--:-- Josh Lu: I remember my first pitch, and it was so bad, they walked me out the back door.
--:-- Henry Ward: By design, transparent to a fault. So as transparent as I can be until something bad happens.
--:-- Josh Lu: The biggest difference is, it's the first time in your career you've worked for somebody that knows less than you do about what you do.
--:-- [Intro music fades in and out]
--:-- Josh Lu: That was Henry Ward, co-founder and CEO of Carta. A company that started reinventing the cap table way back in 2012. Since then, the company's grown to about 2,000 people and is trusted by over 40,000 companies. 13 years in, it's safe to say that Henry has just about seen it all, and he's not shy about his learnings.
--:-- So in today's wide-ranging conversation with A16Z Games partner, Josh Lu, they discuss when to hire missionaries versus mercenaries.
--:-- Henry Ward: When you're hiring early, you tend to want to hire missionaries because they're in love with the problem by definition. They're just like in love with the mission and they'll ride the highs and lows and no problems too low for them beneath them.
--:-- Josh Lu: Knowing when you found product market fit.
--:-- Henry Ward: I've been trying to buy cap table software from you for like two weeks and nobody will pick up what's going on.
--:-- Josh Lu: The problem with selling too quickly.
--:-- Henry Ward: The problem is if you start selling before you figured out product market fit, good GTM can actually hide bad product market fit for a while. And then what happens is GTM's expensive, fucking expensive.
--:-- Josh Lu: And the difference between an inputs versus outputs-driven culture.
--:-- Henry Ward: It is very easy for a company to become outputs-driven. How much did we book? And I always tell them, revenue's a lagging indicator. That's the last thing we should look at.
--:-- Josh Lu: Listen in to the end since this episode includes a lot of candid questions, including how transparent you should be with employees and even knowing what the right number of employees is.
--:-- By the way, this podcast was recorded live in San Francisco during our fourth iteration of our A16Z Games Speedrun program. So if you'd like to learn more about Speedrun, head on over to A16Z.com slash games slash speedrun.
--:-- All right, let's get started.
--:-- [Disclaimer read by host]
--:-- Josh Lu: Henry, maybe by way of introduction. Something that I've noticed about you is you're not only a founder or operator, you're also a student of the game. And what I mean by that is you've thought a lot about what it means to be a founder and an operator. And so there's a lot of founder archetypes. How would you describe yourself as a founder?
--:-- Henry Ward: So I have this kind of weird theory that as a species, we're imitators. It's the Peter Thiel thing. You should watch "Competition is for Losers." We're mimetic, all that kind of stuff. And you see it in management books. Like if you're just like Jack Welch, you'll be successful. You're just like Elon Musk. You're just like Steve Jobs.
--:-- And I think what makes founders unique is that they're all so different, sort of by definition, the aberration. And there's archetypes. They can try to group them, but actually what makes founders really special is that they actually don't fit into categories very well. How do you categorize Steve Jobs? How do you categorize Elon Musk? That's sort of, by definition, the founders are finding the cracks in humanity that everybody else overlooked. And so you do have to be an aberration. You do have to be kind of weird. And so I'm definitely weird in my own ways. Every founder is weird in a different way.
--:-- Maybe the thing that I think defines me in a more unique way is the common trope is founders fall in love with a problem and then entrepreneurship is a vehicle with which to solve that problem. And so you are just obsessed with this problem, whatever it is, game, robotics, whatever it is, you're obsessed with it. And then you build a company to solve this problem because that's the best way to do it.
--:-- And I'm a little bit weird in that I was never obsessed with cap tables. Like that would be really weird. Like, I just didn't care. But Carta was my second company. My first company died and failed. And when I came out of the kind of the trough of depression, out of that one, I just couldn't imagine doing anything else. And so I'd fallen in love with entrepreneurship. I just wanted to be a founder no matter what. And I didn't really care what problem I worked on. So to me, it was the inverse. I wanted to be a founder, and a problem was just the vehicle with which I could be a founder.
--:-- And that's both good and bad. The bad part is you might work on problems you don't really care about. You don't like that much. The good part for me and how it kind of translated was because I was agnostic to the problem, I was never married to the problem, right? Like if we were going to work on cap tables today because that was the most valuable thing to do, I was happy to work on cap tables. If we were going to work on fund accounting, I was happy to work on fund accounting. No problem was too boring, too lowbrow, too beneath me. If it helped build the company and move my founder journey forward, I would work on it. And that's different, right? You have to sort of find what makes you keep taking one step ahead.
