Operators Ep 37 Transcript

Delian: [00:00:00] Hi everyone. My name is Delian and I'm a principal at founders fund, a venture capital firm based in San Francisco. This is operators where I interview non VC, non CEO, non founder operators that make the startup world go round. Today I'm interviewing Kyle Spackman SVP of commercial sales at Sword Health.

Prior to joining sword. Kyle worked in sales at Artemis health Marketware and the Utah department of health. I hope you enjoy the show.

Hey Kyle, thanks so much for joining today. Excited to have you on the podcast.

Kyle: No, of course, I'm a big fan of.

Delian: Yeah, sweet. Uh, well, you know, as you probably know, um, I always love starting out, not before we dive into the world of, you know, sort of health and the work that you're doing over there. Uh, the dive in the early parts of your career.

I see, you know, harken back to my Homeland university of [00:01:00] Utah, um, uh, you know, went to school there and then afterwards actually went straight into just like, you know, working in a variety of different sort of like healthcare focused companies. Was that always sort of just like the, you know, coming from a healthcare family or something that are always kind of the focus or, you know, how did you.

Um, in some of these, you know, sort of various, uh, you know, various different groups, uh, both the Utah department of health, uh, you know, and then, uh, afterwards.

Kyle: Yeah. You know, I honestly didn't come from a healthcare family, uh, by any means, but I think I was. Kind of the typical science nerd loved loved school, had good grades and so wanted to go to med school.

Right. And that was kind of the, it seemed like that's what every, every person wanted to do with it. That was at that stage. And so that was kind of my path. Um, when, for the, obviously the science degree in biology, public health was going that route, um, and then decided not to go to med school. And so I liked the lab sciences.

Got a job initially during college at air, at a big laboratory there, and then got my first real job using my actual degree [00:02:00] at the Utah public health department. So at their lab. So it was so just kind of was from the medical path, wanted to do something in healthcare, really starting to like the laboratory stuff.

And then. Um, kind of bounced around a little bit there with different, with different lab tech. So it was really fascinated by the science. I felt like I got to use my brain a lot on the scientific side of things, which was, which was really important to me. And so that's, I think what drew me to healthcare is it's a big problem.

Uh, but it's a need, it's a problem that needs to be solved. And so whether I was on the front lines of healthcare, um, kind of helping individuals and helping push along the sciences that was meaningful to me. And now on the business side, trying to kind of do.

Delian: And then yeah, after about three plus years there, you moved over to a, you know, market, uh, where a physician relationship tool.

Maybe you can tell us both it, you know, a bit about that. Uh, what made you want to jump over into sort of tech, startup land, and maybe even tell us a little bit about the Utah tech startup scene, um, and how that opportunity came about. Um, and then also would love to hear about, you know, kind of your.

Kyle: Yeah, no.

So pure a pure good [00:03:00] conversation with a good friend, to be honest. So I, uh, was in laboratories realizing hat. I want to get more into the business side of things. So I went back, uh, went back to him, my MBA, and was getting into, uh, some sales type conversations and, and positions with some laboratory, uh, Uh, manufacturer's lab, lab, equipment, and reagents.

So talk to a good friend who said, Hey, look, tech margins are, are a lot different from lab reagents. And so that was honestly, it was that conversation. I was like, Hey, let me check out tech. And so youth obviously has this. Uh, growing, uh, Silicon slopes type movement where we're trying to, we've got a fair following of software companies and I we're putting some on the map.

And so I started to see what's out there and a good friend said, Hey, look, you know, you should look at mark aware. He took a chance on me, frankly, uh, to say, Hey, you know, you, you've got the smarts, you've got the business acumen, you've got the healthcare experience. You know how to talk to these individual.

Um, and was able to give me a shot. [00:04:00] And so went in kind of first, first real frontline sales role there at Marketware learned a ton, again, it was working with hospitals and large clinics. And so that the same type of conversations I was having with the same type of people, um, just on the other side of the table.

And so it really was fascinated with, you know, that was kind of my first taste of, I think some people have. Yeah, you can look down on cells. It's pretty easy to look down on sale sometime. And I frankly had done that. And so I, that was my first experience of like, Hey, it's it actually takes some, some strategy, some work, some smarts to do this whole sales thing.

And so that opened my mind to, Hey, there's, there's a real big business need for sales and you can be strategic about it. And it's not just pounding doors. Uh, lie to people to buy your product. Right. So to speak, there was real, a lot of strategy. So I really liked that. And I thrived in that, that environment.

And so a market where was a great stepping stone for me.

Delian: And what were some of the things that, you know, like translated well from the, you know, call it, uh, you know, more [00:05:00] healthcare focus days, uh, versus what were some things. It just like it started playing just like, you know, it felt totally foreign or just like did not, uh, you know, you did not pick up on.

Kyle: Yeah. So look in a, in the startup world, it was all was all about speed. So the speed was vastly different. The, the speed to make a decision, the speed to implement a decision was vastly different in the startup world versus the, the scientific world. The thing, the other thing that was very different to me, that it was foreign for me, was the.

I came from a world of standard operating procedures, right? Like you use this exact amount of microliters of reagent, you do this and that. And if you do it slightly off, like it won't work and your, your asset would fell and you, you would not get the test results. So I came from that world into a world.

Hey, there's not a playbook for this. Like you, you guys gotta do it. And that was really foreign to me at first. But then I found that I really thrive in that environment where it was, Hey, there's a general path, but you've got to bounce around. You've got to think [00:06:00] strategically, you've got to try different things and it's okay to fail failure before was like, Hey, you failed this test and you have to now.

Um, and so failure was never a good thing. It was never, there was never any positive thing from failing. You just wasted reagents and time and money. And frankly, you had to stay late because you had to rerun it. And so it changed failure from an inhibiting factor to something that helps you grow and say, Hey, the faster you fail at things, the faster you find things that work.

So that was the biggest foreign concept to me that really, I found myself thriving in, and that I've tried to live inside.

Delian: And so after about a year, little over of that, um, uh, at marker where you ended up, uh, joining Artemis health as the head of enterprise sales, how did you sort of make the leap from like, you know, at that time you were really only like an icy, you know, sales person to, you know, getting a sort of head of, you know, position, um, and what sort of made you, you know, seriously, seriously consider the opportunity.

Um, and then how was it transitioning sort of from ICU land to actually eat a sort of head of, and, you know, building out a whole team underneath you and, uh, [00:07:00] you know, sort of leading, leading the charge.

Kyle: So to be honest, I had to work to the head of, I went over as an IC, uh, Artemis, and so to kind of, uh, uh, career level position there, that was the same type of position.

Um, I thought a bigger market, a more bigger opportunity there. And so went over there as an individual contributor and to be honest, my, uh, our VP of sales started about three months after. And he had tone from a successful IPO exit. And on his first day he got there and he said, Hey, look, I had a good mentor at my last organization, uh, who, who gave me the opportunity to succeed and kind of made me who I am.

I need the next person, like who's that here in this group. And I, I knew it right then like, Hey, that's me, I'm your guy. That's what I'm here for. And so I connected really well with him. So he became a great mentor, still is a great mentor for me now. And it was just an experience of having to do everything I can to learn and to grow and to prove myself.

And he was [00:08:00] able to give me more and more responsibility very quickly. And so I quickly grew into. Um, that kind of head of the, the employer enterprise side of things and was a great experience. I learned more in those four years than any four years of college, and it was just kind of a crash course in business and taking on new things that you've never done, trying to figure it out, uh, but always had that great mentor to look to look towards.

So it was a great, huge, huge growth period for me and my.

Delian: And you talked a little bit about just like, yeah, what is your, you know, there's so many different philosophies, you know, sort of on sales, everything from just like, how do you approach customers? How do you discuss the problems with them? How do you, you know, motivate and compensate, you know, sort of sales teams, how do you even break up and structure the sales team or, you know, pod base is a pure, you know, SDR, a customer success.

I'd love to hear sort of like, yeah. What did you learn at arguments and what was sort of the philosophy that you took, you know, there, um, uh, or maybe, you know, what you did for mark aware, maybe applied, you know, at Artemis.

Kyle: Yeah. So I would say that one of the biggest learnings that I [00:09:00] had at Artemis was that a sales team and a Salesforce is different company to company and definitely, definitely industry to industry.

So, um, th no fault to my VP of sales. And he came from a pure SAS play in the ad tech space. And so most of everything we did was saying, Hey, let's create a SAS based Salesforce. Um, let's use the same exact tool stack. Let's use the same, you know, BDR to E ratio. Let's use the same solution engineering or to, to R D or a E ratio unless a bill like this.

And there was a lot of things about that that worked in the sense that we approached it very different from. Digital health companies at the time. Uh, so a lot of healthcare companies they're not run like SAS companies. And so there was a lot of positives to that where we threw a bunch of heads at it.

We did creative marketing, we did things different outside of the box and it was, it was hugely successful. I would say that at the same time, We learned things like for instance, in a SAS company, [00:10:00] when you have an average deal size, you know, sub 100,000, you can throw a whole bunch of BDRs at something and you can have a pretty massive team of, of meeting setters or these BDRs SDRs, wherever you want to call them.

And you can scale pretty, pretty linearly that way we found. And so we started with four, we, we doubled eight, we got up to 14 or something and we found inside a digital health. That there's there's diminishing returns. And so there's a lot about the SAS model that works. There's a lot that didn't work.

And so we had to realize, Hey, that part of the SAS model does not work. So when I came to sword, I knew right away, I'm not going there. Right? Like digital health is different. We need different teams. We need different ratios. Um, and he's part of that,

Delian: just like a limited world of like prospects effectively.

Like you can't, you know, you can't just, if I could be like, you know, canvas the whole world, um, it's actually, you know, a more limited set of players. And so you just have to be more strategic with the approach. And so that doesn't necessarily mean just, you know, dialing for dollars all day long.

Kyle: So totally that, I mean, there's essentially 7,000 [00:11:00] targets, um, that are, uh, kind of decent size.

There's a, there's a long tail of those, but there's essentially 7,000 targets. So you can't make up buyers. You can't create a. They exist. We know who they are, you can easily get their name and it's then much more strategic to go after them versus, Hey, let's go find all these new buyers in this location and let's cultivate them.

It's not that, you know, the buyers, you just got to go strategically.

Delian: It's after, you know, four years though, you did end up deciding to join sorta as a VP of sales. And I remember this, um, both, you know, search and time, very distinctly. It was a, you know, crazy Portuguese company that effectively, you know, had, um, you know, had one client in the United States and, uh, you know, weird Bulgarian, uh, on the.

Um, yeah, I guess, you know, what, what, what made you both want to change over given that, you know, I feel like Artemis has gone pretty well at the time. Um, and you know, how did you actually decide to join something that was just say at the time, you know, I think just clearly, um, you know, socio risky, I mean, there was a large competitor incumbent in the space that was doing pretty damn well.

Um, it's not like there's an infinite set of clients that were, you know, here in the United States, you could build off of, [00:12:00] um, and you know, you effectively had to build out an entire team, you know, that was effectively zero, um, at the time that you joined. So what got you comfortable with that risk? Um, and what got you excited to join

Kyle: Dalian?

I'm bad at this answer, to be honest, people ask me, like, how do you decide when to make a career move? And honestly, I don't know, like, I I'll tell you how I evaluated it. I can't, I can't say anything different than I've lucked in a couple of great opportunities to be quite honest with you. Um, so yeah, look, this is how it sounds sword.

So surgery shout, um, and started having conversations with me about a rep that I've worked with in the past and say, we're looking for how to sales and I hadn't heard of them. Like you said, crazy Portuguese. Um, but I knew the space. Well, I had followed this incumbent very closely. We had common board members.

I had given introductions. Like I knew this one comment very well, this competitor. So they told me what they did at first. I thought, Kay, you're crazy. There's this digging comment. You're not going to do anything there. Then, then they talked to me a little bit about their business model and how they did things [00:13:00] different.

And that started realizing, I had heard some things from clients like. That actually there's a need for that. And so they first had to convince me that their model was different enough from this incumbent. Um, once I got comfortable with that, and I guess the difference of the bat of why it's different was it was, it was clinically superior.

So it automatically started, started speaking to me for my science background, as far as saying, Hey, we're not just a better technology, a better like engineered software. We have a higher clinical. A more efficacious clinical model. And so that spoke to me saying, all right, so like you're doing things more clinical and that's your differentiator.

I can buy into that. And so as I looked back and said, like, one of the challenges that I had at, at Artemis frankly, was we were selling big, big contracts. We sold Amazon, Google, Boeing home Depot. We sold great big logos and it was awesome. The challenge that I personally had was I was selling data [00:14:00] analytics.

And so there's no, like, I was always a step removed from the value of saying, because I did this, like somebody lives a better life than their health care world right now. There was definitely the story. Note, those shots, anyone, there's definitely the story that says, Hey, I giving them data so they can prove what needs they have.

They can address those. He's like, it definitely was in the value chain. I was just a little bit further removed than my scientific kind of. Made me want to be. And so in sword came around gay. There's definitely a market. I knew that, okay, they're differentiated. And the differentiator in a way that means something to me personally.

And it just connected so many passions to me, for me, because it then said they were so connected the value chain of saying, Hey, I'm now selling something that somebody physically uses and avoids pain and decrease the pain of what imports boards life. I mean, combine that with the fact that. On my way home from work one day I was in a car accident, herniated to death, and now I'm literally the walking statistic that half of back surgeries don't work.

