20VC: Linear's Karri Saarinen How to be Grow Capital Efficiently in a World of BS Growth | How to Fundraise with Leverage | How to Select Investors and How to Give Them Homework in the Raise Process & Growth Lessons from Airbnb and Coinbase AI transcript and summary - episode of podcast The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

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Episode: 20VC: Linear's Karri Saarinen How to be Grow Capital Efficiently in a World of BS Growth | How to Fundraise with Leverage | How to Select Investors and How to Give Them Homework in the Raise Process & Growth Lessons from Airbnb and Coinbase

Author: Harry Stebbings
Duration: 00:47:30

Episode Shownotes

Karri Saarinen is the Co-Founder and CEO of Linear. The company has raised from some of the best in the business including Sequoia and Accel. Before founding Linear, Karri was the principal designer at Airbnb and the founding designer at Coinbase. 10 Lessons with One of Silicon Valley’s Most In-Demand

Founders: How to Become a Master Fundraiser: Why does Karri believe it is BS advice that founders should “always be raising”? What is Karri’s biggest advice to founders on minimising dilution? What do most founders think they know about fundraising but do not? What is the best way to put your VCs to work? How can you give them homework to do? What has been the single best VC meeting Karri has had? What has been the worst VC meeting? Product and Growth: What does Karri mean when he says “founder must focus on quality growth over hypergrowth?” How does Karri advise founders on how soon to release and monetise their first product? Wait for platform ready or ship more feature products and monetise? What have been the single biggest product lessons for Karri from Airbnb and Coinbase? What are the most commons ways that growth plateaus? What breaks first? Karri AMA: Brian Armstrong or Brian Chesky; who would you invest in first? Would you sell Linear today for $3BN in cash? What do you know now that you wish you had known when you started? What did you believe that you now no longer believe?

Full Transcript

00:00:00 Speaker_01
I've never been happy with a 20% dilution. I would rather see it at like 10% or less than that. The only real protection you can have as a startup founder in your business is to be successful.

00:00:11 Speaker_01
If you're not successful, there's a lot of ways investors can exert their control.

00:00:16 Speaker_00
This is 20VC with me, Harry Stebbings. Now, the show state is a special one.

00:00:20 Speaker_00
In a world of fake growth, bullshit fundraisers, and hype, Kari Saarinen has built the most incredible, sustainable, and most importantly, capital-efficient business in Linea, where he prioritizes long-term, profitable growth rather than falling for the raise big, spend big mentality that we've seen so much of.

00:00:38 Speaker_00
Of all the companies I'm an investor in, I would say I get two times the number of intro requests for linear and carry than all others combined. That's insane, actually. Carry is a star and this was such a joy to do today.

00:00:51 Speaker_00
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00:01:17 Speaker_00
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00:01:30 Speaker_00
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00:01:41 Speaker_00
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00:01:51 Speaker_00
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00:02:10 Speaker_00
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00:02:17 Speaker_00
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00:02:31 Speaker_00
Visit GleanAI.com forward slash 20, that's two zero, to request a demo today. You have now arrived at your destination. Cary, I am so excited for this, dude.

00:02:41 Speaker_00
I've wanted to do this since we first started working together, so I'm thrilled that you joined me today. Thank you for joining me. Thanks for having me.

00:02:48 Speaker_00
Now, I was chatting to Miles at Excel beforehand, and he said, you've just got to start with context. And so I don't want to do like the, oh, how did you come to found linear? He told me I had to ask about potato farming in Finland. Why?

00:03:02 Speaker_01
This came to be, I think clean air also came to be from my frustration. So I think my frustration living in the US or in California in the last decade is that the potatoes here are not very good, or there isn't that much of a variety of things.

00:03:17 Speaker_01
So when you go to a grocery store, you usually have four different kinds. You have the large one, the golden one, the small one, and a red one. And growing up in Finland, that's not the case. Those are the main categories.

00:03:32 Speaker_01
But then within these categories, you might have different kinds of varieties. And some of them are more seasonal, and some of them are more specific to a region in Finland where they're grown.

00:03:43 Speaker_01
So during summer in Finland, you go to a grocery store, there might be five different kinds of different varieties of the same kind of potato, the same category.

00:03:53 Speaker_01
And then some of them might be picked this morning and they're really fresh and the taste and the texture is very different. They're very buttery. That potato flavor is much more stronger.

00:04:05 Speaker_01
Even if you just boil them, you can taste a lot versus if you boil normal potatoes. I think you get on a grocery store, they don't generally taste that much anything.

00:04:15 Speaker_01
I'm just sad that there isn't good potatoes in the US, so I at least haven't been able to find. So I like going to Finland in the summer to buy some of these potatoes, but I've been also growing my own.

00:04:26 Speaker_01
We have a little cottage and it has a space to farm things, so I've been growing my own as well.

00:04:32 Speaker_00
I've never met a potato nerd. That is the nerdiest description of potatoes I've ever heard. All I say is I hope you didn't use that when you were dating your partner. Clearly you didn't because it converted well.

00:04:45 Speaker_00
But moving the potatoes forward, before Linear, you worked at Airbnb and you worked at Coinbase, two of the most transformative kind of product talks in the business.

00:04:54 Speaker_00
When you think about like impact, which one had a bigger impact on how you think about product?

00:05:00 Speaker_01
With Coinbase, I was there much earlier. So it was when I joined, it was only like 12 people or so. And then when I left, it was less than 100 people. So it was more of the early stage experience.

