This is Kristin O'Brien, and you're listening to the NFX podcast. Today, we're talking with David Sachs and Pete Flint, founders who have each now negotiated 2 companies through 2 downturns and emerged stronger, David with PayPal and Yammer, and Pete with last minute, and Trulia. Each of these companies went on to become market leaders, but not without hard fought lessons. In this remote podcast, David and Pete share the specific tactics they learned about leading through hard times.
The mindset founders need to adopt in order to survive and what, as VCs, they're advising their portfolio companies to prepare for David is now a co founder and general partner at Kraft Ventures, which like NFX, invests in early stage entrepreneurs. Let's jump in. So, David, thanks so much for joining us today. I'm really excited to connect.
You know, we've both been in, somewhat similar kind of Morgan armed forces, building companies through recessions, and and, ultimately, the companies became more successful for it. So you found it's Yama in 2008 just in the kind of heat of the global financial crisis and before that PayPal, during the dot congress, so a kind of wealth of experience there. And then my background in online travel in 2001 in Europe and then running truly in 2008. So there's a wealth of experience.
So hopefully in this, podcast will have a chance to really pull out some insights and give founders some thoughts about how to navigate the, the really changing situation. So maybe just from your own perspective, during the your experiences in leading companies through downturn, what are some of the things that you thought you did right, and perhaps some of the things that you felt you do differently during that time. Yeah. Well, good good to be with you, Pete.
I think these types of downturns can be great times to to build companies. Like you said, PayPal was mainly built right after the dotcom crash. The, the product launched at the end of 90 9 and 3 or 4 months later, we had the the whole dot com crash.
And the the company was mostly built in 2000, 2001, and then was the 1st company to IPO in 2002 and kind of ended that, that sort of the, the dotcom, bus And then like you mentioned, the Amr, began in 2008, 2009, and we were in the midst of the, the great recession then. And so think these can be, you know, obviously difficult in trying times, but also very good times to build a company. There's, you know, innovation doesn't stop just because there's an economic down term.
There's always need for, for innovation. And, you know, assuming you can get funding, which is, you know, the one thing that gets much harder during a downturn, everything else gets Currier. There's fewer copy cats, fewer competitors, the war, you know, the war for Flint, recruiting gets easier. So the most things get easier is just fundraising. It's harder. Talking about cash position. And, you know, I shared a kind of post, 28 moves just from my experience.
And, and, you know, that certainly kind of a dose of realism plus understanding your cash position is paramount. I'm, I'm hearing, you know, I think every day the amount of cash companies need all the wrong way it seems to be extending. Not, not shortening. I guess, what are you thinking about, and what are you advising your companies and, and what did you do when you're in this position? Yeah. I mean, we're, we're recommending to our portfolio of companies just to 2 years of runway.
I mean, at least 8 quarters and really 10 quarters would be better because when you think about it, what's happening right now is everyone's businesses is getting disrupt. Well, I'd say 80% of startups are getting disrupted. There's 10 or 20% that actually are seeing an increase in demand because, you know, we've got a one startup that's that's doing e commerce, another one that, is a nursing marketplace.
And, like, both those companies have seen a huge spike in demand post COVID, but I would say that, you know, the other 80% of companies are gonna be disrupted to some degree. You know, a good number, you know, anything touching, for example, the restaurant industry or travel or anything like that is, you know, the disruption is, you know, 80, 90, a 100%. I mean, revenues has gone to 0.
Then they're sort of the the ones that, are are are disrupted not because they're in an industry that kind of gone with 0, but because, the deal cycles are taking longer. The, you know, there's there's less business confidence. Everyone's kind of cutting awesome taking a wait and see. And so we we we've kind of color coded our our companies based on COVID impact.
There's kind of red, yellow, or green and, you know, red red are the ones, which have kinda revenues gone to 0, green are the ones that have actually been Beller. And, but I think most companies are probably yellow, which is to say that their pipelines have been disrupted, but they don't even know by how much yet. And so because of that, you know, you you you you're gonna need probably two or three quarters just to adapt, make the changes you need.
If you're in, you know, if you're kind of in the in in the red, you're gonna need, you know, maybe a year to to pivot and move to a to a lower burn model. And then you're gonna wanna have another year after that to show that the new model is working. And so 2 years is really, you know, and then you need time to go run fundraising process. So you really want to have 22 and a half years if you're a business that needs to retool or pivot or you know, make major changes because of what's happened.
Yeah. We we've done exactly the same process and similar recommendation. I think just the Flint your own kind of experience truly, we raised in Q2 of 2008 to $15,000,000 kind of in today's language of series B, and we didn't get an up round for more than 3 3 years. And we essentially had to go public to get an up yet we were kind of like growing at least doubling year over year during that period, if not Morgan.