I saw the [00:15:00] healthcare ecosystem of saying, Hey, I've got herniated disc, those are physical. Right? Those are physically displaced. I have to have surgery. Like that's the only thing in my mind at the time. And surgeons were telling me that essentially. So yeah, that's the thing. And so anyways, I go through my own healthcare experience that says, I've got to jump through the hoops to get to surgery.

And now I've got this company telling you. No, no, no, no, no. Like we can solve things without surgery and I'm like, okay, like so many things are lining up of saying, okay, this is the next step of my career. I think I'm ready for it. Uh it's it's an, a market that's massive. They're clearly differentiated.

They're differentiating homemade. It means something to. And I think I can, I can connect to this mission because of my personal experience. I feel like

Delian: one of the, I feel like one of the classic things like enterprise sales that people always talk about is that, you know, especially when the, the sort of buyer and the user are so disconnected, that actually matters like very little, what the quality of the value proposition is, right?

Like, this is why the SAP's of the world like end up, you know, being around for, you know, [00:16:00] 40 year contracts is like, yeah, even though it's got terrible software at the end of the day, the person making that decision doesn't really have to deal with it. And just like the switching costs, you're just like, you know, so painful.

And so I guess, like what gave you confidence that, you know, the clinical value proposition would actually end up like, you know, translating to the customers or maybe as like a, you know, the, the flip side of that question, like how have you, uh, you know, thought about, okay, you know, how do I demonstrate this clinical value proposition to make sure, um, debt becomes a part of the actual evaluation?

Uh, when maybe it's not typically a part of the evaluation process when a certain RFP or, you know, customers debating what to, uh, you know, where to go.

Kyle: Yeah. Look, I think that there's such a, I think you're right when there's a disconnect between the user and the value that it's easy to, it's easy to use a bad product for a long time.

Um, and so my thought at this time I saw the product and yeah. And I, I knew that that experience could touch people and could get people bought in that, Hey, this is actually different. [00:17:00] So I knew the product that existed. And I knew that this experience was very different from what I just saw from restored.

And so I knew, Hey, this is because look, this is a mix of technology and service, right? And so it was this, there's an actual, physically tangible medical device that people can relate to and can use. And that's what I was like, okay. I just got to get this in the hands of. And combine that with the fact that I knew that the market penetration was just so low.

So every month. It's going to have multiple, right? You look at diabetes and digital health. You've got multiple multi-billion dollar companies that are both, they're all very successful. So I knew there was definitely room for, for it to be a two horse race. Um, and I knew that if we got the physical product in the hands of people that could see that.

So it was honestly at that though. And I look back, look, I'll be not, no, uh, no shot at Azir, our founders or anything, but I knew Franklin. Look, I've had a little bit of, I've had a couple of good stops. I can have a mark in my resume. And I had a plan to be honest of going in and saying, [00:18:00] if this doesn't work, how am I going to explain it to my next gig to get the next thing?

And I thought I got, I got, I have, I have the ability to take a chance. And I think that's something that's always helped me in my career. If you can, if you can align your career, your life in a way that allows you to take chances that. You can jump on something. And if I was super concerned that, Hey, if this fails here I'm screwed, then it would have been a different decision.

So I took the chance and glad it did.

Delian: And you know, it's obviously you become, you know, much more, you know, modern in like the post COVID era, but at least when you first got started, um, this was a, you know, I believe, you know, just, you know, pre COVID. Um, and so the idea of like, you know, working remotely for a CEO, that's like halfway across the world and you're like the first effectively like employee United States, at least I'm like the go to market side and are like responsible for building out this team.

Can you just talk through like, you know, some of the challenges. What was it like, sort of, you know, in the early days being that, you know, still a person. And then on the flip side, as you've been building it out and building up this team, [00:19:00] um, in the United States, how have you thought about building it out and making sure that there is this sort of like, you know, cross cultural pollination between the, you know, Portuguese, you know, exec team and the engineering team, that's there with the sort of like, you know, us go to market.

Um, especially given that again, you guys were really ahead of the curve on this versus now it's, you know, in some ways, much more acceptable for people to be structuring their companies this way versus back then it was very contrary.

Kyle: Yeah, look, to be honest, I didn't know what I didn't know. Um, and I was, I was concerned, my wife was concerned like, Hey, your, your boss has crossed the world.

How often are you going to be able to be there in person with them? And so I didn't know what I didn't know, but I think the thing that gave me the, the comfort of saying, Hey, this is going to work was, was our CEO. Um, and I remember vividly as going through my final interview processes with. He, uh, he had a son that was young.

It was my son's age. So I think he was around three at the time. And his wife was, his wife was pregnant with her, with their daughter and his son came onto his lap or something [00:20:00] during the call and he let it happen. And he's like, Hey, this is a gal. And so like I bought into, Hey, this, this person's a good human.

And he knows that I'm trying to be a good human and therefore look for across the world. But. We both want to be good humans. And that means that there's going to be limits to things. And so I trusted that they were going to do what it takes to be successful. There's going to be limits to this as well.

And I knew they were bought in on the U S and so if there was going to be any, any demand on this, some of it was fall in there and frankly, they were going to travel to the U S right. Um, and so that it was part of like, Hey, I'm working with a good human being. And so that's what I was like, I can get over challenges that come up.

If I'm working with. Um, and then from there, like, this was my first experience with international. I, with mixing cultures like this, that was all kind of foreign to me. It's been fascinating, you know, um, you know, the conversations that, that our CEO and I have had a brown, I mean, look in the U S we start with, Hey, you did really well with this, but then this sucks.

Right. Uh, but this was good. [00:21:00] And he's, he told he's like, knock it off. Stop saying that, just tell me straight. So it's helped me as a leader to be more. In a, in a non Portuguese direct way, right? Like I'm not saying everything. Everything is perfect. Uh, I hope, I hope be listened to this one that, uh, but I think.

I think it helped me be more direct and it allowed me to take things from their culture and incorporate them to eat to me. And I think vice versa. So I think it's become a real big selling point to us as we hire candidates of like, Hey, there's, there's this whole art, there's this whole other team that's important.

You get to interact with that. You're going to be able to go see, like it's been really, it's been really cool. And I think, especially with COVID, we've, we've had to make sure that with that distance, we do things that, that bring us together. I think we try to, we learn more about each other's holidays, right.

So we know they know what Memorial day is. And labor day, I know at St John's day is that that's kinda kick off. So like we know some of these things and know when not bother them on certain days cause that's important to them. So. [00:22:00] I think we've just had to mix these two cultures. Um, but it's been a, it's definitely been a net positive for us.

Delian: Uh I'm in total shock that, you know, Portuguese and a Utahns communicate differently. I can't, I can't possibly imagine why that would be.

Kyle: Yeah. That's the only difference between us by the way.

Delian: Exactly. Exactly. Um, well, you talked a little bit about like, obviously a strategy that translated very directly from Artemis and that like, you know, uh, you know, 7,000 clients, it means, you know, it's not like you can make customers, you've got to, you know, really strategically I think about this.

Can you talk about, you know, sort of, you know, what else, you know, translated really well, uh, you know, over from Artemis in terms of, you know, strategies on, uh, you know, whether it was structure of the team competitions, et cetera. Uh, but then, you know, what were also some things that were like, you know, truly, you know, sort of net new, um, that really actually did fundamentally change, you know, either the, you know, sales process or how the team was structured because of either the, the market that sort of is going after or the way the solution instructor.

Kyle: So I would say that the similarity is looking at the exact same buyers. It's the same people that signed our contracts [00:23:00] before that are signing them now. Um, and so we took from that, it took, we knew, I knew what worked, what didn't work. I knew the appropriate size for teams relative to others. And so it was a real kind of similar just go to market.

I would say that, um, where we got into differences were now we weren't selling purely. And so I had the strategy of, Hey, when do you pull a solution engineer in to do a demo? It's kind of a one thing. And then you, you go to other, you kind of move on from that demo. Now we've had to really incorporate this, the physical product.

People love it when they. And so we've really had to incorporate that process in the cells that stays in the sales process that might slow it down on paper. It's like, why are you spending so much time doing that? But it's what works. Um, and so we really had to customize the sales cycle to the product I came in with kind of, Hey, we're gonna use the same stages.

We're gonna use the same. Nomenclature for Salesforce and, and realized, Hey, that's not, that's not exactly how it's going to work. We got to enter it. We [00:24:00] got to add a stage. We got to shorten this one late in this one. So it was all a customization thing. Um, a lot of similarities though, to the, to be quite honest, uh, with the addition of you gotta sell towards your product.

So we include our product way more than I've ever included. In the past. I thought we were product led in the past. We're definitely product letters. Um, I would say, you know, another, another similarity that I think is different from, uh, from some others in the spaces we found a real good flywheel, um, at Artemis with everyone wants to close the Pepsis of the forum.

Right. So do I, um, we love it, but there's a flywheel effect that can take place with last parking, right. They have like 5,000 employees that do parking gates across the. And so like you never ever think of these companies, but you can get this flywheel effect with these smaller employers. And so I came in and said, Hey, we need to figure out some specific strategies to help with that.

Not just the PepsiCo's, let's go for the last parking lot of the world, because there's [00:25:00] a lot of revenue, a lot of lives are covered by insurance, by tiny employers. Um, and so that was something that was, I think, different in the industry, but similar to the strategy we had at Artimus, I was able to pull over.

But again, It, doesn't just, it's not a cookie cutter approach. It's all, it's all different. So from these last couple of experiences, you know, really taught me that there's some things that, that transfer company to company. There's some things that go industry to industry, but it's also different if you're, if you're coming in with a playbook, um, and this is kind of the, the first time I'm really been developing the playbook soup to nuts the whole thing on my own, or at least leading the.

There's not a single playbook that works. And so you gotta adjust and if you're not okay with that ambiguity again, thinking back to my science, there's not an SOP, there's not standard operating procedures. You've got to just make it up as you go. Um, and that's, that's the fun of this for me.

Delian: I think also one of the, you know, impressive things, you know, watching you work with, you know, Virgilio over the past few [00:26:00] years has been your ability to scale up with the company as it's sort of gone through your hyperscale, which I think is something that a lot of, you know, executives aspire towards.

Right. Um, you know, when you joined, uh, you know, the company was maybe, you know, ever so slightly, or, you know, in the midst of basically, you know, closing, uh, you know, the series B, which, you know, today's nomenclature would honestly be more of like a series. Um, and you know, now you guys effectively you to close your series D massively expanded the team, um, gone through, you know, sort of crazy hyper growth on the revenue customer, um, you know, actual customer success and implementations and patients on board, like, you know, everything has just gone through hyperscale.

And at the same time, a year in, you actually got started promoted from not just, you know, You know, sales, but you know, sort of as VP of all commercial, what do you feel like, you know, uh, where some of the things that you did that sort of allows you to scale with the company at that level, right? Are they like, you know, most executives it's just difficult to, you know, scale yourself.

In an exponential way, right? Like companies can grow exponentially. It's a lot harder for people to grow their own skills, responsibilities, et cetera, you know, um, you know, exponentially versus, you know, requiring sort of, you know, outside help [00:27:00] or, you know, going out and helping leading a CRO search, um, to, you know, have somebody that can act as that, you know, mentor, um, that is gonna be, you know, dealt with sort of larger scale teams and problems.

What do you feel like you did that allowed you to sort of scale, you know, with the company

Kyle: first and foremost? I think I was honest with myself and honest. I think it's look, we all try to fake it till we make it. Um, like, and I'm not saying I never do that, but I think that it's, I do that a lot, frankly, but I think that it's all about I came in the plan was they were gonna hire a chief revenue officer over me.

Um, and we were actively going through that process as we went. And so I took that as a challenge. Every time the, uh, interviewed someone, I'd say, let me interview alongside them. Right? Like, let me do the challenge set. I want your feedback. And I was really, I try to be really open and honest with them as Savara is and encourage him to be open.

And on his back to me of saying, this is what I'm good at now, this is my gap. There is a clear gap here. How do I get across that gap? Give me some, uh, some chances to do that. And I'm going to be. [00:28:00] I'm going to be a quick study and try to get over that gap. So if you, if you pretend like there's not gaps, uh, in, in the Portuguese again, they don't pretend there's not gaps.

There's a gap, you know, there's a gap, right? That's the good thing about these different culture communication styles. And so you gotta be honest with what the gaps are and you gotta own it and say, I got it. How do I figure out how to get over this gap? Because he was very clear, um, like saying, Hey look, the Spotify.

Um, is you hire people that essentially are good. They stay with you for two years and the company's going to grow much faster than them, and they did their time and it was a great experience and you appreciate their work and you help them find the next. But it's rare for leaders to kind of stay on longer than two years.

The company is growing too fast. And so he was honest with me that like, Hey, that's, that's, that's probably what's going to happen. And I was honest that like, yeah, that's probably what's going to happen unless I, unless I'm honest with myself that these are the gaps and then work like mad to fix those gaps.

So if you don't have Stockholm syndrome, uh, like I, [00:29:00] I definitely have had Stockholm syndrome thing. Like, what am I doing here? But then you just got to. Uh, balanced that with the reality that, Hey, there's gaps and I got to fix those and I got.

Delian: And can you dive a bit into the dynamics of just like, you know, what is it like either these types of, you know, deals are so complex relative to just call it like your standard enterprise SAS deal, where it's just like, you're dealing with like the, you know, dev team and you're like, you know, selling to them.

