David Francis: All right. It looks like everything is working. The show is back on the road. Hello and welcome back everyone. My name is David Francis and I am the Vice President of Research for Talent Tech Labs. And I am extremely excited for, I think it is going to be an absolutely phenomenal discussion around a topic on everybody's minds, builders and uses of technology alike, how to build a unicorn which is a billion dollar company in tech speak and how to scale a talent acquisition technology business.

David Francis: So we have a couple of the thesis sessions. We have a couple of founders who. In short order we have build a unicorn and we have a couple of investors from slightly different sectors of the investing world. We have a top tier VC and a top tier private equity firm. And so maybe the way that we start, this is if we can do just maybe a quick round of introductions for the whole group, let everybody know who you are and a bit of background about your firm.

David Francis: We'll go kind of in the order that I see you on the screen. So we knew a bunch introduced. 

Anoop Gupta: Hey, thanks so much. David, so hi, everyone excited to be here. I'm Anoop Gupta, the co-founder and CEO of Seekout. What Seekout does is help companies give a competitive advantage as they are trying to recruit hard to find and diverse talent.

Anoop Gupta: We are used by 6 of the 10, most highly valued companies. We have grown 30 fold in the last three years and we were very excited to raise our series C of $115 million at 1.2 billion just a few weeks ago. My background is that I'm a geek and an entrepreneur. I came to this country in 1980, got my PhD in computer science from Carnegie Mellon.

Anoop Gupta: I was a professor at Stanford. Did my first startup in the streaming media business, you know, which is highly popular in 1995. My co-founder was Diane Green, who later did VM-ware and each other who's at Mayfield. Got acquired by Microsoft in 1997, I spent 18 years there including having the privilege of reporting directly to bill gates.

Anoop Gupta: For two years running the Skype and exchange businesses, global technology policy, et cetera. And five years ago, we quit to form Seekout. So thank you so much excited to be here. 

David Francis: Yeah, excited to have you. Unbelievable. All right. And Lainy, would you like to introduce yourself? 

Lainy Painter: Absolutely. Hi everyone. My name is Lainy Painter, and I'm a partner at craft ventures, a $2 billion venture capital firm based in San Francisco.

Lainy Painter: I invest in software and marketplaces, including labor marketplaces at the seed series A and series B. Craft ventures has invested in household names like spaceX and Reddit, but we're also investors in Trusted Health, Insta work, dry Alliance and chef on a labor marketplace front, which I suspect is what we're going to go deep on today.

David Francis: Yep. Excellent. All right. And Ron, 

Ronald Cano: David, thank you for hosting us here. And my post will be part of this conference here. Ron Cano, one of the co-founders and managing partners here at K1 Investment Management. We built our firm to invest in founder owned businesses. So today we've invested in about 200 businesses.

Ronald Cano: 70% are founder owned and It's been really fun to see the growth with our first fund was about 200 million of capital. And today our current funds are around 5 billion. So we had our 10 year anniversary celebrating 10 billion of assets under management, which was a fun landmark for us. So, We primarily invest in recurring revenue, businesses and software businesses.

Ronald Cano: It has taken us this long to build five unicorns and our goal this year is to create five more. So we're hitting the big inflection point. This year, one of the unicorns we invested in as with the Kamal helped us grow after this pretty substantially. So excited to be on this panel with Kamal today.

Ronald Cano: We know, we're trying to invest in 70 companies this year. And I think one of the highlights is our expansion overseas. Half of the unicorns these days are being created overseas. So, our brand promise to founder owners is to create category leaders and that's been really fun for us and helping them do that.

Ronald Cano: Growing organically and inorganically through a very robust buy and build strategy. And on the organic side, you know, we built our K1 operations team from the input from our executives. So a pleasure to be here, excited to discuss this panel together. 

David Francis: It's a pleasure to have you, Ron, thank you so much.

David Francis: And that's a good segue to you. Kamal welcome. You want to introduce yourself and a little bit about. 

Kamal Ahluwalia: Sure David and sorry for joining late global supply chain issues delayed.

Kamal Ahluwalia: So I'm glad to join you all on this panel. President here at Eightfold we are an AI platform for all talent. So for employees, for candidates, for contingent workforce. So the road we are on and the journey we're on is actually. Really straight to, to our mission of providing the right career for everyone in the world that sort of shaped our thinking around both the solution, as well as our go to market to actually think holistically because HR is littered with point solutions.

Kamal Ahluwalia: So the single air platform for all talent has actually resonated very well. Second piece was to actually make diversity and inclusion a core part of our offering. A nice thing to have, not just a social message, but actually walk the talk. So today we are very proud that our clients are actually hiring 50% more women, more black Americans, more veterans, more people with disabilities.

Kamal Ahluwalia: And a lot of the forward-leaning companies like micron are actually sharing their progress and numbers. And that I think is the change that we are very proud to be part of the other thing as our progression has grown and we are today in 120 countries, 15 plus languages, iconic companies like Chevron, Vodafone, Siemens, Medtronics, American Express, Capital One, et cetera, et cetera.

