessimist and not believe the world is going to turn around faster, it’s better to assume the worst and be prepared for it. And then if and when things start picking up, you can always invest into it. So I really recommend erring on the side of being really conservative and kind of assuming the worst in the market. And I also feel like if you do that, and you do it early, and you do it, well, then it’s a little bit I don’t know if you play poker, but it’s like, if you have a big pile of chips, right? And you wait to see for a hand, right? That is worth betting on, you have the chips to bet. But if you just ante all day long write your monthly burn is high, and you got your 12 months, then if and when you find the unlock, you may not be able to 10x that and come out of survival mode thriving. So I really like the idea of thinking in bets, which is Annie Duke book, and I know you’re gonna ask me later about books, but that’s a really good one. But this idea 36:14 Read it. Yeah! 36:15 Yeah, exactly. Like, okay, how do I learn more? How do I pay a little bit to see more data to then decide what do I want to bet on? And what do I not, but if you kind of are just consistently spending money and not going anywhere, you’ll likely kind of die in the desert, if you will, like I recently said to someone, “I’m against a slow burn to nowhere”, like, what the hell is that I’m like, it’s kind of a when you get excited because you got your burn down, but you’re burning, but you’re not learning. So you kind of aren’t finding what you need to invest in to make great things happen to find the inflection point. And so I think that I would really recommend that founders be more in that mentality on the hunt for what they want to invest in, but keep that regular burn super low and assume the worst in the market. And then the other big thing is, I would say a lot of founders, their first reaction, I think Elad Gil wrote a blog post about this. And I was like, ¡Oh, thank God! I had been saying it, but not as well as he does and sent it around. But this idea of like, oh, we cut 15%. It’s like, wherever you were was arbitrary. It was built in a market that was playing fast and loose and on a totally different, you know, game. So cutting 15% is not the way to look at it. I like to take a blank sheet of paper, and basically say everything I know now, what team do I need, right? Where do I need to have and go bottoms up versus thinking about, you know, how much can I cut? 37:40 Yeah, these blanket pieces of advice cut 15%? Not necessarily useful. And yeah, you know, I think about it when one of our successful companies is doing around 150 million of ARR. And it hasn’t been this consistent up into the right furious growth ramp, it’s kind of been a series of like, we found something that worked, they grew for a while. And then they kind of, you know, were very prudent with spending until they found the next growth vector. And it’s not just 30% month over month, every month for 678 years. It doesn’t work that way. 38:13 No, and I don’t think anyone out of this market is expecting that I think a lot of founders are gonna get judged by not only where are you on ARR. But how much money did you burn to get there, so that burn multiple. And so, that is a very different rule than probably most founders were being told a year ago or two years ago. 38:32 It’s such a good observation, because that kind of went away for a couple of years, the capital efficiency and the burn multiples were not being I didn’t feel like we’re being looked at nearly as much as they used to back around the mid 80s. 38:45 I mean, capital was so cheap. Yeah, capital was cheap. They kind of like you could burn a lot of it. And then someone’s willing to give you more of it. 38:53 Jenny, if we can feature anyone here on the show, who do you think we should interview and what topic would you like to hear them speak about? 38:59 Yeah, I think you’re hearing a theme right now where I don’t know the guy, but I’m kind of having an Elad Gil moment where I’m enjoying his blog posts and the way he sort of views the world. And so he takes the complex and makes it simple. I love his book, High Growth Handbook. And I’d love to kind of know Low Growth Handbook, Right? It’s like hearing him like take those same kinds of promises, but at the early stage, and so he would be my favorite. 39:22 Awesome, Jenny, do you have any habits, techniques or tactics that are a secret weapon? 39:28 I have been working hard to listen really deeply. And rather than give my point of view right away, actually think ask, as I mentioned before, ask why. So stay in more of an observer mode, and it’s been kind of delightful, so less reactive, right? And more just observing and then participating. I feel like I’ve learned more that way. Probably been more enjoyable for many that way. And what I also kind of goes with this but I was too doing it before I think I’m probably doing it better is back to our challenger 8, one of the biggest gifts I think I can or biggest ways I can serve founders is to tell them what I think are their blind spots. I may not be right, but I just tell them what I, hey, I’m observing this and I observed it before at the chances is a blind spot of viewers, I’d want you to know, because the thing about blind spots that I love is it’s not a fatal flaw with a blind spot. Like if we take the car analogy, you, you can make it beep at you, you know, to look over your left shoulder, like if you know it’s there, you can be set up for success. If you don’t know what’s there. It could be it could kill you. So the word blind spot I think is great, because it’s not a thing that you necessarily have to fix as much as No, and then plan accordingly. And when people have done that for me, I really appreciate it. And I tried to do that for others. 40:54 Well, and then finally, Jenny, what’s the best way for listeners to connect with you and follow along with Freestyle? 40:59 I would say my email firstname.lastname@example.org is probably best to connect with me. I go on LinkedIn. I’m not particularly active on LinkedIn. I haven’t been as much on Twitter as maybe I used to be not because of Elon just been busy. It depends on my schedule. So yeah, email@example.com 41:18 Awesome! This was a huge thrill for me, Jenny, thanks for spending the time today and for sharing your wisdom with the audience. 41:24 Thanks for having me. I appreciate it. Transcribed by https://otter.ai