So I think there's also just this, not only is there kind of the fundraising window to open up, but also valuations coming down. So I think, I think this is, it's certainly going to be really changing time and all the same reason. I think particularly on, on network of our businesses, if you can use this as a time to build market share, then you you are really sometimes last man standing, you know, many of these, marketplaces that came out of 2000 and 1 or 2009 really were the last man standing.
And they just Beller that network against a relatively uncompetitive environment and come out extremely strong. Is there anything just just as you think about what are the hardest things the real challenges. And is there anything that comes to mind which, is super hard for founders to execute on that that you, you feel is paramount for them to, to do at this time? Yeah. I mean, the hardest thing is always layoffs. Everybody hates doing it. They don't wanna do it.
And so they tend to, to wait, or if they do it, they don't, they don't cut deep enough, and then they have to go back and do it again. And so that, that's the, the, the one that, I mean, burn reduction is the hard thing. And then specifically the, the layoffs that are the biggest part of that, typically. I would agree.
And then then the other component, I think, is communication, I I think in this environment, your team is scared, your, your worried, and and we'll talk about your, your hard talk post in a moment, but just the level of communication is, needs to be significantly increased. You know, if you're doing weekly, all hands, maybe do them twice a week.
If you're doing daily stand ups, maybe twice a day, particularly in in this remote setting, and that And that will, I think, will really separate a number of leaders, not just companies from from others. I I, yeah, I agree with that. You know, one of the the points I make in in the hard talk post is that, you know, when when you when you have to do the tough things, you you have to, it has to be a company with plan, you know. Otherwise, you'll just freak your team out.
If you if you, you know, make layoffs, but then don't communicate and keep communicating what plan is moving forward to to be successful, then people will dispute deeply anxious. And so, yeah, I think the communication is a huge part of it. I think, you know, maybe a third thing it, that's that's hard for founders to do, but it's really important at a time like this is, is to get all the legacy thinking out of their heads. You know, I think that there's so much that changes at a time like this.
And in the the one of the biggest mistakes is to just be too anchored on the past and what the old plan was and the, you know, the old, you know, what the old organization looked like and, you know, the old burn rate and the old roadmap and and all that kind of stuff. And and you really and the the big advantage of startup has is that it can adapt, it can pivot, it can change, it can throw away all those plans.
But but but if founders don't kinda let go of that legacy thinking, then they won't be able to take advantage of Yeah. I I, you know, there's we obviously talk a lot about product market fit as investors and founders need to realize the market has fundamentally shifted for 80% of the companies.
And that kind of means that your product and your company will have to fundamentally may have to fundamentally shift if the case by case, but this is where This is where kind of stubbornness, is an while is an asset for founders adaptability is more important. And helping companies get through this. Yeah. I, I, I just had a conversation with a couple of founders the other day. And, I mean, their, their original plan's been completely disrupted.
By COVID because they're they're basically selling to college students, and all the college students are home right now. So there's just no to fusion. And they, you know, they were outlining, a plan for the business that involved a pivot. And the point I made to them is, look, you've still got $5,000,000 in the bank. If you are a company graduate from YC, you would love to be in that position. You know, you've got a great team of engineers. You've $5,000,000 in the bank.
Your original plan now has been totally disrupted, but, you know, you can do anything you want. The the new plan shouldn't just be a rash realization of the old plan. It should actually be your the the absolute best plan, the the thing that you would be most excited about going all in on. And I think, you know, at a time like this, founders should always be all in on their best idea. And you you just can't afford to be kinda, you know, hedged or pursuing a bunch of different things.
You really need to figure out, like, what is what what is our best idea and just how do we focus on that? You know, I think, you know, if you're if if you've now if you don't have product market Flint, either because you never had it or because of the disruption that's happening now, don't be afraid to take your startup down to the studs effectively because it's a lot easier to manage and adapt and find product market fit as a seed stage company.
And, and and that's one of the big mistakes that, you know, Series A, Series B companies make is they keep operating with all of this you know, series B type headcount and burn, even though they don't have it. They don't have series B product market fit anymore. Morgan a lot of cases, this would be better off going back to it being a seed stage company. Yeah. And there's, you know, there's a bunch of companies that made those pivots successfully, but, but the majority of them don't.
You know, this sort of the systems at adaptability companies that get through this this period almost have a, you know, it's really about narrative, almost about assistance. Kind of never getting up in the face of adversity. They're they're founders that the majors throw in the towel if if they kind of real realize they've lost product market Flint. In your experience coming across 100,000 of founders over your Currier. You know, what do you think the psychology of that persistence is?
And what's driving? What's the sort of kernel of that persistence that separates founders that get through this as founders that don't? You you know, I think there's there's a a greater sense of urgency on on the part founders who who make it.