00:05:11 Speaker_01
I think the main thing I saw there and learned there that how much you can do with very small teams, a lot of the features we built, and they were used by all kinds of companies and large groups of people or very much revenue went through them.

00:05:27 Speaker_01
And those features were maybe built by one person or two people or three people. For example, Coinbase Exchange, which is the trading platform they have, that initially was built by one guy.

00:05:38 Speaker_01
He was in a room and then he was building it for maybe six months, but he was built by one guy. And then when it went live, it already transacted maybe millions or tens of millions of dollars. And today it's probably transacting billions of dollars.

00:05:53 Speaker_01
That was one lesson I learned there. And I think with Airbnb, it's much more about... I think Brian Chesky is very driven or passionate about the experience, like how does this feel and how we want the company or the product to feel. That was

00:06:08 Speaker_01
really great to see that you can run company that way, that you can actually focus on the experience and you don't have to focus on some of the other things like metrics or, I don't know, something else that people tell you to, but the experience is the most important thing you can focus on.

00:06:24 Speaker_00
Can I push you? Which one's a better leader, Chesky or Armstrong?

00:06:28 Speaker_01
I don't know if I want to answer this. And again, I would say they are very different kind of personalities. I also think that they're probably like a really good fit for the company they are operating.

00:06:38 Speaker_00
If both of them were to start a company again, and you have one angel check, which one would you invest in?

00:06:44 Speaker_01
If I really had to choose, I would really choose Brian Chesky. I think he's really this power of nature. He can thrive through anything. I think Brian Armstrong is as well.

00:06:55 Speaker_01
If you put Brian Chesky to do something like he will really do it, then he will have all the energy to do it. So I would bet on him.

00:07:02 Speaker_00
Are you kidding me? Have you seen his weightlifting days? This is a man who, when he sets his mind to something, he goes for it. Unbelievable. Totally understand and get you there. Listen, he was the inspiration behind Founder Mode.

00:07:15 Speaker_00
I have to start giving your answer there. I had Zach on from Plaid, and he was like, actually, I think Founder Mode is going to be incredibly dangerous for a cohort of founders, and it's going to allow for a lot of bluntly bad behavior.

00:07:27 Speaker_00
How do you think about and assess Founder Mode, given your contacts with Brian, and also now being one of the hottest founders in the Valley?

00:07:34 Speaker_01
Yeah, I mean, I agree with Zach that it can be dangerous or the essay itself, it's not very clear what it means. And like the standard advice is like you hire really good leaders in the company, and then you let them do the things.

00:07:50 Speaker_01
The thing with the founder mode, I believe, was about that you should do that. You should hire some leaders. It's not that as a founder, you should be doing everything, operating everything by yourself.

00:08:02 Speaker_01
But you shouldn't also sit on the bench while everyone else is playing on the field. But you are allowed as a founder to still be on the field. You can still play some roles in there, like some position there.

00:08:15 Speaker_00
You said about kind of sitting on the bench when someone should maybe be on the field. If I were to push you and say, where did you sit on the bench too much and you should have been on the field more?

00:08:25 Speaker_01
Well, the first or the last two years, I was maybe too much on the bench when it came to the go-to-market function and the marketing or the sales function. And now, maybe the last six months or the last year, I've been focusing on it much more.

00:08:41 Speaker_01
We have weekly chats about it with the leadership team there. I think the reason for that is that my background is in design and for example, Airbnb and Coinbase, they weren't very like go-to-market driven companies.

00:08:55 Speaker_01
You didn't have salespeople in the company, but when you are building more of an enterprise business and selling to enterprises, the go-to-market function can be more complicated or it can be more nuanced or there's something more in there.

00:09:08 Speaker_01
To me, I have to learn about it. I have to learn about these things in order to be more effective there.

00:09:14 Speaker_00
you know, we mentioned kind of growth and different periods of growth there. I have to start, you said something to me before the show about quality growth over hyper growth.

00:09:24 Speaker_00
What do you mean by quality growth and how does that differ from hyper growth?

00:09:28 Speaker_01
So with Linear, we've been growing much more this sustainable way, or I like to call it more like a quality growth way. And what it means is that the growth is based on something real that is working in the company.

00:09:41 Speaker_01
And it's not something that is artificially choosed, or it's not like the growth is on steroids. It's like the growth is coming from the fact that you go to the gym. That's more sustainable than using steroids.

00:09:53 Speaker_01
You should probably shouldn't use steroids, but maybe some people might use it at some point. not sustainable. So similarly, I think startups, we have this culture of growing fast, scaling fast, trying to hack our way to the growth.

00:10:08 Speaker_01
And to me, it feels dangerous because it's artificial. Some companies, they put a lot of money into their growth. They can get the growth, but they're also spending more than they're making. And eventually that function just doesn't work.

00:10:21 Speaker_01
Like you need to keep raising more and more money. And it might be really hard to actually turn the function now to actually make money versus spend it.

00:10:30 Speaker_01
So for us, the quality growth has always been the product that we almost spent no money in marketing. We didn't even have sales for the first three years.

00:10:39 Speaker_01
We just wanted to see that the growth is coming from the fact that people find our product better than anything else out there and they will pick it up and they will buy it.

00:10:48 Speaker_01
And that's what the real growth to me means and not something like you spend your money on.

00:10:54 Speaker_00
Founders listening will be going, great, I get it. But I need to raise money again. I need a series A, I need a series B, whatever that is. I am looked at in a comparative stack of companies. And if my growth rate is 2x,

00:11:08 Speaker_00
and there are companies who are growing 4, 5, 6x. AI revenues are unbelievably different to what we've seen before. I'm just not going to raise money.

