Episode 8: Funding Your Future: Mitchell and Sheridan from Lendtable

Don: Good afternoon, everyone. Today is an extra special episode. I'm joined here with the co-founders of Lendtable, Sheridan and Mitchell. Hey, guys. Thank you so much for joining. I appreciate you taking the time. - As an overview for those who don't know, Lendtable helps employees secure their financial future by supplying them with the funds they need to receive their full 401(k) match from their employer. Notable clients include the likes of FedEx, AT&T, TechCrunch, Starbucks, Deloitte, and more. Thank you both so much for coming to the podcast with me today. - Mitchell: Thanks for having us. - Sheridan: Thanks for having us on. ➢ Don: All right. Let's dive right in. Guys, in three words or less, I want you to describe one another to our audience. - Sheridan: The way I describe Mitchell would be caring, passionate, and very thoughtful. - Don: I love it. That's hard to beat. - Sheridan: No, no, no. Not too kind. That would have been five words. - Mitchell: If I had to describe Sheridan in three words, I think I would choose (1) he's dynamic, (2) he's visionary, and (3) I think he's very inquisitive. Very inquisitive would be two words, so inquisitive. I think those three things make him a fantastic co-founder, a great partner, and a great friend. - Sheridan: I love it. I appreciate it. - Mitchell: I love you too, my man. ➢ Don: Sheridan, for those who are not yet familiar with Lendtable, can you just describe what it is that you do for our listeners? - Sheridan: Yeah. In the simplest form, we'll give you money so that you can max out your 401(k) match and employee benefits. The reason that our company exists is that in the US today, 25% of people who have access to a 401(k) match don't use it. A lot of folks, when they hear that, assume that it's just a lack of education. - You got a lot of these people in Walmart, they don't get how their match works, they don't recognize that it's free money, therefore, they're not doing it. But really, the broader problem is just a lack of liquidity. The average American doesn't have $500 in their checking account to be able to save up for an emergency expense. - Take Mitchell and I's parents as a great example. They understood what their benefits were, but they just didn't have the liquidity to actually take advantage of it. That's where we step in. We say you've got access to this $4000 401(k) match, but you don't have $4000 of spare liquidity, and therefore, you can't take that out of your paycheck. - We'll give you that money today, you'll put it in your 401(k), and then come a time when you leave your employer, we'll essentially get 20% of that match, but you're left with the other 80% that you wouldn't have had. - We like to say that we're kind of pioneering this new category of lend to earn. Our whole goal is to lend you money so that you can earn and get access to all these other employee benefits that you otherwise wouldn't have had. ➢ Don: Incredible. You mentioned your parents. For each of you, what was your inspiration for Lendtable? Who inspires you? Is there any individual you can point to? Is it your parents or someone else? Who would you say is your biggest inspiration? - Sheridan: For me, so I come from a family of entrepreneurs. I think much like a little bit less of the case in Silicon Valley, but much more so the case in just bottom America. I saw firsthand the perpetual trials and tribulations my dad and mom kind of went through. - I saw my dad start no less than seven companies. Occasionally, he was doing really well and we're making a bunch of money. Then occasionally, we're at points where it's like, oh, we don't necessarily have a whole lot of money. It's like buy food on food stamps and kind of lose the house. I think I have never-ending respect for the amount of times my dad fell for the company, got back up, and tried it again. - I think the silent warrior throughout it all was my mom. My mom always got dragged into these different startup endeavors. She was always kind of just like, ah, at some point, you just got to get a job. I think every time she kind of went into it and I saw just a tremendous amount of grit, to them, putting in 100 hours of work a week was very much so the norm. - You'd have to stay up at 2:00 AM doing a quarter of a paper. The amount of just blood, sweat, and tears, and a little sense that went into their company, for better or for worse, I think really inspired me. It made it so. The only thing I feel like I could ever do would be an entrepreneur, very much so for both of us. ➢ Don: They sound inspiring. Yeah, for better or worse. That's really great. Mitch, how about you? - Mitchell: I'd say inspiration is always a funny thing because it comes from so many places. But I think one piece of inspiration comes from observation and one piece of inspiration comes from people. No doubt about it, when it comes to inspiration for people, it's my family that drives me as well. - Similar to Sheridan, in different industries though, my father was a builder. He had his own little small building company. The financial crisis tanked most of construction, tanked most of those businesses, and then he reinvented himself over and over and