What Founders Get Wrong About Scaling – With Carta’s CEO
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I remember my first pitch, and it was so bad, they walked me out the back door. By design, transparent to a fault. So as transparent as I can be until something bad happens. The biggest difference is, it's the first time in your career you've worked for somebody that knows less than you do about what you do. That was Henry Ward, co-founder and CEO of Carta, a company that started reinventing the cap table way back in 2012.

Since then, the company's grown to about 2,000 people and is trusted by over 40,000 companies. 13 years in, it's safe to say that Henry has just about seen it all, and he's not shy about his learnings.

So in today's wide-ranging conversation with A16Z Games partner Josh Liu, they discuss when to hire missionaries versus mercenaries. When you're hiring early, you tend to want to hire missionaries because they're in love with the problem by definition. They're just like in love with the mission and they'll ride the highs and lows and no problems too low for them and beneath them. Knowing when you found product market fit. I've been trying to buy cap table software from you for like two weeks and nobody will pick up what's going on. The problem is,

The problem with selling too quickly. The problem is if you start selling before you've figured out product market fit, good GTM can actually hide bad product market fit for a while. And then what happens is GTM's expensive, fucking expensive. And the difference between an inputs versus outputs driven culture.

It is very easy for a company to become outputs driven. How much did we book? And I always tell them, revenue is a lagging indicator. That's the last thing we should look at. Listen into the end since this episode includes a lot of candid questions, including how transparent you should be with employees and even knowing what the right number of employees is.

By the way, this podcast was recorded live in San Francisco during our fourth iteration of our A16Z Games speedrun program. So if you'd like to learn more about speedrun, head on over to a16z.com slash games slash speedrun. All right, let's get started.

As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see asextency.com slash disclosures.

Henry, maybe by wave introduction, something that I've noticed about you is you're not only a founder operator, you're also a student of the game. And what I mean by that is you've thought a lot about what it means to be a founder and an operator. And so there's a lot of founder archetypes. How would you describe yourself as a founder? So I have this kind of weird theory that as a species, we're imitators. It's the Peter Thiel thing. You should watch competition versus losers. We're mimetic, all that kind of stuff.

And you see it in management books. Like if you're just like Jack Welch, you'll be successful. If you're just like Elon Musk, you're just like Steve Jobs. And I think what makes founders unique is that they're all so different, sort of by definition, the aberration. And there's archetypes, they can try to group them, but actually what makes founders really special is that they actually don't fit into categories very well. How do you categorize Steve Jobs? How do you categorize Elon Musk? That's sort of, by definition, the founders are finding the cracks in humanity,

that everybody else overlooked. And so you do have to be an aberration. You do have to be kind of weird.

And so I'm definitely weird in my own ways. Every founder is weird in a different way. Maybe the thing that I think defines me in a more unique way is the common trope is founders fall in love with a problem and then entrepreneurship is a vehicle with which to solve that problem. And so you are just obsessed with this problem, whatever it is, you know, a game, robotics, whatever it is, you're obsessed with it. And then you build a company to solve this problem because that's the best way to do it. And

And I'm a little bit weird in that I was never obsessed with cap tables. Like, that would be really weird. Like, I just didn't...

I just didn't care. But Carta was my second company. My first company died and failed. And when I came out of the kind of the trough of depression out of that one, I just couldn't imagine doing anything else. And so I'd fallen in love with entrepreneurship. I just wanted to be a founder no matter what. And I didn't really care what problem I worked on. So to me, it was the inverse. I wanted to be a founder and a problem was just the vehicle with which I could be a founder. And that's both good and bad.

The bad part is you might work on problems you don't really care about, like you don't like that much. The good part for me and how it kind of translated was because I was agnostic to the problem, I was never married to the problem, right? Like if we were going to work on cap tables today, because that was the most valuable thing to do, I was happy to work on cap tables. If we were going to work on fund accounting, I was happy to work on fund accounting. No problem was too boring, too lowbrow, too beneath me. If it helped build the company and

move my founder journey forward, I would work on it. And that's different, right? You have to sort of find what makes you keep taking one step ahead. Yeah. You've talked a lot about managing teams like sports teams. And so I'm going to beat up this analogy quite a bit here today. So apologies in advance. When you're faced with a problem that maybe you haven't spent your entire life thinking about, like cap tables, how do you make sure you win?