00:11:17 Speaker_00
So like, it almost feels like quality growth is a luxury product and I need hyper growth because that's the only way I can get the next round. What would you say to that thought process?

00:11:26 Speaker_01
Well, I mean, I think that's exactly right, that you need the growth to raise the round. But there is the other option, if you just think about this problem, is that what if you don't need to raise the round?

00:11:38 Speaker_01
What if you can sustain without raising a round, or you raise some round, and then you just try to focus on making the business function work, actually try to make money and not spend that much money, and then

00:11:52 Speaker_01
you're no longer tied to those metrics because you don't need to raise. And if you can get to profitability, then you don't necessarily need to raise ever again. You can if you want to, but you don't have to.

00:12:06 Speaker_01
So it definitely depends on your market dynamics, how hard or fast you need to go. But what I advise founders is that you should think about what game you're playing, what markets you're entering, what do you need to do there? What's the dynamic there?

00:12:22 Speaker_01
Our market, it was kind of clear from the beginning that the way we went in this market, it's not like a fast moving market. There's basically one solution every company uses and it's been there for 20 years and it's kind of the legacy solution.

00:12:37 Speaker_01
And it seems like nothing has happened in the last 20 years. I don't think there's a lot happening in the next five or 10 years unless we make it happen.

00:12:45 Speaker_01
So for us, it creates this market where we think it's not necessary to go the fastest as we can, but we actually need to focus on being the best as we can. There is that cost of trying to grow too fast or growing too fast.

00:12:59 Speaker_01
The cost there or what you sacrifice is the quality or the not actually focusing being the best in class for the product.

00:13:07 Speaker_00
And for any founders listening, do not listen to Carrie. You should absolutely get on the VC treadmill, otherwise I will be unemployed. But no, I completely agree with you.

00:13:18 Speaker_00
I think the thing that's so interesting, you mentioned kind of making money from your customers as well there, and being more proactive in doing so earlier. You made money year one, you were profitable year two. How do you think about shipping

00:13:31 Speaker_00
feature products that can be monetized quicker versus the founders that say, well, that's fine, but like, I need to do a platform approach. And actually it's not possible to do that until 24 months in.

00:13:44 Speaker_01
I think startups should always pick a more focused angle or like some kind of niche that you hit first, like some kind of smaller group of people that you can serve as soon as possible.

00:13:55 Speaker_01
Even if you have this idea of a platform, you might also find some use case, which you can do today with a simple feature that get people into that platform and you can start building the platform with them.

00:14:10 Speaker_01
So I don't think it's this kind of binary choice that either you build a platform or you build this like feature product. There is always a way to focus what you're doing to some group of people, build something really great for them.

00:14:22 Speaker_01
then like expand from there. And I think generally that's the right approach for any startup. You shouldn't try to boil the ocean. You need to just boil the pot and get someone in the pot and cook with them.

00:14:34 Speaker_00
But I think the biggest reason why companies I work with don't find product market fit is founders get really nervous pre-launch. They expand the ICP too much and then it doesn't resonate with anyone.

00:14:44 Speaker_00
They don't get a thousand true fans and no one really gives a shit about it. And to your point exactly, like, find the 1,000 people who will really care and pay and love it and expand from there. Totally agree with you and get you there.

00:14:54 Speaker_00
Profitable in year two. This is a very rare thing, Carrie, being profitable. What is wrong with you? My question to you around that is, the counter-argument would be, why didn't you spend more on acquisition?

00:15:06 Speaker_00
Have higher cax, the retention's great, people love Linear as a product. Just pay more and get more people faster.

00:15:14 Speaker_01
I mean, again, like it goes to the strategy we have is we want to be the best tool and there's certain beliefs what we think get us there. One is that the team should be more like smaller and more focused.

00:15:26 Speaker_01
And if I look back to different jobs in different companies, I always felt that the the smallest teams made the best results.

00:15:33 Speaker_01
Not all the time, but usually when you put this special team together that are really talented, maybe it's only three people or five people or something, they could make really big impact in a company very fast. That's something we believe in.

00:15:48 Speaker_01
So one of the main sources of expenses, obviously, is hiring. If you have a large team, you spend a lot of money every month.

00:15:55 Speaker_01
We took the different approach where let's just try to find highest quality people we can, and then not grow the team too much, because it can cause additional problems. It can dilute the culture.

00:16:07 Speaker_01
You spend more time managing things, and you have to onboard people more. So generally, our growth rate on the team size has been 2x per year. So part of that is hitting profitability is that the revenue grew faster than we were able to hire the team.

00:16:24 Speaker_01
And then when it comes to the marketing expense or some other expenses, again, part of it is that I want to see the growth is there even without the spend. And then secondly, the product hasn't been ready for everyone from day one.

00:16:40 Speaker_01
Again, going back to the focus of finding your first group of customers. Our first group of customers for startups, small startups, early stage startups, those people don't even look at ads.

00:16:51 Speaker_01
I don't think they pick products because they see ads out there somewhere. They pick products because they hear about it from their friends or other founders.

00:17:00 Speaker_01
I think the word of mouth and connecting with those founders are much more important than spending money on ads. By the time of Series B, we only had spent like $30,000 in advertising.