And it's like, you know, a piece of software versus here as much as they call it, like, you know, fortune 500 company you're dealing with like probably a chief medical officer. And by the way, the like, you know, deal, isn't like some fixed amount of revenue it's entirely based off of like usage. And so you then have.

The post-deal success. And then by the way, they like outcomes have to be good because if two or three years down the line, you don't have like, you know, healthy patients that like, you know, ultimately, you know, people aren't going to be, you know, super-stoked on the product. Can you just talk through like, in a more integrated way of.

What is it like getting a deal like this over the line? And what are maybe some of like the, you know, nuances of like the signaling of like, Hey, you know, you're not gonna get Walmart on day one, but Walmart actually really respects [00:30:00] Fry's electronics, even though fries is a fucking, like, you know, random retailer, but it turns out they're the ones that is always the tip of the curve on, you know, adoption of benefits.

And so you actually got to go that kingmaker first, uh, you know, before I ever go into Walmart, just a little bit of like the nuances of this, uh, of this world.

Kyle: Totally. Yeah. So look, we, there's no denying that the incumbent, uh, in our space, when we started help to catapult our growth, they had kind of educated the market that there's a need for this, so that their evaluations that were taking place half the challenge with this, because to your point, there's not like one thing on an engineering team that you say, Hey, your engineering team is spending too much time on this.

I can decrease that. Increase their efficiency. Cool. Right? Like we solve this problem. It's like, Hey, healthcare is this immensely overpaid budget line item for you. And everyone has been talking about this forever. Everyone's been pitching you solutions to this, but I've got a solution, right? And so half of it is just convincing people that [00:31:00] there's a different way to think in a different way to do things and keep in mind this isn't to your point earlier, this isn't like an engineer using a different software than they used in the past.

This is like, Hey, instead of seeing this physician or this physical therapist that lives down the street, We want you to do it digitally. So it's a complete reworking and that the employer, you know, they, they have, they have the responsibility for their members to do what's right. And if they then say, use this thing for your health care, it's kind of a, that's a, that's a big deal.

And there, that's not a responsibility to take lightly. So to your point, I think it's all about like, you've got to navigate these things and there is there it's, it's navigating the market as much as it's navigating. So your, your fries and Walmart example, we took, we took a, we had a very strategic initiative to go find one very key employer that we knew was from center.

That was on the speaking circuit that people looked at. And in 2020, our [00:32:00] first year we won. Uh, they've got around 230,000 lives. And we, we really leaned into that and we used every advisor. I mean, I'm sure you and I were on the phone, but like we used everything we could to wouldn't Pepsi and we knew, Hey, if we win.

That's going to signal to the market. That we're the real deal. They're going to speak with us. They've spoken with us several times now and it worked. And so it's playing the market as much as it's playing the deal, the market signals each deal, Hey, people are doing this. You should evaluate this. Once someone tries to do about it besides evaluate it's easy.

Um, it's getting them to evaluate and it's getting them to see that you're a real player in the market. So I would say half the challenge has been navigating the market as much as the deal.

Delian: And have you guys thought about, you know, especially again with this type of EO, uh, Product or service, you know, a lot of it is in like the, like post-sale like, you know, success, uh, and, you know, structuring the, you know, incentives and teams, et cetera, in a way such that like, you know, sales doesn't, you know, over promise what's possible and, you know, set up [00:33:00] customer success, not for success, um, or, you know, get someone involved in the relationship such that like, you know, even if they did sell it appropriately, uh, you know, you just don't get the engagement that you hope for from, you know, the members of the, you know, customer, uh, you know, Yeah.

How did you guys initially structure it? Did that work well, did it not have you guys iterated on that structure to make sure that that handoff is sort of like as smooth as possible because it feels like a perennial problem in some of these like, sort of usage-based, uh, you know, call it contracts or industry.

Kyle: Yeah, w we've definitely had our struggles we've definitely worked through. So this is our third comp comp plan that we've rolled out all three years have been very different. Normally I like to kind of lock something in you adjust the rates. It's kind of like easy if that's not been the case, we've revamped that every year.

So I think we're getting closer and closer. Uh, frankly, I thought that last year, and we weren't all the way there, so we revamped. So we'll see, we'll see how this one goes. But I think, look, I think when, uh, when. Like developing the comp structure. And for this handoff, from sales to CS, you want [00:34:00] there to be a healthy level of friction.

You want everyone to be gold on the same thing, but for us, like if we paid ourselves reps and said, Hey, you're done now, it's on the other side. Like, I want them in the deal. I want them to still, to some extent care what happens with that deal, because then they're going to be, their minds are going to be thinking about it.

They're going to be creative and they're going to sell it differently with that. If they're selling it to give it up, Hey, it's done, it's implemented I'm onto the next, like, yeah. There's a lot of value to that from that's their job is to hunt and find you. So I totally get that, but they sell different when they have the end in mind.

And so you've got to compliment that ends in mind. Now on the flip side, the CS team has to be comp the same way so that they're helping to force, Hey, these are the things I need. So every year we've added things of saying we're not counting a deal book, unless you have X, Y, and Z. And so every year we tightened that up a little bit.

Some things mattered last year, that don't matter this year. So we're always tweaking that. But I think this healthy level of [00:35:00] friction of sales wanting CS to be successful and vice versa. It can be, uh, it can be a pain to deal with from a management perspective, but it's healthy and it helps get better deals overall.

And I think it starts at the top, my, our customer success lead, you know, have a great relationship. And I think that it helps a ton when the leaders are that way and then it flows down and there's always going to be contention and friction that sucks deal with, but it's healthy overall. So we're not up there all the way.

Um, but I think the other, the last thing I'll say on that is it's an enablement thing as much as. If the sales rep does not know what causes for a good deal, then they can't do anything about it. And so it's an enablement thing. That's on, that's on management to say, this is what causes for a good deal.

And these are the things you should push for early on. These are things you should avoid. And so it's really on us. They'll sell what we tell them to sell. So even more so here than it, just software, it's been this enablement challenge of, I got to tell them exactly what to do. [00:36:00] In like not what software to sell, but what ecosystem to sell this solution into.

You've got to create that ecosystem. You've got to prove that ecosystem that Hey, marketing access is important and this is who should be able to get this product and things. Those nuances don't exist with software and they do here. It's been a bigger, a bigger enablement challenge that I've dealt with.

And I see

Delian: a part of that is just like the, you know, trial and error from the prior, you know, sort of customers and feeding back in, you know, sort of what worked and what didn't work and studying recently, the ones that had the highest engagement in best usage sources, where, where it, didn't it finding those basically patterns.

And does that ultimately come down on you, is that you coordinating with sort of head of customer success or how do you end up sort of feeding back that enablement, you know, information back into the sales.

Kyle: Yeah. I mean, I think, I think it comes back from, from CS and it comes to my enablement team. So then comes back, it's on sales to, to educate the sales team.

Our CS team does, does a great job. I think they provide the data and then it's up to sales to do something like that. I think, you know, [00:37:00] to, to credit you and the advisors around us though, the, the one thing that I've really. Not the one thing I've have really respected about soar the ability to, to understand what we're good at and to surround us with people that are good at the other things.

And so when I joined visa put a commercial, um, advisory board in place, so we got the old CCO of Castlight of, of MD live as well product. We put these, these people around me. And so we got a lot of this stuff, a lot of these learnings from our advisor network that helped us catapult. Jump a couple layers forward.

And so we know, Hey, enablement's going to be a big thing. And so we don't have to wait to fail. We can implement those things early on. So that's been a big strategy of surround ourselves with people that are better smarter than us, the key areas, and then try to learn.

Delian: It makes a ton of sense. I'm curious also, you know, given that you're so deep in the ecosystem here, uh, it seems like, you know, digital health is having a sort of truly, you know, wanting generation moment.

Right. Um, you know, maybe, you know, that, [00:38:00] you know, ahead of the curve, you know, Lavango and Teladoc, but across so many different, um, you know, uh, either disciplines or, you know, parts of the healthcare system, these types of, you know, digital health, full stack focus players going off, like, you know, self-insured employers and healthcare planes is just, you know, becoming very much the norm.

I'm curious, like. How do you think this just like, you know, market at large plays out over the coming, you know, five years, 10 years, is it that like, you know, this is just going to fundamentally change how healthcare is delivered in the United States. Um, is there going to be some level consolidation is going to be something like Omni channel approach where yeah.

It turns out there's some level of stuff you just can't do without a brick and mortar, you know, for, you know, some really deep conditions and stuff. Uh, well, if you've got the whole contract with sword might as well have to be the brick and mortar one day too. And so you guys are going to be opening up physical therapy centers.

Like what do you think the sort of like, you know, five, 10 year impact of, you know, this massive wave that we're riding is?

Kyle: Yeah, it look as much as I'd say, I want the whole ecosystem to go digital. I don't think it is. I think there are certain parts of the population, certain segments [00:39:00] that like brick and mortar.

I think there's certain things that need brick and mortar. Um, I do think that digital is. Like the pandemic was the best thing that happened. The sword, um, as scary as it was like, uh, joining a new company and then having the world flip upside down, it solidified the need for digital health. People were talking to doctors on zoom that have never, ever considered doing that.

So they were doing that and they realized, Hey, this works. So I think there's a lot about digital health that is here and it will never leave. I don't think I will ever take my child into. You know, for certain appointments, I'll just do Teladoc. I'll just do video because it's so much easier. It shaves an hour off.

And I think there's a lot of people that realize that. So it solidified the need. It's here to stay. I would say that, look, the market goes back and forth every, every decade or half decade from, Hey, let's go to direct to P to people, to these point solutions, Hey, let's go. And then it switches and they say, let's buy through partners.

And it has to be this combined bulk solution that I'm going to bolt on altogether. And then it swings [00:40:00] back. Um, we're currently swinging from people don't want to sign as many individual contracts with point solutions. They want to do things more in a conglomerated fashion. Um, personally, I don't think we're ever going to go all the way there.

There's always going to be these direct things, but there is going to be a lot of consolidations. I think that you will see consolidation both from vendors in the same space, but then vendors in similar spaces, either con consolidation from an actual ownership perspective, or just a simple partnership.

So we've got, we've got partnerships that are, that are far stronger than I would imagined at this point because of. We're, we're not competitive. We're not trying to do what they're doing. They're not trying to do what we're doing, but they're way better at what they do. Then we could do it and vice versa.

And so we're better together, employers and health plans like that. They value that. And so there's going to be a lot of consolidation now, is that ownership, stake, maybe, maybe not, um, in certain areas, but it's definitely from a better together. Hey, let's combine these and we're seeing, we're [00:41:00] seeing employer evaluations right now.

So they're putting out their request for proposals. And just frankly, the other day, we got one from a very large employer and we look at them and say, is this the right one? There's 400 questions. And 35 of them were about us. Like, did they send us the right one? Or, and it's because they want us to be a part of a larger strategy.

So I think there's gonna be a lot more about that, but digital health is here to stay. Um, and there's going to be many, many wins. There's going to be many losers, I think as well as if you, if you can get into the right partnerships, if you can get those right better together stories. The thing that we're seeing right now is for a while here, your technology was not necessarily needed at the initial onset.

Anything was better than nothing. And what we're seeing now is better technology wins and that's where sword was. Well-positioned by staying in R and D mode for five years, we have the most superior solution on the market and. And so I think we see [00:42:00] that regardless of the condition, like to begin with anything's better than nothing, but over time, the best solution, the best clinical, the highest quality solution will win.

So I think we'll continue to see that.

Delian: And maybe it's, you know, sort of final question to wrap up, uh, you know, the chat I'd love to hear sort of, you know, if you're talking to call, you know, a fresh university of Utah, 2021. They want to, you know, dive into this ecosystem and whether it's digital health or beyond just, you know, want to grow into being, I sort of, you know, go to market, you know, executive, uh, while, while living in Utah, what do you feel like are the sort of, you know, where would you point them in what direction of like the type of company would be looking for a stage of company, uh, or just, you know, a major, you know, piece of advice on, you know, just, you know, where to, uh, you know, project the career towards, in order to end up in a situation like you've ended up in.

Kyle: Yeah. So I look for first and foremost, I wouldn't go anywhere for tech. Uh, you gotta be connected tech it's to your, to your question. If this is someone in Utah, but essentially look, there's [00:43:00] not a market. And there you go to Poissy to go to New Mexico, to go to Phoenix, all these kind of tier two tier three markets, they've all got.

So don't go anywhere, but tech that's my first advice. Second, I would say, look, if you want to be in a go-to-market kind of executive role, there's a traditional path where you, you start hitting the phones and you're cold calling people. You prove yourself, you get a junior, a role and you kind of move up the chain.

Um, that's definitely a path that you can take and that's a valuable, uh, valley and path to take. And I would love to help. I love to help people take that path. There's a second route though, that I think is closer to me where, uh, You, you don't have to necessarily take that path. And if you find yourself on a career path, that's not that.

And you say, Hey, I don't want to go back and start from the ground. Started hitting the phones. Um, you just got to believe that you can, that if someone gives you the shot, you can do it. Someone will give you the shot. There's so much growth right now. There's so much ability. There's so much technology and growth that we need.[00:44:00]

And if you can prove that you're talented in one area that you Excel somewhere, someone will give you a shot. So don't be afraid to go for it. Don't be afraid to, to try for a role rather than going from ground up. Um, and so that's what I was able to try to prove with my science background, with my MBA of saying, Hey, I don't, I don't want to start cold calling, give me a shot.