For some reason, they're just more finely calibrated, almost sort of more high strung in a way, and more, you know, they're just they're able to react much quicker to the changing circumstances and and and sort of throw away the old plan and and figure out a new plan. And, you know, the ones who don't make it, there's just kind of this lack of urgency. There's always kind of like a wait and see. You know, I'll give you an example.
I've got a I've got a company that, you know, we we invest in the series a. The founder had 3 years of runway. He's been running it very frugally. You know, and he asked me, well, is 3 years runway enough? I said, yeah, you're actually in pretty good shape compared to a lot of other Pete. And he still went back and got his team to all including himself take a 20% pay cut, and he figured out how to cut some costs. And now he's got 4 years of runway.
I mean, that's just like a tremendous sense of of urgency and sort of, you know, finally calibrated, and reacting to the changing circumstances. And then we've got a lot of other founders who, you know, their their reaction as well. We're gonna weigh see how things shake out over the next 3 months. And then if things look bad, we'll we'll make we'll make cuts then. You know, I guess that can work too, but but it's just, you know, much less urgent somehow.
And, you know, there's always, a reason to kind of postpone the, the the tough things that need to be done. Well, of course, if that, you know, yeah, I I Pete the same thing. Of course, you the founder, the delay of basically burning cash during this time with very low revenues, and that shortens their runway. Right.
And it also essentially makes it much harder for them to, motivate the team they tried something and tried something and tried something, then I think it's just a sort of a slow death as opposed to being responsive and being fast. A certain point when, you know, when all the companies around you are cutting costs, your employees will actually develop, you know, they they've got some sense of what's happening. And, you know, if they know if the burn is too high.
And at a certain point, if you can just keep procrastinating it, they're all just kind of looking around at each other saying when, you know, when is the accident fall. And, you know, and it and so in a weird way, you don't get rid of the anxiety by procrastinating. You're you're better off acting, if figuring out what the plan is gonna be, I mean, you don't want to just cut willy nilly.
You do want to figure out what what the sort of go for plan is, but, you know, you you then make those changes quickly as you can so that the people who are remaining with the company like being safe and comfortable, and they understand that, you know, we we only needed to do this once. And, and and they and they buy in, you know, to your point about communication, they buy Flint the to the new plan.
And, you know, the longer you sort of procrastinate doing all those things, the the more anxious people actually become. When I was running truly, the, you know, I'm you probably remember that time, the Dow dropped a 1000 points is of course another memo that was widely distributed.
You know, I was I was in that meeting, their offices, and, ended up calling a staff meeting on Morgan management team meeting on the Sunday afternoon, and we basically came in on Monday morning and, presented the Flint, you know, talk about the market, talk about what's happening to the economy, talk about what's happening to the industry, and then talking about our specific plan. And kind of what was, what were some of the changes in terms of people that we had to make?
And then also just person, almost, person by person, how they fitted into our, kind of, into our business model in the sense that this is a explained the financial details saying team by team, if you can move this metric from here to here, then the compounding impact of these changes from everybody will lead the company to profitability.
And then that, you know, being very explicit, almost overly explicit at this time is necessary to give people the transparency and kind of comfort that there's a very explicit plan. And then they can see their role in achieving that success. How do I contribute to this company success and that, and knowing what everyone else is doing can be, I think, is a very clear way to do that. I'm curious from your experience in kind of yarom paper.
Any any experiences or specific tactics that you did or you had to navigate that that you might might be helpful for the audience? Yeah. I mean, so as I think back on PayPal, it sounds it sounds a lot like what what you went through at at Trulia. In the sense that we the PayPal business model could be expressed as a formula very easily. I mean, it was very, you know, very straightforward.
It's basically volume times the price of transaction fees, minus fraud, minus funding costs, minus customer support. And so everything could be kind of traced back to that. And, and so, you know, we showed everybody how they fit into that and where we need to to move the numbers to. The the PayPal story really was a story of, you know, a series of life and death struggles.
Everyone, I mean, the PayPal mafia now has gone on to so many other things and and PayPal's a $100,000,000,000 plus company, but Pete don't realize how close it came to to dying multiple times. And, at one point in, I think, mid 2000 or middle late 2000, the company had about $40,000,000 left from the bank, and we were burning $10,000,000 a month.
And so, you know, it doesn't take you know, a genius to figure out that you've only got about 4 months of of runway and, you know, the the company's about to run on a cash and die. The the big lever that we pulled at that time was we, you know, PayPal is basically free.
And we had promised, we had promised the customer base that that payments would be free and and the the thinking was that payments to be a loss leader to get people into these financial accounts, basically bank accounts, and we would make ultimately make money by upselling various kinds of financial products. And what we realized is and and, you know, there was a there's some amount of skepticism or or disbelief that people would ever just pay for the basic payments product.
