DTC POD Ryan Denehy - Electric
So why don't you kick us off and tell us a little bit more about yourself and your background.
Yeah, thanks for having me. Great to be here. You hit the nail on the head. Three time founder so I think I'm generally unemployable at this point in my life. But yeah, I started my first company when I was 17. I was making extreme sports videos. Specifically, I made two mountain biking dvds that were sold in bike shops all over the world. Yeah.
It was kind of an interesting sort of transition from that to today, running a B, two B SaaS company. But it was kind of this logical progression went from making and selling sports content via dvds and traditional retail to selling and distributing sports content on the Internet to starting an ad technology company, selling that to USA TODAY Sports in 2008. From there, then starting my first software company, which I sold to Groupon at the end of 2014, and then for the last six and a half years, been running electric here in New York City, so.
Ramon Berrios 00:03:15 - 00:03:25
Right. I was going to say, right, you were pretty young for all of this. Right. I think when you sold to USA Today, how old were you?
I was junior in college. Yeah. So my business partner, I think he had graduated, like, two years earlier. Right. So that was at least somewhat legitimate in the sense that we had an office in LA, so he was in there every day. I don't think it was important for USA Today to know that I was still enrolled full time in college. I briefly thought about dropping out, but to the credit of my professors and advisors at Hofstra circa 2007 2008, I basically went to class Monday nights, Tuesdays, and Thursday mornings. And so I was able to actually finish out my degree and work full time at USA Today at the same time.
Ramon Berrios 00:04:14 - 00:04:15
Was this in SF?
No. So our company was based in southern California, but I was going to college on Long island, so I had an apartment in LA, and so I would go back and forth quite a bit. But it worked out really well because we basically pivoted the company from selling extreme sports videos, like digital downloads on the Internet, which, again, in 2007, there was no market for that because nobody really had broadband connections and people thought buying things online was sketchy. So when we pivoted to being an ad network, the fact that I was actually right outside of New York City worked great, because ultimately we became an ad supportive business, and all of the biggest ad agencies were here in New York.
Ramon Berrios 00:04:56 - 00:05:02
It's like a marketplace. Way before the word marketplace was a thing in the ad tech space.
Yeah. I mean, at the time, we were basically just an advertising representation firm, kind of in the classic sense. Like, we just created a network of independent websites that all served a similar demographic. So it was skiing, surfing, skateboarding, mountain biking. Individually, none of them were big enough to go out and have a credible conversation with a national advertiser. Collectively, as a group, we were able to go out and pitch that as a network. We were one of 200 other companies doing the exact same thing. Pick your vertical.
There was a company, there were five other companies doing exactly what we did in the extreme sports space. So low barrier to entry, a lot of competition. In the end, it was kind of a race to the bottom. But it was such a fun business as like a first company to go build. The fact that the barriers to entry were low, yes, that meant that it was not so great business over the long run, but it also meant that as a teenager, I could actually start a company.
Ramon Berrios 00:06:04 - 00:06:35
But how? At 17, you're not thinking so much? Oh, well, if I do this and I aggregate this, and I can get these people to fund it and sponsor it, I can package it up and I can sell it. At 17, not most people are thinking that. And you know what's funny, too? It's like in that industry as well, especially those groups of people, probably a lot of them are just like getting hammered. Things are sloppy. The industry is not as concrete. So you were in that sort of circle.
That's the cool part about a lot of these industries, though. If you think about it and you see this actually with a lot of. I mean, the action sports space was really cool because my very first company, even before it had turned into this technology play, I was just making mountain biking movies. Like, I had a camera, I had a bunch of editing software I had illegally downloaded. And yeah, I was writing sponsorship proposals and getting companies in the industry to give me some money so I could slap their logo on my dvd and go travel and film and all that. But the fact that industries like that, the fact that the barriers to entry are low and, yeah, it's not, as you said, necessarily the most professional working environment. The marketing directors I was pitching to at these companies in the bike industry, most of them were former athletes or the level of business acumen was not that high, which, again, is good, because at 17, I can't tell you what was in that sponsorship proposal or how it was formatted or what it looked like, but it was enough for me to kind of get a phone call. And that's kind of what I think is so great about the time that we're living in now is that if you're a teenager or you're in college or in your 20s or frankly, any age, but let's say you don't have a lot of business experience, you can start any type of brand you want, or you can start a media company or whatever you want to do, you can go do it.
Just because the barriers to entry are so low. I think when I did it 20 years ago now, it was insane because you couldn't just go on the Internet and go start a business. And particularly, like, media production. There was no such thing as GoPro. There was no such thing. Your phone couldn't take videos. Right? So I feel like now, looking back on it, I have an even bigger appreciation for just kind of, like, taking the leap and having this just completely unwarranted confidence that I could go do it. Whereas today, it's kind of the, like, I think a lot of people could be entrepreneurs that maybe otherwise would have been able to.