And I took it and I did the most with it. And so I think, look, either pass it pass is fine. Do it in tech. Uh, no matter what job you're doing. Do that job in tech. I have a brother that's in finance and I said, do finance, wherever, like do finance and tech. Uh, and I, and I strongly believe that. So be in tech, take the traditional path, or don't be afraid to be non-traditional.

Some will give you a shot, I'll give you a shot. Um, and I think it's just believe yourself and go for it.

Delian: I love it, man. Well, Kyle, thanks so much for taking the time to chat today. It was a, you know, super great to hear about your whole background and you know, your work with.

Kyle: Now daily. Appreciate it.

Thanks for having [00:45:00] me. Let's chat.

Delian: Thanks for listening everyone. If you'd like to support the podcast, please sign up for a paid sub-sect subscription, which we use to pay for transcripts mikes and other improvements. If you have any comments or feedback on what kinds of questions I should ask, who should come on the show or anything else, please do let me know, have a great rest of your day.

Operators Ep 36 Transcript

Delian:

Hi everyone. My name is Delian and I'm a principal at Founders Fund, a venture capital firm based in San Francisco. This is Operators, where I interview non-VC, non-CEO, non-founder operators that make the startup world go round. Today, I'm interviewing Hannah Willson, SVP of sales and partnerships at Modern Health. Prior to joining Modern Health, Hannah led high growth sales teams at Zenefits, Rainforest QA and HelloWallet, which was acquired by Morningstar. She spent more than eight years at CEB, which was acquired by Gartner where she was the top revenue generator for seven consecutive years and consistently exceeded targets for renewals and upsells. I hope you enjoy the show.

Delian:

Cool well, Hannah, thank you so much for taking the time today to hop on the podcast, very excited to chat.

Hannah:

Yeah, thanks for having me.

Delian:

So I always like starting these conversations by diving back into the beginning of people's careers before we talk about where you're currently at, i.e. Modern Health, a favorite Founders Fund portfolio company. But you started your career originally at the EDO Corp executive board where you were a research associate and then eventually made your way all the way up to senior director. Can you talk us through a little bit of how you landed there initially? What got you sort of interested in working in sales and how you grew within the organization?

Hannah:

Yeah, definitely. I mean, I started there right after college. So when I was a senior in college, I mean, I had no idea what I wanted to do. I was actually an international relations major and so I had studied abroad in Beijing but I knew I wanted a job after college. So I went to an on-campus career fair and just applied to a bunch of companies that came on campus. I ended up getting this job the fall of my senior year and so after that I was like, "Okay, I'm done. I already have the job. I don't have to worry about it." So it was more just like fell into it than really being super thoughtful or planning it. But I was actually super lucky where I landed because it was... I mean, CEB back then in the early 2000s was a really interesting company.

Hannah:

Basically what we were doing is it was a membership based consulting model. And so companies would pay an annual fee and then they would get access to this whole array of best practices research. So I landed in the sales function, doing research actually for sales executives. So basically a sales executive from a fortune 500 company would call us up and say, this is the business problem I'm struggling with. And then I would go and call 15 other heads of sales and write a research brief and say this is how this company is doing it and basically share information. So it was through that, that I just really learned about sales and learned out how important it was to the company and what a good career opportunity it was. And that's kind of what got me interested.

Delian:

Interesting. I'm sure yeah one of the classic things that I feel like a lot of the executives say is that mentorship from other heads of sales or other heads of whatever unit you're running, tend to be some of the best ways to learn. And that was effectively your full-time role, and also you were in somewhat of like a sales role. So I'm curious, do you remember times where you would actually take a lesson that you basically learn from writing one of these reports and you realize, oh, I can actually apply this to my own sales process that I'm doing internally as well.

Hannah:

Yeah back then, but when I was doing research for sales executives, I was mainly just doing the research for them. And then eventually I moved on, I was doing sales selling into heads of HR, but I think, I mean, at that point I was kind of thrown into the deep end. I remember calling VPs of sales and they're like, you have no business doing sales research. Cause I knew nothing at the time, but that was kind of the model at the company is they would take really young people and people that didn't have a ton of experience and you'd write these pretty sophisticated research briefs. And that was actually the team that ended up writing The Challenger Sale, which has become one of the main methodologies in sales today. And so in addition to what I was doing, which was writing these briefs, they were also doing these large scale studies and analysis to see what sales leaders cared about as a whole. And then taking that so, I mean, yeah it was incredible learning perspective, just what I got to learn about the function overall.

Delian:

And yeah, you ended up deciding to stay around for eight years, I'm curious, was it the sort of learning opportunities? Was it the fact that obviously the .com bust sort of happened and maybe there weren't an infinite set of companies that were doing super well. What got you excited to stick around for such an extended period of time?

Hannah:

Yeah. I mean, I think one, it was just I constantly felt like I was learning, two it was kind of like the basics, they made it really fun they had awesome incentives. Once I did transition over to the sales side, they put together these amazing trips around the world for high performers. The compensation was really good and I just felt like I was good at it. And so also, it's interesting because maybe it's just that industry or maybe it's the timeframe, but now when I look at resumes, I see people that have been at a company for three years. I'm like, oh my gosh, they have such long tenure.

Hannah:

And sometimes I think it's actually super beneficial to stay at a company for longer. You build up that knowledge, you build up your skill sets and you can become really good at something. And so I'm all also trying to think too now, as a sales leader, how do we actually keep people for even longer? And of course the cycle time is different in Silicon valley. And with all this, just the speed at which startups change, in which your roles can change, but still I felt like I was able to get really good at that job because I did it for a long period of time too.

Delian:

Yeah. I guess if you could point to a handful of things that you think you could attribute your success to, because while you searched over to doing sales towards HR executives, you ended up being one of the top revenue generators at the company. What do you think sort of were your unique attributes or things that made you stand out sort of vis-a-vis your peers during your time there?

Hannah:

Yeah. I mean, I think it's the same thing that... I mean I added it up once, how many quarters I've been selling for, it's too many to count like 50 something. It makes me feel super old, but I've basically done the same thing every quarter. And this has even gone through to management and to being a VP, you just do all the little things. There's no secret to it in some ways it's just, at the end of the day, I mean, sales is pretty much a math equation and you can figure out if I have a million dollar quota, how many opportunities do I need to have in my pipeline? And if that number comes out to 20 opportunities, it's like okay, what can I do to get 40 opportunities in my pipeline?

Hannah:

And so it's just constantly working backwards and thinking through, what do I need to do, so it's assured I'm going to overperform? And it's also this mindset, which I don't know if is a healthy mindset, but this mindset of, of course luck is going to be a part of it but if you sort of take out luck as a variable and you say my success is going to be a hundred percent attributable to the effort that I put in it, it makes it a lot easier, I think, to actually get to that number every month.

Delian:

So I assume you're a fan of Bill Walsh's The Score Takes Care of Itself and trust the process type methodologies.

Hannah:

Yeah, I think that's really correct. And I mean, the other thing we do a lot at Modern Health is we call it all the little things. You just do everything you get connected to the prospect through investors, you write really thorough emails that are really comprehensive, that are tied to their needs. You do tons of prep, you think of every single objection, you think of people you can connect them to you, think of what's motivating that person. And it truly is, all those little things just add up. So people would say at the end of the quarter oh my gosh, you've got so lucky all those last minute deals closed. And it was like, well, it wasn't really that it was all these tiny things I did every single day.

Delian:

One of the things I think is always interesting to talk about, especially after you spent so much time at one particular company is, what was the framework that you used for the decision making around where to sort of go next after eight and a half years at CEB? How did you end up deciding to go over to HelloWallet, which is a much smaller company at the time? In a sort of VP position. How did that opportunity land and how did you... I'm sure you had plenty of maybe opportunities that you could have chosen otherwise. How did you decide sort of on them?

Hannah:

Yeah. I mean, I think it was one, I just didn't feel like I was challenged at CEB anymore and I think it's always good to put yourself in challenging situations. But also strike a balance between something that's going to be challenging, it's going to push you out of your comfort zone, and you think you can actually do really well. And so for me, I've never really thought hugely strategically I would say about my overall career path, it's been more like do really well in one role, constantly be optimizing for learning, being successful. And that'll get you to the next place.

Delian:

Yeah, no it makes a ton of sense. And so, yeah can you talk a little bit about during your time at HelloWallet, what were some of the things that were very similar and could immediately be adapted from your time at CEB, versus what was just like, oh my God at a smaller company, I don't have maybe X, Y or Z infrastructure or the product market fit isn't quite as strong yet. What were the things that immediately translated versus things were maybe a little bit of a splash of cold water relative to a more established company?

Hannah:

Yeah. I mean, the thing that immediately translated is we were selling into the fortune 500 space and we were selling into HR executives. So it was good because I had the momentum of having connections and knowing the space. I think what was hard is when you're at CEB you recognize that you have a big brand behind you and there's a lot of momentum behind that and there's a lot that can come just directly from having that brand. And at that period of time we had just a lot of tailwinds in our favor because of the overall CEB brand, which obviously we didn't have going to a brand new company. And also just thinking through it's kind of a hard strategy to immediately go in and sell to fortune 500 companies. And I think now, a lot of B2B companies have rethought that and maybe start with smaller SMB mid-market and work their way up to enterprise. But at that time I mean it felt like the playbook was really go directly to enterprise, which is very, very hard.

Delian:

Yeah, I'm curious, were there noticeable differences just in terms of sales culture, given these sort of different products really different contract sizes or contract types that you guys were selling that actually changed, let's say all the little details from CEB versus HelloWallet. Were the things that you felt like were very different in terms of yeah, how you either communicated with customers or what the comp plan was like or what the ideal sales team structure looked like between the two?

Hannah:

Yeah. I mean, it was just basically night and day. I mean, the sales culture was like incredible at CEB and there's been a ton of sales leaders that have come out of that culture of just like momentum and using data and all of that. But then trends... And I don't know, there's probably maybe I would say a thousand people within the sales organization at CEB and then translate that to HelloWallet and it's like three salespeople. And so you're just kind of doing everything I'm flying around, meeting with people directly and HelloWallet never got to extreme scale as say Zenefits did in terms of the number of people we had. So it was more just that day to day grind of meeting with employers and that was financial wellness product. I mean, that was 10 years ago so that was really early in terms of even thinking about what is financial wellness as an employer? Why should I care about financial wellness? So a huge uphill battle in terms of demonstrating ROI and the business case and the value proposition.

Delian:

Especially through years, yeah HelloWallet got acquired by Morningstar and you went over to Zenefits, which I believe at the time was even earlier than where HelloWallet was relative to when you joined, it was less than a year old. I'm sure it was very, very early in figuring out [inaudible 00:11:27] emotion. But it sounds like it was obviously in your wheelhouse of selling to HR executives seems like it's been a common pattern let's say across your careers, I'm starting to realize. And so I'm curious how you sort of landed at that opportunity and then what was it like joining so, so early stage in a company's life cycle?

Hannah:

Yeah. So I mean, how I landed at Zenefits I had a friend who was like a recruiter and was like, there's this hot company Zenefits, people are making half a million dollars a year, you don't have to travel. And I mean, turned out not totally to be the case, but yeah, also at that point, I'd just had a baby I'd spent the past 10 years flying all over the country. I was like, this sounds awesome this is a San Francisco based company, cause HelloWallet was on the east coast. It's growing really quickly. Even though it was really young I mean, you probably know Zenefits just grew so quickly, so when I joined, there was already a sales machine going and I mean, candidly it just sounded fun.

Hannah:

And it sounded like it sort of aligned with where I was in my life. And so, yeah, it was another one of those moves that on paper, it's not like this career ladder that just goes from every rung perfectly it was like, I went from being a VP of sales to now essentially being an enterprise AE, selling an SMB product. Most people are like, this is kind of crazy but I was like, I don't know it just seems like an awesome company, it seems like it'll be fun, it seems like I'll learn a lot and I definitely did.

Delian:

Yeah. I'm sure that sales culture... I think Parker has an incredible skillset of just building a like very efficient SMB go to market motion and a sort of like gong ring type culture. I'm curious it was that closer to the CEB type culture in terms of true nonstop sort of sales hustle, or if you could like underline what is Parker's sales... he's clearly been able to replicate it now with Rippling so it's not a sort of one time thing, if you could articulate almost the DNA of what at Zenefits made it just grow so fast and in such a intense and fast-paced environment. What do you think was the actual underlying cause of that? Or how would one create that?

Hannah:

I mean, it's a good question. And yeah Parker was an incredibly inspiring leader and as with Sam Blond, who's been a mentor of mine who is the chief sales officer at Brex now, and he was the chief revenue officer at Zenefits then. But yeah it was kind of humbling cause when you've been in enterprise sales most of your career, you kind of I don't want to say look down on SMB, but you're like oh SMB, I did that earlier in my career. And then when I got to Zenefits, I was like, wow, this is a machine, just the process that had been set up, the way that we recruited people really quickly, just the sales sort of environment that was created, how you're driving urgency and quick sales cycle, putting monthly quotas in place. I'd never been to a place that had monthly quotas before that. And so yeah, the volume was so much higher than anything that I'd done before.

Delian:

And then for the first time in your career as far as I can tell, you then switch to an organization that was selling to a very different type of client, you switched over to the VP of sales at Rainforest. And correct me if I'm wrong, but I assume there you're largely selling into, I assume VPs of engineering. I'm curious both, how did you end up transitioning? And then I'm sure that was probably the first time where your customer set obviously changed a lot or maybe even the language and pitch and product and things like that changed a lot curious what that transition was like?