But we ran out of time and we realized that there is no plan b here. We just need to go with the part we have in charge for what we're already, you know, putting out into the Morgan. And, you know, we don't have time to to do some sort of upsell. And so, you know, over a few week period, we basically force all of the user to pay transaction fees. You know, we were very worried that this could lead to enormous churn. We could lose to competitors.
But as it turns out, people were willing to pay for the service. And, you know, virtually overnight, we were able to slash the burn by by turning on revenue. And, you know, things got a little more comfortable after that. It was still pretty pretty tough.
So I think, you know, this idea that raised prices that can be a major Beller, but, you know, this idea of, you know, there there is no plan B. There is no time for kind of elaborate multi step plans you just gotta be all in on whatever your best idea your best product is right now. And necessity is the mother of invention. I've been speaking to founders that, that think, oh, okay. We'll raise money in next year or in sort of 12 months.
And I think there's that mental shift to say there is no money. Yes. There's there's some kind of more mature account. There is no kind of backstop. There is no there is no alternative almost like that movie, the Morgan, where where you gotta figure it out Right. That there is nothing like that to focus the mind Yes. And figure out how you navigate this path and figure out how do you get profitable?
And of course, I made it really possible from the kind of the Currier stage companies, but the thought process is often illuminating. And then you really drill in on, like, do I truly have a tenant's product? Do I truly have product market fit? Is this something that Pete will buy this when they're feeling poor and almost unemployed, then then it's a pretty interesting product.
Yes. So I think we're about to find out how many products are actually mission critical because everyone's slashing their budgets and you know, any product that's kind of optional, people just aren't gonna pay for. And so over the next few months, I think a lot of companies are gonna find out that, I mean, they're, they will have more churn or their deals will take longer to close, and we'll find out they just aren't aren't that mission critical.
And, you know, VCs, I think, are waiting for that data. And so it makes it kind of a really bad time to be going out and and raising is, you know, I think VCs wanna know what which business has been disrupted and which ones haven't. And it's gonna take a couple more months for us to, to see that in the numbers. But I, but I agree with what you said about, you know, the, the money that you have in the bank for 80% of startups, that is it.
I mean, you have to assume that that is all the money you're ever gonna have. I think, you know, when times were frothy, there was this, you know, there's this assumption that every 12 to 18 months, you'll be able to raise an up round. And, you know, there's always a a bigger, better deal you know, a year or 18 months of the future.
And I think now the situation we're in, there's about 10 or 20 percent of companies that have been accelerated by this, but the other 80% just the money you've got in the bank is all you're ever gonna have. And so how do you how do you make that last to give yourself enough time to find product market fit and to have enough time to to have enough James tape after you find product market fit for the number to reflect that.
Because it's not like you can just go out and raise, you know, a month after you supposedly find product market fit. You need to have three or four quarters of, you know, rapid growth after that moment. To prove that that you have it. And so, you know, Stars really need to make sure they have the time to to to be able to do that. I mean, I remember her back in 2000, 2001 during the doc own crash. You know, it went on for 2 years.
You know, we had this sort of the stock market crash, but then, you know, the stock market is kept going down gradually after that. I think the the initial crash was about a 50% down in the dot com stocks, but then they went down another 90% over the next 2 years. It like this gradual erosion. And, and and the startups, you know, just kind of one by one fell by the, you know, most of them did Beller the wayside and died. And you have to ask, why didn't they just make the cuts, you know, Flint?
They could have given themselves years of runway and Yeah. They were all just kind of constantly hope holding out hope that things would just get Beller, and they weren't making serious enough cuts to give themself the runway they needed to get to to essentially reinvent themselves. Yes. And just to build on that, you You recently published an article about, happy talk versus hard talk, the willingness to ask tough questions.
And, you know, we talked earlier about kind of confronting this reality the, like, really sort of digesting the the gravitas of what's going on. Like, can you just share a little bit about kind of the thesis and kind of what what was a trigger point for that article. And, you know, why perhaps many founders avoid a holotalk? What are the intrinsic reasons and perhaps why for happy talk?
I guess I guess the trigger is, you know, so so happy talk is it's, I think it's probably the number one killer of startups. Because, you know, and I guess the the the trigger for the blog post was, I mean, I have these meetings with founders all the time where the meeting starts off and everything is wonderful. And they tell you how great they're doing. And by the end of the meeting, you realize that actually there's only 3 months of runway left, and they're about to run out of money. You know?
And I've just had so many of those meetings where I'm just like, there there must be something, you know, that that that there's something there there's like a deeper psychology to this. And I think it's because founders have to be optimistic. You know, the odds are so stacked against you as a founder that you have to be optimistic to to to create a a startup.
And and, you know, you you encounter so much rejection, you know, in the early days of a startup, whether it's you know, prospects Beller you no or employees who, you know, or would be employees who who who don't wanna come work for you or or you know, investors who say no, there's just so much rejection that a, an entrepreneur, I think, does have to be fundamentally wired for optimism.