--:-- Josh Lu: Yeah. You've talked a lot about managing teams like sports teams. And so I'm going to beat up this analogy quite a bit here today. So apologies in advance. When you're faced with a problem that maybe you haven't spent your entire life thinking about, like cap tables, how do you make sure you win?
--:-- Henry Ward: Yeah. So it's really interesting in the early days of hiring, which I know all of you are thinking about this a lot. One paradigm to think about hiring is, are you hiring missionaries versus mercenaries? And there's a lot of ways of describing it. Keith Rabois talks about it's bullets versus barrels. But I think the missionary versus mercenary helps a lot in that when you're hiring early, you tend to want to hire missionaries because they're in love with the problem by definition. They're just like in love with the mission and they'll ride the highs and lows and no problems too low for them and beneath them. They'll just do whatever it takes. And they're, if not incredibly loyal to you, they're at least incredibly loyal to the company that you're trying to build.
--:-- And so two founders, it's 100% missionary. It might be 10 people and you're 90% missionary and you've got one person that's there for a paycheck. And when you're 100 people, it's 70% missionary. Over time, that ratio changes. And asymptotically, the N plus one person you hire is really there for the job. But you still need to keep the missionary culture and they tend to be the people closest to you, right? So Carta is about maybe 2,000 people-ish now. Maybe 10%, 20%, 15% if I'm lucky, the population's missionaries, but they're probably the closest to me.
--:-- The problem with missionaries, of course, is they're really a pain to manage, right? Because sometimes you're like, look, can you just do what I told you to do and not give me a lecture on it? Like I paid you to do the thing. I don't need to like convince you that there's a philosophical purpose for this. And that's why you do need the balance, right? Of the missionary versus mercenary. And then I think there's a long way of answering a question around culture is then the culture gets built around the missionaries you decide to hire. And that's the mission culture.
--:-- Josh Lu: Yeah. How do you identify new missionaries? Are you saying that most of the missionaries at the company now have been with you for a long time? Are you creating new missionaries along the way? And how do you, as a CEO, identify that and pull that up into sort of the thing that you're doing?
--:-- Henry Ward: Yeah, I think it's different for every CEO. So for us, so today we pay above market. If you just look at our comp, we just sort of pay above market for a variety of reasons. But in the early days, it was a rule. You had to take a pay cut to come to Carta. The first 20 people all took pay cuts to come to Carta. And the reason for that was two things. One was to test how bad they wanted to be there, right? If they're a mercenary, they'll only come if they get paid more. If they're a missionary, they'll come if they get paid less.
--:-- And then two, it really forced me to be able not just recruit, but inspire the people to come, right? Like if I'm like, look, you're going to make $20,000 less than you're making today to come. Now the burden of proof is on me to convince them that that's worth doing. And we're an equity company also. So it's like, hey, I give you equity and you've got to believe in the equity and you've got to believe in the equity story and all that kind of stuff. But it then forced me to elevate my game because if I couldn't convince these people to take a pay cut to come to Carta, I wasn't good at what I did. And that was my litmus test. I don't know if that still works anymore in a very different world now, but that was what we did. That was our hack.
--:-- Josh Lu: Cool. We had Mark and Jason come in here a couple weeks ago and tell us, the founder journey is one of lots of changes. When you have a two-person company and you double it to four people, when you double it to eight people, it's a new company every single time. And as the CEO and founder, you also have to evolve. And so I'm just curious, in what ways have you evolved over time as a founder? And in what ways have you stayed the same?
--:-- Henry Ward: Yeah, Mark's so funny. He's on my board in 2019. We did, it was our $1.7 billion round. And Mark led it with a $100 million check and then we filled it up to about 200-ish. And he joined the board. And I remember my first board meeting after, so he's very interesting in the board meeting, says nothing. It was quiet the whole time. And this was pre-COVID when we were in the room together. But he'd just sit in the back and he'd just be taking these notes in tiny, tiny font. And there's nobody that can read these notes except him. They're so tiny. And he'd just sit there and then he doesn't say anything in the board meeting and he just leaves. And then he calls you for breakfast and he goes, I'll give you feedback privately.