Yeah, Ryan, I'd love to talk about kind of what you just like, sometimes when you're young, the biggest advantage you have is you don't know how hard it is, so you just go for it and you have all this energy. And I think Ramon, myself, and you, all our first businesses were things where we just kind of got started and look up and we're like, oh, this is kind of hard, but would love to hear a little bit more about, like you were saying you built out kind of like this ad network, and you were creating content across a network. What was it like at the time? Were you guys producing the content? What did the actual business and operation look like as you scaled beyond just selling kind of like your own dvds and looking for sponsorships and stuff like that?
Yes, I did two dvds, and that actually worked really well, better than it could have, because at the time, physical distribution, you had to have a distributor. You couldn't just go bank on selling these things online. And the one distributor in the industry had said, oh, yeah, this sounds amazing. We'd love to add it to the catalog, all that. So I go lock down all these sponsors, and then I go back to them, probably, I don't know, four or five months later, and they're like, yeah, cool. So we've picked our titles for this season, but we'd love to catch up with you on the next, you know, nearly dropped the phone because I'm just like, wait a second. I literally just spent the last four or five months pitching sponsors, saying that I had distribution to every bike shop in America and eventually the world, and now I don't. And so there was a guy named Josh Berman who was making ski movies at the time, and I was a huge fan of his movies, and I knew that he had kind of built his company with his bare hands.
And I emailed him, and I was just, like, introducing, pulled, emailed him, and I was like, hey, I'm trying to make this mountain bike. Like, I got a bunch of questions. So he gets on the phone with me and he's like, oh, dude, I had the exact same thing happen to me. And I'm like, well, what'd you do? And he's like, me and my brother cold called every ski shop in America, and we sold thousands of copies of the first movie. He's like, and then we did it again and again. And now we have a whole bunch of distributors, and it's all good. So even with when I was just making the videos, my backup plan, if I couldn't find a distributor, was like, me and my friends were just going to cold call every bike shop in America. And like hell or high water, we were going to sell thousands of copies of this movie.
As luck would have it, my biggest sponsor of the film was this bicycle accessories company in Utah called Lizard Skins. And they actually had their own warehouse and their own distribution company and direct relationships with all the bike shops. So the owner, brian, called me one day, and he's like, hey, I got an idea. He's like, what if we sell it for you? I'm going to want a bigger kind of little more consideration on the sponsorship front. Like maybe it's presented by lizard skins or whatever. And he was like, and we're Mormon, so we're not bashful about making phone calls, so we'll hit up everybody. And he wasn't kidding. He had these kids at his warehouse out or in Utah, and they sold thousands of units of the film.
And so for me, that was probably the best unintentional lesson I could have learned early on, which is, it doesn't really matter what you're selling if you don't have distribution. It doesn't matter. It doesn't matter. All things being equal, the person who is the best at sales and marketing is going to be the winner. Period. End of story. I know all of us want to have the best product out there, but there comes a point at which it doesn't really matter how good it is in many cases, you have to know how you're going to get it to market and that it's going to work.
Ramon Berrios 00:12:38 - 00:13:04
I mean, also, you could have easily said, well, now I need to hire a sales team, and just folded your cards and said, I don't have the money. I need a sales team. I'm realistically not going to call 1000 shops. And I think that's also a testament to the power of the right partnerships or the power of just when you have the will away always shows up in the most unexpected way.
Yeah, definitely. Right. I'm sure both of you guys have been through this, but for me, I don't know. I always took it for granted that that's the way that I thought about things. And I actually hadn't really thought about it until you just sort of put it that way. It never, ever for 1 second crossed my mind that I wasn't going to make the movie and I wasn't going to distribute it. It never entered my thoughts that I wouldn't do those things. Like, literally the second I got off the phone with that distributor and they told me that they weren't going to be distributing the film, my very first thought was like, okay, there's got to be, like, four other ways to do this.
And so that's ultimately the thing that I think stops. It's kind of a good filtering mechanism for who should actually be an entrepreneur versus someone who just kind of wants to pursue. The idea of it is like, you have to be wired a certain way. I think if your brain doesn't kind of automatically go there, you're going to be in for a lot of pain. If it does. Yeah, it's going to be scary and full of uncertainty and a lot of work, but ultimately, you're going to be doing the thing that you feel like you just have to do.
Ramon Berrios 00:14:15 - 00:14:51
I was thinking about that the other day of, like, I'm working more than I think I ever have, and it's just because I want to. And so I think of this concept of, I was thinking, what is, like, work life balance? This might be a hot take, but there is almost no such thing. It is one thing if you really love it. I'm like, if you have to think of, like, I need to step back, et cetera. I mean, sometimes, yeah, we might go overboard, but if you have to constantly sort of create that balance, it might just not be for a lot of people.
Yeah. And what's normal to me? What's normal to you? Normal to you? My guess is that most people would be like, that's not normal. That's weird. But, yeah, for me, I've lived my whole life moving from one obsession to another, right. So it's like, for me, growing up, I was never really into team sports, but I grew up skateboarding. And so for me, I just thought about it all day. Every day I'd be sitting in class thinking about some ledge that I was going to go try some tricks on later or something. Right.