But if that wiring kind of locks them into this happy talk mode and they can't and they kinda lose, the ability to see ground truth the the reality of their situation, that's where it becomes a huge problem.
And so I think the best entrepreneurs are able to maintain this dual state where they're very optimistic about the vision of the company and where it's going and and that it will ultimately prevail, but they have tremendous clarity about the day to day challenges and what they need to do right now and and the existential risks, and they work to systematically knock off those risks. Kinda likewise, Andy Grove paranoia.
So optimism is great, but but paranoia is, is it's just necessary during this time, and it's, sure, things might bounce back in 6 months time. But what if they don't? Because the unemployment rate is through the roof and we may be not social distancing, but the sort of downstream societal impacts are gonna be, way bigger in And I think the the sort of paranoia is is absolutely a key asset in good times and and bad times. Yeah. I I think the whole, you know, only the paranoid survive Pete.
Yeah. It it very much dovetails with this. You know, what what does it mean to be paranoid? I think what it means is that you are constantly seeking disconfirming evidence. So you've got a thesis, but you, you know, and you're you're that you're optimistic about. But it doesn't cause you to have kind of confirmation bias. You go looking for the reasons why it might not work.
You go looking for the big existential risk factors so that you could systematically eliminate them so that you can work the problem. And if you're just not sort of intellectually honest about the ways in which the startup isn't working, then you won't be able to solve those problems. I mean, the the the key is you have to I guess you have to be paranoid in order to find problems, and you have to admit the problem so we're able to fix them.
And the the reason why happy talk is so pernicious is that if you can't if you can't even admit to yourself or your board or whoever, like, what the or your team, what the problems are, you're definitely not going to solve them. Yeah. I I think there's, from a paranoid perspective, there's I mean, there's also just how to manage risk.
I think you've you've seen how, you know, the conversations with founders who are saying, I think we're delayed these cuts or the these changes because it they think it will help. They'll they'll be in a position to register in the future. And I think you you know, that this is not just a the outcome of a failure of mistake here is your company will go bankrupt. That's right. And I think There were very few examples of bankrupt companies in kind of in recent history.
It's just because we've been on this kind of a linear boom, But the bankruptcies are like you you remember the kind of blogs. I mean, the ticker of bankruptcies that went through in 2001, and in 2009 was just a daily occurrence Yep. Of company. And then layoffs is one thing, but bankruptcy has worked on it were it daily occurrence. And I think that seems so far from the truth. And so just managing risk, of course, you can sort of make some changes today.
And if you don't if you don't have precision on those, then the downside situation is not necessarily a down round. It is, it is bankruptcy. That's right. Which is which is gonna it's gonna be a real very real situation. And that how just from a communication perspective, and we we've talked earlier how, transparency with the team to get them to kind of have confidence in the plan and confidence that the team is is critical. You know, that said, you know, transparency can be a double 8 Morgan.
You know, my my sense is today is that teams are looking for almost true transparency in what's going on into an organization. I'm curious to get your take in terms of the degree of transparency within Morgan organization, how necessary is that from a, from a, from the average employee, not just to the board. I, I mean, I think it's it's very important.
You know, we Beller with this, I mean, very different type of issue, but we dealt with this to some extent of benefit when we had to do a turnaround there. To some degree, the employees already know that there's a huge problem. And if you don't acknowledge it, or admitted Pete to it, then it just again makes everyone feel more anxious because they feel like it's not being addressed or it's being covered up or, you know, rather than cleaned up.
So I think the the transparency is is very important. And the only thing I would just add to it is that when you you you do have to kind of give people, you know, I've called the hard talk kind of the opposite of happy talk. It's the it's the, I'd say harsh assessment of where things currently stand. I think it's important to combine that with a plan moving forward that gives people some hope.
You know, I don't think you just wanna lay all the negatives on people without also giving them a highly actual plan to let them know that if they do those things, there is a path to success. Yeah. That it's it you know, we're there's a lot of talk about wartime CEOs and we reference Churchill and it and it's sort of, you know, giving almost every team a mission and an objective. And this is their mission to achieve.
And if they succeed in that mission, then ultimately other people see their mission than the company be successful. And, you know, like any sort of any mission, you're gonna have these unexpected surprises and unexpected changes along the way. And, you know, you don't know, necessarily, you don't have all the direction of what to do, but it's imperative that the teams go out and execute on those individual missions and innovate along the way.
But that that's sort of clarity about what's the last of Pete, and I've seen 98% of the time that people rise the rise of the challenge. They kind of get excited by this. They can see the path. If there's if it's a realistic path, then the sort of energy and ferocity and innovation comes out. And it can be inspiring for many teams. They, they go from deer and headlights through to commandos and, and really figure out that this is the part to be to to to success. Yeah. I I agree.