--:-- So you go meet him for breakfast. He pulled out a napkin at breakfast and he wrote this line. And he said, this is the founder spectrum. And he goes, on one end, I'm going to put down maniac. And then the other end, I'm going to put down rigid. And then he put like one in for maniac and it was like impulsive or something like that. I'm not sure. And he put one in for something slightly less than rigid, like rules based. And then he goes in the middle. He goes, you don't know what to call this, this middle thing. And he goes, you're on this maniac side. He goes, when you're early stage, that's fine. And you should be a maniac. But you now have $200 million in the bank account. You got 700 employees whatever it was. So we need to get you, you know, over to the middle. Like we don't want you to be rigid but we need to like get you just in the systems thinker.
--:-- And it probably took me a year to like, understand what that meant. And now I totally get it. Because when you're early stage, you're just building a thing, you're building a product, you're building the team. But when you get to a certain level of scale, you're not building a thing, you're building a system that builds a thing. And so you start thinking about like, well, how do I build an HR department? Like, how do I build a sales organization? How do I build not a product, but how do I build an R&D organization that can then go build products, right? That's the thing.
--:-- And it took me a year before I really conceptualized it. And the way that I can know if I'm doing a good job or if I'm working is if I'm actually building systems versus building things is if the team comes to me and they don't know how to make a decision, right? They're like, hey, should we do, Henry, should we do A or B? And what that says to me is I didn't give them a systems framework for how to make that decision. Because my job shouldn't, in general, not 100%. Like, there's some things only the CEO can decide. But generally, when they come to you in A and B, what they're really saying is you didn't give us a framework with which we could make a decision on our own, A or B. And so then I spend all my time going, why didn't I give them a framework, and what is the framework. And then I teach them the framework so that they can figure out how to do A and B. And I think that skill, I still am learning and practicing every day.
--:-- Josh Lu: So all these founders are early stage. They're all racing towards product market fit. You had one company that didn't quite make it, one company that has clearly achieved product market fit. What does product market fit mean to you? And what advice would you give to founders that are sort of in this stage right now where they haven't quite gotten it yet, they're racing towards it?
--:-- Henry Ward: Mark describes it in his writings as like, product market fit is when you can feel the market pull the product out of you. And I remember that moment in, I think it was August of 2014. We were selling cap tables. Back then, people would actually call in to buy cap table software. And so we changed our phone system. It's like RingCentral to Dialpad or whatever. And it was like, you know how you press one to talk to sales, press two to talk to support, whatever. Somehow we messed it up. So when you hit one to talk to sales, it just hung up. We didn't know for like three weeks and the only way we found out is we were just still like selling so many cap tables and the only way we found out is somebody somehow got their way through our support channel and was like "I've been trying to buy cap table software from you for like two weeks and nobody will pick up what's going on." And that's the only way we figured out and then we're like wow, we might have product market fit no matter how bad we are at selling this stuff people are finding a way to buy it in spite of us. That's a really good sign.
--:-- I think that the problem or the challenge or maybe the mistake that founders often run into is it's sort of like the George Washington thing, like don't fire until you see the whites of their eyes. Founders start spending a lot of money on sales quickly. They're like, oh, I got the product. Now it's a sales problem. And the problem is if you start selling before you figured out product market fit, good GTM can actually hide bad product market fit for a while. And then what happens is GTM's expensive, fucking expensive. It's incredibly expensive. It's actually far more expensive than R&D.
--:-- And 10 years ago, right, everybody's doing open source software, AWS. We are dramatically lowering the cost of creating a startup, of starting a company. And we think we helped with that. Part of this mission was to create more entrepreneurs, create more founders by reducing the cost of starting a company. And our thing was not compute or software. Ours was legal fees. Let's reduce the legal fees so more founders could start companies. So we dramatically, between 2010 and 2015, dramatically, the world dramatically reduced the cost of starting a company. But the rounds kept getting bigger. Why? It doesn't make sense, right? Why does it cost more money? And it's that economic theory of the more abundant something becomes, right, the more demand gets created. It got cheaper and easier to make startups, so then to actually be a successful startup required way more cost to break out. And that's where all the money goes, is in sales and marketing.
--:-- So anyway, the mistake that a lot of founders make is they don't wait till they see the lights of their eyes before they fire and they start selling and investing in sales too soon, which hides the product market fit. And the kind of the thesis I always give is for founders, the first thing any founder wants to do after they build the product is hire a VP of sales because they hate selling because most founders today are product founders. So they hate selling because selling sucks. And so like, oh, just hire a VP of sales. Problem solved. And, you know, my angel investments, what I say is like, hey, wait as long as you can before you hire a VP of sales and do all the sales yourself. Because you're the only one that will feel the market pull. Wait as long as you can before you are a VP of sales and just wait a little bit longer. Wait till you see the whites of their eyes before you do it. Because what I see all the Series A companies that don't make it is they raise $10 million, $20 million. They hire a bunch of salespeople. They burn through it and they didn't have product market fit.