00:17:13 Speaker_01
And $30,000, I think, went to your podcast at some point, and then it went to another podcast. So we basically did two podcast sponsorships with that money and nothing else. But now we are spending a lot

00:17:27 Speaker_01
more money in advertising, because now the company, like the products is actually working for a wider audience. And it's working for larger enterprises, larger companies.

00:17:36 Speaker_01
And those people need, we need to influence them a little bit, like they need to see that we are there, we are around, we are like a serious company. So there, I think the advertiser makes more sense. But in the beginning, I don't think it made sense.

00:17:47 Speaker_00
Do you wish you'd gone more enterprise earlier?

00:17:50 Speaker_01
Not really. The way I look at this is that you have the product, then you have marketing, and then you have sales. In order to move to the next segment of the market, each of these functions kind of have to elevate at somewhat equal base.

00:18:04 Speaker_01
So when you're selling to enterprises, obviously you need to have the sales team to figure out how to do that. How do you work? like an enterprise account, how do you talk to people there more and how do you influence them?

00:18:16 Speaker_01
And then the marketing has to be there that people have to know about you. They're not going to engage in a sales process if they've never heard of you and they don't understand what you do or why it's better or something.

00:18:27 Speaker_01
And then the product has to be there. Eventually, if they actually buy the product, it actually has to work to them well.

00:18:32 Speaker_01
So we started getting some of these enterprise customers maybe a year ago, just before our Series B. And that was the story there. It's like, hey, we are seeing now that it enterprises are buying this product.

00:18:45 Speaker_01
It just doesn't happen very often right now. It's a little bit special companies do this, that they see the value earlier than some others. And now one year later, we have the switchers every month.

00:18:56 Speaker_01
So it's like it has gained a little traction, but we needed this year to figure it out and improve the product and get few of those customers in so we could see where the product breaks down and then we can fix it.

00:19:08 Speaker_01
And then we can see in our sales conversations, what do we need to do on the marketing side? And then on the sales side, we need to obviously see what do we need to do on the sales side?

00:19:16 Speaker_01
So I think there's this, you need to keep elevating each of these functions and you can't just jump in and hope for the best.

00:19:22 Speaker_00
You mentioned the series Be There. I'm intrigued. When you're profitable, why raise another round? Why dilute more?

00:19:29 Speaker_01
I think it's still something like we are definitely, I would say like, I'm still figuring out or, and I've been talking to people about this, like, do we need to raise more money? Like, is that like, what happens? I think there are some basic reasons.

00:19:41 Speaker_01
Like one is that it is useful to mark up the company every now and then, like we were, we raised serious B maybe almost two, three years after the serious A and it's annoying when you talk to

00:19:52 Speaker_01
candidates, and you say you're a Series A company, and they think that you're technically a Series B company, but technically you're more like a Series B company in terms of your revenue or something.

00:20:03 Speaker_01
And then there's this disconnect of, hey, we can't give you 1% of the company like a Series A company could, because we are just much further along. So there's this disconnect between the equity value. And so marking up the companies is useful.

00:20:18 Speaker_01
You can do it other ways, too. You don't necessarily need a round for that. I think there's also like signaling with the customers as well. You're no longer a Series A company.

00:20:27 Speaker_01
If you are a Series B company, it sounds more serious because there is a lot of like seed or Series A companies, but not that much Series B companies.

00:20:36 Speaker_00
How impactful is having Sequoia for hiring?

00:20:39 Speaker_01
It's kind of hard to tell, but I would say like the thing, let's say like we didn't have Sequoia or any of them, like we didn't have any VCs, we would be just bootstrapped.

00:20:47 Speaker_01
I think like what you're signaling with VCs or Sequoia is that you are really aiming high, like you have a high ambition, you want to make this big.

00:20:55 Speaker_01
And that for the candidate, it can feel like it's I don't think it's a major thing that people pick companies just because they have this VC invested in them. But it can be one of those like safety things that least the company is not horrible.

00:21:09 Speaker_01
It's not terrible what they do because someone believed in them and a tier one VC believed in them. So I have a little bit of signal there. So I do think it is meaningful. I wouldn't say it's the main driver, but

00:21:22 Speaker_01
Part of this round, racing around is about the signaling with the candidates and the markets. And then I think there's each time we raced around, there was definitely like some level of uncertainty.

00:21:33 Speaker_01
Like with the Series B, we raced it at the time where the market was quite bad or looking to be quite bad. Companies were doing layoffs. They were shutting down. It was hard to tell, like, is it going to get better or worse?

00:21:46 Speaker_01
It's one of those like safety things that we, again, like we want to be here for the long term and we want to be a sustainable company.

00:21:53 Speaker_01
So raising around now versus waiting until the market is really tanked and everything is bad and we have to then go out there to raise because our revenues dropped and we are no longer profitable and such.

00:22:06 Speaker_00
How much did you raise in the B? It's about 30 million. Why did you decide that was the right amount?

00:22:12 Speaker_01
So usually with the rounds, I always focus on the dilution, obviously. I think that's the main thing you want to control, ideally.

00:22:21 Speaker_00
What dilution are you happy with per round?

00:22:23 Speaker_01
Well, I think it changes per round, but I think it's as low as I can get it, or as low as it makes sense. So I've never been happy with a 20% dilution, for example. Even in the earlier rounds, I would rather see it at 10% or less than that.

00:22:39 Speaker_01
Can you get the Sequoia for 10%? I mean, I would say, I don't know what you have to ask that, but I think it's possible if you have the leverage to do that.

00:22:49 Speaker_01
The thing with Sequoia is that they did invest in Seed and Series A. And like one of the reasons we did the Series A with them is that we could push the dilution lower because they already have ownership.