Yeah. So it's really interesting in the early days of hiring, which I know all of you are thinking about this a lot. One paradigm to think about hiring is, are you hiring missionaries versus mercenaries? And there's a lot of ways of describing it. Keith Roblois talks about it's bullets versus barrels, but...

I think the missionary versus mercenary helps a lot in that when you're hiring early, you tend to want to hire missionaries because they're in love with the problem by definition. They're just like in love with the mission and they'll ride the highs and lows and no problems too low for them and beneath them. They'll just do whatever it takes. And they're, if not incredibly loyal to you, they're at least incredibly loyal to the company that you're trying to build. And so two founders, it's 100% missionary missionaries.

- It might be 10 people and you're 90% missionary, and you've got one person that's there for a paycheck. And when you're 100 people, it's 70% missionary. Over time, that ratio changes, and asymptotically, the N plus one person you hire is really there for the job.

But you still need to keep the missionary culture. And they tend to be the people closest to you, right? So CART is about maybe 2,000 people-ish now. Maybe 10%, 20%, 15% if I'm lucky, the population's missionaries. But they're probably the closest to me. The problem with missionaries, of course, is they're really a pain to manage, right? Because sometimes you're like, look,

can you just do what I told you to do and not give me a lecture on it? Like, I paid you to do the thing. I don't need to, like, convince you that there's a philosophical purpose for this. And that's why you do need the balance, right, of the missionary versus mercenary. And then I think there's a long-winded way of answering a question around culture is then the culture gets built around the missionaries you decide to hire, and that's the mission culture. Yeah. How do you identify new missionaries? Are you saying that most of the missionaries at the company now have been with you for a long time now,

Are you creating new missionaries along the way? And how do you, as a CEO, identify that and pull that up into sort of the thing that you're doing? Yeah, I think it's different for every CEO. For us, so today we pay above market. If you just look at our comp, we just sort of pay above market for a variety of reasons. But in the early days, it was a rule. You had to take a pay cut to come to Carta. The first 20 people all took pay cuts to come to Carta. And the reason for that was two things. One was to test Carta.

how bad they wanted to be there, right? If they're a mercenary, they'll only come if they get paid more. If they're a missionary, they'll come if they get paid less. And then two, it really forced me to be able not just recruit, but inspire the people to come, right? Like if I'm like, look, you're going to make $20,000 less than you're making today to come. Now the burden of proof is on me to convince them that that's worth doing.

And we're an equity company also. So it's like, hey, I give you equity and you've got to believe in the equity and you've got to believe in the equity story and all that kind of stuff. But it then forced me to elevate my game because if I couldn't convince these people to take a pay cut to come to Carta, I wasn't good at what I did. And that was my limit test. I don't know if that still works anymore in a very different world now, but that was what we did. That was our hack.

Cool. We had Mark and Jason come in here a couple weeks ago and tell us, you know, the founder journey is one of lots of changes. When you have a two-person company and you double it to four people, when you double it to eight people, it's a new company every single time. And as the CEO and founder, you also have to evolve. And so I'm just curious, in what ways have you evolved over time as a founder? And in what ways have you stayed the same?

Yeah, Mark's so funny. He's on my board in 2019. We did, it was our $1.7 billion round. And Mark led it with a $100 million check and then we filled it up to about 200-ish. And he joined the board. I remember my first board meeting after. So he's very interesting in the board meetings. Says nothing. He's quiet the whole time. And this is pre-COVID when we're in the room together. But he'd just sit in the back and he'd just be taking these notes in tiny, tiny font. And there's nobody that can read these notes except him. They're so tiny.

And he just sits there and then he doesn't say anything in the board meeting, he just leaves. And then he calls you for breakfast and he goes, "I'll give you feedback privately." So you go meet him for breakfast. He pulled out a napkin at breakfast and he wrote this line. And he said, "This is the founder spectrum." And he goes, "On one end, I'm going to put down maniac. And then the other end, I'm going to put down rigid."

And then he put like one in for maniac and it was like impulsive or something like that. I'm not sure. And he put one in from something slightly less than rigid, you know, like rules based.