--:-- Josh Lu: Super helpful. You talked a little bit about company culture, and maybe just to come back to this for a little bit. As a founder, CEO, at some point you go from making all the decisions to creating systems and still making a couple of decisions. And as you evolve, you also have to sort of train yourself. So if being a founder is like an athlete, what is part of your training regimen?
--:-- Henry Ward: Yeah, so I spend most of my days doing scale problems, not early stage problems. So apologies if I'm not being as relevant, but I'll give you a scale problem that I think maybe translates to the early stage. And so I do this thing with executives, whether I'm promoting executive or hiring executive. Imagine it's a CFO. Hey, what's the difference between working for a CEO, working for me, versus every other boss you've ever had in your career? And most of them will give business school answers. Well, you have to be cross-functional and you've got to be strategic and whatever. And I say, you know, all that's probably true. But the biggest difference is it's the first time in your career you've worked for somebody that knows less than you do about what you do.
--:-- You're a CFO. You spent the last 20 years, you were an analyst and then became a director of finance and a VP of finance. And every stage of the way, you work for somebody that used to do your job. And they did it really well. Otherwise, they wouldn't have got promoted. And then now you work for me and I've never done finance. I've never been a CFO. And I'm very sympathetic. I'm compassionate. I always say, it must be so disappointing. You spend 25 of your career grinding it out, climbing up this ladder to one day be a CFO and work for the CEO and you realize he's an idiot. Like he knows nothing about what you do.
--:-- So my interview question is always, well, so how do you deal with that? If that's the difference, how do you work differently? And then you go into a conversation about like, am I hiring you to tell you what to do versus I'm hiring you to tell me what to do? Which is another framework to think about hiring.
--:-- The reason I say that is then the flip side, the founder, the CEO is, okay, well, if everybody in your exec team, the eight execs you've got, all know their jobs better than you do, what do you do? Like, where is your value in this? Like, how do you be the CEO that the CFO, who knows way more than you do about CFOing, how do you have a 30-minute meeting with them? And they walk away going, that was really helpful. Like, Henry, I'm really glad I met with him. And that's the challenge of being a scale CEO.
--:-- The reason I tell that story is I think that's the challenge of being early stage, right? There's some things you'll be an expert in. There's others you won't. But how do you be relevant to everybody that you have to engage with? Whether it's your new head of product or your new engineering lead or the support person on the team that's doing customer calls, an investor, right? How do you be relevant to all these constituents that by definition know more than you do about their narrow slice? And I think that's the challenge of being a founder over time.
--:-- Josh Lu: Maybe just to take that one step further, at some point the company gets big enough or broad enough where you can't know all the things. How much do you as a founder focus on inputs versus outputs as a shortcut to this exact thing?
--:-- Henry Ward: Yeah, it's such a great question. Literally, we were talking about this last week in our exec meeting about inputs. It is very easy for a company to become outputs driven. How much did we book? How much revenue? And partly why that's true is because that's kind of how we're wired and we want to win and that's the scoreboard and all that kind of human psychology. The other part is just organizational, right? Like your team's going to come to you and they're going to be like, crushed it. Let me show you how I crushed it.
--:-- And we're an inputs company and I have to keep reminding my exec team because they always want to talk about revenue. Did we hit our quarterly revenue numbers? And I always tell them, revenue's a lagging indicator. That's the last thing we should look at. It's totally lagging. We should look at everything else other than revenue that drives the revenue and focus inputs. But that's not what people will bring to you.
--:-- And the story or analogy I use is Draymond Green, Warriors player, not the best shooter. Anyway, the game was on the line and the ball was, of course, supposed to go to Curry. Didn't happen. It went to Draymond and he shoots a three. He never gets threes in. But he got it in this time. And it was the buzzer beater won the game. And the commentator was like, what a brilliant move, you know, by Steve Kerr to give it to Draymond. Right. And the coach analyst that was there was like, no, no, no, no. That's an outputs driven model. It was actually a terrible move. They got lucky. But in no world was that the right play. And in fact, it wasn't. They tried to get the curve and Draymond just made a decision and it worked out.