Kamal Ahluwalia: But more than the talent part, it's our. The work that we are doing with organizations like oneten.org, where we are the platform, and they are committing to helping a million black Americans who don't have a four-year college degree, find family sustaining jobs. And 50 of the largest employers in the country are on our platform.

Kamal Ahluwalia: Then the work that we are doing with the department of labor and department of defense to help transitioning veterans and their spouses, when they leave the military service, enjoying the civilian jobs. And in a couple of weeks, you'll also hear what a department of defense is starting to do with our platform to modernize national guard and national reserve on drought to model the service lines for that kind of work with our AI platform.

Kamal Ahluwalia: I think that has been very exciting. And some of the other milestones that you hit along the way are nice to have, but I think it's a really right way for everyone in the world. 

David Francis: Brilliant. Alright. Well, now we know everybody and we've got a pretty.

David Francis: Ron, you said you're looking for you know, you're looking to get the five unicorns this year, our hypothesis is that one or two of them are somewhere watching the session and we're going to give him some advice for how to get. So why don't we start Lainy, can you give us the lifecycle of a technology start up as it's, you traditionally evolve in venture capital land. 

Lainy Painter: Absolutely. So I will begin by caveating all my remarks. I am always referring to venture backed startups and VC backable implies a billion dollar market, exponential growth spending excess capital, having a strategy for a major liquidity event within a pretty predefined time frame where a lot of good businesses that don't require venture funding.

Lainy Painter: In fact, if you can avoid it. Up further ado, we can get into the life cycle a little bit. So the first stage for me is founder market fit. Why are you the right person to build this company? Why now, what insights or experiences do you have that are unique? And what's the long-term vision? And to me, that unlocks the first milestone, which is a pre-seed round.

Lainy Painter: Maybe 250K 750K to get started building the product. The next thing that happens hopefully is the penny gap, which is when you sell your product for the first time to an unaffiliated buyer, they have a pain point and you've built something that solves that pain and they're willing to pay you for it.

Lainy Painter: And that would hopefully unlock for you. Maybe if you've done it once, maybe two, three or 10 times the milestone of a seed round of funding, which could be one to $3 million in this market. Hopefully things continue to go well and you've hit product market fit. People want your product. They're asking you for access.

Lainy Painter: Telling you what new features they want. There's usually actually an oh crap moment associated with product market fit because you didn't build the infrastructure to scale this quickly, or hire a support rep to field as many questions. It usually feels like there's a whole lot going on. And there's a whole lot of demand that just all of a sudden came in the door.

Lainy Painter: This usually correlates with around a million in revenue, give or take and would unlock the milestone of a series A, which is usually around 8 to 20 million these days. Now you're off to the races. You've hit the scale up stage you are hiring in every function. You developed a predictable sales cycle, have a long product roadmap to continue to expand the platform your organization is growing every single day in the last year.

Lainy Painter: Maybe you grew from 1 million to 4 million in revenue. And it's time to start thinking about those growth stage rounds, Series B, Series C and onward. Now these rounds are a little harder to triangulate on because different businesses have different capital needs, different capital requirements and different growth trajectory.

Lainy Painter: And you've already sold a couple of VCs on your vision, your leadership, the product we're going to over time. And so we kind of say tongue in cheek at this point, usually fundraising becomes more of an Excel exercise. Are you able to sustain your growth? How growth have you fast? How fast have you grown and is the market large enough to support a multi-billion dollar opportunity?

Lainy Painter: Eventually, hopefully in the next 10, 12 years, you've hidden an inflection point. You've reached a hundred million in ARR or thereafter. And you're able to go and take that company public or exit somewhere along the way to a buyer who's interested in acquiring it 

David Francis: ARR for the uninitiated any recurring revenue.

David Francis: Great. Okay. So, a pretty wild journey. So, and do you want to Ron, do you want to talk about the you know, the, we got the startup cycle as it traditionally happens to VC, and this is typically what we're reading about in the news every time, know, this you know, a new round of funding for a company in the space. Ron, Talk a little bit about the role of private equity.

David Francis: What stage do you guys come in? And you know, what kind of deals do you look for? 

Ronald Cano: Yeah. I echo a lot of the sentiments that Lainy highlighted, particularly on product market fit and having that aha moment or, oh, crap moment. Yeah. That's the technical term in the, in, in the investment world you know, it's really, you know, I think two things, it comes down to one listening to the customer and then two making trade-offs and That's where we come in.

Ronald Cano: Cause you know, backing founder businesses. We like to see those types of trade-offs where you've had to listen to the customer. You can't throw money at everything in the industry and you might have a big tan, but you've had to choose one specific area. And that's where we built K1 to kind of come in.

Ronald Cano: And once you found that niche, now let's go take advantage of that. Let's go explore that. Let's dominate that category. And as you grow in scale you know, and we typically invest in businesses, we haven't done one investment over a hundred million of revenue. We've found that culture is actually the biggest and one of the hardest things to overcome when you're, you know, 20 million or so revenue, maybe a hundred or so people, you can just get everyone in a room and say, Hey, we have a problem with.

Ronald Cano: Or, you know, nowadays, if you have to put their zoom, zooming together can have more than 20 people on a zoom. You start having chaos. So how do you scale, what processes do you put in place, but you can't put in too many processes, right? If you ended up doing acquisitions, how do you have these arranged marriages of people coming together?