And then he goes in the middle, he goes, you don't know what to call this, this middle thing. And he goes, you're on this maniac side. He goes, when you're at early stage, that's fine. And you should be a maniac. But you now have $200 million in the bank account. You've got 700 employees, whatever it was. So we need to get you, you know, over to the middle. Like, we don't want you to be rigid, but we need to like get you just in the systems thinker.

And it probably took me a year to like understand what that meant. And now I totally get it because when you're early stage, you're just building a thing. You're building a product. You're building the team. But when you get to a certain level of scale, you're not building a thing. You're building a system that builds a thing.

And so you start thinking about like, well, how do I build an HR department? Like, how do I build a sales organization? How do I build not a product, but how do I build an R&D organization that can then go build products, right? That's the thing. And it took me a year before I really conceptualized it. And the way that I can know if I'm doing a good job or if I'm working is if I'm actually building systems versus building things is if

if the team comes to me and they don't know how to make a decision, right? They're like, hey, should we do, Henry, should we do A or B?

And what that says to me is I didn't give them a systems framework for how to make that decision because my job shouldn't, in general, not 100%, like there's some things only the CEO can decide. But generally, when they come to you in A and B, what they're really saying is you didn't give us a framework with which we could make a decision on our own, A or B. And so then I spend all my time going, why didn't I give them a framework, right? And what is the framework?

And then I teach them the framework so that they can figure out how to do A and B. And I think that skill, I still am learning and practicing every day. Awesome. So all these founders are early stage. They're all racing towards product market fit. You had one company that didn't quite make it, one company that has clearly achieved product market fit. What does product market fit mean to you? And what advice would you give to founders that are sort of in this stage right now where they haven't quite gotten it yet, they're racing towards it?

Mark described it in his writings as like product market fit is when you can feel the market pull the product out of you. And I remember that moment in, I think it was August of 2014. We were selling cap tables. Back then, people would actually call in to buy cap table software. And so we changed our phone system. It's like ring central to dial pad or whatever. And it was like, you know how you like press one to talk to sales, press two to talk to support, whatever.

Somehow we messed it up. So when you hit one to talk to sales, it just hung up.

We didn't know for like three weeks. And the only way we found out is we were just still like selling so many cap tables. And the only way we found out is somebody somehow got their way through our support channel and was like, I've been trying to buy cap table software from you for like two weeks and nobody will pick up what's going on. And that's the only way we figured it out. And then we're like, wow, we might have product market fit. No matter how bad we are at selling this stuff, people are finding a way to buy it in spite of us. That's a really good sign.

I think that the problem or the challenge or maybe the mistake that founders often run into is it's sort of like the George Washington thing, like don't fire until you see the whites of their eyes. Founders start spending a lot of money on sales quickly. They're like, oh, I got the product. Now it's a sales problem. And the problem is if you start selling before you figured out product market fit,

Good GTM can actually hide bad product market fit for a while. And then what happens is GTMs expensive, fucking expensive. It's incredibly expensive. It's actually far more expensive than R&D. And 10 years ago, right, everybody was using open source software.

AWS, we are dramatically lowering the cost of creating a startup, of starting a company. And we think we helped with that. Part of this mission was to create more entrepreneurs, create more founders by reducing the cost of starting a company. And our thing was not compute or software. Ours was legal fees. Let's reduce the legal fees so more founders could start companies. So we dramatically, between 2010 and 2015, dramatically, the world dramatically reduced the cost of starting a company. But the rounds kept getting bigger.

Why? It doesn't make sense, right? Why does it cost more money? And it's that economic theory of the more abundant something becomes, right, the more demand gets created. It got cheaper and easier to make startups. So then to actually be a successful startup required way more cost to break out. And that's where all the money goes is in sales and marketing. So anyway, the mistake that a lot of founders make is,

They don't wait till they see the lights of their eyes before they fire and they start selling and investing in sales too soon, which hides the product market fit. And the kind of the thesis I always give is for founders, the first thing any founder wants to do after they build the product is hire a VP of sales because they hate selling because most founders today are product founders. So they hate selling because selling sucks. And so like, I'll just hire a VP of sales problem solved.