--:-- But that's the difference in outputs versus inputs. Is the outputs go, next time we'll do Draymond again. But that's the wrong answer, right? The answer is always inputs, you go to Curry. But it's really hard, you have to keep reminding teams to do that because they will naturally always want to go to outputs because that's how we trained, that's how their careers are built, that's how they look good in front of you, all of those things.
--:-- Josh Lu: Yeah. And so maybe you take this full circle back to company culture. What have you built inside of Carta to make sure that the team stays inputs focused?
--:-- Henry Ward: So I don't do as much as I should and would like to, but writing is an incredibly powerful tool. If you're a good writer, but being a good writer, it's like being a good coder or a bad coder. Like it makes a big difference. If you're the programmer of a company, your coding languages, any language you're using, but that's how you program the system. And the writing is incredibly powerful because when it codifies everything, but it becomes a reference Bible that when teams are getting together and arguing about stuff, it's the checksum on the manager, right? Somebody on the team goes, well, Henry wrote that and we should be doing that. And so writing is incredibly powerful.
--:-- I have a Slack channel called Henry and it's just my channel. I'm the only one that's allowed to post. So it's a read-only channel. It's basically my kind of internal newsletter. People can post on the replies, but they can't do the main messaging. And it's been there since 2014. Any employee can come and see everything I've written. And it's things from eShares 101 and our culture to our strategy to here's a trip from Rio, our office there, and here's what I'm thinking. So like, I do a lot of shout outs. Customer emailed me. They love their team or support person. Here's a screenshot of that email. And that's my way to codify the culture. And then the reinforcement comes from hiring.
--:-- Josh Lu: I love that idea. Because one of the things that happens in big companies, as you might know, is whatever you've written in the past becomes weaponized at the ground level. Somebody says, oh wait, Henry wrote this thing before. And so therefore we must do things this way. But by being in front of people all of the time, having this written thing that people can look at that's updated is really, really helpful. It prevents some of the bad big company things that can happen.
--:-- Henry Ward: Totally. The "Henry said" problem is a huge one. Whatever your name, Bob, Amy said, you'll get it if you're not already. I actually don't know quite how to solve this. I'm curious if anybody has, because it gets weaponized all the time. They're like, well, Henry said this, Henry said that. And people always come to me, they're like, they actually wanted to ban the phrase "Henry said." You just couldn't say that at Carta. They came to me, the exec team, right? Can we get your support to ban the phrase "Henry said"? And I said, well, I'm all supporting if they're wrong. But if they're right, they should say Henry said that. If it's correct, I don't want to ban that one. And so that's one of the biggest bureaucratic problems of a company, yeah.
--:-- Josh Lu: All right, all these founders are busy building. They're going to be raising their next round here in just a couple of months. A few short weeks, a few short months. Maybe talk a little bit about any advice you would have for them. You talked a lot about your early investors and how important they were to you. And so I would love to hear any of your advice for early stage investing from the founder side.
--:-- Henry Ward: So the thing I learned in the early stages, I don't know if this is still true, but I remember my first pitch and it was so bad. They walked me out the back door. Like I couldn't even leave in the front. They're just like, here's the exits to the stairway. And it's just the fucking worst. You could only go up from there.
--:-- And this was also before they treated entrepreneurs more respectfully. Before Andreessen was like, don't be late for an entrepreneur. I mean, this is where they kept you waiting. You think I'm joking. I'm not. I would go to pitches in the evening to pitch to angel investors, because they'd have all these angel networks. And it was basically like, I don't know, it was like a drunk sporting thing that you went to. Like you'd go up, they'd be drinking beer and heckle you while you're pitching. It was like a stand-up night for pitches. It was brutal.
--:-- Raising capital is never easy. It's not easier now, but it's more civilized today. I thought, you know, I got escorted out the back exit, fire escape, because I wasn't charismatic enough. I was like, I just didn't have it. The je ne sais quoi. It just wasn't it there.
--:-- And what I realized through it is, especially in early stage, it's more like sales. It's not the type of sales you think of, like the charismatic salesperson that can sell snow to Eskimos, which I think is more true as you get later stage, but it's about filtering. It's like finding the right customer. And I could tell, after I got good at this, I could tell within five minutes if they were going to invest, because the litmus test of whether you were going to invest in a cap table software company was if you cared at all about cap tables. It had nothing to do with about, I mean, how do you make cap tables sexy? There was no charisma around cap tables. It was either I explained the cap table story, and they're like, I fucking hate cap tables too. Somebody should solve this problem. I'm interested. Or they're like, the fire exits there, right? It was just like you could just tell, right?