over again with his jobs after that. - My mom is always very similar to Sheridan's. She's always been the consistent backbone in terms of her work and everything she does as well. I got to see two things that I really took that were elements to my game, so to speak, in terms of how I work. - One is no idea is too big. My father is a dreamer. He's always thinking bigger. He's always thinking about an idea. I go home and he's shooting ideas at me all the time, even to this day. That innovation spirit never goes away. Then for my mom, it's just to get it done. That's the other thing that I think is a really, really big piece of how I work on things. - Most of the people in the company will tell you, my goal is always just, what do we need to do to succeed? Our goal is to win. We have to help everyone retire by 60, and we're not even close yet. I think from inspiration point is definitely my parents. - From an observation standpoint, the only reason I really went into startups was because of the fact that I saw my parents, when it came time for them to save and invest for retirement, all their money was essentially in checking accounts. That wasn't because they were stupid, it wasn't because they didn't understand. It was the same thing I saw with all my buddies who live down the street. - It's the same thing I saw with the kids I was going to school with, which is that the access to information in investing is not very good. What that means is a lot of people are trying to do but they don't know. They don't know what they should be doing. - I was in college and I come from Dayton, Ohio. No one's investing. I didn't even know what an investment bank was until I went to Yale. When I saw that, I just saw such an obvious problem that could be fixed, and it just drove me insane. I didn't even know anything about startups at that point, but I was like, this specific issue has been pissing me off effectively now for 10 years. - That was the only reason I went into entrepreneurship to begin with. I didn't know it was going to be that at the time, but I just started using this as research. To this day, Lendtable is just a new derivation of that same problem. In short or I guess in long, it's the people in your life and it's the observations you make that really inspire you to do what you're going to do. ➢ Don: Amazing. Yeah, it makes a ton of sense and definitely something that I've noticed throughout my own journey. That really resonates. The name of this podcast is Startup Growth Stories where I like to dig into the founding story. It's really special that we have both of you in one place, so I really want to dig into this founding story behind Lendtable. - It sounds like Mitch just got into a little bit at the tail end of the last question, but it helped me to understand. What was the inspiration behind founding this particular idea? How did this idea become a reality and where did it start? Where was that seed planted? - Mitchell: Yeah. I think the really cool thing, there are two pieces of this, which is Sheridan's side of it, my side of it, and how it's beautiful. - Don: I want to hear both. - Mitchell: It's super cool because it's actually how we complement each other as founders as well, which I think is the really cool part about it. From my side, I had been coming from a previous startup, also in financial inclusion. It was called Parable. - What we were trying to build was we were trying to help people save and invest their money. Essentially, your investments are a playbook. There are certain things you should do at every step of the way. Everyone advises you on what you should do, we were trying to automate that. We were just trying to do it for you. - Real-time payments were starting to get popular. Payroll routing was starting to get popular. A lot of these ideas were getting popular. I felt that that would be a great way to figure out that exact problem that I had seen from my parents. You guys, if you just trust a third-party, they can automate it for you. You can probably do it without all these fees because a lot of this stuff is actually just a technical routing challenge. - That being said, the distribution was absolutely a nightmare. That wasn't a thing we could figure out. I wanted to really double down on the insights we had found in saving and investing. He had seen some really cool insights, specifically in compensation from the employers we had talked to, so he went on to found a compensation company that's doing very, very well. - He's doing great, but I was just obsessed with this one specific problem. I want to figure out, how do we help people save and invest? But I needed a new co-founder. A good buddy of mine introduced me to—as he said, hey, there's this kid working at Dropbox. He's super young, just got out of college. He's interested in startups, do you want to chat? - I'm coming into this conversation like, all right, a mentorship is something I care a ton about. I love giving people—especially who are from different backgrounds—startup advice and stuff like that. - Sheridan: As one would mentor, if you are a mentor, you would want an emerging middle schooler right now, fundamentally [...] who doesn't know the term startup means. Come with that mentality, which