And then think about it. I was thinking about this the other day. Actually, it took me like four years to learn how to do a kick flip. And so basically I would skate every single day, rain or shine, no matter what the temperature was. I grew up in Connecticut, so winters were pretty cold. So I grew up skating and it's like I'd be out in my driveway for 3 hours every single know, and you're slamming left and right, you're trying tricks hundreds of times per day, not landing them literally for years. You're also going to spots and getting kicked out by security guards and shit like that. And I think that had a huge impact on, I think on me now as an adult because for whatever reason, me in 5th, 6th grade, without a coach telling me to do anything, without any type of structure, without there being any type of championship or game that I'm even trying to win, I was just going out there on my own every day for hours and hours and just eating shit and happily doing it.
And so I don't know. Nowadays when I think about what I've been doing for work for the past 20 years, I'm like, it's really not that different.
Ramon Berrios 00:16:43 - 00:16:56
I was going to say, well, now it's like the version of that is you've been doing these kip for these businesses and now you look up and now you're running electric, which like, what, you guys have raised 90 million, right?
Electric 212. I don't know if better we wouldn't have spent so much.
Ramon Berrios 00:17:03 - 00:17:11
And what is the team size? Just give the audience a general sense of what electric is and does.
Yeah, best way to think about what we do is we do it support and it management for companies that don't have their own it staff. And so we have really lightweight, easy to use software for nontechnical people to do things like manage your applications, order a new MacBook for a new hire, make sure you're not going to get hacked. Really easy stuff like that. All the way up to sort of a full outsourced it solution that uses a mix of our software and a really great services team that we have. So I started this company at the very end of 2016. I just moved back to New York from San Francisco. I started mostly because at my last company, this is exactly the kind of thing that I wanted and needed and that didn't really exist. And yeah, it's the first company of the three that I've started that has not had to completely pivot the problem.
The market. We've had some pivots in terms of products and strategies, but then of 2016, when we started and we said we're going to make it easy for small businesses. We're still doing that today as we head into 2024. Yeah, today we're thinking around 250 full time employees ended last year, I think just shy of 50 million of ARR raised 212,000,000 from some amazing investors. Fortunately still have a bunch of that left. And yeah, the other goal is really just to be the number one name in it for small businesses in the world over the next decade and just have a really great business that can go in the market and be around for a long time.
Ramon Berrios 00:18:56 - 00:19:17
And that's wild. And I've gotten to see some of your journey as we've chatted throughout the years. And it's cool to see also the verticals that you guys have expanded into now and the new products and serving some ecom and DTC brands. What are the specific product lines that are, say, the most recent that have been the biggest shift?
Yeah. So now you can't see it on our website quite yet, but we've got some really easy to use premium tools that we can get companies set up with. And so, biggest thing is, I always put myself back in the mindset of small business. Maybe you're five people, you're 15 people, maybe you're 25 or 30, what have you. But you're buying computers, you're buying software. You really cannot afford to have a data breach or a hack. But for most of us as entrepreneurs, we're not hyper technical people. We're definitely not in this to be it people and thinking about this stuff in the same way, most of us aren't in it to be tax people or hr people.
And there's a lot of great tools for things like that. But when it comes to it and just really making sure that the technology you're using is going to be up to date and secure and that you're using the right stuff, we make that super easy, I would imagine, really anyone who's thinking about building and scaling a company, what I love is that the things that we spend time obsessing over at electric are things that most people really do not want to spend any time doing.
So, Ryan, my next question was going to be around something that you just mentioned about how this was like the first company that you started that you didn't have massive pivots and changing everything up.
I think it's something that I've been through. Massive pivots. Ramon, I'm sure, has gone through his fair share as well, and the business that we're working on now. It seems to be in a similar situation where it's just kind of worked from the beginning. It's like scaling up nicely and nothing crazy has happened in terms of pivoting. I think it might also be something where once you get a little bit more experience working on businesses, maybe you don't have these crazy, crazy pivots. But I'd love to kind of understand what take us back to the founding and the inception of the business. Right.
What did it look like?
What was the value prop and what did execution look like? To start putting rubber, to road, to start actually growing the business in a successful way. What was the value prop? Who are your first customers and how did you convey that value prop and get started?
Yeah, well, the thing I learned, at least with this one on the third go around, is there's really no replacement for knowing exactly what problem you're solving and who you're solving it for. And I think a lot of companies that I see sort of if I were to put my investor hat on and I'm looking at like angel investment, for example, I am very wary of companies that are being started purely because people just want to go start a company. It's like, well, we're going to explore this problem and see what's it. That's fine. But in reality, many of the best companies are started because you have a founder or founding team that really sees an opportunity and has a lot of conviction in it, or really understands a problem or a segment in the market and just says, I need to go solve that problem or I need to go build something for that particular customer. Because so much of the pain and suffering of finding product market fit, a lot of it's self inflicted. It's like you're basically just kind of walking around in the desert for one to two years, sometimes more, kind of just trying to solve this. So for me, it's like my first two companies took you with my last company, my retail analytics business, we had a faint idea that if you took online analytics like you get with Google Analytics and made that available to a retail store owner, that that could be really my cobra.