Hannah:

Yeah so I went there because Sam who was the CRO at Zenefits ended up going there, and so then I went there really because of him because I wanted to learn directly from him. So I think it was maybe a little bit less about the company itself and just about that mentorship and career opportunity. And it was a huge challenge for me, but one that I really wanted because I've been selling to HR executives for most of my career and so again, I was trying to optimize for, how can I learn things that I don't know today. And I mean selling to VP's of [eng 00:15:25] is a totally different sale everything is different about it. And so yeah that was an awesome experience to get that.

Delian:

Can you dive into a little bit of that of just like how customer persona changing changes sale cycles. I feel like that's a really interesting thing that most people don't realize that yeah, depending on... Enterprise sales is not just the same enterprise sale across every type of SaaS based business. It largely depends on sort of who the buyer is and so I'd love if you have examples of maybe it's sales motions or how to actually get somebody over the line and convince them that was very different from selling to HR executives versus selling into VPs.

Hannah:

Yeah. I mean, one simple difference I think of a bunch, is that when I've sold to heads of HR before even HR technology, they more want to know about what is the employee experience going to be like, is this something that our employees will find value in? And oftentimes when you do the demo of the product if you will, you might even just share screenshots or an envision app or something. Whereas obviously if you're demoing to a VP event that's just not going to cut it they want to see exactly how the product works, they're going to pull it apart. So you just have to be so much more knowledgeable about all the intricacies of it. And it's not to say that one is harder, easier it's just the persona is so different that you're selling into.

Delian:

Makes a ton of sense. And then after roughly two years there, you joined your current role in Modern Health. Would love to again, just want to hear sort of how the opportunity came about and then was part of the attraction the fact that, I assume with Modern Health you're selling a sort of benefits program, which I assume sells it to HR executives, was a part of the attraction, you could lean back on those core skills that you developed over the course of many years.

Hannah:

Yeah. And after rainforest, I wasn't even really thinking about getting back into the HR space. I think the blessing and the curse is that I knew all the challenges with selling to benefits leaders and HR leaders. But then I got connected to Alyson I'm forgetting how, through a friend and that's our founder and CEO, Alyson Watson. I met her for coffee one day, we talked for five minutes and I was like, I have to start at this company. And it was basically, she just knew the market so well and she knew what all the challenges were and she'd spent the last three years working in this market, understanding what the gaps were in the space.

Hannah:

And I was like, from my time at HelloWallet, I knew all the challenges of selling into this market as well and I just thought to myself like, wow there's really something here. And this is even before the pandemic and you could tell mental health was becoming that next big pillar of benefits after medical, dental, vision, if you will. And so, yeah, that's what got me so excited to work at Modern Health and Modern Health was actually the earliest stage company that I'd ever been at, cause I think at that point it was less than 10 people.

Delian:

Wow. Okay so there's I assume very little sales structure, sales motion built out at that point. So I'm curious, what was it like landing there on the ground and helping actually go through that sort of discovery process for what all the little details and ideal customer persona and customer path look like?

Hannah:

I mean, one big benefit that I had coming in and this was also something that was really exciting was just Alyson herself as a founder was so good at Sales. And I sometimes was like, well you've never really even done sales, but you're already really good at it, and she just got it why it was so important to the overall growth of the company and even though it was super early, had already built a good foundation. She'd hired two really good AEs who were cranking and she was in every opportunity, she was listening to the market, she was leading calls that we had with perspective customers. And so that really helped in the early days that it was like, you're not coming in cold or having to prove the value of sales you can actually just build it from the ground up. And so there was a lot of things, obviously that I took from all the different parts of my career to say if we can build this from the ground up, what is the best way to do that.

Delian:

And I'm sure across all of your roles team management and team building has been a core component of it. But I'm curious at a place where you're sort of truly starting from scratch, how do you guys at Modern Health think about what has been the process for... Where did you start to build the team first, how do you structure the sales team? How do you determine whether or not somebody's a fit for modern versus maybe they would've been a fit at prior sales teams that you were part of, but what's the sort of unique special sauce that makes somebody a fit for modern?

Hannah:

Yeah it's a good question. I think a lot of sales skills translate across companies and the one biggest thing I look for is performance at a previous employer. And so if someone can show that they've had success at one company and have moved on to multiple roles and have been number one or number two in the sales organization there the chances of them being successful at another company in a sales org are pretty high. So that's probably the first thing I look for but Modern Health is a bit of a unique sale just because we're selling into HR and benefits leaders and this is a benefit that they're rolling out to their entire workforce. And so it's a very visible sale in the sense you have someone putting themselves on the line if it goes wrong, it's every single employee has had access to this and it's a healthcare product.

Hannah:

So the bar for building trust is really, really high. So that's one thing is really good EQ to be able to build trust with our buyers. And then the other thing is just overall, thoroughness, diligence. Because it is a regulated industry and because we also have this interesting sale where we're selling directly to employers, but often through benefits brokers like Mercer or Willis Towers Watson. Attention to detail is really important, thoroughness of email responses, crossing every T dotting every I. So we also need to look for AEs that have that quality as well and aren't just going to fly over the details.

Delian:

And you talk about the, let's say both benefits and complexities that come with having... In this area relative to I think most enterprise SaaS channel partners, like Willis Towers Watson are incredibly critical to success of a company like this. That is very atypical I feel like an enterprise [inaudible 00:21:16] it's not like when you were selling Rainforest QA to EPEs, if there's a large channel partner that is expected to be a part of the transaction. Can you talk to that cause I think it's something that's pretty opaque to folks that aren't involved in this sort of digital health world and I think that enterprise sales or digital health is just like any other type of enterprise sale.

Hannah:

Yeah. That's a good question. So for those people that don't know, any big company has a benefits broker that they work with. So if I'm like Slack, for example and I'm their benefits leader I'm not just going to go and call Blue Cross or Blue Shield and get my benefits, I'm going to go through a benefits broker who's going to help me select that benefits package. And so it's this really interesting dynamic where we're selling directly to employers, but we also need to convince the benefits broker that it's going to be helpful and the benefits brokers often the ones that are running those evaluations. And so there's been companies in this space that have come up that have said, we're just going to work directly with the employer and we're going to leave out the benefits broker. And those companies have very clearly not been successful.

Hannah:

And so even from the early days, we've done a really good job of... we have a whole partnerships team that works with benefits brokers, that communicates our value, that talks about what are the benefits going to be to them and to their companies. But it is an interesting dynamic because it's like, you're almost selling to two different companies at once.

Delian:

And then I think one of the other things that's unique in digital health is also just the timeframes and timelines for both getting customers over the line, but then also utilization as well. Which I imagine makes it difficult to have a Zenefits style one month quota. I'm sure that things move a little bit more slowly in the digital health world, but yet, you guys have managed to scale quite rapidly. Can you talk about benefits like sales cycles and how that compares to just traditional enterprise sale? And then also maybe how customer success compares to traditional enterprise sales i.e. utilization from the actual employee base and how important that is.

Hannah:

Yeah so companies tend to select benefits on an annual cycle, so January 1st is when we're going to roll out all of our new benefits, we'll do this open enrollment period in the fall. And so most benefit buying decisions or aligned to that which makes planning from a business perspective, a little bit complex for us because we have so much of our revenue that comes in at the end of the year. And so many new customers that are coming on at one point in time, which can strain us from an operations perspective. And so it is just something we need to think about.

Hannah:

And I guess one thing that was interesting is COVID sort of threw that out of the window. During COVID people just wanted to give mental health support and still do to all of their employees. And so in the early days of Modern Health I think there was a lot of the revenue did follow that one one cycle. And then as soon as COVID hit that kind of... It was companies wanting to buy almost every month because of just the extreme need.

Delian:

Can you talk about how you guys adapted into the COVID world, both in terms of how internally you operated, or in terms of shifting from a I'm sure in person office culture to then being fully remote. But then also how you adapted to this new world where all of a sudden sales cycles just got blown out of the water and everything just looked completely different. And there was obviously extreme demand for the types of services you guys were providing.

Hannah:

Yeah. I mean like every business, we were just kind of doing what we could on the fly. Everyone was suddenly home we had to communicate just through Slack all day. At the very beginning, we had literally daily meetings with the sales team. So it was like, let's just all stay super connected because I mean in this space overall it's growing so fast, there's so many competitors in the market. Our sales team needs to stay super close and if one person hears something we want to make sure that everyone... that knowledge share is happening and that used to happen in the office environment. And we really fostered this culture of people sharing ideas with each other, Gong has been an incredible tool for us to do that as well virtually, but we just needed to stay super close.

Hannah:

And so we had daily meetings, over time that's obviously gone down a bit, but I do think we've done a good job of staying really tightly connected as a team. And then the other thing that we did at Modern Health, which had come from some of the experiences that I had at Zenefits and other places was that we kept the team really lean. I mean, there's definitely been some downside to that, but I think the upside to that is that it was easier to have that really tight feedback loop with a very lean sales organization.

Delian:

Yeah I guess down a vein, could you expand a bit on how the team needs to be structured when it is so lean and then maybe also more broadly, this is one example of a lesson brought over from Zenefits. If you could talk through other examples of things, whether it's even from CEB, HelloWallet, Rainforest et cetera, that are lessons or structures or comp plan that have come from some of the prior experiences that you've had.

Hannah:

Yeah. So basically when I think of how many people to have on the team, it's kind of just a simple math equation of what's the revenue target that you want to get to, and then divide that out by what you think the quotas can be. And now getting the quotas right is really hard and in the days of Modern Health, I think we were a bit aggressive in terms of the quotas that we felt like AEs could carry, but we had phenomenal AEs and they were all exceeding those. And so, we had fairly high quotas, over $2 million for account executives. And so basically what that allowed us to do was have a leaner team and the thinking there as we were building it was, one, if you have a higher quota and you have a standard based commission rate, or a percentage of every opportunity that you bring in, then you can have a higher overall OTE or on target earnings.

Hannah:

And so that really helped us recruit really good AEs in the early days is cause we had these high quotas, we were still efficient as a sales organization but the thinking was let's continue to bring in really good AEs, give them a lot of advance and make them really successful. And then you kind of get this flywheel going where they tell their friends and then it's this virtuous cycle. Whereas other organizations that I had been at where we added AEs added SDRs really quickly. Maybe figuring out the quota is even easier than figuring out what is your lead engine. The AEs productivity is largely based on how many leads that you can funnel into those AEs, but you need a pretty sophisticated model to figure out are we going to have the right number of leads for the right number of AEs?

Hannah:

And even if you're in a really fast growing market and there's a huge total addressable market it still can be difficult to figure that out. And you definitely just don't want to get to a place where you've hired all these really good AEs, and then for whatever reason you can't get that lead engine cranking because then you have this cycle where AEs aren't hitting their quotas, all these really good AEs you've hired, they might leave they tell their friends. And so it was really important to me in building Modern Health that we had this really good sales culture, which starts with having a winning sales culture, the foundation is AEs hitting their quotas.

Delian:

Yeah. How do you guys think about growing as aggressively as possible while maintaining employee retention and not under utilizing folks. It seems like a tricky balance to gauge where, if you obviously ever have an under utilized AE and they're unhappy, but also on the flip side, if none of your AEs are under utilized you're probably potentially dropping the ball on potential growth that one could have. How do you think through the planning around what is the right number to have such that you're leaning in as aggressively as possible, or how much is the appropriate amount before you suffer from like employee retention problems.

Hannah:

Yeah. So a couple things that I would've done differently in the early days, one is looking at sort of more of a bottoms up approach, so saying well, it's great if you can give AEs this super high quota, really high OTE, but can they actually work all the opportunities that they have sufficiently? And so now we've started to do bottoms up analysis where we say, how many at bats can an AE actually work, cause you don't want to get to that breaking point where we can't work all of the leads that a particular account executive has. And so for that it's more of just talking to managers and figuring out what is the right number of opportunities that an AE can effectively work at one time.

Hannah:

But then also just, thinking through what is... There's a lot that goes into it. I mean we think through the segments how big of a spread can an AE work and that was also something we did in the early days was we made really big segments. So we had one AE selling to both SMB companies and enterprise companies. And over time we've created more segments but I do think that helped us in a number of ways, just giving AEs more at bats, but another mistake I would say or something I would do differently next time it's just what is the support that you have around those AEs, so they're not at their breaking point.

Hannah:

So for example, in our business we have to fill out a ton of RFPs and that was getting down to the AE who would have to fill out these RFPs that would literally take them out of pocket for a week because there's hundreds and hundreds of detailed questions. And so building those support functions earlier having an RFP writer and a whole team to work on those RFPs, so the AEs can work on different activities, or sales enablement, for example I would hire those probably a bit earlier.

Delian:

And I'm curious, in modern obviously because of the structure of the market, you have these partners that are critical for success. I'm curious how you think about sort of long term management of those relationships in making sure to keep those super happy. Do you almost have customer success folks that aren't just dedicated just to the particular end customers, but also to the sort of intermediate partners that you guys work with to deliver your service?

Hannah:

Exactly yeah. So we've built out a partnerships team and within that partnerships team, there's different components of it. But one component of the partnerships team is just to work with brokers and consultants and so we have them aligned by firms, and we even hired people who've come from those firms. And we've hired people, customers actually who've rolled out the benefit at their organization who have now come to work for Modern Health. And so having that benefits expertise and having the credibility is really important than just putting like a SaaS sales executive on a partnership opportunity.