My angel investments, what I say is like, hey, wait as long as you can before you hire a VP of sales and do all the sales yourself because you're the only one that will feel the market pull. Wait as long as you can before you hire a VP of sales and just wait a little bit longer. Wait till you see the whites of their eyes before you do it. Because what I see all the Series A companies that don't make it is they raise $10 million, $20 million, they hire a bunch of salespeople, they burn through it, and they didn't have product market fit.

Super helpful. You talked a little bit about company culture and maybe just to come back to this for a little bit. As a founder, CEO, at some point you go from making all the decisions to creating systems and still making a couple of decisions. And as you evolve, you also have to sort of train yourself. So if being a founder is like an athlete, what is part of your training regimen?

Yeah, so I spend most of my days doing scale problems, not early stage problems. So apologies if I'm not being as relevant, but I'll give you a scale problem that I think maybe translates to the early stage. So I do this thing with executives, whether I'm promoting executive or hiring executive. Imagine it's a CFO. Hey, what's the difference between working for a CEO, working for me versus every other boss you've ever had in your career?

And most of them will give business school answers. Well, you have to be cross-functional and you've got to be strategic and whatever. And I say, you know, all that's probably true. But the biggest difference is it's the first time in your career you've worked for somebody that knows less than you do.

about what you do right like you're a CFO you spent the last 20 years you were an analyst and then became a director of finance and a VP of finance and every stage of the way you work for somebody that used to do your job and they did it really well otherwise they wouldn't have got promoted and then now you work for me and I've never done finance I've never been a CFO and I'm very sympathetic I'm compassionate I always say like it must be so disappointing right you spend like

25 of your career grinding it out, climbing up this ladder to one day be a CFO and work for the CEO and you realize he's an idiot. Like he knows nothing about what you do. So my interview question is always, well, so how do you deal with that? If that's the difference, how do you work differently? And then you go into a conversation about like, am I hiring you to tell you what to do versus I'm hiring you to tell me what to do, right? Which is another framework to think about hiring. The reason I say that is then the flip side, the founder or the CEO is,

is, okay, well, if everybody in your exec team, the eight execs you've got, all know their jobs better than you do, what do you do? Like, where is your value in this? Like, how do you be the CEO that the CFO who knows way more than you do about CFOing, how do you have a 30-minute meeting with them? And they walk away going, that was really helpful. Like, Henry, I'm really glad I met with him.

And that's the challenge of being a scale CEO. The reason I tell that story is I think that's the challenge of being early stage, right? Is there's some things you'll be an expert in, there's others you won't. But how do you be relevant to everybody that you have to engage with? Whether it's your new head of product or your new engineering lead or the support person on the team that's doing customer calls, you know, an investor, right? How do you be relevant to all these constituents?

that by definition know more than you do about their narrow slice. And I think that's the challenge of being a founder over time. And now for a quick word from our friends at OddLots. ♪

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Maybe just to take that one step further, at some point the company gets big enough or broad enough where you can't know all the things. How much do you as a founder focus on inputs versus outputs as a shortcut to this exact thing? Yeah, it's such a great question. Literally, we were talking about this last week in our exec meeting about inputs. It's very easy for a company to become outputs-driven.

how much did we book? How much revenue? And partly why that's true is because that's kind of how we're wired and we want to win. And that's the scoreboard and all that kind of human psychology. The other part is just organizational, right? Like your team's going to come to you and they're going to be like, crushed it. Let me show you how I crushed it. And we're an inputs company. And I have to keep reminding my exec team because they always want to talk about revenue. Did we hit our quarterly revenue numbers? And I always tell them,

Revenue is a lagging indicator. That's the last thing we should look at. It's totally lagging. We should look at everything else other than revenue that drives the revenue and focus inputs. But that's not what people will bring to you. And the story or analogy I use is Draymond Green, Warriors player, not the best shooter. Anyway, the game was on the line.

And the ball was, of course, supposed to go to Curry. Didn't happen. It went to Draymond and he shoots a three. He never gets threes in, but he got it in this time. And it was the buzzer beater won the game. And the commentator was like, what a brilliant move, you know, by Steve Kerr to give it to Draymond. Right. And the coach analyst that was there was like, no, no, no, no.