We had no experience in retail. We didn't know the market, we didn't know what products. So we spent easily a year and a half just going down all these dead ends, thinking we had this epiphany and then finding ten other companies are doing exactly what we thought and all that. And so, yeah, with electric, it was very different. I knew because I was the ideal customer of what became the electric product, I'm like, okay, well, if I'm a business that's spending money on it, but I don't have an in house it guy, my only option is to try to do it myself, which is no good, or hire a local it consultant, which is fine. It's just really expensive and sometimes you don't really know what you're going to get. So I was able to go into it and already really have a good sense of, hey, there's this band of customer. There's sort of this user Persona that this is for sure something that they need.
And I know exactly who I'm competing with and therefore the solution I need to go offer is basically just that, but something that looks and feels like a modern piece of software, maybe that's priced in a way that's easy to understand. All that. The other lesson I learned too is you can never get too minimal with your MVP. I see people sometimes show me they're like, here's your MVP. And I'm like, but you literally spent six months and like 300,000. That's not an MVP. Our MVP for electric was literally we created a user in your slack account called electric. So we didn't even write an app.
I just created a super admin user called electric. I hired a guy from Best Buy from Geek Squad who would just sit on the other end in our office and then we had a report that we would send you at the end of the week and it was this really cool looking email report. But actually I just did it in PowerPoint and would export it as a PDF screenshot. The PDF, throw it in an email. But we got to our first half a million of ARR on that product because my view, I was so burned out from my first two companies perpetually running out of money because we were throwing money at ideas where there wasn't yet product market fit. I was like, I'm not going to do that again. And weirdly, with electric my seed round, I was able to raise 2 million completely pre product. So in a weird way, it's like I was actually for the first time in my entrepreneurial career in a position where I had plenty of money to throw at the problem and I actually spent the least getting the MVP off the ground.
I literally spent nothing to do it.
I think that's so important to note about the point you made about one solving your own problem, which is probably advice other founders have heard. But something that I've even noticed is the company that we're working on right now I remember talking to Ramon about it, and our problem was like, how do we scale content production, repurposing, being able to draft content, all this sort of stuff. And I actually didn't think it was that big of a problem. It was just like a little problem that I had. But what's so funny is even solving sometimes what might seem like to you is like a little problem. If you really know that problem can be way more effective than, like you were saying when you're just shopping around asking other people, hey, what problems do you have? And you don't have a vantage point or a vision of what the problem is. And like you're saying you could run up against, oh, we're going in this direction, and then, oh, looks like other people are building there. Now we're pivoting to this.
So I think what you said for any founder, and this applies to any business, whether it's a software business, a commerce business, et cetera, it's like inherently knowing your problem and building something that you yourself have a perspective on, I think is extremely important.
100% right. And in a weird way, when I was making my mountain biking movies at 1617 years old, I didn't realize that what I was doing was figuring out product market fit. At the end of the day, the only reason I made the first mountain bike movie was because I thought all of the existing dvds out there were really boring, and I thought the music was terrible, and they weren't including any of the riders or styles of riding that I thought were becoming really popular, that I was reading about on these message boards online. I'm like, people are taking their mountain bikes to skate parks and dirt jumps and stuff like that. And I'm like, that's not represented anywhere in the current crop of these dvds, nor are these athletes. And so I sort of approach it from the perspective of, like, someone's got to get out there and tell that story, because I'm like, I know from hanging out on these message boards all day that there's tens of thousands of people all over the world that are dying to see this, right? And so I never thought about it that way, in that kind of systematic of a way. I was just like, wait, someone has to do this. Someone has to do it, right? You know, that's the same thing with any company you're starting.
When I was living in LA, it felt like everyone I knew was either trying to start a clothing company or a record label, or both, right? And the reality is, people would start record labels, but no one's even listening to your music to begin with. That seems. It's like. It's like, oh, you're starting a clothing company, but no one really likes what you wear as it. Like, maybe that's.
Ramon Berrios 00:28:36 - 00:29:09
Know, that's funny you mentioned that, because last week we recorded an episode with Mikey Taylor. And so I was asking him, like, why beer? And he's like, because every other skater was doing a clothing brand or a trucks company or whatever, and it's like, not because you're a skater. It means you have the best swag in skateboarding. So then it was just saturated. And he's like, what if we just do a beer company? Like, we all drink beer. Nobody's trying to do a beer company. And so they blew it up and sold it for nine figures in, like.
Three and a half years.
Oh, was that the beer company that he did with?
Ramon Berrios 00:29:13 - 00:29:51
Yes. St. Archer. Yeah, it was P rod and a few other surfers. I think. It sounded like a massive. You know, I think one of the things, from the angle that Blaine was talking about, of, like, okay, regardless, if you're building to solve a big problem, that what you foresee to be a big problem, but you don't have as much knowledge about, or whether it's a small problem that you know a lot about, the first thing you need to do is sell it, package it, and sell it. Before you talk to any investors, before you try to do any research, the best research is research is going to be selling it.
Ramon Berrios 00:29:51 - 00:30:06
So I know people listening to this podcast might be like, ryan, no way. How did you just create a slack Persona and make 500,000? So how did you do it? And how do you suggest the founders get your first dollar?