Delian:

And then if you were fresh grad starting out today maybe with a slightly more forethought than you had going into, let's say your first role. And wanted to end up in a position where they were a sales executive at a large Silicon valley based company. What advice would you give for let's say the new landscape of today where obviously back in 2000 the set of types of companies that were actually doing let's say, Silicon valley based enterprise sales was more limited than it is today, right? Digital health, obviously wasn't even a thing really back then. What advice would you give to them in terms of where to start, how to learn, what things to be targeting, what to trends to latch onto in the world of 2021 versus the early 2000s.

Hannah:

Yeah. That's a good question in terms of what's changed, cause I oftentimes think about what hasn't changed too. And if you want to be successful in a sales career, it's kind of like... What's that saying, the hard way is the easy way. If you just hit your quota every quarter then you get promoted and you move up but obviously that's easier said than done. I would optimize for organizations maybe less based on industry cause I mean there's so many interesting industries out there and you can learn a lot from a variety of industries. But maybe optimize more for the sales leader that's there, and it's someone that you feel like would be a really good mentor and you can really learn from.

Delian:

Makes a ton of sense and a hundred percent agreed on the mentorship perspective. I think most people don't appreciate how, I think almost everything in business is done via... Apprenticeship is almost always the best way to accelerate a career. But yeah, thanks so much for coming on the podcast today Hannah was really a great conversation appreciate you hopping on.

Hannah:

Yeah thanks for having me.

Delian:

Thanks for listening everyone. If you'd like to support the podcast, please sign up for a paid Substack subscription, which we use to pay for transcripts, mics and other improvements. If you have any comments or feedback on what kinds of questions I should ask, who should come on the show, or anything else, please do let me know. Have a great rest of your day.

Hannah Willson is the SVP of Sales and Partnerships at Modern Health. Prior to joining Modern Health Hannah led high-growth sales teams at Zenefits, Rainforest QA, and HelloWallet (acquired by Morningstar). She spent more than eight years at CEB (acquired by Gartner) where she was a top revenue generator for seven consecutive years and consistently exceeded targets for renewals and upsells.

In this episode we talk about what it was like joining Modern Health as one of the first ten employees, the importance of building trust with buyers, and how the tiny things add up in career trajectory. Hannah also discusses how much variety there is in sales, what she looks for when hiring, and advice for getting started and staying in the industry.

I hope you enjoy the show.

Full transcript available.

Toby Espinosa is the VP of Ads at DoorDash.  Toby joined DoorDash as the 70th employee to launch new markets and has grown the business development team from 3 to 75 people.  Prior to joining DoorDash, Toby was an investor at Lux and Henry Crown & Co.  He is also a lecturer in the engineering department at Stanford University. 

In this episode we talk about where Toby’s urge to build companies comes from, why he decided to leave the VC world and join DoorDash, and what the company was like when he first joined. He also shares thoughts on the focus of moving very quickly early on, how he thinks about hiring, and the dynamics with some of DoorDash’s biggest partnerships.

I hope you enjoy the show.

Full transcript available here.

Operators Ep 35 Transcript

Delian:                          Hi, everyone. My name is Delian and I'm a principal at Founders Fund, a venture capital firm based in San Francisco. This is Operators, where I interview non-VC, non-CEO, non-founder operators that make the startup world go round.

Delian:                          Today, I'm interviewing Toby Espinosa, VP of Ads at DoorDash and previously VP of Global Business Development. Toby joined DoorDash as the 70th employee to launch new markets and has grown the business development team from 3 to over 120 people. Prior to joining DoorDash, Toby was an investor at Lux and Henry Crown & Co. He's also a lecturer in the Engineering Department at Stanford University. I hope you enjoy the show.

Delian:                          Cool, Toby. Well, thanks so much for taking the time to hop on today. I'm excited to chat about all the work that you've done at DoorDash and, obviously, super exciting now that you guys are public and some awesome news that's come out both this week, but I feel like even over the prior couple quarters, you guys have been absolutely crushing it.

Toby Espinosa:              Totally.

Delian:                          I'm so excited to chat today.

Toby Espinosa:              Thank you. Thank you and thank you for having me on. It's very fun.

Delian:                          But yeah, before we dive into that, I always like cycling back to where you got your career started. You actually started off on the investing side of startups. You were both at Lux Capital way back in the day for a little under two years, and then also at Henry Crown & Co. Can you tell us a bit about how you got involved in investing straight out of school? What did you like about that? Also, what ultimately made you want to leave investing to join in the world of building companies?

Toby Espinosa:              Totally, totally, and join the ranks of Delian building companies. It's the best. It's the best. So, yeah, quick background myself. I was in undergraduate school back east at Brown University, and I applied to be ... At the time I was an Economics and South Asian Studies undergrad, which liberal arts is now back in fashion, but there was a moment there for a while that if, unless you are an engineer or something like that, you were not in fashion. So I got the great advice to go and do a graduate program in engineering so that I could get closer to how things are built, which I think is extremely important. So I found my way. I applied to a graduate program at Stanford, got in, and then had a year off, and a close friend and mentor of mine who was on the water polo team at Brown with me, called me and said, "Hey, I'm going to business school. My job is opening up at Henry Crown & company. Would you like to work in the world of investing for a year?" and I basically was like, "I have no idea what that means." It's a family office. I had no idea that families had offices maybe besides, and so it was a super, super cool experience.

Toby Espinosa:              Basically, what I learned first at Henry Crown &Company is like there's this massive world of ... the financial world is massive. There are many other players growing up in Silicon Valley that the only kind of financial world that I really understood or had heard of was venture investing. So I think it was a really, really great experience for me to learn that there were a bunch of different categories across private equity that include venture, alternatives, natural resources, real estate, and the family itself were some of the earliest folks that got big to diversification. So even before David Swanson built the diversification model or the endowment model that everyone now knows at Yale. They were doing very diversified things across many different things.

Toby Espinosa:              So it was a fascinating experience seeing something from like a 10 million-foot view. Then after, when I was back in grad school, I zoomed in a little bit, not getting all the way down to the customer level, but zoomed in a little bit at Lux Capital and learned from Peter & Josh and a bunch of great people there who I still look up to today and who are great friends and learned how to look at markets, I think, from a macro level is the best way I could describe it though I didn't have any experience building companies, and so that's what took me to wanting to dive in and learn what it's like to build something from scratch. So, yeah.

Delian:                          Again, wearing that investor hat, what was the macro analysis or how did you think through the DoorDash opportunity? What got you excited about joining that team in 2015? There were like 70 or so employees at the time and so-

Toby Espinosa:              Totally.

Delian:                          ... relatively early on in the company's life cycle. What made that opportunity the most attractive, especially given that I'm sure you had a very broad view on the startup landscape?

Toby Espinosa:              Totally, totally. Well, I think me joining DoorDash comes actually the fact, when we talk about like what makes entrepreneurs amazing, but comes to the fact that Tony Xu, our CEO, is probably one of the best recruiters I think I've ever met of all time. If you zoom into the opportunity seven years ago, I like to tell people that when I joined DoorDash, DoorDash was not the largest food delivery company even in my hometown of Palo Alto. There were probably two or three that were larger dominoes, was certainly larger. So I think if you look at it from a macro standpoint, you'd say, "Okay, $800 billion of food GMV spend in the United States annually. If you looked at analogous companies in the fast casual space, Domino's or Pizza Hut are the traditional big pizza or Chinese food companies, you could say, "Well, we could see easily 25% to 30% of that could be food delivery." So that's your overarching theme, but there were tons of players in the space

Toby Espinosa:              I think, really, what caught my attention was Tony describing the customer set and the customer problems. What I really learned is instead of thinking from a macro level, what's going on out there in the world, really learning from, first, principles on the customer level. So what is the problem that you're solving for the customer in the moment and Tony had a great explanation of what we were doing, which was helping local businesses reach into the digital economy that Amazon had been doing on their own for 10, 15 years, bringing the tools and services to every mom and pop shop on Main Street to be able to compete in this new digital world. That's the same thing that we're doing today in a myriad of different things, but it's the same process on how we built out the ads business. But that was really what convinced me joining DoorDash was large macro opportunity and huge customer pain point that if we just solved over and over again, we could be a large business.

Toby Espinosa:              In retrospect, there's a bunch of other things, Delian, that you probably think about all the time. I think probably one of the most important things that now, looking back, I didn't think about, though it was an interesting thought experiment within itself, is why now. I think a lot of people, there's many incredible ideas out there, many incredible entrepreneurs and markets, but the why now, particularly in our business, is like everything. I think the why now for DoorDash was also particularly strong at the time that I joined.

Delian:                          Yeah. I guess, I'm curious, there obviously ... Yeah, there were, as you described in Palo Alto, multiple other players. Was there a part of like Tony's argument that focused on, from a first principal's basis, why these companies weren't focused on fundamentally solving these customer problems in a way that DoorDash could and, I guess, yeah, obviously, maybe it wasn't necessarily an aspect of your argument at the time, but how would you articulate the why now in 2015, for why DoorDash was able to take over and dominate, call it, in even just Palo Alto?

Toby Espinosa:              Totally. Yeah, so I think, part of his brilliance in both recruiting, but also in the way we operate our business, is that even in a super competitive market in which we operate where everything is execution-based. We talked about this yesterday. Tony talks about it yesterday, talked about it from when I joined the business, but everything, our business is execution-based. So if you think about it, like the brilliance of our company is that we focus, again, on the customer problem. So when he was convincing me to join, I don't think I even asked a question on how to beat competition. Everything would be focused right back to the customer. Okay, what problem are we solving, how many of them are there, and how big do you think this opportunity can be? Which is what makes us one of the reasons, I think ,we've done quite well to date.

Toby Espinosa:              I think on the why now, if you just think, if you go back seven years, if you go back 10 years, 11 years, not everybody had a smartphone. So the ability, like you have this proliferation of smartphones ... every Dasher who's delivering, every consumer now has a smartphone on their phone, really solid wifi. This surprised people, but SMB restaurants 10 years ago, even some of them still today, there's companies that are still addressing this, didn't have strong wifi so you couldn't have a great tablet in the store or if you didn't have great wifi. So I think a lot about that, and then if you look at just the capital markets that we've been in for the last amount of time, it takes a lot of capital for us to go out and build a network of our size. Today, we are lucky and privileged to be at the scale that we have, and with scale comes a lot of efficiencies, but I don't think it's lost on us that we were in this moment of time where these companies could enter the space, whether it be an open door type company with a leveraged certain debt markets or folks in the food delivery space that leveraged the fact that we could get access to dollars to grow.

Delian:                          So when you first joined DoorDash, 70th employee, largely focused on being a market launcher, can you talk through what that role was and what the first year-and-a-half of your experience there was like?

Toby Espinosa:              Yeah, absolutely. So the role was mom drops you off at San Jose Airport. You fly by yourself to Phoenix, Arizona. You get picked up in a Toyota Yaris by your boss who's a 6'6" former baseball player from USC. You drive to the office, brand new office in Tempe, and you blow up an air mattress and you sleep on an air mattress in the office and that's basically it. Then the next day, your boss leaves and moves on to the next market and you stay and you build the business, and it's also 115 degrees outside. So that was my introduction to DoorDash and that was basically the first job. Everything we learned, we learned from each other. There were a bunch of incredible launchers that I still have lasting relationships with, that have gone on to lead projects like the Bitcoin business at Square Cash to launching their own companies that have done incredibly well.

Toby Espinosa:              That cohort, still to this day, I look back and we learn so much from each other. But that was my job. My job was to build the business, and in those days it meant going out and acquiring drivers. It meant going out and signing restaurants. It meant customer acquisition and then it meant turning on the market and finding my replacement. So going and finding the eventual general manager of Phoenix to take on my role. Until you found that person, the launcher couldn't leave the market, and then from there you went into the next market and so I went from Phoenix to Atlanta, to Vancouver, and it was great. You learn a lot from being directly face-to-face with all of your customers.

Delian:                          After about a little under two years, you transitioned to this role heading up business development, and I've always found that the early days of DoorDash's supply business development was incredibly passionate and clever in that the ability to see to market and solve the pre-existing chicken and egg problems, some of these national brands, was a huge unlock relative to, I feel like, what other folks were trying to do to solve that problem. Can you talk through a little bit of both how that opportunity was identified and what those first couple partnerships looked like, and how you convinced the org that this was actually like a very valuable strategy or channel to pursue?

Toby Espinosa:              Yeah, absolutely. So in the early days of our model, some of the launchers realized that if we turned on national chain restaurants in a market, Phoenix or Atlanta, that we would see growth. Effectively, what that was, was consumers wanted the novel fee of getting The Cheesecake Factory or PF Chang's or Applebee's or Chili's delivered to them, and that stuck in my mind. The other thing that stuck in my mind was one of our earliest partners was Taco Bell. We turned them on, on a Friday and our site went down, I think, within 30 minutes of us turning on Taco Bell. So that also stuck in my mind. So you had these massive, really powerful national brands, but the hard thing about our business was that our business wasn't national in scale when we started. It was neighborhood by neighborhood.