That's that's, very well said. Yeah. I think you can focus people's energy on on missions on a concrete plan, then they're they're gonna they're gonna wallow in the negatives and the anxieties if they don't have that. But if they have a a tangible plan to execute on, I think they will enjoy that. They prefer that.
And, you know, if you're on the other side of whatever hard cuts you can make, then I think that's it's doubly true because they, you know, this is a team that you've decided to stick with. And, it's very important to convey that that, you know, obviously with any cuts that you have to make are very unfortunate, but the people who are remaining are the people who are the most important, moving forward to accomplish the mission. Sort of extend the the kind of wartime CEO, you reference Churchill.
I'm a I'm a big Churchill fan as Beller. And, you know, he's obviously a great kind of leader and an orator as well. So a lot of his quotes and stories kind of resonate. You know, there's many kind of quotes from Churchill at this time from you're going through how I'll keep going was was one of my favorites or the never let a good crisis go to waste or the empire of the future or the empires of your of the mind. Yep. You you referenced Churchill in your article.
What what's what was the reference then? Well, he, to to me, he's an exemplar of hard talk. Which is the opposite of happy talk. And, you know, when you read his speeches, there's a type of, bracing clarity to them where he acknowledges what a dire situation they're in. There's no kind of shirking away from that. He talks about how the the British way of life is at stake, not not just that, but all of western civilization.
You know, he talks about how, you know, if the Nazis win, it it would be, you know, it it would take civilization back to some dark age I think, what does he say perverted by the lights of a, dark by the lights of a perverted science or something like that?
Anyway, there's a lot of, like, bracing language about the, the dire situation they're in, but at the same time, there's also a lot of, inspiring, you know, language in there as well that if they do you know, face this this menace and and when it will be, you know, the people look back for a 1000 years and say this is their finest hour. So he he manages to find I think a really, great combination of, giving people the the ground truth, but also inspiring them. Yeah. It's, It's remarkable.
Yeah. It's remarkable. There's a lot and some great movies as well. You know, given this kind of very strange Pete up where we're remote working. We're collaborating over Zoom and kind of online. I'm curious from your perspective either sort of tips or or tactics that you're seeing from founders or teams or also just how to manage tough conversations over this environment.
It sort of feels that in some ways, the stress of the situation, plus there's sort of, frankly, the kind of impersonal nature of these these platforms almost makes it easier to have hard conversations, that you sort of forget with perhaps the niceties and that kind of chitchat and you get down to the, kind of, the really hard issues. What's, what's your perspective on given the strength working environment? You can't look some of the eye. I can't look someone physically in the eye.
And kind of have these straight conversations. How are you seeing founders navigating it, either in the board conversations or in the team conversations? Yeah. I mean, it's the the, the idea of doing layoffs via zoom, or I'd say even the the postplay off conversations where the rest of the team gets so much harder because you can't do it in person. There there's that's definitely true.
I think that, you know, if if you are gonna do layoffs, I think there needs to be a communication plan that's really well thought through, not just for the people who are being laid off, but also for everybody else afterwards. And, like, like you talked about the the reasons for why this is happening and what it means and what the path has been it have to be over communicated to everybody, you know, whereas some of these things might have happened in a all hands meeting before to some degree.
Now, you know, you may need to do all hands via zoom, but before that, you might wanna just do more one on ones. Or if the CEO can't do them all, then the exec team needs to, you know, go through, you know, run down a list and maybe every member of the exec team, you know, every employee is talked to by somebody for 15 minutes, half an hour, whatever it is. So, yeah, you really have to think through that.
Yeah. I think that the human element of what's going on, I think with a sort of stress and panic that's company seeing, if they forget the human element, then, it's very hard to recover from that just because or so much of the success of helping our company Right? It's from a challenging period as the culture. And, it's particularly hard to manage and curate cultures right now.
But if you're able to figure it out, or if you have a strong culture to begin with, then you're gonna be in a much better situation.
I was gonna say we have a couple of startups that, were fully remote And, you know, I was, I've always been a little bit skeptical of that because the companies I've been involved in, you know, had a strong kind of central headquarters but they they're they're managing quite well with this because they already had all the processes in place to to kind of keep hold their teams together. So, for them, it's been easy. It's been no change.
And then everybody else, they've had to figure out how to do it. So maybe so maybe let's switch to COVID nineteen. So I guess in Silicon Valley, like, in the in the technology ecosystem broadly, like, what do you think, we're doing right? And perhaps, what do you think we're not doing enough of Well, there's been a a weird dynamic over the past month where I feel like tech Twitter has advocated for things and the the so called experts have been against them.
And then, and then a week or 2 goes by, and then all of a sudden, you know, the experts get on board with it. Yeah. And so, like, mass is the latest example where, I mean, I don't feel like I'm an expert on anything, but I've been tweeting about the need for mass for, you know, over a week And, it was just crazy to me that that wasn't part of, like, the standard kit of things that we were doing.