00:23:00 Speaker_01
So it's one of those things you can optimize for. But I don't go super hard on optimizing on any of these things. So often it's a matter of what do we think is reasonable valuation in terms of our progress.

00:23:13 Speaker_01
So I'm not trying to get the highest valuation possible. I think it's dangerous. And what we've seen in the past couple of years is that it can lead to down rounds, and those are really annoying or unmotivating to people.

00:23:25 Speaker_01
So I want the valuation to be good, but not something that adds overly a lot of pressure, or we get ourselves locked into this valuation cage and we can't do anything anymore.

00:23:37 Speaker_01
But I'd rather see a good progress on the valuation and then push down the dilution to the level that it still makes sense to the investor.

00:23:45 Speaker_01
I want the investor still to be engaged in the business and not just like, well, I bought 1%, I don't really care. But I think it's depending on the round, it should be enough for them to care, but as low as possible, we can get it.

00:23:57 Speaker_00
Should founders have a board from seed, from A?

00:24:00 Speaker_01
I would say like, personally, I think like you shouldn't have a board at seed. And I think you can raise a price round. I don't think you need to, you can do a safe round at seed. At a series A, you can think about it.

00:24:11 Speaker_01
I do think it's like we added the board to the series A. I feel like it's, it's kind of like a standard thing where I think it's in some ways it feels good governance to have someone outside of there.

00:24:24 Speaker_01
And then I think with the series B we added another board member to kind of get to the different perspectives in the board meeting. So we just don't have us and then a one investor, but we now have two investors and then then us.

00:24:36 Speaker_01
But I would say like on the board seats, I would definitely think about controlling them or having a little bit more. If you're a solo founder, you probably should have more seats or more voting on those seats. We have three founders.

00:24:48 Speaker_01
So it's, it's been like kind of working out that way. Like we can have three, we negotiated to have three seats from the beginning and then the VC can have one and so we can retain the control of the board.

00:24:58 Speaker_01
But me and even our legal counsel, I don't think some of these tricks don't really work that well anymore.

00:25:04 Speaker_01
And I saw this interview from Parker Conrad, and I think he said that the only real protection you can have as a startup founder in your business is to be successful. If you're not successful, there's a lot of ways. It's not about the board control.

00:25:19 Speaker_01
It doesn't really matter. There's a lot of ways investors can exert their control. They have much more experience in that than you have as a founder.

00:25:28 Speaker_01
The real protection you can have is to be successful and not overthink these different terms or controls you can have in the legal framework.

00:25:36 Speaker_00
What was the single best investor meeting that you've had, Kari?

00:25:39 Speaker_01
To me, it's always if people come in informed and get us and they're willing to go deep. That's something I do with this fundraising process is that I don't like going very broad with the process.

00:25:53 Speaker_01
When we see that there's a good time or reason to do a fundraise, I usually have a list of people that I know or heard from folks.

00:26:01 Speaker_00
How long is the list?

00:26:03 Speaker_01
The list can be longer, but usually when I start the process, it can be only like five people that I want to talk to. And they can be a little bit different kinds. Some of them maybe are solo investors. Some of them are tier one investors.

00:26:15 Speaker_01
Some of them are some specific person I've heard about.

00:26:18 Speaker_00
So when you have that list, a lot of people are told always be raising, you need to continuously build relationships between rounds. How do you feel about that?

00:26:26 Speaker_01
I mean, like absolutely not to be always raising. I do think that as a founder or CEO, you should always think about the next round or what would make it good or what would ideally, what would you want to get out of it?

00:26:39 Speaker_01
Like what kind of person would you want to get in? And then obviously, if you do need the money, then you also need to think when is a good time to do that, that you still have a good amount of leverage and the momentum in the business is good.

00:26:51 Speaker_01
So I think there is this background process that you need to run every now and then. You don't have to think about it every day, but maybe every quarter or every month or something.

00:27:00 Speaker_01
Just think, is there something I should do or think about the next round? When is it going to happen? What should I prepare for that? And I do meet with some of these investors, even though I'm not fundraising, but they're often very casual chats.

00:27:13 Speaker_01
And I just want to get to know the person a little bit. So when the time comes that I want to run this process, I already have some level of relationship there.

00:27:22 Speaker_01
And then we can just go deeper into what kind of investor they are and their questions and my questions and that kind of stuff.

00:27:29 Speaker_00
Which investors do you not work with today that you would most like to work with?

00:27:34 Speaker_01
There's definitely the question even in my head, do we need to raise like, is this it? And I'm being kind of like researching, are there like different ways of doing this?

00:27:42 Speaker_01
And, and I think like, for example, if you don't need that much primary capital, you could do more like a secondary capital, you can actually build this more into a little bit like public companies where the team's equity in the business is a little more liquid that you could have more of the secondary opportunities with the team.

00:28:01 Speaker_01
And that could be a good thing for the team that they can actually feel like the equity is worth something and not just like a paper ticket they have that maybe one day will turn into something.

00:28:11 Speaker_01
So I think there's that question of like, do we even need more investors in the business? We actually have quite a lot and they are good.

00:28:18 Speaker_00
You said earlier about the kind of investor shortlist. When we chatted before, you said about putting VCs to work and giving VCs homework. What did you mean by this? I'm not often given the homework, Kari.

00:28:28 Speaker_01
I make a separate Google doc for each investor and say like, Hey, here's a memo at the end of the memo. There's some questions for you that I would like you to think about, and then they should write them down.