Toby Espinosa:              So the question that we always thought was, "How could we utilize these national brands to become a national player?" The big bet that myself and Tony and my boss Christopher made at the time was that our economic model would work in a city like San Francisco, in Palo Alto, a suburb, or in Whitefish, Montana, a town of 15,000 people. The underlying reason why it wouldn't work is there wouldn't be enough consumer demand for the product. The product is a novelty, it won't come of scale to the rest of the country. So we leaned and worked really heavily with our partners at the time. Took our Tony principle, focused on the partner, asked them what they needed, and national chains were willing to help us scale from a marketing standpoint to Whitefish, Montana, because most national chains in the U.S. are franchise organizations and so in order to be equal for all franchisees and to layer on growth, the Whitefish McDonald's franchisee who I've delivered from, and the McDonald's franchisee in Menlo Park want the same thing: they want delivery.

Toby Espinosa:              So if we could turn it on at a scale and leverage some of their things that they have like large national marketing budgets, it became part of our growth strategy probably year two to year five, six, and is still part of our growth strategy, that it ended up being that national chains, the ability to have a bunch of national chains on our platform was a novelty, and it turned out that a lot of the greenfield opportunity in these markets, we were able to scale very, very fast without competitors there, which helped us to get our lead position in the U.S. But it started at a very basic level, a small insight that we carried led to a ... a small insight on a consumer side and then a small insight from partners needing us to be there, those two things combined led us to build business. It was very fun.

Delian:                          Do you have a thesis as to why, let's say, pre-existing plays in the space ignored this greenfield, whether it be the actual Whitefish, Montanas, or actually looking to partner with these national brands, as the types of integrations you guys did were quite, quite deep, right? Obviously, them being in your guys' app, you guys being physically in the stores with signage, et cetera. Why do you think other people like missed this opportunity, that even while you were executing on it still continue to under-appreciate or missed the opportunity?

Toby Espinosa:              Yeah. I started by saying off at the beginning of this, our business is, Tony says this all the time, is execution-oriented. So any minute, any second that we take a turn and that turn leads to an advantage, it just compounds, compounds, compounds. So to your point, folks eventually did catch on, but it helped us continue to win in those markets. If I double click on the first part of the question, which is why did some folks choose to strategically not pay attention to this market, I think it fundamentally comes down to ... and you probably talked to a bunch of entrepreneurs all the time and you probably asked yourself this question, like, "Who is your core customer?" I think in marketplace businesses, it can get confusing because everyone will say, "Well, my core customer is the end consumer," right? For us, our core customer in the early days that helped us grow and build, and we very much still think that our core customer is the SMB restaurant.

Toby Espinosa:              What that inevitably leads to is a strategic decision. For us, it was: if the national restaurant chain partner is our core customer and they need us in Whitefish, Montana, we will launch Whitefish, Montana regardless of if there's enough consumer demand in that moment, taking a bet that there'll be enough consumer demand in the future. That bet ended up being right, but you could completely have done it in an alternate universe, you can completely have done it and maybe Whitefish, Montana wouldn't have worked. So I think if you look at other players, they most likely chose another side of the marketplace being their core consumer, and when that is your core consumer, you will just make decisions that are different than others.

Delian:                          You guys grew that team quite significantly from just a handful of folks to north of a hundred, focused on these types of partnerships domestically, internationally, et cetera, what was the appropriate skill set or type of person to come in and actually execute on these types of partnerships? Then what were some partnerships or aspects of certain partnerships that were maybe more difficult than expected on the 51st and the 52nd national brand there were different challenges relative to the first handful of rollouts?

Toby Espinosa:              Yeah. Yeah, it's a great question. So I think of all these things in time-based, and so our first earliest folks that joined the team had different skill sets than the end person on the team and those skill sets are neither better nor worse. They were actually just the best for the time. So early on, I think we definitely did focus on very, very smart, humble generalists that can learn from first principles. The reasoning for that is primarily due to the fact ... and we still do this today if you look at us launching new businesses, we still launch new businesses in the same way ... is coming up with a unique insight from a customer that will help you win, actually just means you need to listen; means you need to have big, big ears and listen. The best people to listen are normally folks that don't have a pre-existing notion of the way that the world should work, and it's not always the case, but generally it helps us. So in that kind of way, we look for folks that are super smart, that will listen, that are humble, that will take the insights from the customer, and then go execute in the early days.

Toby Espinosa:              Once you reach certain scale, you're 51st, you're 52nd partner, there's a playbook. There's a recipe that already exists, and so what you really need are folks and a process that makes you move faster with that recipe than anybody else. So a lot of the times, it's the best time to bring in folks that can learn, write down a recipe, and then execute fast. The only kind of thing I always like to talk about with org structure and hiring and those types of things is, and I mentioned it a little bit, because we are an execution-oriented company, we always focus on being able to move fast. So, again, in the earliest innings, the folks you want are people that can learn really quickly and can learn really fast, which helps you move quicker, launch a new business and get market feedback. In the later stage, it's folks that understand a great process and can make sure that processes goes over and over and over again. That's basically how we've built the team.

Delian:                          Speaking of institutionalizing the process, especially for this type of business partnerships team, which, in some ways, has aspects of it that are similar to colleges like traditional enterprise SaaS sales, trying to get at a customer over the line, you're trying to get them to, I assume, sign a contract. But the actual like backend revenue monetization looks wildly different, right? This isn't a simple SaaS contract. This is a three party marketplace that early on, as it's nascent, has worse margins and then matures as the market gets larger and larger. How do you guys even think through the typical things that enterprise SaaS company has, which is just like quotas for sales, people customer success, how to make sure that partner is actually succeeding in the wallet share, is increasing but in a much more dynamic, difficult to model, predict, understand the margins for this and keep the original salespeople that closed the deal incentivized to make sure that the deal actually gets across the line and succeeds for all parties?

Toby Espinosa:              Totally. It's a great question. So I think there's always like the mass 80 that matters to move fast and then there's the 20% that's the exception that you normally learn from incremental customer feedback or market feedback. So the way that I would describe that is in the earliest days, there were three of us going out, and those three folks are still some of my best friends, going out, signing national restaurant chains, actually closing the deal, doing the account management, the post-sale account management or customer success in the enterprise SaaS world, and also operationalizing these things. There were three of us and that worked. We were all generalists, pretty much. We had some sort of specialization, but we would move as a pack.

Toby Espinosa:              You fast forward 2, 3, 4 years, you have 100 folks, it doesn't really work that way anymore, and so we eventually started to specialize. You started specializing in presale, SaaS folks that were compensated in the same way that a sales team would be compensated. You'd have your customer success team that would work in that same fashion. But then the 20%, this strange operational lens that is DoorDash, which is this quasi technical account management paired with operational account management, which is the final bucket. And that final bucket evolved and grew over time and still growing. But today there are specialists that focus on point of sale integrations, specialists that focus on Dashers showing up to the restaurant on time, and all of those things don't fit into the currently enterprise SaaS mode from the beginning.

Toby Espinosa:              So, again, that flexibility of like, yes, we understand what enterprise SaaS teams look like and we can scale and build them and build a process, but also be flexible and listen to the customer on what we need to go build, I think, is essential in today's world. I would assume for you, it probably comes also in some different format where you have maybe, I don't know what they'd be called, like the space mission control specialist or something that are like these generalists that are not the existing, "I'm going to go out and sign a large contract," which that motion, that muscle is probably known pretty well today in the industry, at least. I could be wrong, but.

Delian:                          Totally, totally. Yeah, they're quite different. I guess, do you have a particular ... it sounds like as you guys started to scale, you discover edge cases that you needed to put operational specialists around. Do you have a particular story from a national brand where as you started to get deep into customer success and it was like, "Oh man, these guys weren't set up to have like a pickup counter that was meant for DoorDashers," and so working with that team to rethink like layouts of their future stores, or-

Toby Espinosa:              Totally.

Delian:                          ... how to readjust their current stores, such that this stuff actually works and you don't have a Dasher sitting 30 minutes waiting in line, with the meal basically already ready to go.

Toby Espinosa:              Totally.

Delian:                          Like, can you talk through maybe one of those use cases of national brand that maybe wasn't perfectly set up for DoorDash and how you guys iterated through that partnership with them to make it a better fit on both sides?

Toby Espinosa:              Yeah. There's a group of individuals who I never thought growing up because it was the place ... growing up, it was a special Friday night if you're able to go to this restaurant, and it was only celebrations; it was Cheesecake Factory. When cheesecake factory opening in Palo Alto, I remember there being a line around the block and my family, for sure, waited in that line multiple times to get access to The Cheesecake Factory. So I never thought I'd be that close to these celebrities, but I am today, and The Cheesecake Factory, they actually are an interesting case just like if I look at the partnership overall, because The Cheesecake Factory is one of our first really, really close, deep, exclusive partnerships. They were actually one of the reasons why we expanded nationally in the way that we did to suburban markets.

Toby Espinosa:              If you roll back the clock, there was this moment where we were covering probably 120 of their 200 units and their CEO would call our CEO probably once a week saying, "When are you going to launch new markets? When are you going to launch new markets?" and we could have delivered them a hundred billion dollars in sales of some 50x, whatever they wanted, and it would not have been good enough if we hadn't covered those 80 stores. They put it that way. So, eventually, they became one of the major reasons why, if you think about listening to your customer, sometimes they do have to pound the table. We listen to customer, we expanded for Cheesecake Factory, and the rest is history.

Toby Espinosa:              But one of the interesting things that we had to build for them that we then scaled to other partners was, we called it our merchant operations organization. The first problem the merchant operations organization had to solve was the case of the missing cheesecakes. There was this moment in time where there was like the missing and incorrect, which is how many times an item is missing and incorrect, of cheesecakes was their highest missing item by a crazy factor. Of course, the restaurants would say, "We put the cheesecake in there;" we would say, "You didn't put it in there," and there's always this is back and forth. So, again, things that don't scale, we deploy the team to the ground in multiple locations and we watched. It turned out, yes, to your point on like moving things around in the restaurant, that the bakery for cheesecakes and the pickup counter in some locations is separate, in some locations is the same. So we had to design a system where we could do specific Dasher operational instructions. In some stores, they actually did change the way that they were built though, often, as the incumbent, you have to provide solutions for your large customers.

Toby Espinosa:              But that's an example. We brought that cheesecake number down. So that system, I think a lot of folks would look at that problem and say, "It's an existing problem. It's a known problem. It's going to go away at some point." But the reality is that small change or difference, think about how many customers. You order from The Cheesecake Factory. You don't get your cheesecake, you don't really want to order from The Cheesecake Factory again. I mean, that's why you went there. So think how many customers, even if you just did 100 of those, 10 of those, one of those, the LTV for their customers goes up over time. So, yeah, that's an example. Fun example.

Delian:                          When you had that missing cheesecake example that eventually turned into a system of, "Okay, we actually do statistically study when there's missing items that are abnormal." "Hey, this particular item on this particular menu is consistently missing," deploy the team, figure out what the solution is, and actually like turn that into the system that you then apply to future partners?

Toby Espinosa:              Totally. Yeah. So now we have a full step. I actually don't even know today how large the merchant operations team is, but we have it both for local partners and national partners. They work really closely with our analytics team to try to figure out what the problem is, and it actually turns out, for us, it was both like location for The Cheesecake Factory, but also volume during certain times of day. So you can imagine, like because of our business, it's heavy lunch, heavy dinner, and The Cheesecake Factory in San Jose is going to get their peak hours at 7:00 PM. You have 25 Dashers all trying to go pick up an order at 7:00 PM at the same time they have their peak capacity, and labor's not meant to flex in that way. So in some cases we actually brought people to work during certain hours of the day. You can make the economics work, too, but yes, we created a system for partners. So if it's anyone from McDonald's to Cheesecake, to Chipotle, to any of our local partners, they now have a merchant operations specialist on their account management team that helps them go through these problems.

Delian:                          Speaking of some of these large partners, most importantly, my favorite restaurant of all time, Chick-fil-A, but also McDonald's, Wendy's, et cetera, you guys have kept as partners for extended periods of time despite, obviously, there being tons of competition in this space, very high profile. What do you think you guys have done that has kept these partners so excited to continue to work with DoorDash for such an extended period of time?

Toby Espinosa:              Yeah, I mean, I think it's goes back to we listen and we want to build solutions for them. We've created this tagline when I was running the business development team, which was we want to be your most important partner. I've taken that, installing it for the ads business too, which is we want to be your most important ad partner. What's crazy about our ad business that was launched 12 months ago is that I'm at a restaurant conference today and I'm speaking to some of the executive team for Panera, Chick-fil-A and a few others, we are now a large percentage of their digital marketing spend, like larger than way above our weight compared to the Facebooks and Googles, and et cetera, of the world. The reason we're able to do that is we can understand their problems much better than others.

Toby Espinosa:              So I generally think, when you look macro, if you go back to the venture world, and I'm sure you feel the same way too, when you go back to the macro and you go top-down, you look at the world as if everything's the same. It's like a peanut butter approach, and it's hard to find these exceptions, and the exceptions are what make our business is. So we find those things. Knowing the Chick-fil-A team really, really, really well, we find those exceptions, and what's really cool about Chick-fil-A, Chick-fil-A is another great example of we worked with them ... Because we knew them so well, we actually were able to build a Chick-fil-A location in Redwood City in a dark kitchen before there was Chick-fil-A on any other platform in that area. If you look at that selection advantage, even if it's for a couple months, it's a material difference for your business. So I'd say, listen, build things for the customer, and then maybe if I add something, it's like the exception rule. It's normally what you find the exceptions.