when you get to know me a little bit better, you recognize it's actually a little bit too advanced for what I'm capable of. - Mitchell: I think this is actually the perfect dovetail into Sheridan's side of what he had been doing, and then we can kind of get into how we rift. ➢ Don: Let's hear it, Sheridan. I want to hear about the initial interactions. - Sheridan: Yeah. I'll give a little bit of context of what I've done prior, which led me to be a, I guess, 21-year-old, 20-year-old at the time doing a 401(k) company, which was definitely interesting. I worked in finance when I was 16 and 17. I was at JPMorgan and Goldman. - I was really interested in finance from that, but I think I was disinterested in the sense that I felt we were serving a very, very small portion of the population. It just felt like there were a whole lot of ways you could make people 99.9% money. You then just have to focus on the 0.01% of the populace. - I have also done a lot of different companies. The first company I did was a hedge fund. We were essentially doing arbitrage. A very different kind of space, but we were doing sneakers. I had bought and sold tens of millions of dollars of sneakers, tickets, and apparel by the time I was 18. - Afterward, I'd kind of built two companies in fintech. One was essentially helping non-accredited investors invest in private equity funds. The other was helping people submit their rental payments to boost their credit, as well as a bunch of different fintech ideas interspersed throughout. - I think the motivation behind a lot of that was one, I just cared very deeply about helping the communities I came from, but I don't want to make it sound all altruistic. I knew a lot about finance. I really liked numbers and math. I love arbitrages. I love it. There's something about the idea of finding this quick flip always fascinated me. - I think this kind of segues into how we actually kind of came about Lendtable. I had started at Dropbox. Dropbox was actually the reason Mitchell and I connected. I was talking with my manager at Dropbox at the time, actually, about quitting. This was a month into the company. Joining me on a startup, I was running [...]. He's like, yeah, I hear you're kind of interesting. It's a weird thing to do on your first month of job, but here you are. There's this guy Mitchell. You got to chat with him. He's super, super awesome. - Mitchell and I, we kind of started talking. We initially had slotted a 30-minute meeting. Mitch already kind of prefaced with a little bit of a 30-minute mentorship meeting that I'm supremely grateful for to this day. No, but I think it ended up turning into this five-, six-hour-long conversation. - Initially, it wasn't even about what Lendtable is today. It was a bunch of things. Mitch was talking about what he was doing with this company. He had already done some work and was thinking about ways and so forth. I had mentioned the stuff I'd done prior, some of which are still kind of an operation, some of which, we're just talking about it. - Also, Mitch had talked about some of the other ideas he had at fintech. I had talked about some of the other things that I was kind of thinking about. I think this kind of goes to that yin and yang that Mitch was kind of talking about. Mitch, do you want to go for it? - Mitchell: Yeah. I just really want to emphasize. It's like, amen. That was the piece that was really fun here. It was me talking about, here is this kind of basic layout. With Sheridan, again, that inquisitive piece just came in. Tell me what your model is for how you think about this playbook, X, Y, and Z. - One of the pieces in it, anyone who's a finance nerd will know. Step one, pay off super high interest debt. Step two, have three to six months of high savings. Step three, in every single playbook is always get your 401(k) match because it's guaranteed 100% return. - As soon as I said that, I'm talking about the whole thing, Sheridan just dark-zoned that. Again, this is where the arbitrage part comes in. He's like, oh my God, I'm seeing the same thing at Dropbox. This is crazy. Why are people doing this? This is so wow. - Well, there's liquidity stuff. Then he's like, yeah, but what if we just bought their 401(k) off of them, they get the money right up front, and then everyone's happy? Then something clicks on my head. I'm like, first of all, Sheridan, that's illegal. Second of all, Sheridan, you are onto something, which is that people have wealth that they're not getting access to today. - That was essentially the crux of what all of Lendtable's thesis is, which is that there's $300 billion of benefits that are going unused and unmatched. Essentially, it's a hole in the credit market, and that people aren't recognizing that with a little bit of tech, you can actually help people get this benefit. I really think that's what really highlights the great balance between Sheridan and I and the beauty of Lendtable. - It was the no-idea-is-too-big inquisitiveness and just visionary bit that Sheridan always brings. Again, that get it done, wait a minute, there's actually something here. Let's double down and let's really start to pull this out. That really got us started. From there, it was months of time of us biking over