00:28:38 Speaker_01
And then we should talk about those answers. And to me, what it gives me, it's, it's a little bit like simulating the relationship of working with them. And I can see the answers themselves might not matter that much. It's more about the.

00:28:50 Speaker_01
I can see how they think and what their style is. Are they more tactical? Are they more high-level thinker? What are you looking to see? It's more like, do I like this style?

00:29:01 Speaker_01
I would say, for example, what I don't like is overly benchmarking or following playbooks from other companies. It's templating the business. You are not really thinking about our unique challenges. You are applying this template from somewhere else.

00:29:16 Speaker_01
So that's one thing I don't want to see. But in terms of what they actually do, I think it can vary a lot. In the end, it's more just when we go through it, it's more like the feeling I have. Do we speak the same language?

00:29:29 Speaker_01
It doesn't mean we have to think about the things the same way and that's not the goal. It's more that, does this way of communicating or thinking seem productive? Do they get our values or how we do things or do they not?

00:29:42 Speaker_01
And did they completely miss that? I'm just looking for a fit and that fit can look different.

00:29:48 Speaker_00
Kari, what advice to VCs give that founders listen to that you think is most dangerous?

00:29:53 Speaker_01
VCs tend to push you to hire more leadership people, but then it's not always the right time or it's also tough to find the right person. At least for me, I'm again, looking for a fit in that leadership role.

00:30:08 Speaker_01
So I think there's way too much push on hiring, especially like business roles, like hiring a VP of sales, hiring a CRO or hiring something where I always ask, what are they actually going to do? Like, what are they actually going to change?

00:30:21 Speaker_01
And usually there's no answer because they don't know what they're going to do. And the people themselves don't know. They come into the company, they start doing some stuff, and maybe, hopefully, they will do something productive.

00:30:30 Speaker_00
Are there any questions that you ask when identifying talent that are common across different functions? And so, like, I always ask, like, talk to me about your relationship with your siblings. It tends to be the opposite of how they view themselves.

00:30:44 Speaker_01
I like to ask people what they're really proud of. What is something they built that they're really proud of? What do you want to see in that answer?

00:30:53 Speaker_01
First of all, I would like to see that they're proud of something, that they actually care about something and they could articulate why they care about it. And then I think, again, it's not what it is, but it's about how they talk about it.

00:31:05 Speaker_01
The people who really care about their craft, whatever role they're doing, they always want to go beyond what is expected or want to do it better than expected.

00:31:15 Speaker_01
What I'm looking for in that answer, people who are passionate about their craft or want to do it well. Usually, their answers start to sound more like these projects are almost their children.

00:31:25 Speaker_01
They start kind of lighting up, they get emotional, or they get much more nuanced on what they build and why.

00:31:31 Speaker_01
And the people who don't care about the craft as much, their answers are more flat or more factual, where it's more of, I did this and it worked well, the impact was there, it was successful. So to me, that's the interesting thing to look at.

00:31:45 Speaker_01
Do they want to go beyond? Can they think beyond what is expected or standard in this job or role? Can they come up with something even better? And do they have that motivation to do that? I look for that craft in that question.

00:32:00 Speaker_01
Kari, what are the biggest hiring fuck-ups you've made? There's only a few people we had to let go. There's only a few people who have left the company in this five years.

00:32:09 Speaker_01
It probably always comes down to hiring someone that you weren't strong yes about. It's a little bit of that pressure of, hey, this seems good enough, we should go forward with it. And then usually you end up regretting it.

00:32:22 Speaker_01
The moments we had to let people go was that we kind of forgot that and just hired someone because they were fitting for the role, but we didn't actually feel the special sauce in there.

00:32:32 Speaker_00
What do you say to founders who say, that's great, but like, I need the role today. That's super idealistic world. I need this seat filled.

00:32:38 Speaker_01
If it's your first 10 people or even like first 15, 20 people, it's much more important in the early stages. Every role you hire impacts the culture a lot. It potentially sets the standard for the whole function.

00:32:52 Speaker_01
So if you hire your first marketer, that first marketer is going to be at the standard of what marketing is. in the company. And if you hire your first engineer you hire, that also sets the culture of engineering.

00:33:04 Speaker_01
I would definitely not ever do that in the very early cases. You just, as a founder, have to do the job until you find someone who is really good at it, or you find that right person.

00:33:14 Speaker_01
At the later stages, when the team is a little bit more there, it's maybe like less impactful role.

00:33:20 Speaker_01
I like to think there's more like upstream roles and downstream roles, like how much those people might be affecting, like, if they're more upstream, they affect everything downstream.

00:33:29 Speaker_01
So obviously, like leaders or, for example, product people that are affecting the whole product organization or the whole product quality or direction or something, those people have a lot of downstream impact.

00:33:41 Speaker_01
on the business or on the company versus someone who is more on the end of the spectrum or at the end of the downstream where, for example, support. It's like, we want to do support really well, and we want to hire really good support people.

00:33:53 Speaker_01
But also, the support doesn't impact everything in the company. So I think there is nuances you can find that why maybe it makes sense to sometimes fill the role versus just wait until you find the right person.

00:34:06 Speaker_01
Kari, why are you insecure in your role today? It comes down to the CEO role that I feel like you can be insecure all the time. That role is never the same. You can never be the best at it. The company is always changing. The team's changing.

00:34:21 Speaker_01
The market is changing. Everything's always changing. So what you did maybe well in the past, and it was good or well done, it's not enough anymore. The company is now bigger. You need to do something differently. You need to do something better.