That's an outputs-driven model. It was actually a terrible move. They got lucky, but in no world was that the right play. And in fact, it wasn't. They tried to get the Curry and Draymond just made a decision and it worked out. But that's the difference in outputs versus inputs is the outputs go, next time we'll do Draymond again. But that's the wrong answer.

right the answer is always inputs you go to curry but it's really hard you have to keep reminding teams to do that because they will naturally always want to go to outputs because that's how we're trained that's how their careers are built that's how they look good in front of you all of those things yeah and so maybe you take this full circle back to company culture

What have you built inside of Carta to make sure that the team stays inputs focused? So I don't do as much as I should and would like to, but writing is an incredibly powerful tool. If you're a good writer, but being a good writer, it's like being a good coder or a bad coder. Like it makes a big difference. If you're the programmer of a company,

Your coding language is any language you're using, but that's how you program the system. And the writing is incredibly powerful because when it like codifies everything, but it becomes a reference Bible that when teams are getting together and arguing about stuff, it's the checksum on the manager, right? Somebody on the team goes, well, Henry wrote that and we should be doing that. And so writing is incredibly powerful. I have a Slack channel online.

called Henry. And it's just my channel. I'm the only one that's allowed to post. So it's a read-only channel. It's basically my kind of internal newsletter. People can post in the replies, but they can't do the main messaging. And it's been there since 2014. Any employee can come and see everything I've written. And it's things from

eShares 101 and our culture to our strategy to here's a trip from Rio, you know, our office there. And here's what I'm thinking to like, I do a lot of shout outs. Customer emailed me, they love their team or support person. Here's a screenshot of that email. And that's my way to codify the culture. And then the reinforcement comes from hiring. I love that idea because one of the things that happens in big companies, as you might know, is

Whatever you've written in the past becomes weaponized at the ground level. Somebody says, "Oh wait, Henry wrote this thing before, and so therefore we must do things this way." But by being in front of people all of the time, having this written thing that people can look at that's updated is really, really helpful. It prevents some of the bad big company things that can happen. Totally. The Henry said problem is a huge one. Whatever your name, Bob, Amy said, you'll get it if you're not already.

I actually don't know quite how to solve this. I'm curious if anybody has, because it gets weaponized all the time. They're like, well, Henry said this, Henry said that. And people always come to me, they're like, they actually wanted to ban the phrase Henry said. You just couldn't say that at Carta. They came to me, the exec team, right? Can we get your support to ban the phrase Henry said? And I said, well, I'm all supporting it if they're wrong. But if they're right, like they should say Henry said that, like it's correct. I don't want to ban that one. And so that's one of the biggest bureaucratic problems of a company, yeah.

All right. All these founders are busy building. They're going to be raising their next round here in just a couple of months, a few short weeks, a few short months. Maybe talk a little bit about any advice you would have for them. I mean, you talked a lot about your early investors and how important they were to you. And so I would love to hear any of your advice for early stage investing from the founder side. So the thing I learned in the early stages, I don't know if this is still true, but I remember my first pitch and I

It was so bad, they walked me out the back door. Like, I couldn't even leave in the front. They're just like, here's the exit to the stairway. And it's just the fucking worst. You could only go up from there. And this was also before they treated entrepreneurs more respectfully. Before Andreessen was like, don't be late for an entrepreneur. I mean, this is where they kept you waiting. You think I'm joking. I'm not. I would go to pitches in the evening to pitch to angel investors because they'd have all these angel networks online.

And it was basically like, I don't know, it was like a drunk sporting thing that you went to. Like, you'd go up, they'd be drinking beer and heckle you while you're pitching. It was like a stand-up night for pitches. It was brutal. Raising capital is never easy. It's not easier now, but it's more civilized today. I thought, you know, I got escorted out the back exit fire escape because I wasn't charismatic enough. I was like, I just didn't have it. The je ne sais quoi. It just wasn't it there.

And what I realized through it is, especially in early stage, it's more like sales. It's not the type of sales you think of like the charismatic salesperson that can sell snow to Eskimos, which I think is more true as you get later stage, but it's about filtering. It's like finding the right customer.