Ronald Cano: So these are the challenges and trade-offs you face and we help companies. 

David Francis: Brilliant. Alright, thank you. So I want to get a bit more insight into a new income, all kinds of your founder story, your origin story, like, like we, this is the, we heard it from Lainy and Ron kind of life cycle of a startup.

David Francis: You guys are the living example of that. And so, maybe you could tell us a little bit about your journey, you know, growing this business from the earliest days in any kind of challenges you had and kind of major successes you had and what was your kind of, you know, oh, crap moment. If you had one.

Anoop Gupta: Okay,

Anoop Gupta: Who do you want to go first? Kamal, you want to go? Or should I go? 

David Francis: Why don't you start anew, you will go in alphabetical order here. 

Anoop Gupta: Okay. Sometimes there's an advantage to being alphabetical. Again, hi everyone. So. As I said, in my introduction, you know, this is my second startup and a lot of incubations. That is that in this particular case, I might say.

Anoop Gupta: We were blown out of desperation where necessity turned into, you know, something beautiful. So when I quit Microsoft, the first business that we did was a new messaging platform that empowered recipients, where senders had to add a postage stamp to their emails, whatever else. So you were adding friction.

Anoop Gupta: On that side. We loved the idea, but we were not able to bootstrap it to millions and millions of users. And so we actually built. A tool to bootstrap. Bootstrapping means how to get users, you know, which is called carrier insights. So if you analyze all the resumes, then you can say for any bond, right.

Anoop Gupta: If you're in this role, here are all the possibilities of the next roles that you can do. And, you know, there was a lot of love around that from recruiters, colleges, everywhere else. And we were still not. Succeeding and the messages and the messaging world. So we made a pivot and actually investors liked the fact that we made the pivot, that we were not stuck to an idea.

Anoop Gupta: And just that they said, you know, you're so then the second thing, you know, it becomes important to you. How are you as Ron and Lainy said, listening to the customer and continuously once we were in the talent acquisition space. And we said, you know, it's interesting, a big opportunity. It quickly became obvious that, you know, Hey, they were looking for tech talent and, you know, LinkedIn is a very weak system for that.

Anoop Gupta: And there's a good hub and all kinds of sources and data that you can bring here. You go a little bit deeper. They say, oh, we would like to, you know, diversity is just so important and you know, we are rated number one and G2 crowd on diversity. And if you go and look at it there, then how do you know, Set targets and have conversations with job hiring managers.

Anoop Gupta: And so, you know, that became a thing then talent analytics before, you know, LinkedIn shifted, we shipped it three years before that. And so it's been a continuous journey. And so listening to the, you know, customers deeply and being able to solve problems culture rarely matters a lot. As I said, we've grown more than 30 falls, just in the last three years.

Anoop Gupta: Okay. So, Lainy said has a hundred million dollars over 10 years or something, you know, we are planning to get there much, much. That's the respiration. 

David Francis: Fair enough. Who are your first customers? They knew who when you started this, was it like, did you just decide, like I'm sick of Microsoft, I'm going to go build this thing like, or was Microsoft your first customer?

Anoop Gupta: No, Microsoft was not, actually, our first customers started with smaller staffing agencies who decided. Okay. Then we actually got into defense customers. They were like Lockheed Martin and some of those companies. And then the tech companies came in and said, you know, almost every major tech company, you know, brand name that you know of is a customer of ours.

Anoop Gupta: Yeah. So, so, you know, it's that, and then the COVID hits our oh, crap moment for us. The first two quarters off COVID, Oh crap outlines, you know, we didn't lose. ARR didn't go down, but we were kind of flat for the first two quarters. And then during the last two quarters, our overall growth was two and a half times during the first year of COVID.

Anoop Gupta: So, you know, you grew 2.5 X, you know, the first year of the COVID. So it's really important that you're persistent. You believe in what you're doing. You are creating value for customers. One of the advantages that startups have. Is that the universe of all customers is very large. You only have to get to a small number of them where there's a need and you can address the value.

Anoop Gupta: So it's not actually defocusing yourself. Can rarely cause problems and having focus, understanding where you're adding value and you're adding lots of value for them is super important in your journey. So right now, you know, seek out is expanding from not only talent acquisition, but how do we help drive retention?

Anoop Gupta: You know, how do we drive employee growth? How do we, you know, drive the redeployment of talent. So all of those things are coming in as we move forward. 

David Francis: Got it. Fantastic. Well, thank you for sharing that. And so, Kamal let's hear the Eightfold story you know, why did you build it?

David Francis: How did you do it? What were your oh, crap moments? 

Kamal Ahluwalia: I think that thinking for us about four years ago, when we came out of stealth mode was to actually think big. A lot of us, most of us have had success in the past. So we knew we could sell. We knew we could build products. I'm in the other two co-founders Ashutosh and Varun come from essentially being machine learning experts from Google, YouTube.

Kamal Ahluwalia: So there was that confidence that we can build it and we can sell it. I think the main thing that we were thinking is how to actually get past the initial issues around the mindset and the orthodoxies on the HR side, because it is a very small market. Left-hand doesn't know what the right hand is doing.