to Dropbox secretly hanging out in his house or mine. That was the best part of it. ➢ Don: But Sheridan knew, right? Sheridan's boss knew this meeting happened. - Sheridan: He was very supportive of it, just to be clear. I think this kind of goes back to even when I was chuckling at that. This is like a mentorship meeting for Mitchell. In reality, it very much so was. I think it was abundantly clear to me that this man had such an incredible wealth in fintech, such an incredible wealth of knowledge, who had spent so much of his life and his career building towards it. - Genuinely, he was, I don't want to say singularly passionate, but this was an absolute pillar of what he was trying to do for his life's work. I think that was incredible to me because while I may have had the initial thought of like, hey, let's go buy up people's 401(k)s, I said that amongst a row of six other things I was thinking of. - I think the fact that Mitchell was able to take that and be like, okay, it's an interesting idea that you might want to try to make a million dollars off of a Dropbox playing of doing that. But why not let's do this across the US? Let's make this a national thing. - There are an incredible amount of people who have access to it. There are so many ways to build the skill organization around it. I think that was the yin and yang that kind of interplayed so well throughout. Really, the entire working relationship that Mitchell and I have. I think it very much so was a real mentorship at the end of the day. ➢ Don: From that initial ideation session though, it sounds like months at Dropbox working in the dark, working after hours, how did that working relationship evolve between the two of you? How did the idea go from this initial ideation to what it is today or to the decision to maybe leave Dropbox and ultimately raise your seed round of capital? - I'd love to hear that story, that phase. A lot of first-time founders dialing today trying to figure out what it takes to quit their job at Dropbox, to leave that guaranteed income to go do something on their own and take that leap into entrepreneurship. - Sheridan: That portion I can talk to very explicitly because I actually created a whole Excel spreadsheet. Initially, I think Mitch and I probably started talking, I think I was at Dropbox for two or three months, and then, how long was it before you and your co-founders pulled up? - Mitchell: We met in late October. We officially founded the company on March 15th of the next year. October 2019, Sheridan and I met. March 15th, 2020, we found the company. I was still moonlighting between two companies up until that point. I was still working on startup one in a day, and then when Sheridan would get off, we would talk about Parable. That's the pretext there. - Sheridan: Yeah. I think at that point, it was very much so kind of an interview on both of our paths. To be clear, Mitch had far more job opportunities than I did. All I've done, it looks like I've done a Dropbox internship at that point. I dropped out of school. I was at Dropbox for two, three months. - Mitch was coming by the Dropbox office all the time. He's in the cafeteria there and hanging out. I think a lot of it was just understanding our own working relationship together. I think that's probably one of the biggest things just to start. It matters a lot what we're doing. - I think the reason that I think we both got a conviction around it is we fully said, there were many things that we do not understand about the space. There are many regulatory questions. There are many lending questions. We're going to get confidence and conviction around it by talking to all these lawyers, by testing out this product with other people. - It was also an interesting thing of not that we thought what those product market fit, but there is a clear—we know what the value this can provide is. It is very explicit. These people don't have access to these benefits, we can help them get access to it. It's less so can this provide them value, but more so, is this a value proposition that people are going to be able to understand, that we're going to do it easily enough, they're going to be able to digest it in such a way that it's going to make sense to kind of sign them up for it? - The unit economics is very explicit of just, okay, you don't have a $5000 match, how can you get that $5000 match? I think the biggest part of the integral process that we're both doing together is could we see ourselves working together for the long haul. I think I can very probably say that Mitch is amongst my best friends. - I would work on the 401(k) match company with him. I'd work on literally any other startup with him. I think that was the biggest thing, at least for me, that kind of got the conviction. I guess the last thing is how I actually decided to quit. This one, I can talk to specifically. I actually just created an Excel sheet. - I did an Excel sheet of what is the expected probabilities of all of these different outcomes. If I stay at this company, what's the chance I get a promotion? I get fired, I plateau. What's the expected probability of my general state of happiness? How do I feel about joining this new company? - I came to the end conclusion at the end of the day. I was also in a different position because I made a couple of million from my prior [...]