And I could tell, after I got good at this, I could tell within five minutes if they were going to invest. Because the litmus test of whether you were going to invest in a cap table software company was if you cared at all about cap tables. It had nothing to do with about, I mean, how do you make cap tables sexy? There was no charisma around cap tables. It was either I explained the cap table story and they're like, I fucking hate cap tables too. Somebody should solve this problem. I'm interested. Or they're like,

The fire exits there, right? It was just like, you could just tell, right? And so what I realized, it's finding people that connect to your problem. And I think a lot of founders, understandably, they do three pitches, they get no's, and nobody cares about, I must suck. They just didn't connect to your problem set. That doesn't mean your pitch doesn't matter. Once you do find the person that connects to your problem set, then yes, you're good.

How you talk about it, what you're doing, all that stuff really does matter. But what I try to encourage founders when they're feeling really beat down because they think it's a charisma problem, I tell them, I don't think it is. I think it's a filtering problem. All right, so we will open it up to questions.

Hi, I'm Mike and I've been scaling my product team and really trying to find great product leaders. And I was wondering if you have any opinion on what they look like or where they come from. In particular, I think about technical versus non-technical, ICP versus non-ICP. And it sounds like you've been through this. So I was wondering if you had any advice there. So how I think about the early stage, and this is probably true in general, but I think very specific to early stage, your first product hire, your first head of product hire,

There is kind of three archetypes. Again, all generalizations are wrong, but hopefully some are helpful of product people. And I'll categorize it like there's the technical product manager that's like really no specs. They're often former engineers that turn product like they're very technical people.

And then you've got like the process product people. They just know how to run a product sprint and cycle and do the user interviews and get designers and get the process driven product managers that can keep the trains running for you. And then there's like the vision product, the creative geniuses that invent the new ideas and all that kind of stuff. So here's what I think the trap that founders often fall into and that I fell into.

So you start interviewing of these three archetypes. If you're not explicit, you meet these product managers, you try to get to know them,

The type of founder that all of us resonate with is that vision product founder because they're like us. They got lots of great ideas, they get the vision, they get what you're trying to accomplish. They're missionaries by definition, they can riff with you and you just fall in love and you're like, "That's who I want." So you hire them. The problem with hiring them is one, they're usually not very good because if they're actually a vision product manager,

They're you. They're a founder. They're not looking for a job, right? They're trying to build their vision. But two, it's like that's not what you need. You're the vision product person generally. You don't want a vision product manager, but that's what you get attracted to. It's like bad dating, right? Like I date the people that are wrong for me. It's just like that's what it is.

So then it becomes one is like being aware of like, don't get seduced by the visionary, even though it will gravitate towards them. So then the second question becomes, okay, well, great. If I solve that problem, do I go technical or process?

And that, I think, becomes very product, very specific to you. So kind of obvious, but if it's a super technical engineering problem, you go in the technical route, right? Because that's the weakness that you have. If you're like, look, I know not just what to build, but I know how to build this thing. But like, I need someone to like keep the trains running, then you index to a process.

And we can talk about how to interview for those types of product managers. But that tends to be where I see product hires not work as you hire someone like you and where it does work as you hire someone that's not like you. Danny, my question here

There's this idea of visualizing victory and having a vision for what the company is going to look like at a very late stage. And whenever I've been asked to do that, it's always with a low headcount relative to how big I want to go. So I've generally been curious, just looking at trajectories of other companies, why does Carta need 2,000 people at its current stage? How did you get there? How do you know?

I don't know what they all do. Like I'm as shocked as you are how we're this big. We run a very specific kind of business for right or wrong, but we are what I call a services to software playbook company. So when we got into CapTables, CapTables was a services business. Lawyers did it, spreadsheets, da-da-da-da. And we entered that business, we literally hired a bunch of paralegals.

We hired all these experts. They do it by hand. And I'd get a bunch of product managers, technical ones that would sit there and watch them work. And I go translate that into software. And you could see it as we translated the work into software. It just turned into a software business. It was amazing. And then we'd started doing that with our second business, which is the fund accounting business. Literally, it started with, I flew to New Jersey. I was in a hotel lobby room. I interviewed

20 fund accountants, I hired four of them and I gave them spreadsheets and a laptop. I said, "Go start doing fund admin." Then we put a product team and we learned. So the criticism of me is I run a people-heavy business.