00:34:33 Speaker_01
To me, the insecurity is always about that. Am I doing enough? Am I doing it well enough? Should I be thinking about the next thing? Should I be focusing on today? Should I be focusing on the future? The answer is both.

00:34:48 Speaker_01
And so I think there's this constant, am I doing a good job? Should I be doing something less? Should I be doing something more? So I would say it's just like a nature of the CEO job that I would say like nothing is ever enough.

00:34:59 Speaker_01
There's always more you could do.

00:35:00 Speaker_00
Do you think becoming a father changed who you are as a leader?

00:35:04 Speaker_01
I think there's some aspects probably I think about more is like your influence on your children, what you say or do, they might learn that same thing.

00:35:13 Speaker_01
And if you do something, if you say something or talk in a certain way, it might influence them to become something or they kind of like pick it up.

00:35:22 Speaker_01
I may be like more conscious now of what do I say to the company, because like the whatever I say or do might influence them in a certain way.

00:35:31 Speaker_00
it's not like i'm telling them to do something my mother always used to swear in the car and so as a result i have one of the worst mouths ever and i just blame her in perpetuity for it so i completely agree with you for being concerned about that final one i i'm intrigued how do you feel about angel investing as a founder a lot of other founders do it how do you feel about it

00:35:52 Speaker_01
I've done it a little bit and maybe I would like to do it more. I think as many other founders say that it can be very time consuming. So it's like reading the email and trying to like evaluate this business.

00:36:04 Speaker_01
Like, is this something I should be focused on? So my criteria is now just very simple or clear is that, do I know this person? Do I believe? what they do or in this kind of product category or something. And then I might invest or might not.

00:36:20 Speaker_01
But what I like about it is that you can see how other people are doing building their companies. You get this investor updates. You can see sometimes you talk to the founders, learn a little bit of how other people are doing things.

00:36:31 Speaker_01
that can give you some ideas too. So I like that aspect. I don't like the deal flow filtering or figuring out which companies to invest.

00:36:39 Speaker_01
So now I just try to focus on, do I already know this person and I want to support them or do I really believe in what they're building and I want to support that.

00:36:47 Speaker_00
And after this, you get a flurry of angel investment requests. Sorry, man. That was a really unfair one. Listen, I'd love to do a quick fire round with you, Cary. So I say a short statement, you give me your immediate thoughts. Does that sound okay?

00:37:00 Speaker_00
Let's do it. What are the biggest ways that companies fuck up remote work today?

00:37:05 Speaker_01
not thinking that it is a way of operating and just thinking that it's something you can keep flipping back and forth.

00:37:12 Speaker_01
You have to build a whole company around being a remote culture and not just decide one day that, okay, today we are remote and then a year later, we are no longer remote.

00:37:22 Speaker_00
In the linear journey, what did you not do that with the benefit of hindsight you wish you'd done?

00:37:27 Speaker_01
I actually think like we did the right thing, but for example, like bringing in sales earlier, and this is credit to the investors, the investors are saying, you should bring a sales. Like this is the time to bring the sales in.

00:37:37 Speaker_01
And for us founders, we were like, no, like, I don't think it's right right now. And I think we had to go through that pain of, we started realizing, oh, there's a lot of people actually, companies wanting to talk to us.

00:37:49 Speaker_01
and realizing, do I want to be the salesperson like 100% of the time or should we like hire someone to do that? And then we realized, yes, we should hire someone to do that.

00:37:57 Speaker_01
So I think in the end we could have done it earlier, but I think it was important for us to like learn that lesson to Bain and not just do it and constantly think about if the sales is the right thing or not.

00:38:08 Speaker_00
What do you believe that most around you disbelieve?

00:38:11 Speaker_01
I think it's just that the quality and doing things well still matter. It seems to be when I look at the market or me personally buying things that today it's really hard to find quality things.

00:38:22 Speaker_01
A lot of things or products are marketed really well and they can seem like they're high quality, but then when they actually use them, you're disappointed.

00:38:30 Speaker_01
There is some kind of power that if you actually do things really well, it is rare and people will notice and people will talk about it. It's like all that viral products on Instagram or something.

00:38:41 Speaker_01
I think usually there is some quality aspect to them that people get interested about.

00:38:46 Speaker_00
What thing of quality do you do today at Linea that you will not be able to do at scale?

00:38:52 Speaker_01
I think one thing is me personally looking at every project, the design or when the team is building different features or different projects. I follow along.

00:39:03 Speaker_01
And when I start seeing them appearing in the app, I internally, I start playing around with them. I start trying them out.

00:39:09 Speaker_01
And before we, it's like, we don't have very complicated processes, but usually before we launch anything to everyone, I or the other founders will do some kind of check on it. It's like, does this feel good? Does it feel right?

00:39:21 Speaker_01
Are the animations correct? And like those like little details are correct. I'm not sure if we can keep doing that or it's fully scales and even now it's hard. So I feel like it might be something hard to do when you scale the company more.

00:39:33 Speaker_00
What product other than Linea do you use and go quality?

00:39:38 Speaker_01
I think something I use a lot is Superhuman. It gets the right things right. It's fast and it has the features that I need. I think it's like the intro thing where you just hit the shift I or something and does the PCC for you.

00:39:53 Speaker_01
kind of things that you do constantly in this job is there and no other email client really has it. To me, it's similar to Linear. It's more purpose built. It's purpose built for people like us.