. At the end of the day, to me, it was just like, worst case, I hate Mitchell, I hate this company. All this is terrible. Okay, we just stopped working together in six months. - Mitch has already worked at Dropbox and Facebook. He can get any job he wants. I'm in a slightly trickier spot, but worst worst case, I'm taking a job while making half the pay, which is still fine to me. But I won't regret having made that decision and trying it. - To me, the Excel sheet lined up such that there was legitimately no downside of quitting. I just felt like there were so many fallbacks. If I compare that to my parents, it was very different. To them, doing a startup was taking out a second mortgage on the house. My dad didn't graduate from college, there was a real risk. To me, it was just like, this isn't a risky proposition at all. ➢ Don: Right. It's almost a no-brainer when you look at it in hindsight. Mitchell, how about you? It sounds like you had plenty of opportunities. It sounds like there are lots of co-founders, including other startups you were working on. How did you decide that Sheridan was the one? That this was the opportunity that you wanted to go heads down and just run at? Was there an aha moment for you where you said, hey, there's a real opportunity here, I'm doing this thing, and Sheridan is the guy I'm doing it with? - Mitchell: There are a couple of elements to that question. (1) I self-funded my startup journey. I don't come from money. A lot of people ask, Mitch, you decided to work in industry—I worked in the industry because I needed money, but I also built a lot of skills. - I went to Dropbox, then I worked at Facebook where I was running a fintech wallet. It's essentially a precursor to Libra. It was called Mobile Financial Services. I was running that product for all of Latin America and Asia Pacific. I learned a bunch about how to build/run teams in addition to obviously saving money. - The really important thing is, when you are using your own money to finance your startup ambitions, you have to get really efficient with the little bit of runway you have. When my original co-founder and I split up, I had a choice. I had three things I had to figure out. I knew I wanted another co-founder and I knew I wanted someone to work with. (2) I could have continued building the product. (3) I could have continued trying to get original customers because we were going B2B2C or business to business, then into a consumer. - I chose to find a good co-founder you want to work with. The reason why was, (1) I knew fundamentally that for my style, I needed somebody that I could work with to build something really big. (2) I didn't fully believe I found the right thing from a product perspective, so I was willing to shuffle the deck on that perspective. - This is actually one of the things that was really, really important about Sheridan that made me feel confident about working with him, and then I can also talk about Lendtable itself because there are two reasons that I had to do. I had to both be comfortable to shut down the old business, but also, who would I want to work with? - From the product perspective, I love to think about what needs to be true for a business to be big. Does the idea just make sense? At its core, Lendtable aligns a lot of parties. People are getting squeezed, recordkeepers are missing out on more assets under management. There's just so much alignment. - Also, it solves a lot of the challenges of consumer fintech, which usually it's hard to make money and also scale because the customer acquisition cost is too high. Lendtable did both of those very well. I felt like this was a potential home run hit idea. That's what made me feel confident about Lendtable. - More importantly, I had to feel confident about Sheridan. I think there are two things that I would—anyone who's listening to this who's a first-time founder—make sure the person you are working with, you understand their incentives and that their core incentive is they just want to win. They don't care about the titles, they don't care about who's doing what. We want to make something really big. - Most teams and most startups fail because the founders, either they can't raise money or the founders split up and they can't get big. Don't let problems that maybe will be problems down the road be problems now when they don't need to. - The other one, which was really, really valuable is Sheridan and I in the early days, had things that we disagreed on, but we always found ways to resolve our disagreements in an aspect of what we felt was best for the business. Those two things are super important because you will disagree, some will be some fights, and some won't be some fights. At the end of the day, do you still respect the person you're sitting across from the table? Do you still believe they believe in this business and it's going to be a billion-dollar business? - I think those were the things I saw in Sheridan from the beginning, where I think he's brilliant. I think there is so much that he already brings to the table. He just gets it. He's so creative. But more importantly, I trust him. I trust