No question. The counter argument is, well, that's because I'm on the cutting edge of hiring people and reinventing services business in the software businesses. And so if you take a two-year lens, it looks like I'm the worst software CEO in the world. Hopefully, if you take a 10-year lens, you're like, wow, Carta is going to reinvent all these people-heavy businesses into software businesses and TBD, if we will.

Hey, Henry, Nathan. As a founder, I get to run a fundraise every couple of years. As a VC, you get to run a few hundred on kind of yearly basis. Carta sees tens of thousands of cap tables on yearly basis. So what are some of the emerging kind of trends and insights that you can share with us for early stage founders that are raising capital now based on everything kind of happening in the US and how that is impacting the fundraise landscape?

So we have a ton of data on this. If you haven't followed Peter Walker, he's great. He's got a ton of data on it. I would say as much as venture capitalists try to believe that they're like on the cutting edge of thinking outside the box, most are not. A few are.

But most investors are lemmings. And you just see this herd-like mentality. So in 2015 to 17, 18, it was all crypto. And then it moved to fintech. Now it's all into AI. And so it's very hard to actually generalize all startups because it's so pocketed. You just kind of move in gossip and social circles. My favorite story about what you said, we only raise money a couple times a year. It's like once every two years. And you guys write term sheets once a month, maybe more. Yeah.

I remember when Mark, when he led our Series E, I met him and Alex Rempel for breakfast in Menlo Park. It was Sunday morning, and it was the very tail end. And we had a couple term sheets, and I said, Mark, I'd really like to work with you. Have a term sheet from so-and-so, slightly better than yours. Here are the terms. If you'll match it, I'll sign with you. And he was great. Let me take that to the partnership, and I'll get back to you.

And so we leave, it's like 11 a.m., and he calls his partners, they do their thing, and he calls me back, he says, hey, can I come by your house and talk to you about the term sheet? And I said, of course. And I lived in Menlo Park. So I mean, I have a little boy, he was a baby back then. So it was Sunday, I was hanging out with my son, and he comes to my house at a tiny little place.

And he brings a Lego box with him for my kid. And my kid plays Lego on the floor while he and I sit at the breakfast table talking. And he gives me the term sheet. And I tell that story, and not for you, but for investors, where I tell the story every time I speak at investor events is, if Marc Andreessen can come to my house on a Sunday...

You can too. For you, you write term sheets once a month. For a founder, this is a seminal moment in their journey. And I encourage every investor to go visit your home with a box of Legos to give you a term sheet. Stocking up on Lego sets. Hey, Henry, my name is Blas. How have your motivations changed as you've scaled from visionary small team to scaled company? Everybody says don't do it for the money.

And mostly they're trying to do that to weed out the tourists and all that kind of stuff. But I can actually tell you why not to do it for the money. Most of the time you're poor, right? You're just poor, right? All of you can make so much more money than doing what you're doing. So most of the time you're poor. And so if you're doing it for the money, you'll eventually just get tired and give up, right? Because it's a grind. I mean, it sucks. Most of the time it sucks. And then if you're one of the lucky people where it works and it takes off, then you're rich.

And you're not doing it for the money still, right? Because you're rich. You might as well stop because you're now rich. And so either way, it doesn't work if you're doing it for the money. For me, because everyone's like, so Henry, when are you going to retire? Which I find a little insulting because I'm not that old. But there was like, why don't you retire? Why do you keep doing it? And it's the love of the game. I mean, I've been working since I was 16, 25 years. I've only been successful four of them or five.

I'm like Tom Brady, retire already. I'm like, no, I'll keep going as long as I can throw a football. I want to be on the field because so few people get to be on the field. And so I say the best founders, I think they're in it for the love of the game. Hi, my name is Antoine. I'm very curious to hear your thoughts about what do you use as the architect, the designer, the product manager of that system? And do you think about you as being the main kind of

developer here or do you think about all the other leaders, all the team leaders in your company also contributing that as an open source project? And then how do you then enable that kind of continuous product development?

There's no one answer. It's a lot of little things to build a company. But I'll give you one example of something that's in the toolkit for system design of companies. This is more true when you get larger, but I think the principles are valuable. You know, one obvious tool or lever is culture, like how do you build the culture? And I would say that's like the softer kind of nuanced version of this. The second is, and this is very like

Systems design, like your engineers will get this. It's like org design. I would say like one of the things I've really enjoyed over the last 10 years is becoming a student of org design. And good org design is very unlocking and bad org design can be terrible. And there's a lot of principles and I actually haven't written about this. It's on my list of stuff I'd love to write as sort of, you know, principles of good org design. I'll give you like one example that actually Ben Horowitz shared with me.