--:-- Josh Lu: And so what I realized, it's finding people that connect to your problem. And I think a lot of founders, understandably, they do three pitches, they get no's, and nobody cares about "I must suck." They just didn't connect to your problem set. That doesn't mean your pitch doesn't matter. Once you do find the person that connects to your problem set, then yes, how you talk about it, what you're doing, all that stuff really does matter. But what I try to encourage founders when they're feeling really beat down because they think it's a charisma problem, I tell them, I don't think it is. I think it's a filtering problem.
--:-- Josh Lu: All right, so we will open it up to questions.
--:-- Audience Member (Mike): Hi, I'm Mike, and I've been scaling my product team and really trying to find great product leaders. I was wondering if you have any opinion on what they look like or where they come from. In particular, I think about technical versus non-technical, ICP versus non-ICP. It sounds like you've been through this, so I was wondering if you had any advice there.
--:-- Henry Ward: So how I think about the early stage — and this is probably true in general, but I think very specific to early stage — your first product hire, your first head of product hire, there is kind of three archetypes. All generalizations are wrong, but hopefully some are helpful. I'll categorize it like this: there's the technical product manager that's really in those specs. They're often former engineers that turn product, very technical. Then you've got the process product people. They just know how to run a product sprint and cycle, do the user interviews, get designers, the process-driven product managers that can keep the trains running. And then there's the vision product, the creative geniuses that invent the new ideas.
--:-- Henry Ward: Here's what I think the trap that founders often fall into, and that I fall into. You start interviewing these three archetypes. If you're not explicit, you meet these product managers, you try to get to know them. The type of founder that all of us resonate with is that vision product founder, because they're like us. They've got lots of great ideas. They get the vision. They get what you're trying to accomplish. They're missionaries by definition. They can riff with you. And you just fall in love. You're like, that's who I want. So you hire them.
--:-- Henry Ward: The problem with hiring them is, one, they're usually not very good. Because if they're actually a vision product manager, they're you. They're a founder. They're not looking for a job. They're trying to build their vision. But two, it's like that's not what you need. You're the vision product person, generally. You don't want a vision product manager. But that's what you get attracted to. It's like bad dating. I date the people that are wrong for me. So it becomes about being aware of, don't get seduced by the visionary, even though you will gravitate towards them.
--:-- Henry Ward: So then the second question becomes, okay, great. If I solve that problem, do I go technical or process? That becomes very product-specific to you. Kind of obvious, but if it's a super technical engineering problem, you go the technical route, because that's the weakness that you have. If you're like, "I know not just what to build, but I know how to build this thing, but I need someone to keep the trains running," then you index to process. We can talk about how to interview for those types of product managers. But that tends to be where I see product hires not work: you hire someone like you. Where it does work is you hire someone that's not like you.
--:-- Audience Member (Danny): Danny, my question here. There's this idea of visualizing victory and having a vision for what the company is going to look like at a very late stage. Whenever I've been asked to do that, it's always with a low headcount relative to how big I want to go. So I've generally been curious just looking at trajectories of other companies. Why does Carta need 2,000 people at its current stage? How did you get there? How do you know?
--:-- Henry Ward: I don't know what they all do. I'm as shocked as you are how we're this big. We run a very specific kind of business, for right or wrong. We are what I call a "services to software playbook" company. When we got into cap tables, cap tables was a services business. Lawyers did it, spreadsheets, da-da-da-da. We entered that business. We literally hired a bunch of paralegals. We hired all these experts. They do it by hand. Then I'd get a bunch of product managers, technical ones, that would sit there and watch them work. I'd go translate that into software. You could see as we translated the work into software, it just turned into a software business. It was amazing.
--:-- Henry Ward: Then we started doing that with our second business, which is the fund accounting business. Literally, it started with me flying to New Jersey. I was in a hotel lobby room. I interviewed 20 fund accountants. I hired four of them. I gave them spreadsheets and a laptop. I said, "Go start doing fund admin." Then we put a product team and we learned. So the criticism of me is I run a people-heavy business. No question. The counterargument is, that's because I'm on the cutting edge of hiring people and reinventing services businesses into software businesses. If you take a two-year lens, it looks like I'm the worst software CEO in the world. Hopefully, if you take a 10-year lens, you're like, "Wow, Carta is going to reinvent all these people-heavy businesses into software businesses." TBD if we will.