00:40:06 Speaker_01
And it's not maybe the best email client for every single person out there. But I do think it's like the best email client for me or maybe for you as an investor.

00:40:14 Speaker_00
What blog post written post 2000 is your favorite?

00:40:17 Speaker_01
I like a lot of Paul Graham's essays. I think they're the classics and going back to this profitability, I do like his blog post about ramen profitability and this written maybe like a decade ago. That's the ideal way of building a startup.

00:40:31 Speaker_01
Being profitable gets you the highest leverage you can have in terms of when it comes to talking to investors. It gives you the leverage of not needing them. And so that's always the highest leverage, if you can walk away from any deal.

00:40:44 Speaker_01
So I always loved that. It wasn't an explicit goal when we started Linear, but when we started seeing it's like, oh, this is actually possible and we can kind of project or forecast how is this going to happen. We did get excited about it.

00:40:55 Speaker_01
It's very motivating and freeing to be in that position. What was the worst investor meeting you had? I don't want to name names, but I feel some of the larger funds going in there to the pitch meeting, everyone's silent. No one has any questions.

00:41:12 Speaker_01
Those kind of meetings, there's maybe 10 people in the room. You don't know who you should be even focusing on.

00:41:17 Speaker_01
you come to this audience and then that audience is passive and they don't have anything, like they don't give you any signal, they don't say anything, they don't ask much anything. Why am I even here?

00:41:28 Speaker_01
And which makes me think like I shouldn't be here. It's like this is not where I should be. I don't like those kind of, like I had some of those, I don't like them.

00:41:36 Speaker_00
I'm pushing and prodding here, but I'm enjoying this. Would you sell the company today for $3 billion?

00:41:42 Speaker_01
It's hard to say. There's a good chance I would, and then there's probably a good chance I wouldn't. I think it would depend a little bit on what happens after. Who is buying? What's the story there? Can I get excited about that story?

00:41:55 Speaker_01
But if it's just that, okay, sell the company, shut it down for 3 billion, I don't know if I want to do that. So I think the answer today would be, by default, would be no.

00:42:05 Speaker_01
But if there would be some reason that we could see that, oh, this is really exciting, and we could actually do this thing better or something with some other organization, it could be interesting to look at.

00:42:16 Speaker_00
I'm asking the really spicy questions. I saw that Jira started advertising against linear searches. I think you tweeted it or someone in linear tweeted it.

00:42:25 Speaker_00
Does a company benefit from having a common enemy, someone to go like, we're fighting against you?

00:42:31 Speaker_01
It does. Sometimes if you don't have that, you're not sure where the, which, which directions are bad directions.

00:42:36 Speaker_01
So I think like when you have a more of an enemy in the market, you can kind of think like, well, we should do differently, but they do like, we should actually go the different direction from them.

00:42:46 Speaker_01
Anyway, I don't think it's worth building the same product again. So there's this product out there. It's very well used. So what we should do is we should still solve the same problems, but we should do it very differently from them.

00:42:59 Speaker_01
Not everything differently, but some things differently. And that's where the value can be. The value is not there if we just try to copy what they do and do it slightly better.

00:43:10 Speaker_00
What question are you not often asked by employees, by interviews, by investors that you feel you should be asked?

00:43:19 Speaker_01
Maybe a lot of times it's the why. I like why questions.

00:43:23 Speaker_01
And I think that the one question I would like to ask more is the why building a product that people want to use in an enterprise is meaningful because there's like a lot of focus in the market or even the buyers or the customers or

00:43:39 Speaker_01
There's always looking at the features. It's more about what can I easily see on a website or something or in my comparison chart that some product does more or less. People don't ask about what is the most important thing, actually.

00:43:55 Speaker_01
And to me, I think the enterprise tools or collaboration tools in enterprise, the most important thing is, do people actually want to use this tool? If they do want to use it, they will use it more. All of the things will work better.

00:44:07 Speaker_01
if they don't want to use it, almost like you don't have the tool anymore. The value is not there if no one is using it. So I think people don't ask that why question enough.

00:44:17 Speaker_00
I think the fastest way a company can lose credibility in a fundraiser is when they do the quadrant on what features they have versus competitors don't. And it's like Microsoft, and it's got cross, cross, cross, cross, and then them.

00:44:28 Speaker_00
Green tick, green tick, green tick. Like, I don't know. Seems like a stretch.

00:44:33 Speaker_01
Yeah, the last thing is I really hate those comparison pages companies do. We never done those because I feel like it's not honest to do this pages. Like they're never objective, like linear versus X tool.

00:44:48 Speaker_01
And the X tool is obviously making it so that they always wrong. in even on a factual basis, like the features we have or don't have. And it's this comparison charts.

00:44:58 Speaker_01
I just feel like it's so dishonest practice in the industry, but everyone is doing it. That's something like we don't want to do.

00:45:04 Speaker_00
It's also predicated on the wrong things. Like you're not explaining why you should even need them. Maybe you don't have the features because you don't need them. And it's feature creep. And I totally agree with you.

00:45:15 Speaker_00
Cary, dude, I so appreciate you working with me now, accepting my money. I know not many people have the luxury of being a linear investor, so I'm so grateful. And you've been fantastic. So thank you so much, man. This has been such a joy.

00:45:28 Speaker_01
Thanks, Harry.

00:45:29 Speaker_00
It was great to be here. I so enjoyed that with Carrie, what an incredible story from Linea. If you want to see the full episode, you can watch it on YouTube by searching for 20VC, that's two zero VC.

00:45:39 Speaker_00
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