Yeah, I mean, that's a little bit of the x factor, I think, that goes into being a founder in the sense that I think founders can come in all different shapes and sizes, and there's all sorts of mental models you can apply to these things. But for the most part, time and time again, the founders that I've seen that most predictably can kind of solve that enigma of going zero to one. There's a real, legitimate level of creativity that is somewhat innate to them because you're not solving a math problem in the early days, for the most part. Right. Scaling a business really does become a math problem, that zero to one phase. I think why you see so many people who are talented in other walks of life really crash and burn trying to go start a company is because it is kind of this catch 22 of, hey, I can't sell the customer until I have the product, but I can't get the money to build the product until I have traction, blah, blah, blah, blah. Right? And there's some frameworks for how to think about that, but ultimately you have to kind of view the world in a fairly abstract and clever way to get around that. Right? And if you do, what you end up doing is basically being able to create a company with your bare hands, basically out of thin air.
So, yeah, in my case with electric, don't get me wrong, this didn't come to me immediately. I really racked my brain for most of the summer of 2016. I knew what the business wanted to be, but I was really struggling to figure out how I could get it off the ground without requiring a huge upfront investment. And yeah, ultimately, after probably 20 iterations and talking to a bunch of people who really knew the problem that I was trying to solve, I had a handful of different people over the course of week. Just tell me you don't need to do any of that. What are you building software for? Software is not proving anything. You just need to prove that a customer wants a modern, easy to use, sensibly priced it management solution. That's it.
You don't have to build anything. I was like, oh, wow, that's totally right. And I see this with a lot of founders now. It's like I need to go. If it's software, it's like I need to go hire an engineering team and build this product. You can sell a Figma demo if you want, right? You see this actually a lot now with clothing brands. I can print up a few samples, get the Shopify store going, and then actually see if I get orders. I don't need to go print a thousand shirts.
That was so key. I mean, look, we got really lucky. We had immediate product market fit. Within six weeks of launching the MVP and starting to go sell it, we had our first paying customer. And then within a week and a half of that, we had our second. And then within two weeks of that, we had two more. But more often than not, what's going to happen is it's not going to go that way. You are going to be really wrong.
And then all that money and time that you invested in this initial product, you just have to assume it's going to be vaporized. So you want to spend as little as possible. And again, ultimately, what I've realized is there's almost no correlation between time and dollars spent on an initial product and the ultimate commercial success of the company.
Ramon Berrios 00:33:39 - 00:34:18
All that being said, you then went on and have raced all these rounds. Here's a all the way to d, I believe. And what has changed? You just said earlier that, oh, it's still all the same. How is it all the same? What has changed in lockstep throughout all these financing rounds? I guess I'm also trying to get to the question of why should founders look for raising? Just because you can get the round done doesn't necessarily mean you should raise. So how is everything the same? And how have things changed at the same time?
Yeah, let's be clear. A bunch of things have changed so fundamentally. We've never pivoted in the sense that we're solving the same problem for the same customer in generally the same way. Right. What we have done this past year is we significantly pivoted the offerings that we have in market, going from being more services centric to really being more pure SaaS centric. We significantly pivoted the go to market. So we went from a purely direct sales motion to now a purely partner and channel driven motion. So I definitely don't want people to think, hey, yeah, we're just kind of plowing the same fields we always have been.
There's been some really big decision points and forks on the road in the past twelve months. But the biggest thing that changes from just being a couple of people sitting around a table to one to 3 million of ARR and really growing is just the fact that you have to immediately move from being these utility players to actually having some specialization, actually having real structure, real discipline, real accountability. Because in the early days you actually can't have any of that. I mean, you need to be disciplined in the sense that you got to be kind of putting the quarters into the machine every day to get some results. But when you're getting a new product in market, it's all about experimentation and you need as much latitude as possible to be creative and try day things. But the second that you've got really clearly defined product market fit, experimentation becomes a much smaller part of what you're doing. And then really it turns into a business operations exercise. And that is where I also I hated it initially.
In my last company, when we went from finding product market fit to having to scale it, I was a very reluctant operator. I kind of told myself initially, I don't know if it's a lie for some people, it's definitely a lie for some founders. It's like I'm just the idea guy or I'm the zero to one guy. It's like you're whoever you tell yourself you are, right? At the end of the day, if you add what it takes to do the zero to one and to find the product market fit, you absolutely have what it takes to go the distance if you want it. And most things, when you suck at them, are not that much fun initially. And then when you get better, they're more fun. So, yeah, it doesn't surprise me that a lot of founders, when the business turns into, now I got to build a management team, now I got to hire people, now I got to hold people accountable to metrics that initially you're like, this sucks. That's not fun.
I want to launch new products and not worry about this stuff. Sure, there's pros and cons to that, but at the end of the day, it's like, if you can just accept that, oh, I might not like this simply because I'm not good at it, and it's a learn a skill, and if I get good at, it'll be fun. And also, as a founder, I'm probably the best equipped to take this company from one to 10 million or ten to 50 or whatever. That's really interesting. So that was, I think for me, at least in my last company, that was one of the bigger mental things to get over, which is like, stop feeling bad for yourself and telling yourself this narrative that you're not that guy. It's like, no, just go do it.