that we will be able to disagree and we will still continue growing this business. That is one of the things where anybody listening to this, if you do not feel that in your heart about your co-founder, I don't think you should work with them. - Sheridan: Yeah. I think even a second to that last point, that whole idea of, there's some strong disagreement, at some point, you're going to have to go with one of the other person says, whether it's your opinion and the other person's not getting their way while the other person is getting in their way, the ability to move on from that is so huge. - I've seen some founders where that happens, they never get over it. No, there have absolutely been decisions where I've disagreed with Mitch. We've just, for whatever reason, kind of decided that going with Mitch is what we should do probably just because he's right most of the time. And I get over it. - At the end of the day, it is a business decision that is important. There is absolutely no business benefit of lingering on it. I think that is a huge, huge thing. I absolutely saw that with Mitchell. I couldn't second any more of what he just said. ➢ Don: Those are such insightful points. I would encourage first-time founders to rewind, go back, and listen to this narrative. I wish I could have listened to this a year and a half ago. All of this resonates with me. It rings true for me and my co-founding team. Very well said, guys. - Let's fast forward a little bit. Let's talk about fundraising. A lot of the founders listening in today want to raise capital, have raised capital, or are considering their first price round. Can you talk a little about your fundraising journey? I guess, first, the decision to raise seed capital. - I know you recently raised a Series A financing as well, so congrats on all the success raising literally tens of millions of dollars of capital. What does that feel like? Why did you raise? Why did you decide to sell a portion of your equity to fund your growth? And then if you just compare seed fundraising to Series A price fundraising, that would be really helpful for the listeners dialed in today. - Sheridan: Mitch, mind if I'd say why we raised? - Mitchell: Absolutely. - Sheridan: Fantastic. To that point, I was just making Mitch is right most of the time. This is actually a great example where we did have an argument. I was like, why would we raise money for this? This is a cash cow. We're making very guaranteed returns. Why would we want to put inside capital? - Mitch had a different opinion on it. I think eventually, when coming to a decision that it makes sense to raise, that was absolutely the correct choice. I think our goal was to build a multibillion-dollar, gigantic generational company. To do that, there are a lot of things we got to do. Just having more capital enables us to bring on a team to bring on all these other people. We're also, fundamentally at its core, a very capital-intensive business. - Even more so, if you look at the cash flow for it, we're deploying large amounts of money right now. I'm getting that money back in the future, which means that if we're going to grow 10x in a year, you can't even do that with cash that you have on hand. We either need to do it with debt or equity. You just have to. - If not, then you're essentially capped at growing at whatever is the fixed interest rate that you're charging, which is not what we want to be capped by and constrained by. I think the first round that we put together, I think it's very important to talk about the actual time in the market in which we did it because it can heavily dictate what your fundraising process is like. - We started this company in March of 2020. For those of you who don't remember, that was the beginning of COVID. On top of that, a bunch of companies, we were getting news articles from helpful investors all the time being like, hey, we just saw this article talking about this company, we're moving their 401(k) match. Is that an issue for you guys? We're like, great, that is some great sentiment. - It was an absolute slugfest to do it. We ended up going on what must have been 60–70 people from our cap table and just trying to talk to as many angels, as many people would be willing to pick up the phone with us as possible. From that, we put together about a million dollars. ➢ Don: Purely angel investments? - Sheridan: It was a lot of angel funds. We also had a couple actual funds. Foundation Capital was the first kind of serious fund that backed us, which we were super, super excited for. The next one that we went through was YC. We got into YC, we went through at the tail end of YC. We ended up raising our seed round. That was a very different experience. - A couple of reasons. The market had certainly just gotten better. There was less. For about two, three months in that COVID era, everyone was worried that it was going to be the absolute implosion of the markets, everything was going to fall off a cliff, all of these kinds of fundraising rounds [...]