Kamal Ahluwalia: And we came out with talent and just a platform, and clearly we are an AI company. Lots of questions. And like, I used to start making a joke of it that in every large meeting, the smart person in the room would say, Hey, Amazon failed trying to use AI for their own hiring needs. How will you avoid this as if that was the as it is, right?

Kamal Ahluwalia: I'm sure Amazon has better engineers doing better things than solving this problem. So those were sort of the progression. I think the second part in our journey was. We're also fortunate that the Capitol kept showing up before we needed it. So it was relatively easy to step on the gas and keep it floating.

Kamal Ahluwalia: And it resulted in a lot of that stuff, right. Because that does, then you start making short term decisions and you're solving for optics for the investors in the next round, so that our team and what we were claiming and showing we were actually walking the talk. And the third thing was.

David Francis: Definitely didn't have the experience of having to go pound the pavement and, you know, pitch at 4 to, you know, 50 investors.

David Francis: It was more investors coming to you. Right. It's a fortunate position to be in, come on, 

Kamal Ahluwalia: very fortunate and kudos with all the hard work by a team. Right. And then I think that, oh, shit was when COVID set up last March and there was a lot of pressure to cut and conserve capital and hide under the table.

Kamal Ahluwalia: And the nonsense from Sequoia, right? It's and they've done it a couple of times. So that's why I'm calling it that, see if we could call that. But we stuck to it because we didn't see the weakness in our business. And I've been through a couple of cycles before where the big one big companies actually choose downturns to invest in because when we were talking to the execs, none of us caused COVID most of the businesses were sound.

Kamal Ahluwalia: And this was just something to deal with. Not that you throw everything out and just hunkered down. So 120 people when COVID started today, we are about 430. With another couple of hundred to add. In-between a General Catalyst came in October of 2020 led that round and then SoftBank came, 6, 7, 7 months later led that round.

Kamal Ahluwalia: So it just so happened that we were backing ourselves. That business looks good. Clients are interested, we should keep going and through it. And it was hard work. Our stuff is solution selling and AI is hard. The appetite for education evangelism talking about an AI platform is hard. All those things to do at a remote was very different in the fatigue set in right after first year, it was hard the second year now life work.

Kamal Ahluwalia: So I think it, oh, shit moment has spanned about two years. 

David Francis: Okay. You've had one. You just said yelling from your office. Oh, great. Okay. This is fantastic. Thank you. Thank you for all the context. So now I want to open it up to the group in is there's the whole bunch of just kind of topical areas.

David Francis: I want to hit to the extent possible we can get, you know, kind of specific examples of. Things you've seen and how that's worked in practice. I guess one question you know, a new being, come on, both of you are, have a technical background, right? Both, know, technical solutions you know, one, one, just the issue, if you're, if your, if you come from the industry and you don't have a technical background you know, what are the odds of success, you know, building a great technology business. You know, if you're not a technical person. 

Kamal Ahluwalia: I think I'm not in the same zip code of smartness as a new business. So, what I would say is this is a team game, strengths are the others, other team members around, you need to compliment your strength.

Kamal Ahluwalia: So whether you are good on the business side, you go on the technical side and that's essentially how I was brought in.. Because the technical team is actually extremely strong. It was to actually build a business and enterprise grade business and a fast growing business. But it is a team game. What I see a lot in young companies is especially with technical founders, they keep thinking that, Hey, I'm the one doing the talking and people are buying from me.

Kamal Ahluwalia: So let me just get cheap crappy sales people or ignore marketing because that's not what I need. But it's the other way around yet. Oh, everybody's multiples after the first couple of rounds of funding are all based on your top line that doesn't come from having brilliant engineers that comes from growth. So you have to invest on both sides adequately, but really dig in for the long term because what you and I were laughing about, right?

Kamal Ahluwalia: Why all yourself, unicorn, none of us should be proud of being labeled a unicorn because unicorns never exist. And even that billion dollar milestone is nothing. I mean, Royal cannot just say right as first fund 200 million today, they raised 5 billion. A billion is nothing. I mean the biggest deals there are with LinkedIn went at 26 billion.

Kamal Ahluwalia: Work days at 60 billion. I think the mark should be about 10 billion where you all feel proud. So I think all these labels are there, but bill dig in for the long term. Nobody knows this as well as you do because you're living it. 

Anoop Gupta: He also did the two senses and I would add, you know, a common list.

Anoop Gupta: Totally. Right. This is, you know, building a startup is a team sport. So if you're not a technical person, you know, find a technical co-founder, you know, get somebody else. You need marketing, you need sales, you need product. You need to bring all of those things together under the right culture to build, you know, a great business.

Anoop Gupta: You know, it's not a technology. Everything is technology nowadays. It's about building a great business and you need all those parts together. 

David Francis: Fascinating. So the quick question, what is harder for you guys? You know, this is your I you're seeing entrepreneurs at this point, you know, was it harder the first time around and you know, the linear run, you might comment on it, I guess it's a higher risk, right?