I'd love to kind of dive a little deeper there because I think what you said is so spot on. There's a lot of people who pigeonhole themselves and say, either I'm only a zero to one guy, or I'm only an operator within this defined role. And you were like, you're whatever you want to be. So why don't you tell us what your experience was like moving from that stage of finding that product market fit, realizing that, okay, our slack thing is working. We're building out a product. We've got product market fit. We've crossed, call it a million in ARR, and it's time to really scale up our operations. How did your role change?
What changed in your day to day.
And what did you need to learn and adapt and get better at to grow with the companies that started to scale?
Yeah, I mean, the big, the biggest thing from, like, I would say from like, 25 employees on was I went from being a player, coach CEO to having to be someone that really needed to delegate as much of the day to day down to managers, because at that point, you're really going to hold the company back. There's generally no justification for trying to manage an entire department. I can see it as a technical co founder, if you're a CTO or something like that. Me being more commercially focused, me trying to be CEO and also head of sales, not useful. Right? I brought in ahead of sales Matt Grossbard. We brought him in early 2017, and he did in six weeks what I wouldn't have been able to do in a very long amount of time. Right. But that's also too, it's a completely different skill set.
The things I just spent the whole last year doing of talking to customers and rapidly iterating on products and doing all this stuff basically overnight. Right before we closed our Series A, I had to go from the entirety of my day of being that to now I have to become an excellent recruiter. Now I have to become excellent at managing relatively senior people and holding them accountable. When we closed our series A and we got know one of the most prominent venture capital funds out there, they led the round and Bob Goodman joins the board, it's like, wow, I need to get my shit together and understand how to communicate with these real deal. That's to me now I find it really exciting because it's like, wow, what a cool position to be in that my job could change that radically that quickly. And honestly, if you're a founder of a company, expectations are very high in terms of the outcome that you need to produce. But expectations are actually quite low for a lot of founders in terms of you needing to be excellent at all of these things. Like, actually as a founder, you're given, I think, way more of a pass than often many of the people that you hire.
In terms of your relative level of expertise at a lot of these things, again, you have to be someone that people want to work for, and you have to guide the company to success, but very little expectation that you're going to have all the answers.
Ramon Berrios 00:41:02 - 00:41:29
Sometimes, too, as we delegate those things, we just like being in the mix. Like, I love marketing and I just love getting my hands dirty and marketing. And then I'm like, wait a minute, I remember I need to step back because I'm just staring the pot here. I shouldn't be in the wheat. And so oftentimes I would find myself having to remind myself, what is the job of a CEO? And so I'm curious, in your words, what is the job of a great CEO?
I mean, your number one job is to not run out of money. So don't get it twisted. Look, it sounds really obvious, but the number one killer of companies is running out of money, right? To just sort of put it in really blunt terms, that has to be on your mind every single day. It's like, am I making decisions that are ultimately putting us in a position to keep going and to actually have a shot at doing the things, doing the things that we want to do? Most companies that go out of business, the vast majority, it was all self inflicted. Forget what you hear, whatever article in the information or tech crunch says about why the company went under. The reality is, if you actually talk to people who are on the inside of a startup that failed, it's usually there's some level of dysfunction related to we knew what the problems were and we never did anything. Or we waited too long. We convinced ourselves that there were no problems.
We bet the ranch on stuff that everyone knew wasn't going to work. We knowingly spent too much money and foolishly thought we could go get more. It's so unusual that a company truly gets taken out by situations beyond their control. First and foremost is like, you have to understand that once you actually have paying customers, once you actually have employees, definitely once you take money from investors, you're now a steward of that money and those customers and those people's careers. It is a lot bigger than you from that point forward. And so that's how I think about it. At least when I walk in in the morning, I have an enormous responsibility to all of them.
Ramon Berrios 00:43:55 - 00:44:55
This reminds me that you're also an angel investor yourself. You've invested in over 30 startups and there is no better point of view than you having been an operator three times. And I remember just from some of the conversations I would have with you when I needed help or advice. You have this innate sort of talent to give advice without saying what to do exactly or what to do specifically, but instead just sort of help the founder gather data points. Because at the end of the day, in my opinion, when you're asking for advice, all you're looking for is more data points, right? Like if you're looking for advice for somebody to tell you what to do, you're going to lose. You're going to make the wrong call. All you need is more data points. And so I'm curious, from all the conversations with founders that you have, what advice do you have for founders in terms of how they should assemble their group of advisors investors and how should they ask for advice?
Yeah, that's awesome and appreciate the compliment, but I'll throw one back at you, which you're one of the few people I've worked with across all my investments that actually listens and implements feedback and is really good at asking questions. And for me, those are the founders that I get excited about working with. Yes. From time to time there are companies that I see that are just, I just know it's going to be great. And whether or not the founder wants my advice, I just want to be on the cap table because I think it's a great investment. But more often than not, with the angel investing, I really want to know that I can be helpful and that I can be impactful, because it's fun for me. Like, weirdly, as if I didn't have enough fun spending 14 hours in my office today, a nice way for me to unwind is to get a call from a founder and at least try to be helpful with some problem they're trying to solve. But, yeah, for me, I realized at a very young age, actually, when I was making my mountain bike movies, that the information is free.