. - Don: Which batch was this, Sheridan? - Sheridan: Summer of 2020. - Don: Summer of 2020. Okay, got it. - Sheridan: Yeah. That was a much, much quicker process. We ended up having fewer conversations. I ended up bringing on a handful funds that we're super excited about. Most recently, we did our series A. - That series A was an even more different experience. In our first round, okay, we're trying to talk to anyone possible to put this together to, okay, we have six term sheets on the table. We can only go with one of these term sheets. We're going to have to figure out what we're actually going to do here. Mitch, do you maybe want to talk to more of any specific round? ➢ Don: First of all, great problem to have. How do you select your investor among six competing term sheets? Is it always price? Does the investor matter? If you just talk with other terms, non-financial terms. How do you actually wrap your head around six term sheets when you're lucky enough to be in that position? - Mitchell: Yeah. That's a good question. First of all, we can answer one thing. For us, at least, and again, one of the things you always see is that fundraising is an art, not a science. Again, a lot of it is you and your founding team thinking about what's best for your business. - For our Series A, of the six term sheets, price was important, but it actually wasn't the most important factor. We didn't go with the term sheet that just gave us the highest valuation. The reason why is we loved our Series A lead. We did our lead from 01 Advisors, the firm started by Dick Costolo and Adam Bain, the former CEO and COO of Twitter. - What we loved about them is they're just operators through and through. They get on the phone with us whenever. I just texted Adam the other day for things we wanted, again, for raising debt, because obviously, we have a capital-intensive business that Sheridan talked about. Those guys are hopping on the phone whenever we need them. - At the end of the day, they've been there, they've done that before, and they just get it. For us, given the fact that we are in a new market and we are the category leader in a new market, we felt that having that type of experience was really valuable for us. Every term sheet is not one-size-fits-all. - You really want to make sure, as you continue to grow, that you have people around the table who you think are adding something to your game or adding something to your team. Every investor is a teammate. When you think about them like a teammate, you should be evaluating among more than just the dollars to bring in. - One of the things I will say though, and Sheridan, you might have thoughts as well, I think this calculus changes, depending on the market, depending on the fundraise. In our earliest days, your number one job is don't run out of money. Frankly, you have to think about investor dynamics. - In the earliest days, once an investor writes a check at seed and pre-seed, they're pretty much out of their head because they have to deploy so many more checks. Also at the same point in time, for them to return the fund, you're not going to return the fund for years. Also, they have other startups that are already further along. For them, they're trying to help those startups get even deeper in the process because again, that's doubling down for them. - From that perspective, the amount of help you will get from the average investor looks different at the seed level than it does at the Series A, and then again at the Series B and so on. In the earliest days, our number one job was make sure we raise enough money that we'll be able to continue to survive. Your number one job as a founder is don't let your company run out of money, don't let your company die. - The next step for us was then saying, as we continue to grow this, make sure we're being efficient with our capital to prove the narrative. At your seed round, most of what you're selling is the vision and the team. We're going to only home run hits here. You have to explain why you have a big market, a big vision, and the best team out there. - When you get to Series A, you should start to be able to show you have a thesis that actually is repeatable. It's not like tons of unit economics are really going to be the driver yet. For some businesses, it might, depending on the industry. But at that point, do you have something that's repeatable? Do you have a very clear thesis? And then can you actually show that that thesis has an opportunity to grow? - It's really, really important for two things. (1) Investors matter a ton because they can change the narrative for you, especially as you get further along into business. (2) At the earliest stages, it's a little bit of a different dynamic. ➢ Don: Yeah, very, very well said. In fundamentals, as you get further and further along and become increasingly important at the beginning, it's all about vision. It's all about the founding team. Clearly, you guys have something very special going on here. - In the last segment of this podcast, we'd like to get a little bit vulnerable with founders. I appreciate that starting a company is hard. Many of the guests we've had on our podcast have shared the challenges, the trials, and tribulations of actually starting a company, and the toll it can take on your physical and mental health. - I like to understand what keeps you both up at night, and how you actually cope with the daily stresses of starting a company? Sharing that