I was doing a big reorg at Carta and I wanted to ask Ben for help. So I had dinner with Ben and Mark actually. I gave him all the current org charts, what I wanted to do. I had a whole packet for him to review over his stake and give me advice. And I remember one of the principles which resonates still, I still teach this all the time to my team. He goes, most people think of org charts like, oh, you have a leader and then here's the function and then there's the function and there's the function and whatever.

He goes, one way to think about org design is what problems do you want to come to you and which problems do you not? And so you think about like, okay, there's product and engineering, and that's why you have two orgs is two different functions. But the other way to think about it is the reason you separate product and engineering is when there's a conflict between what to build and how to build it, you want that conflict to come to you because you can resolve it. Sales and marketing, when there's conflict, you want that to come to you.

So where you do the cellular mitosis of teams is really where do you want problems to escalate and where do you not want them? That's an incredibly powerful framework as you start thinking about how do you build an exec team? How do you build leadership teams? How do you build teams where they may go, "I just grouped the function."

And you're like, "No, no, no. I actually want to unpack this function because when there's this function within this organization or this department, I want that to bubble up to me." There's so many of those principles around org design that allow you to construct the system of what gets built, what gets escalated to you as a decision, what doesn't get escalated, how do decisions get routed to the organization, etc. One is culture.

Does everybody feel like they can come to you or not? Then the other is org design, which is like, how does the system actually get these decisions made? That's just one example.

Question for you on early stage culture and communication. One thing I've debated a lot is how honest to be about runway, numbers, results. I think I found you want to be transparent, but some employees are not quite ready for that level of transparency. Also, I think there's a lot of, it tends to be, if you say something like runway, there tends to be angles that they may not see, like you can either get more money from your investors, et cetera. So I always debate on how

transparent I should be there if that creates energy or again, if that actually creates stress and is potentially not good for the company? Such a good question. I'm by design transparent to a fault. So as transparent as I can be until something bad happens, which bad things have happened from being too transparent. I don't have a great answer for you, but maybe I'll give you a few quick stories. When I was so transparent, I was like, everybody should access our cap table. And so I opened up the cap table. Everyone can see the cap table who invested everything, including how many options everybody got.

We were a pretty ragtag group of misfits. Like we had a guy who hired his cousin and another guy who hired his brother. And we hired a guy out of an Uber. Like it was just a pretty rough, rough group, the early, early employees. And so when everybody saw, people just started going ballistic and running into my office. And they're like, Edison, I went to first grade with him. He used to eat paste and he got like 50 more shares than I did. Just like the dumbest,

And I was like, well, okay, too transparent, right? Like lock that down. Thank God I didn't open a payroll, right? That would have been my next transparent to a fault. The better story or more helpful story probably is I was raising the Series A round. And it was just in fall of 2014.

and super transparent. I'd be like, "Hey, everybody, I'm going to Sand Hill. We're going to meet Greylocked. I'm going to meet this, that, and the other." And everyone's like, "Great, Henry. Good luck." And I'd go, I'd do my thing. And of course, no fire exits there. You know, and I'd come back and everyone would be waiting at the door for me. How'd it go? And I'd be like, "Not good." Their just faces fell. And it was just like that every day. And it was a beat down for them. And what I realized is,

They just don't understand what the fundraising process is like. And my job is to be as transparent as possible, but it's also to protect the company from the external volatility of the world. Because most people in a company can't handle it. That is a unique role. The founder is an incredibly volatile, especially early stage, very volatile position. And part of you is to be the suspension between that, the shock absorber between that. And so my solution was, I said, you know, everybody, I just realized...

You're really excited about this fundraising, but like, this is what it's like. And I don't want to keep hurting you. So I am going to be transparently not transparent. I am not going to tell you anything until it's done. And everybody just will keep grinding and I'll do my thing. And when it's over, I will tell you we were successful or we won't be. And it'll probably take me three weeks. So hang in there and I will give you an update in three weeks. And that worked pretty well.

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