The only thing separating me from being a CEO of a Fortune 500 company is basically what I know and what I don't know and how aware I am of that and how quickly I can learn. And so in the case of if I were to go all the way back to my first mountain bike, this story we were talking about earlier of, like, I get screwed on my distribution, so I just cold email a producer of a ski movie and I'm like, what'd you do? Right? And I wasn't asking him to solve the problem for me, but he's like, well, I was in a similar situation. Here's what we did now. I ended up, through a mix of luck and kind of just kind of happenstance, I solved it a different way. I didn't cold call every bike shop in America, but for every business that I've started, that's been my number one. I think for me, like, personal competitive advantage is, I'm very clear with myself about what I don't know, what problems I'm trying to solve. And I think over the course of 20 years, I've gotten really good at asking questions and getting answers quickly and interpreting that feedback. I had a founder I was working with a couple of years ago, and I made a bunch of introductions to some of my favorite advisors that I've worked with, people that I think are really thoughtful operators I thought would be a good fit for her.
And the feedback I got later on was like, oh, well, that person's useless. That person didn't know anything. And I'm thinking like, whoa, hold on a second. The reality is you can learn from anyone, right? If you're barking up the right tree, it's actually on you to get the right information out of them. Granted, some people aren't going to be a fit. Like, I talked to plenty of people where the chemistry is not there or what I'm describing, I'm not really getting much out of it. But at the end of the day, if you knock on enough doors and you're really good at asking questions and you're really good at listening, the answers are just going to come to you. They're just going to appear.
And so to me, that's one of the biggest superpowers I see in the founders that I've backed that are the most predictably successful. Just amazing at asking questions. And it's that middle ground between you don't want to be the type of person that looks for a really literal answer and it's like, okay, well, I'm just going to go do exactly that. You definitely don't want to be the type of person that sort of adopts this Steve Jobs mentality of, like, I know better than everyone else, which, believe me, there's actually plenty of those people and they're kind of scary, but you kind of want to end up somewhere in the middle, which is like, earlier this year, I was really trying to figure out some stuff related to product led growth. Didn't know much about it. I probably made six phone calls over the course of two weeks. And like, two weeks I'm like, I think I got this. And I was able to form my own opinion on what I thought was the right solution for our company based on a diversity of viewpoints that I was able to collect.
Ramon Berrios 00:49:16 - 00:50:07
Yeah. And that self awareness is like, self awareness is an underrated skill for an operator. Self awareness is important because only I know what I'm good at and what I'm not good at when I'm listening to advice, and I have to be realistic with myself on what those things are. And then, number two, I also have to be self aware of whether I'm the right person to solve this problem, if somebody else on my team is the right person to solve this problem. And I think it's something that's not talked about enough in terms of, what are your blind spots, and how do you know what they are? Right. We all have blind spots. How do we uncover those? And how do we know we're not asking a question, skewing the question to the answer we want to hear? You have to be self aware.
I used to be really bad at that. I used to be very high conviction, but kind of inflexible. I thought I was flexible. That's really dangerous. People who think they're collaborative and they're not. It's really bad, right? I mean, look, for me, one of the best things that happened was I had some issues with the first wave of management, of much more senior management that I had brought in at electric. At the end of the day, all of the problems in your company are ultimately your fault. Right? Granted, I remember the first real personnel issue I had at the executive level in the company.
I had hired someone who objectively did some not good things and whatever. It's sort of relevant what they are. But it was a learning experience for me. I'm like, why hired her? I created this best, even though I didn't really. And so that was the first time where a couple of board members were like, hey, you should really think about talking to an executive coach. And I was like, all right. And I hadn't really thought about it. And that was four and a half years ago.
That's definitely been one of the more transformational things that I've done both personally and professionally, which is actually sit down with a trained professional who can really help you think in a really non confrontational way about, what am I good at? What am I bad at? What are my biases? What are my blind spots? It's a muscle that you have to flex, but at the end of the day, if you don't ever take yourself there, it's not going to develop on its own.
Ramon Berrios 00:51:54 - 00:52:28
Yeah, I love that I always go back to this, but it's also how you reflect on your previous mistakes that also shapes that. Like, pain plus reflection equals progress. Like Ray Dalio says, if you never go back and revisit. It's funny, I just remembered I probably wrote, like, ten emails that you never got that I typed to you. And then as I got to know you better, I'm like, I know exactly what you would say. Just delete the whole email and get back to solving the problem.
Dude, I love that you said that because it's, um, in between our series B and series C, Dick Costello and Adam Bain invested in electric. And so Dick was the CEO of Twitter for a long time. Adam was eventually coo for a while, but yeah, ever since I started working with them, particularly in the last probably two years, as I've spent more time working specifically with Dick. Can't tell you the number of times I've started writing down and kind of shaping the problem and the setup of this thing, I'm going to send to Dick and be like, okay. And, yeah, after a while of being around people like that, it's like, hold on. You get halfway through and it's like, wait, I've answered my own question because I kind of know how he, and it's less about that particular person would answer it in this way. But it's just like you start to develop this muscle memory from being around people who have a lot of skills and a lot of intuition that you wouldn't otherwise have. And to me, that's another part of probably one of the, I think the bigger gifts of being a founder and running a business is you do have access to these people.