David Francis: Like, it's easier to say yes to somebody if they've done something successful in the past. Right. And you know, betting on a first time founder is kind of like betting on. I dunno, an early career candidate who hasn't worked at your organization yet, and you're hiring for potential instead of, for like what you've done in the past.

David Francis: Right. So, like if you're a first time founder for some company, basically like any advice for getting started, you know, what advice would you give your, you know, I don't know how old you were when you, when nuclear quality first started. What advice would you give yourself back then?

Anoop Gupta: So actually, you know, it is entire I had amazing co-founder they said Diane Green, who later did VMware, you know, now being the managing director at Mayfield was my student at Stanford and be co-founded it when you're young and, you know, Your ego, I'm safe. It's just a totally different dynamic. We are so peaceful.

Anoop Gupta: So calm, so focused now on go do it for the first time for a startup for, you know, there are a lot of founders' issues and companies' issues, and who's adding more value and who I'm doing, and I'm great. And it's not about you being great at this. How collectively as a team you're delivering for the customers. So what I would say is that the social dynamics.

Anoop Gupta: Which is very important is so much better when you're doing it a second time and later in life. That's my experience. I still love all the people. You know, we are great friends, but we went through a hard time. 

David Francis: You're saying that.

Ronald Cano: Yeah. And David, yeah, maybe I can jump in. I mean, I love this topic on team building. I think that kind of hits on the culture element that I was talking about before. And if you think about the first time versus second time, the second time you know, you're going to make mistakes. You've learned from them.

Ronald Cano: And I think that's what the platform we built at K1, cause we only invested. You know, B2B software businesses, and someone in the room has made a mistake that someone's about to make. And so being able to learn from that And share that and, you know, spending a lot of time on the team. Everyone has different personality profiles in different ways in which they are extroverted or introverted.

Ronald Cano: And so, oh, am I seeing my son's coming? Help with this conversation understanding, you know, how everyone works together. I think it was really important. So I'll hand it over here to talk to my son. 

David Francis: Fair enough. As Kim, what would his thoughts be on early founding a joking father to myself. I I understand. So, so good to know one question, you know, getting your first client is kind of a, I guess, a bit of a hurdle you know, for some you know, Sarah for some folks.

David Francis: And there's an element of like, how much do you build before you, you know, like how much time do you invest in building out a solution before you start generating revenue for something right. What are your thoughts on I'm assuming, especially for like, c'mon like a solution like an Eightfold, which kind of has this, know, this AI layer is the foundation of it.

David Francis: Like you don't just build that overnight. Right. And so like, yeah, how much work should go. Did you get put in before you can start selling this and kind of, how do you know when you've got, you know, you know, like a better word product market fit? 

Kamal Ahluwalia: I think that is a moving target. What I'll share with you is that John Thompson was chairman of Microsoft.

Kamal Ahluwalia: He's with Lightspeed now. So I get a chance to spend some time with him and biggest brain, something he said, sincerely directly addresses what your question is. He says, nothing happens until someone sells something. Yup. You can't sit in a corner and get product market fit. Right. It will evolve. So simply whenever you think you have enough or you don't have enough, you have an idea.

Kamal Ahluwalia: Go. If you can get someone to actually work with you. Whether they pay you something or don't pay doesn't matter, that will actually mature things faster. And in our case that first client was Tata communications all the way in India. They actually were very forward thinking because they had a very good vision of what they wanted.

Kamal Ahluwalia: And it was actually the whole thing for employees, diversity in India, it was more for women and hiring retention and more engagement, all of that. And also how to actually have HR policies. That allows for internal mobility, how to take friction away. Cause a problem is a first-line manager, right? Who won't let go of you even though the other ops.

Kamal Ahluwalia: So all those things, they had the policy and the strategy figured out they needed a platform and we were fortunate that we jumped into it and they were sort of dictating what needed, but that just built that first wave, very soundly. And we had more built because of them. Then we would have done it on our own. I think keep going because you'll be building for awhile, 

David Francis: Right? Yes. Fair enough. Any other thoughts from the group there? 

Anoop Gupta: Okay. Well, you gotta settle as quickly as possible, you know, get something in the hands and it's right.

David Francis: Lainy, I want to ask you specifically, maybe we'll get a reaction from the group. So, you know, your job is evaluating. You know, technology companies and founding teams and, you know, trying to make a bet on who's going to win, but what categories are going to win and you know, which companies inside those categories are going to win.

David Francis: And so, you know, I guess two things, one, know, what Like, how do you do that? Like, how do, what is, what's your kind of decision criteria and what's the firm's decision criteria? Like what are you looking for? And two you know, what advice would you give to, to, you know,

David Francis: Basically for how to better present themselves best. 

Lainy Painter: Yeah, absolutely. So the first question is really which categories are we looking for? And we're generally looking for net new categories that have been unlocked either by a change in the market dynamic or a new insight or a new technology. Something like that, but generally.

Lainy Painter: An unsolved problem. And the easiest way to show that you have an unsolved problem is what people have been repeatedly alluding to, which is a happy customer who has said, yes, this is a huge problem. This is a total pain for me. Okay. And no one has solved this problem yet for me. And when you've done that 1, 2, 3, 4 times, you've really shown that, you know, not only is there an acute enough pain that people are willing to part with their dollars.