And, and then finally, the, you know, the exports just caught on board with that, There are other things. The use of, blood serology tests is a way of doing, you know, at home fingerprint testing you know, we were treating about that weeks ago. And, now the FDA has finally just gotten on board with approving it. The expansion of the right to try and and use things like hydroxychloroquine. Don't know if it's gonna work, but certainly makes sense to, to be trying these things.
So, and all of these things have ultimately happened. It's just, it seems like the experts have always been a couple weeks behind. You know, I'm not sure exactly why that is, but, I mean, I do feel like for us at at Craft, we I I feel fortunate that the people that I know a bunch of the people on Twitter who have been very early on this. And because I know them, I sort of trust them, And when I saw them tweeting about what was coming, you know, we we took it more seriously, I think.
And so, you know, at Kraft, we started doing work from home on first. It was about 2 weeks before the shelter in place. And, you know, that turned out to be a very important time for people to get ready and get whatever supplies they need to And that happened because I was listening to Biology and, you know, other folks, you know, who I know on Twitter. And so it feels to me like tech, Twitter's done a decent job of being ahead of the curve on this thing.
And, you know, I'm, I'm certainly grateful to all those people who are kind of the early warning system for this. Yeah. For sure. I think that's just I mean, when you're in a Silicon Morgan, you often describe it a Beller. And in this context, the echo chamber, it was very noisy weeks ago. And I think, in the good and the bad of Twitter, it sort of amplifies perspectives and, it's very true. And I think that's, you know, San Francisco and Mayor London Bridge was ahead of the Currier.
Many things. I'm not sure about how much those influenced by, the sort of tech sector, but, you know, I feel like today, San Francisco is in the fortunate position. Silicon Valley's of Morgan position relative to a number of other US and international cities, for sure. It seems like the one place that took it seriously before it was directly hit hard.
It seems like the pattern just about everywhere else in in the US and I'd say probably Western Europe as well is that people haven't really taken it seriously until their own social networks are impacted.
You know, when it was in in Wuhan mostly, we were seeing these videos of them, you know, Pete in hazmat suits, you know, doing these, the streets being empty and being disinfected, you know, by these white plumes of smoke and there and, you know, there was just very little coverage of it in the US and, you know, Pete, it it was just it it felt like something was just happening somewhere else in the world.
And then it happened in Iran, And then it happened in Italy, and there was still this sense. Well, that's, you know, not gonna happen here. And, you know, then it started happening in Washington State and You know, even New York, it they were very, very late to to react.
And I was getting text messages from friends in New Morgan, and there was just no awareness of it happening there, and they were kind of, dismissive of the, you know, the the crazy tech people on the West Coast are paranoid about this. So it does feel like San Francisco was slightly ahead of the curve and we, you know, again, we had these folks who were a little bit of an early warning system on Twitter, and it's been a great resource.
I mean, the, the strength of Twitter is is that is the ability to get decentralized information routing around these experts who don't seem to know what the hell they're talking about.
I mean, if you go to the WHO website, the things they're saying on their website are just manifestly not true, you know, that you don't need a mask unless you're taking care of someone who's infected with COVID 19 that, you know, that maintaining a three foot distance from someone who's coughing and sneezing, is sufficient. I mean, things like that's crazy you know, the best part of Twitter is being able to get access to decentralized information.
I mean, the worst part is kind of the tweet mobs that you also get, but there is something very positive about it right now. From your perspective, what do you see is is some of the longer term impacts on society and Silicon Valley? What do you, you know, is with an investor hat on? What do you see as some of the opportunities? Well, it's it's very hard to know the future. I I sort of see it as scenarios, and then you kind of assign a probability of scenarios.
And I think right now, there's kind of three scenarios. There's the v, the u, and the l, which I, you know, kind of generally applied Flint terms of recovery. Recovery, but I think you can also use that as a proxy for societal impact and geopolitics and a bunch of other things. I mean, if the US doesn't have a V or U shaped recovery and it gets into an l, then where implications are gonna be huge.
And, you know, we don't we don't even fully know what all of them are gonna So, you know, I tend to think those are the scenarios. And then I I've got friends all across the spectrum.
I've got some of who are very optimistic and think it's gonna be like a v and that we'll get, you know, that that will arrest the, you know, in in in April is gonna be tough because of the lockdown, but that will arrest the exponentiality of the virus And then, you know, starting in this summer, maybe June or May, we could start getting much more fine tune in our policy and we let people out of lockdown based on risk factors.
And we have, you know, we, you know, have gloves and masks and and ways of managing that that are aren't as bad as lockdown. And that by the summer, you'll have, you know, treatments and, you know, towards the end of the year, you'll have a vaccine. And so they're they're kind of on the optimistic side of this.