And the accelerated timeline that you can grow and develop as a human is so nuts and for me, so fulfilling and rewarding, that I've had a lot of days where, yeah, I'm doing the same thing. I'm typing out this email, whatever, and I'm thinking to myself, like, this is my job. I get to have this intellectual debate with myself and maybe potentially send an email with my problem to a very well known CEO of a public company. That's incredible.
Ramon Berrios 00:54:13 - 00:54:56
100%. And that's a good segue into sort of my last question as we get towards the end here, which is you mentioned Adam. I remember you brought Adam into one of our calls one time. I think he just raised a 300 million dollar fund. And so, interesting times to raise a fund. Interesting time to be an operator. I think another data point is like they're saying that 80% of seed companies have under twelve months of Runway or something like that. What is going on? What does the environment look like right now? You have a good pulse of everything going on, and you've always had this sort of good sense of the general conditions of the market.
Ramon Berrios 00:54:56 - 00:54:59
What advice do you have for founders in current market.
I mean, you control what you spend, so no one's going to feel bad for you if you run out of money. If you take nothing else away from this, you have 100% control over the money you spent and how much is in your bank account, period. So that was one of the best pieces of advice I got from when I was working at USA Today. This was in mid 2008. The economy was going to hell real quick, and I'm working at a newspaper which was already going to hell really quick business wise, right? It was a great place to work, but the business was going nowhere fast, right? And so working in a business that had a fundamentally dying and rapidly shrinking business model set against the backdrop of a global financial crisis was interesting. And so the president of USA ToDay Sports at the time, this guy, Tom Busey, he's just like, I forget what I was saying, but it was probably real stupid about revenue and the plan or whatever. And he was just like, revenue is a wish, cost is what you can control. And it doesn't matter if you're a sole proprietor working a job on the side or you're a public company CEO or anything in between.
Times like these where capital is hard to come by when the buying patterns of your customers are unpredictable or somewhat unpredictable. Right. You have to focus on what you can control and start there, right. And then outside of that, I think you have to take a pretty generous hedge off of what you think is going to happen with the things that you don't control. It's why a huge chunk of startups are all missing their plan right now. Most of them are doing a poor job controlling the things that they can control, I. E. Spending too much money, hoping things are going to turn out differently, and b not being conservative enough about the things that they don't have control over.
We were guilty of it, too. For three years straight. Our revenue would grow 30% year over year if we did nothing, just because our customers were hiring so many people. So end of 2022, we're like, okay, for 2023, maybe we'll get less than half that. Worst case scenario. Well, guess what? It's less than half of that, right? So that's the biggest thing, right? There's probably a lot of other advice out there, but at the end of the day, now more than ever, controlling what you can control and just setting yourself up to have continued optionality to run the business. Most important thing.
Ramon Berrios 00:58:00 - 00:58:15
Speaking of that, one last thing, actually, that I wanted to touch on earlier and I forgot, I think you made the story public of, like, when Groupon acquired you guys and they covered payroll during the acquisition. That's a wild story.
Yeah. I mean, the whole thing was wild. Basically, the company had raised a few million dollars. We had fortunately got to a few million in ARR. And, yeah, we were either going to raise a series b or pursue an acquisition. We got a great offer to sell the business to Groupon. However, we only had two months of cash left in the bank, which didn't matter because we had people who were really interested in leading the next round or whatever. Three months of know.
And their corp dev department at the time was run by this guy named Jason Harrinnstein, who has since become a friend of mine, actually an investor in electric. Everyone said he's a class act. There's not going to be any funny business. Okay, that's fine when someone tells you that. But as these things typically play out, due diligence took a little bit longer, lawyers took a little bit longer. And so I think we were a week away from closing, maybe two weeks away from closing. And I come in the office and I see my co founder and CEO and our CFO, they have this look on their face, and Rudd's just like, dude, we got negative $212,000 in the bank. We ran payroll, and there's nothing there.
And I think it was, like, some people, some of our existing investors spotted us a little bit of money. Like, Groupon spotted us a little bit of money. I mean, they could have totally screwed us. They didn't, which was awesome. But, yeah, you would think that. You've got a signed acquisition offer in hand and the closing date set, you're already a little bit on edge. But to have negative almost a quarter million dollars in the bank.
Ramon Berrios 01:00:00 - 01:00:07
You rolled that one till the wheels fell. This was Blaine. Do you want to add anything else?
No. The last thing I was going to add, Ryan, is just for anyone who's listening, where can we connect with you on social? Where can we find you?
I'm very easy to reach at Dennehyxxl. On all social platforms. Twitter is usually the best one if you're a founder, and Ryan at Electric AI, if you want to send me an email. Awesome.
Well, thanks so much for coming on the show, Ryan. We learned a lot. I think all of us. I think I was getting a little bit of PTSD when you were telling that last story, because I know me and Ramona have been through crazy stuff like that as well. But thanks for coming on the show, and best of luck. As you guys continue to scale electric.
Thanks. Appreciate you having me.
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