Lainy Painter: But you know, you're seeing it across different companies and industries over and over again. And so if there's anything that makes an investment the most compelling, it's just ridiculously happy customers over and over again. And I would take 10 happy customers that are advocates and enthusiastic over a hundred that are lukewarm every single day of the week.

David Francis: Got it. That's fascinating. Do you and so I guess when you're looking at markets, right, when you're, when you, I'm sure you're seeing pitch decks and people are like, you know, we were probably putting some stats together about where we think things are going and people are pitching you on like, oh, it's gonna grow this big or that big, like, how do you know, how do you validate, you know, some of that stuff.

David Francis: How do you make sense of like, you know, BS from. What's actually happening. 

Lainy Painter: Well, one of the dynamics that happens early on is, you know, looking for a really sharp wedge to build on. And so it may seem like the problem that you're solving is relatively small in scope and the dollars that you have to spend on it are relatively small, but usually particularly in categories like HR or sales and marketing there's usually an opportunity to continue to expand that wedge over time.

Lainy Painter: And so sometimes. The vision that the founder paints in terms of how this small, but very acute pain that you're solving for a certain person in this organization can spread and grow over time. And it's really up to the founder to paint that picture of where they believe this company will grow into over time.

David Francis: Got it. That's the whole point, I guess, come on. I mean, you're the living example of that, right? You started pretty. Specific, you know, specific use case specific niche, but had a vision for kind of this, how you're going to grow. And you've been pretty aggressive and quickly getting there.

David Francis: So, okay. Very helpful. One other, one of the questions you just have, you know, you know, areas of the ecosystem maybe that you think are exciting right now Ron. Or Lainy, you know, from an investor's perspective, like, as you're looking out there's a couple thousand, you know, HR technology companies and, you know, but there's probably still a lot of problems to be solved.

David Francis: And so, you know, what kind of areas do you think are going to be big in the future? Maybe what unsolved problems are there, know, what wakes you up in the morning and gets your you know, gives you goose pimples? 

Ronald Cano: Yeah, I can maybe jump in first here. I think it's relevant to this conversation.

Ronald Cano: We like looking at, like Lainy said, you know, happy customers. One of the things we're really excited about is actually stemming from unhappy customers, particularly in the recruiting space. So we had a thesis coming in that the recruiters were ignored. You know, SMB for recruiters, 70% is Greenfield.

Ronald Cano: They don't even have a solution in mid-market. Yeah. And you have these broad HRS solutions with the check, the box recruiting solution. And so identifying that and being able to invest behind it is I think really exciting. We brought it together. 

David Francis: Basically. 

Ronald Cano: Yeah. And listening to the customer and what their needs were and having a recruiter who said, someone's listening to me and helping me solve my pain points.

Ronald Cano: We brought it together. Nine companies and no platform in the recruiting space, which is Jazz HR, Jobvite, and next thing and bringing together the staffing RPO with technology is really interesting. And seeing that connection grow is really exciting.

David Francis: Yeah. 

Lainy Painter: Yeah. I am always looking for areas where someone's doing something in a spreadsheet now and they want to pull their hair out. So some of those categories that jump out to me, people still do a lot in terms of equity, compensation, and benchmarking. That's a lot of spreadsheets at employee level.

Lainy Painter: You know, you've had someone joined as an engineer level three, and they want to know why they're not an employee level four, that's a stretch. And you kind go on down the list. What is it that, that, you know, people are spending a lot of time on that is still really analog. There's probably a wedge for product there over time.

David Francis: Brilliant a question for the group. So AI has been one of the, you know, the hotter, hotter topics and its application in, you know, HR, one of the things we've observed, I don't know if. You all would agree to disagree or, know, is basically, you know, AI systems are kind of, they work for their own tooling.

David Francis: Right. It's not like AI as a service that you know, anybody can build on, it's like AI for this one system. And so, you like, like, is there a, you know, in the future, is there kind of a, like, is there one AI to rule them all or, know, is every system kind of going to be its own? I have its own embedded AI architecture.

David Francis: Does that make sense or thoughts and reactions? 

Anoop Gupta: Maybe let me take, you know, come and I'm sure Kamal we'll have a lot. My PhD thesis was, you know, around AI, it's a field that's existed and. The thing about AI is it's very powerful, but it is also, you know, tremendously immature.

Anoop Gupta: So people need to understand what it can do and what it can't do. And people confuse those a lot. So, you know, The AI is nowhere near, like in, you know, one year old child means it is so far away from that. And yet there are certain classes of things, you know, it's very good at classification. It's very good at recommendations.

Anoop Gupta: He's very good at certain kinds of things. So one is that for. Everybody realizes AI is not a silver bullet and a panacea. It is a technology like anything else that correctly and suitably applied to the right problems and adds value. And secondly, you know, what I believe is always AI and human combination, you know, intelligence amplification rather than artificial intelligence, which you say substitutes, human.

Anoop Gupta: Right. It is a better solution or better ways to think about AI and that also, you know, I think socially makes people more comfortable that, you know, we are here to replace you, which never works most of the time. Anyway, in many cases, right. I'll pause. 

David Francis: That's good. I think that's a good articulation.