back with our listeners to actually help them manage the pressures of building and scaling a technology business. - Sheridan: Sure. I think on my end, I've done a lot of startups before. This is the first time I have a large team, an office, and a lot of full time employees. I had this expectation that when I have this kind of big team, all these pressures and stresses were taken away from me. - It's great, I got all these people who are now managing these things and fewer things that you got to think about. In reality, it's almost the opposite. There are so many things that can come up, so many things that are on your mind. It was people's livelihood. Employees have kids and they have families. - I think it is incredibly meaningful that they've taken a bet on us at this early stage. They've really shown conviction that they care about what our journey is. Now it's not even like Mitchell and I letting each other down. It's like we're letting down a group of people, all the investors, and all the other people that have been helpful, have been advisors, and all those things. - I think with that being said, one of the biggest things that help me manage stress is I have been in positions where I felt no stress. When I was at Dropbox, when I've worked on other projects, and every single time, that has been a recipe for a very, very bad mental health state for me. I think a lot of people will say negative things on stress to some degree. I think a lot of the time, it can be a very positive emotional state being the driving force behind action. - If anything, I don't know if I want to be in an environment with those things. Actually, I know for certain, I do not want to be in an environment where there's no stress. Whenever it gets a little bit overwhelming or anything like that, I balance that with, okay, I could just be working at a job while I'm doing 10, 20 hours a week and fine. I know the absolute pit of dismay and despair that that puts me in. I'm like, this doesn't seem so bad. ➢ Don: Right. You think to yourself, what's the alternative, and realize that you thrive in this environment? And this is the best position for you to be in. - Sheridan: Yeah. I need a little bit of gas. - Don: Yeah. Mitchell? - Mitchell: Yeah. This is probably something that a lot of founders will understand because it happens at every single stage of your business. The scaling challenge always feels like it's daunting. When you raise a new round, you're super excited about it, then you look at it and you're like, oh my God, to get to the next round, the amount of stuff I have to do, it seems wild. Or when you're in a pre-seed, oh my God, just getting a customer seems so hard. - The scaling problem, you're always thinking about it. Spoiler alert, it doesn't go away, but you get better at managing it. The thing I would say is that, the thing that I'm thinking about is, how do we level up our game? What are the new tools in the tool belt we're going to add? - If last year we worked on our free throw, now we're working on our three-pointers. How are we continuing to up what we're doing? I think the best suggestion I have for people is you have to be able to combine two skills really well. You have to be able to maintain your vision of knowing where you're going, but you have to obsess over just win the day ahead of you. - Greatness is iterative. Greatness is what you're doing every day. It's choosing every single day to do, to your best damn ability, the most important thing you can be doing that day and know exactly what that is. You don't get around overnight. But every single day, there's something that is the most important thing you could be doing to get to that next place and getting really, really good at only focusing on that thing. Because if you focus on everything else, it's going to feel daunting, you're going to be looking at the mountain, and you're going to be like, how am I going to get that up? - All you need to worry about is, can you take that step in front of you today? I think that has been, for me, really, really important. I very much know, and Sheridan does too, what we have to do. That scale always looks scary, but then you work your way back and say, what are the most important things I could be doing and only focus on that? - When you do that, a lot of times, that problem doesn't make you feel so anxiety-driving or stressful because you're breaking it down into smaller parts that are things you can win. Focus on the steps ahead of you, be great in the day that you have, and win the day in front of you. It would be my suggestion to people ➢ Don: Very, very well said. Break it down. Win the battle each day and you'll win the war. - Sheridan: Have a kickass co-founder like Mitchell. It makes it a lot easier. - Don: I think that's the biggest takeaway from this podcast episode, guys. You've built an incredible company. It's clear to me why and how. I know it's clear to the listeners on this podcast. Thank you both so much for joining me today in helping startups grow. I appreciate your time. - Mitchell: Thank you so much. - Sheridan: All right. Take care. - Don: Thanks, guys. I really appreciate it. This is awesome. I wish I could meet you before we push it live. Yeah, this is a lot of fun.