Delian:                          Then we talked about this a bit earlier of just like, obviously, there's a lot of cross-functional teams required to make these partnerships successful, but I'm sure there's been times where some national partner for some reason or another just hasn't ultimately ended up being successful. How do you actually figure out how to make the team accountable to bring in ideally partners that are successful to both sides, i.e. it's great for the partner, great for DoorDash and keep them accountable to that when the fruit of that effort may not come or be realized that it's not necessarily successful six months a year later, et cetera. It may come from wildly different teams than the original folks like negotiating the original agreement. How do you actually feed that feedback back to the original top of funnel?

Toby Espinosa:              Yeah, it's a great question. So one of the ways organizationally you can do it is you can make folks responsible for both. So they can be responsible for signing the deal and then actually managing and maintaining that deal over a long period of time. That works for speed and for knowing your customer, if you would in certain areas if you start to verticalize your teams. We reward behavior when we see when we see people doing it, and that can manifest itself. At the beginning, it manifests itself in, if when there's that exception rule, "All right, I'm going to dive into the problem. Cheesecake, let me go figure out what's going on with the cheesecakes. I will go to your store. Chick-fil-A, let me figure out why Dashers are lining up. I will go visit your store," and that thing is embedded in our culture.

Toby Espinosa:              But then the secondary point is how you then scale that over time and a part of that is then to help figure out, okay, once it's no longer part of your system, who cross-functionally are your core stakeholders and partners that you're going to hold hands with, and then making sure you can all work together in the same room. Don't be so single-minded to think that you are the only way that things can get solved. Those two things can fight each other in certain moments, but I think that's again in the yang of any great builder or founder, to be honest, and so you manage those things over time.

Delian:                          You talked about this, the peanut butter top-down approach, but curious if there have been particular moments during the past couple of years at DoorDash where you felt like, "Oh, the fact that I had this macro investor background or viewpoint actually impacted either how I thought about the strategy or particular unit, how to compensate, how to assess what opportunity to go after." Do you feel like there are times where you're having that macro background and broader view has helped when you faced certain decisions at DoorDash?

Toby Espinosa:              Yeah. I mean, I think for us, looking at ... I think when, when I was personally assessing what I wanted to go do next at DoorDash and looking at the playing field, I think the one macro dichotomy that existed out there that then if you zoomed in at a customer level also existed, was that digital ads as a percentage of the ad industry is growing a tremendous, tremendous, tremendous amount. You can just watch, that's a macro trend, more and more dollars going into the space. But if you zoomed in on restaurants, it was growing, but not as fast, and so then you ask yourself, like, "Why?" Like, "What was it that CPGs had that restaurants don't have? or, what is it that XYZ have that others don't?" If you start to zoom in, you start to realize, "Oh, wow, restaurant brands when they think about marketing, still think about marketing the same way they thought about marketing, for the most part, 10, 15 years ago. It's real estate, real estate, real estate, national TV when I hit scale, and maybe some Facebook and some Google.

Toby Espinosa:              If you think about why, some folks, like when you think about what has been created for the consumer if you're going to flip the script and look at Facebook and Instagram and Pinterest and these sorts of places, they work really well for native environments for consumers to look at retail. Like a cool new shoe, for example, works really well on Instagram, but a restaurant concept meeting consumers where they are, that's like maybe there are some percentage of consumers that are hungry in the moment, but we have a 20 million monthly actives, 9 million DashPass subscribers that when they open up their application every single day, they are hungry and want something, and putting your brand in front of them means a lot. So I think that sort of macro dichotomy definitely helped us when evaluating if this could be a large business.

Delian:                          Yeah, I guess, diving into DoorDash's ads launch, I'm curious, what was the process for shifting from obviously this type of national partner business development team had grown quite large, super successful, their willingness to revving, I feel like most operators or execs would just get complacent and just continue to grow that as opposed to taking the crazy shot at building entirely separate and new line of business. Like, how did you even think through doing that? What do you think DoorDash does better than most in ability to you, guys, I think, have quite successfully launched many "non-core" businesses that are seeing a ton of success. Both how did you decide to do it, but then how do you feel DoorDash set you up for success to build up this new line of business?

Toby Espinosa:              Totally. Yeah. So, I think I'll take the first one first, which is why from a career standpoint. I think the best advice I ever got from Tony Xu was lean into your superpower early in your career and you will move faster. My superpower very clearly, from anyone who works with me or any partner you meet, is understanding partners better than most. This kind of like sales/BD/partnership mentality. That helped me and my career move very, very quickly at DoorDash. But if you always only focus on your superpower, then you actually, I've found that it's hard to take a beat and actually write down and be able to make it into a process.

Toby Espinosa:              So, often, if you think about the best coaches, they were not the best players. So this insight of how do I then become a really great coach, it's like, "I actually need to do something that I'm a little bit uncomfortable with," so go outside your comfort zone. Leverage your superpower, go outside your comfort zone. So you look around the ad spends was a great a place for me personally to start, because it was focused on a core customer, which was our restaurant brands, local and national, building a business for them to help scale within our company. So I think that from a personal standpoint, it worked really, really, really well for me. From a company perspective, it's a very interesting time because if you take a step back, we were looking ... this was right before COVID hit and what we were noticing was that restaurant partners wanted ways to grow on our platform. We had something like 350,000 partners at that time. We now have 500,000 partners on DoorDash in the U.S. So if you look at them, most of them were still trying to find ways to access new consumers within our marketplace.

Toby Espinosa:              So we started with the very basic premise, which was launch a promotions platform, a way that a lot of us have known, gotten to know new restaurants, is say $5 off, 10% off, et cetera, et cetera. So we made a very flexible promotions platform, which then scaled, and then we got another call from our local restaurant partners, which was "We want something called sponsored listings," which is we just want a banner in certain areas and height in services for our consumers, and I think that's the moment where we switched into, is this also going to be good for our consumer side of our marketplace? The one thing we can't do is violate that kind of experience.

Toby Espinosa:              So we did a whole bunch of testing on the consumer side, and we ended up in a place where ... DoorDash is a very interesting ecosystem where you're super, super high intent, but most folks actually don't know exactly what they want. So they don't search exactly for the restaurant. They're actually kind of, "Oh, inspire me a little bit," and that prospecting and inspirational moment, much like Instagram, makes it a very, very valuable place for brands to be in front of consumers and inspire them to try their product. So from there we realized if we were able to do that in a nice way, we wouldn't be violating the consumer experience. In fact, if ad formats continue to get better and better, it actually might enhance the consumer experience from a content trying to find new things perspective.

Toby Espinosa:              So that's where we are today. So if you move forward, what have we done? We've built the sponsored listings business for every SMB. So any one of our 5,000 merchant partners can purchase sponsored listings within our business on a CPA basis, which is slightly revolutionary. Or, I like to think it's revolutionary in the ad space. Most ads are CPC. This is you will only pay us, SMB restaurant, if you get an order from DoorDash, which aligns incentives perfectly for us. So we launched that business, we scaled an ad platform so we can turn on a new surface within a matter of weeks, not months. We launched our grocery, our CPG business, so sponsored listings units within there, our banner business, and our promo business.

Toby Espinosa:              In the first nine months of this year, we're very proud that we were able to generate over a billion and a half dollars in incremental revenue for our ad partners on DoorDash, which is a material difference for any mom and pop. So, yeah, so I think that's the journey. There's this personal moment of being able to get out of my comfort zone, explore, and then by doing so, compounding yourself in your career, but also at the same time working on a business that would be great for our core customers.

Delian:                          I feel like there's something relatively revolutionary not just about, obviously, CPA versus CPC, but also the fact that you're taking these SMB businesses and even some of these, I'm sure, even national partners that up until now have basically entirely only done brand, non-quantitative marketing versus this is almost certainly the first time that they're actually doing direct marketing and they've ever even measured a CPA. Can you talk through some of the customer education around that and actually understanding? I mean, obviously, in startup land CAC, LTV, payback period, et cetera, like very natural languages, but the mom and pop waffle shop probably isn't necessarily thinking about their customers that same way, but it would probably be very advantageous to both the waffle shop and to DoorDash if they did think about it that way.

Toby Espinosa:              Totally.

Delian:                          So how do you, guys, go about that customer education?

Toby Espinosa:              Yeah. It's a great question. So, basically, one whole thing what's also very cool about being in the DoorDash ecosystem is we actually know the value of an incremental customer that you acquire. So, I think, the first thing is, and we're not doing this perfectly today, but we are working very, very hard to make this accessible so we can tell a merchant, whoever they are, any brand with, with inventory on DoorDash, what is the value of the person that you are trying to go interact with and by doing so, then you can reach back. So if I tell you that Delian loves Chick-fil-A and he's a power user, so he's ordering two times a week, and so we're talking hundreds and hundreds of dollars a year in Chick-fil-A.

Toby Espinosa:              But what he really loves, if you zoom in, is he really loves the chicken sandwich, and you're a KFC or you're a mom and pop and you have a new chicken sandwich, and all you had to do was get his mouth, his taste buds, just try that chicken once and it's better chicken, and all of a sudden you can take some percentage of that spend, that's a really, really cool opportunity. So that data set's really massive. We talk a lot about cuisine types or cuisine groups that are very, very interesting for both, yes, the restaurants that are brand restaurants, but also for CPGs. So the example there would be Cholula knowing that you love spicy, well, now they want to put their brand in front of you because that's great for Cholula brand.

Toby Espinosa:              So, yeah, we have this abundant amount of data that we want to surface to our customers in an interesting way so that they can continue to participate in the platform. I'd say we're doing an okay job of it today. We have a long way to go. But if you think about the way that we actually describe what a CPA or CPC is, we are trying to do it in a very basic way. We say, "Give us a budget and in return we'll give you sales, and we'll show them to you because they are on our platform." If you can just do that over and over again, I think there's a lot of lingo in the marketing space attribution, where that 5,000 point attribution doesn't ... we're a very basic folks, first principle is solving for a customer. I'm just going to tell you how much money you're going to spend and I'll give you that money in return, and we think that approach is both a competitive advantage for DoorDash, but also quite novel for most folks spending money.

Delian:                          Then you talked about how switching over to ads was a way for you to not just rely on your core superpower. Can you talk about some of the things that were maybe more difficult in that transition that were not native to you and required you to either, yeah, grind through, make a couple mistakes. Like, what were the aspects of switching over to ads that took you some time to wrap your head around?

Toby Espinosa:              Yeah, I think Silicon Valley is a very interesting place where, my mentor once said, very simply there's two things that happen: there are people that build products and then there are people that sell products in an organization, and there's a million of other people that are important cross-functionally, but at the fundamental level that's what we're doing. Because I was out in front on the sales side, I don't think I was moving away from the build side. What that inevitably means is I don't think sometimes, from a speed standpoint, changing direction, particularly with an engineering and product organization can be quite difficult.

Toby Espinosa:              So I think learning a little bit about being very, very clear on which way we're going and why, which is like north star, and then behind that, the rational for that north star so that everybody can get behind it is a skill set I had to learn. Historically, that skill set was, we need to get every national restaurant chain and large grocery on our platform and watch the magic, and no one would disagree with that. Everyone would say, "Of course, we need every national restaurant on DoorDash. That makes total sense. Just go do it." But I think writing down north star rationale for reasons why I think is something that is a skill set that I employed a lot when I was in college writing papers, but just hadn't done for a long time. So it was a skill set I had to bring back.

Delian:                          Then it's a bit of a tangent. You actually have been teaching a tech investing course at Stanford for quite some time, basically the entire time you've been at DoorDash. Can you talk a little bit about how that course got started, what your motivation was to do it and, how you continue, I guess, to do it as a now public company executive?

Toby Espinosa:              Totally, totally. So, yeah, when I was in grad school at Stanford, there was this interesting opportunity. I was in a graduate program in engineering school and most of the programs that would teach about the economy, how people think about investing a diversified portfolio, why there's so much money going into private equity, why there's more money within private equity going into venture. I think the macro reasons as to why, there weren't classes that taught that. There were some classes in the business school, but there was no class in the engineering school. Again, back to this point of like the getting closer to the folks that are building things. Those are the folks that are building things. So I felt it was very, very important for people that were building things to understand why the larger world, at least in the financial world, was working in a particular fashion. So we think of it as like demystifying what we think of as like the alternative investment landscape, which is a completely opaque for the most part, place. It has gotten way more transparent, I would argue, with many more people talking about it and a bunch of new things, but still large, still much more opaque than others.

Toby Espinosa:              So, yeah, we've just been doing it. It's a bunch of guest lectures in the winter quarter and we bring folks in from venture funds, private equity funds, endowments, family offices to talk about what they're seeing in the environment and where they're investing. So anything from Web 3 crypto to ... We haven't had anyone come in to talk about space so maybe at some point we can have someone come in and talk about space, but, yeah.

Delian:                          Hopefully, I'd like to think I know a thing or two about it, but yeah. Toby, appreciate you taking the time today to hop on the podcast.

Toby Espinosa:              Of course.

Delian:                          --It's a really cool conversation.

Toby Espinosa:              Of course, thank you so much. This is really fun and wish you all the best in success for your business and Founders Fund in the future. So thanks so much.

Delian:                          Thank you.

Delian:                          Thanks for listening, everyone. If you'd like to support the podcast, please sign up for a paid Substack subscription, which we use to pay for transcripts, mikes, and other improvements. If you have any comments or feedback on what kinds of questions I should ask, who should come on the show or anything else, please do let me know. Have a great rest of your day.