Kamal Ahluwalia: David I'll add something to it. I think when you have AI, you need to think about the underlying data sets required. Right? Well, that particular domain is basically the answer, it's not like the techniques are dramatically different, but depending on the domain and what you're trying to ask. Yeah, that needs to be deep and broad because I gave a slightly different example, which might actually resonate.

Kamal Ahluwalia: So if you look at this last self-driving capability or semi-autonomous capability, data points, each of us will drive about one to 2 million miles in our lifetime. And we all think we are to export drive. Right. A professional truck driver will drive about 8 million miles in their lifetime. And if from the moment you get a driver's license and all you do for the rest of your life is drive every day.

Kamal Ahluwalia: You will drive about 16 million miles. And Tesla is learning from over 10 billion miles. And that learning is coming into each of our Tesla. Right. So that's the promise of AI is the broad anonymized, aggregated learning. That's there to help us make better, faster decisions, and then the ability to automate some of the workflows, but it is simply there to assist, not to take over in most of the use cases.

Kamal Ahluwalia: Right? Then you look at the applications across whether it's in e-commerce, whether it's for Netflix, whether it's for you too, whether it's for something else. That's all. Yeah. I was using different forms of machine learning with different data sets, driving the right recommendations. And then the bigger thing today is there is more scrutiny of AI and in the case of HR, there are certain other implications.

Kamal Ahluwalia: One is. The transparency of the recommendation, because the individual experience for the employee for the candidate is very important that why is this thing recommending this to me versus something else 

David Francis: that builds in hiring context? Cause there's legal ramifications. So that's exactly right.

David Francis: Yeah. 

Kamal Ahluwalia: And for the employee also. So those are the things that there are nuances answers on top of AI that are more relevant for the experience than just. 

David Francis: Brilliant. Okay. Lainy, I've got a question particularly for you, since you are into marketplaces. You know, the we had in an, on our opening session, we had a couple of sessions already in our opening session, we talked about kind of what the landscape looks like.

David Francis: And, know, we talked to a couple of marketplaces and, you know, it's clear that, you know, marketplaces are certainly valued at significantly richer multiples than our traditional staffing firms that might. Leveraging technology. Right. And so my question is like, like, what would you say?

David Francis: Like, like help delay, you know, delay, staffing, executive understand kind of what's your thesis here and, you know, what would be your kind of response to a critic who said, Hey, aren't these just kind of glorified you know, tech enabled, but glorified staffing companies. 

Lainy Painter: Absolutely. So it may surprise you that I actually agree that there are startups that look much closer to tech enabled staffing firms than to marketplaces.

Lainy Painter: I believe marketplaces is shorthand terminology for a platform that controls both supply and demand in a market with network effects. That being said, many of these labor marketplaces are being built in very complex markets. With entrenched solutions, slow moving parts, et cetera. So many of these companies have made a conscious decision to focus on one side of the market and build up liquidity.

Lainy Painter: And if offer a success story of like what this looks like over time, 1998 open table started by selling a reservation software tool to. They aggregated the supply side density needed to jumpstart their future online marketplace. So I think what you're seeing right now, that's where the skepticism that's coming out is that you're seeing act one for a lot of companies and not everyone will succeed in the transition, but some will.

Lainy Painter: And I'm really excited to see it play out and see the chess pieces move on the board. 

David Francis: That's fantastic. Love it. And then, you know, kind of a followup to that if you know, looking at this industry in the staffing industry actually specifically, right? There's always this kind of dual dynamic.

David Francis: If you're a technology company, are you going to, you try to be the company that comes in and disrupts everyone, or are you going to try to be, you know, the company that comes in and, you know, arms, the rebels. Right. And so do you have any thoughts around you know, for the staffing industry specifically, which of those looks more exciting to you?

David Francis: Or are you kind of just ambivalent or looking for great businesses or what are your thoughts? 

Lainy Painter: Yeah, I can start there. So I think it totally depends on which market you're going after and the existing solutions in the market. So I think there will be very successful businesses built on both sides, one building software that enables.

Lainy Painter: You know, existing staffing firms or HR departments continue to increase their tool set and build from there. And I think there will be some very disruptive companies who come in tech enabled and write a full suite of solutions. To me, the question is, are you able to, if you go the full stack solution, the disruptor solution, are you playing in a winner, take all market or winner take most market.

Lainy Painter: And are you going to. You know, aggregate more and more demand over time. If not, it's a whole lot of effort to, you know, become one of, you know, 10 or 20 or a hundred players in space. And I would recommend going that enablement side. If you see dynamics that make you think I can take this whole thing over, that's when I would say, go for it, build the company that's gonna, you know, aggregate all that supply demands.

David Francis: We'll give you a war chest to do it at the same time for what it's worth important to note that Anoop and Kamal, you know, both of your businesses were built enabling, you know, clients and not going in and trying to disrupt incumbents. And in fact, you've got kind of across in the staffing industry you're helping you know, contingent labor programs and, you know, better management systems make better decisions around talent, kind of embedded in their own solution.