--:-- Audience Member (Nathan): Hey, Henry. Nathan. As a founder, I get to run a fundraise every couple of years. As a VC, you get to run a few hundred on a kind of yearly basis. Carta sees tens of thousands of cap tables on a yearly basis. So what are some of the emerging trends and insights that you can share with us for early stage founders that are raising capital now, based on everything happening in the U and how that is impacting the fundraise landscape?
--:-- Henry Ward: We have a ton of data on this. If you haven't followed Peter Walker, he's great. He's got a ton of data on it. I would say as much as venture capitalists try to believe that they're on the cutting edge of thinking outside the box, most are not. A few are, but most investors are lemmings. You just see this herd-like mentality. In 2015 to 17, 18, it was all crypto, then it moved to fintech. Now it's all into AI. It's very hard to actually generalize all startups because it's so pocketed. You just kind of move in gossip and social circles.
--:-- Henry Ward: My favorite story about what you said — we only raise money a couple times a year, once every two years, and you guys write term sheets once a month, maybe more. I remember when Mark, when he led our Series E, I met him and Alex Rampell for breakfast in Menlo Park. It was Sunday morning. It was the very tail end. I had a couple term sheets. I said, "Mark, I'd really like to work with you. I have a term sheet from so-and-so, slightly better than yours. Here are the terms. If you'll match it, I'll sign with you." He goes, "Great. Let me take that to the partnership and I'll get back to you." We leave. It's like 11 a.m. He calls his partners. They do their thing. He calls me back. He says, "Hey, can I come by your house and talk to you about the term sheet?" I said, "Of course." I lived in Menlo Park. I had a little boy. He was a baby back then. It was Sunday. I was hanging out with my son. He comes to my house. I had a tiny little place. He brings a Lego box with him for my kid. My kid plays Lego on the floor while he and I sit at the breakfast table talking. He gives me the term sheet.
--:-- Henry Ward: I tell that story not for you, but for investors. I tell it every time I speak at investor events: if Marc Andreessen can come to my house on a Sunday, you can too. For you, you write term sheets once a month. For a founder, this is a seminal moment in their journey. I encourage every investor to go visit your home with a box of Legos to give you a term sheet.
--:-- Josh Lu: Stocking up on Legos. That's nice to speak.
--:-- Audience Member (Bloss): Hey, Henry. My name is Bloss. How have your motivations changed as you've scaled from visionary small team to scaled company?
--:-- Henry Ward: Everybody says don't do it for the money. Mostly they're trying to do that to weed out the tourists. But I can actually tell you why not to do it for the money. Most of the time you're poor. You're just poor. All of you can make so much more money than doing what you're doing. So most of the time you're poor. If you're doing it for the money, you'll eventually just get tired and give up. Because it's a grind. It sucks. Most of the time it sucks. Then if you're one of the lucky people where it works and it takes off, then you're rich. And you're not doing it for the money still, because you're rich. You might as well stop because you're now rich. Either way, it doesn't work if you're doing it for the money.
--:-- Henry Ward: For me, everyone's like, "So Henry, when are you going to retire?" Which I find a little insulting because I'm not that old. But they say, "Why don't you retire? Why do you keep doing it?" It's the love of the game. I've been working since I was 16, 25 years. I've only been successful four of them, or five. I'm like Tom Brady — retire already. I'm like, no, I'll keep going as long as I can throw a football. I want to be on the field because so few people get to be on the field. The best founders, I think they're in it for the love of the game.
--:-- Audience Member (Antoine): Hi, my name is Antoine. I'm very curious to hear your thoughts about what you use as the architect, the designer, the product manager of that system. Do you think about you as being the main developer here? Or do you think about all the other leaders, all the team leaders in your company also contributing as an open source project? And then how do you enable that kind of continuous product development?
--:-- Henry Ward: There's no one answer. It's a lot of little things to build a company. But I'll give you one example of something that's in the toolkit for system design of companies. This is more true when you get larger, but I think the principles are valuable. One tool or lever is culture. How do you build the culture? That's the softer, nuanced version of this. The second is — and this is very systems design, your engineers will get this — it's org design. One of the things I've really enjoyed over the last 10 years is becoming a student of org design. Good org design is very unlocking, and bad org design can be terrible. There are a lot of principles. I haven't written about this. It's on my list of stuff I'd love to write as principles of good org design.