And that would be kind of the v. And then there's the u, which would say that basically the v story is largely correct, but the wound we've, you know, in the sense that, yeah, we'll get treatments this summer, and we're gonna figure out an alternative to full lockdown. And eventually, we'll get, you know, we'll get a vaccine in a year. And, but they would say that that narrative is largely right, but it's the wound we've suffered is more grievous than that. It's gonna take longer.
It's not gonna be perfect. It's gonna take a few more months. We're probably likely to have, you know, 18 month 2 year to something recession. And then you've kinda got the the the the case that's worse than that. Which is, that actually, you know, that we've never had a running stop of an economy like this. And, you know, I was watching an interview with Kevin Wars former Fed governor the other day.
And the way he put it was it may be possible to bring the economy to a sudden stop, but it's unclear that we're gonna be able to to to do a some restart of it. And right now, it does feel like the economy is sort of unraveling.
And, you know, there the the government is trying very hard with these massive bailouts to, you know, multi $1,000,000,000,000 bailastic hold everything in place, hold it all together, but somehow if it just slips out of their fingers and you, you, you start to just see, you know, ripple effects of distress of people becoming insolvent, you know, creditworthiness to sort of sequential ripples, you could really see a great unraveling.
And so, you know, that that that would be kind of on the extreme end. And if that happens, we'd be looking at a whole new world order in which I think the US would probably be compelled to pull back from many, if not just about all of its overseas commitments, you know, you could really see a change in the world order where China becomes the world's biggest economy. It already is sort of at parity with the US.
But in a world in which we were wounded or or crippled and, and they were still humming along. That would be you know, that would be a huge geopolitical shift. And there could be very big implications from that. I kind of call that the fall of Rome scenario. Which might be out to the out to the end of the of the l. But, you know, I'm not saying anything's are gonna happen, but I think we're just scenarios.
And, the the the reason why the the Morgan is so volatile right now is because these are the scenarios. I mean, you've got everything a, a view shape recession to a deeper recession, to a depression, to, you know, a new reshaping your world order. All these things are on the table. And when the scenarios are that extreme, every data point can swing them Morgan wildly as people try to assess which of these scenarios they support.
Yeah. And it's and it's very unclear where this is which of these three scenarios is right now. I think you're you know, because there's not, there's really no precedent for this. There's no, there's no playbook. This is not, you know, an asset bubble driven recession. And in Flint intertwined global economy, it is very unclear kind of which, which of these scenarios is, is going to happen.
Obviously, from, kind of investing and technology but it seems it's it's almost it's very surprising that, you know, I think there are many sectors sort of principally education Beller care. Which have been, you know, almost like VC Currier shortcut is sort of avoiding education and avoiding health care because there's really a lack of successful, large number of successful startups in those in those areas.
Yeah. It does feel that maybe now is the time for education and Beller care companies that perhaps can get over the friction of regulation and kind of societal inertia, but then now is a time for building quite interesting Beller care and education companies. Currier, as you've, you know, clearly, we're a bit early on to be sort of enthusiastic about kind of how this changes and how we use to know chain society.
But is there anything that you're seeing or sort of, obviously, remote work is just an emerging trend that will be accelerated Yeah. There's a whole bunch of trends that were already underway that are just gonna be turbocharged by this. Obviously, the shift to re remote work you know, e commerce, I mean, death of retail and the shift to e commerce, that is just, I mean, that's going to happen 10 years faster now.
I mean, it's already happening, but hard to see, you know, 80 seems like 80% of retailers have been got a business now. Everything that can be delivered will be delivered, basically. I mean, that was already happening. The shift from, restaurants to delivery as Beller.
And and, you know, we were a series a investor in top kitchens, the whole idea of ghost kitchens, you know, once once the main consumption of restaurant food is delivery, then it changes the whole to a whole foothold that a restaurant needs. So that's that's happening. You have the shift from, you know, movie theaters to streaming. You know, I saw that Netflix and Disney have roughly the same market cap, which is just unbelievable. It's extraordinary.
So there's a lot of these trends that already happen and I think now they're just gonna be accelerated. And then there'll be, you know, hopefully, like you're saying, in the areas of Beller care and education, we get a Flint with red tape so that I mean, this is where I think the wartime mentality is very helpful is that we can finally cut through a lot of those red tape, you know, telemedicine, you know, letting doctor practice across state lines, you know, would help telemedicine.
So there's a lot of things like this that, you know, we're, we still need the government to react in the right way, I think there could be a, an opening up, of these markets based on, based on wartime realities. Yeah. It's so true. It's the new reality that we're in. Or David, it was terrific to have you on today. Thank you so much for your time. Stay healthy. Stay safe in this kind of crazy world we're in. So Thanks again for joining us today.