David Francis: So. Many ways to play. Very cool. Ron, do you want to, do you want to comment on you have some experience, know, once when we were talking you kind of mentioned that you've come in and been able to help companies essentially accelerate excelling. It gets harder and harder to keep scaling a business as you get bigger, kind of in percentage terms.

David Francis: And, you know, you mentioned that there've been some cases where. What is it, I guess what I'm trying to get, what are some operating principles that you've been able to kind of bring to the table? Kind of post-investment that have helped companies, you know, that may have been chugging along great businesses, but chugging along and kind of, grow outside of just the money itself.

David Francis: Other kinds of best practices or operating principles you've been able to bring to bear that have helped, you know, companies do better that wouldn't have existed.

Ronald Cano: Yeah, I think I mentioned as we were building our operations team, we listened to our executives on what they needed, what they wanted and you know, it's it's helpful to come in every quarter and, you know, drop knowledge and say, and pontificate on how to change the world.

Ronald Cano: But it's really that laundry list of stuff that every executive has that wished they could accomplish, which they could accomplish. And so, we call it, how do we provide shots in the yard? To our companies. And we're not talking vaccines in this case, we're talking, how do you actually, your kid folks and we developed a team that can come in for two to four weeks stints.

Ronald Cano: And for example, I wish I could go survey my customers and ask them, what do they really want? I wish I could go survey all my prospects and figure out you know, how, which ones are top, you know, A, B, C, or D. And so I think in those situations, Excuse me. That's how you know, listen to the customer.

Ronald Cano: You listen to the teams and are nimble. I think that's really important is being nimble. 

David Francis: Brilliant. All right. And Last question here, we've come out of the we've got about five minutes left. I want to leave with this kind of final thought. We're in, or, you know, depending on your point of view, possibly coming out of the best kind of funding environment for builders In history in, in history.

David Francis: And so the question is, you know, the times have been good. I don't like to say money has been easy because except apparently in Kamal's case in almost every case it's still typically quite difficult to secure funding, even in a liquid environment like now, but the big question is, you know, how can companies basically set themselves up to win?

David Francis: You know, if the table start in March, 2020 was a good example. You know, things have been looking good and when the pandemic hit everybody freaked out kind of funding stopped. And if you were profitable, you know, you were in, in trouble. And so, you know, quickly, like how do you win in any type of environment.

Anoop Gupta: I can take a pass at it. You know, my 2 cents, so close to fit. It is like any family in some sense. So, you know, you've got to manage your budgets. You got to see, you know, are you rarely burning cash? What your cash looks like. So as a founder, as the CEO, you're aware of that and you need to manage it.

Anoop Gupta: Well, the second is. You know, keep that focus on the customer and keep them happy and growing in any environment. There's still plenty of people growing. As Kamal says, you know, a tech company, there's so many companies that are going through the roof, even through the pandemic, their valuations have increased and their businesses growing they're hiring.

Anoop Gupta: There are enough customers out there and focusing and being smart about who you focus on. Who do you deliver the solution for? Can help you survive and thrive and even go deeper in your investment if you have the right amount of money, but you know, times of crisis or times of opportunity to get ahead.

Anoop Gupta: So I'll just pause there because there are lots of people. 

Lainy Painter: I'll jump in here and just say the only thing that gets harder and a downturn is raising outside capital. It gets easier to hire people. Your cost of acquisition goes down because there's less competition, literally everything else, except for raising external capital gets easier.

Lainy Painter: And so that's why you see these incredible companies built during these downturns and why you saw PayPal and Google and Salesforce right after the.com bubble burst. Square and Uber and WhatsApp a few months after the great recession crash. There's just so much opportunity in time. Good and bad. And so to me, the, you know, I'd almost say, you know, you're better off if there's some sort of market correction, especially if you had recently raised capital ahead of time.

David Francis: Right. Do you think we're due for a forbid thinning out of the kind of the number of solutions? It's a, you know, if our customers tell us all the time it's overwhelming you know, the number of kind of companies and solutions that are out there don't wanna put you on the spot to prognosticate too much, but in any case, if it does stand out, it'd be good for those that survive.

David Francis: I think Ron, you had. What was the metaphor you had about wine? Yeah, 

Ronald Cano: So I think, you know, if there's a downturn it causes you to focus and make trade-offs. And we like to say that if you think about wine your best years are the driest years because the roots have to go deeper, more complex grapes that are wine.

Ronald Cano: And when you have a lot of money, you can, you know, you just throw it around and figure out what's worse. But when there's a down. Yeah, the focus and I think that's what downturns enable you to do and help, you listen to the customer and drive if you can make some really good businesses then.

David Francis: Excellent. So we've got about two minutes left. I think we'll cap it here. I want to think the entire group Anoop, Kamal, Ron, Lainy have been a fantastic conversation. Congratulations on You know, the businesses, you built Anoop and Kamala, it's extremely exciting. We're wishing you continued success.

David Francis: Ron and Lainy. Thank you for coming here, spending some time with us and sharing your insights and we're looking forward to seeing both of you increase your portfolio of the unicorns as well. So with this, we'll go ahead and cap it here and we'll reconvene after lunch. Thank you all.

David Francis: Have a great day. Thank you so much. 

Anoop Gupta: Cheers. Bye.

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