--:-- Henry Ward: I'll give you one example that Ben Horowitz shared with me. I was doing a big reorg at Carta and I wanted to ask Ben for help. I had dinner with Ben and Mark, actually. I gave him all the current org charts, what I want to do. I had a whole packet for him to review over his steak and give me advice. One of the principles, which still resonates — I still teach this all the time to my team. He goes, "Most people think of org charts like, you have a leader and then here's the function and there's the function. One way to think about org design is: what problems do you want to come to you and which problems do you not?"
--:-- Henry Ward: So you think about, okay, there's product and engineering. That's why you have two orgs, two different functions. But the other way to think about it is: the reason you separate product and engineering is when there's a conflict between what to build and how to build it, you want that conflict to come to you because you can resolve it. Sales and marketing. When there's conflict, you want that to come to you. Where you do the cellular mitosis of teams is really where do you want problems to escalate and where do you not want them? That's an incredibly powerful framework as you start thinking about how do you build an exec team, how do you build leadership teams.
--:-- Henry Ward: You might have teams that go, "Well, I just grouped a function." You're like, "No, no, no. I actually want to unpack this function because when there's dysfunction within this organization, I want that to bubble up to me." There are so many principles around org design that allow you to construct the system of what gets built, what gets escalated to you as a decision, what doesn't get escalated, how decisions get routed to the organization. One is culture. Does everybody feel like they can come to you or not? The other is org design, which is how does the system actually get these decisions made? That's just one example.
--:-- Audience Member: Question for you on early stage culture and communication. One thing I've debated a lot is how honest to be about runway, numbers, results. I think I've found you want to be transparent, but some employees are not quite ready for that level of transparency. Also, if you say something like runway, there tends to be angles that they may not see. Like you can either get more money from your investors, et cetera. So I always debate on how transparent I should be there, if that creates energy, or if that actually creates stress and is potentially not good for the company.
--:-- Henry Ward: Such a good question. I'm, by design, transparent to a fault. As transparent as I can be until something bad happens, which bad things have happened from being too transparent. I don't have a great answer for you, but maybe I'll give you a few quick stories. When I was so transparent, I was like, everybody should access our cap table. I opened up the cap table. Everyone could see the cap table, who invested everything, including how many options everybody got. We were a pretty ragtag group of misfits. We had a guy who hired his cousin and another guy who hired his brother. We hired a guy out of an Uber. It was a pretty rough group, the early employees. When everybody saw, people just started going ballistic and running into my office. They're like, "Edison, I went to first grade with him. He used to eat paste. And he got 50 more shares than I did." Just the dumbest stuff. I was like, okay, too transparent. Lock that down. Thank God I didn't open payroll. That would have been my next.
--:-- Henry Ward: The better story, or more helpful story, is probably when I was raising the Series A round. It was fall of 2014. Super transparent. I'd be like, "Hey everybody, I'm going to Sand Hill. We're going to meet Greylock. I'm going to meet this, that, and the other." Everyone's like, "Great, Henry. Good luck." I'd go do my thing. Of course, no fire exits there. I'd come back and everyone would be waiting at the door for me. "How'd it go?" I'd be like, "Not good." Their faces just fell. It was like that every day. It was a beatdown for them.
--:-- Henry Ward: What I realized is they just don't understand what the fundraising process is like. My job is to be as transparent as possible, but it's also to protect the company from the external volatility of the world. Most people in a company can't handle it. That is a unique role. The founder is incredibly volatile, especially early stage. Part of you is to be the suspension, the shock absorber between that. My solution was I said, "Everybody, I just realized you're really excited about this fundraising, but this is what it's like. I don't want to keep hurting you. So I am going to be transparently not transparent. I am not going to tell you anything until it's done. Everybody will keep grinding. I'll do my thing. When it's over, I will tell you we were successful or we won't be. It'll probably take me three weeks. So hang in there, and I will give you an update in three weeks." That worked pretty well.
--:-- Josh Lu: All right, that is all for today. If you did make it this far, first of all, thank you. We put a lot of thought into each of these episodes, whether it's guests, the calendar Tetris, the cycles with our amazing editor Tommy, until the music is just right. So if you like what we've put together, consider dropping us a line at ratethispodcast.com slash A16Z. Let us know what your favorite episode is. It'll make my day, and I'm sure Tommy's too. We'll catch you on the flip side.
