Today, we're with Garrett Smallwood, the CEO of WAG. Garrett, somebody that we've known now for 5 years. He, grew up in San Mateo and went to University of Arizona and then went over to Red Beacon. Where he was a product manager, and then he was over at Pillow, and then started the company that we funded at NFX years ago. And, it was called FinRise, eventually backed by Mayfield. It was, in the consumer space around veterinary loans and and whatnot for consumers.
And then he became an EIR at NFX and, and after the acquisition of Finrise by by WAG ended up, sort of climbing the ranks there. And eventually, became the CEO of the company. And today, we're gonna hear from Garrett about, profitable and efficient management of companies and thoughtfully operating in this new era of COVID and after COVID and on switching mental models. Garrett's been through it all. He's gotten all the badges.
Of the of the founder and the entrepreneur and, has has great insights, that we've shared over the years, and we're very pleased to have you on the podcast today, Gary. Thanks, James. Good to connect. Yeah. Good to see you, man. So let's talk about your path with with Finrise and under WAG and what happened there and and now you're the CEO. How'd that all come down? Okay. So I started FinRise, I think, in 2016, and I joined WAG via the acquisition of FinRise.
And I I joined WAG basically to launch the Northern California office. For those who don't know WAG was a LA based and founded business. One of the few. So WAG is the on demand dog walking company most notorious for. And, been at WAG most recently as the head of product and partnerships. And then took over a CEO in November of 19. Got it. And how did that all cut take place? Why why did they choose you? There was a lot of people. How many people were there at this peak?
Yes. So WAG had around 500 employees when I first took over. And just for context, say we're about a little less than a 100 pretty huge transformation. I would say, look, there's a lot of news around WAG. It's it's been an amazing ride and amazing adventure. I think it was just a different time for the company.
I think you look at WAG, the history has been fundamentally like growth at all costs, huge emphasis on kind of quick market expansion, geographic footprint, I think when you take a step back, there's probably just a new way to build WAG and one that I firmly believe in, which is really focused on operational excellence, strategic advantages through services and density and, being really smart about kind of the way you build the company going forward. Got it.
And they had a lot of different leaders at company and, with 500 employees, and they realized that there was a new time coming for WAG. This was pre COVID even.
And COVID increases the the challenges that the headwinds, the company like wag faces, but what do you think it was about your style about how you think about your mental models, which let the board know that you are the person to become the CEO, even though they had made a brought you in as an what I've seen Garrett over the years is there's a certain way you think about operating business, and I think this is what's going to be interesting to the founders who are listening to this podcast.
Yeah. I would just say I'm really impatient. You know, I I actually had dropped out of college. I I didn't I just didn't think it was valuable. I I I think it's kinda rude, but I leave meetings early. Like, I'm just a really impatient person. And I think when you build a startup, I really I think WAG is still a startup. You have to be impatient. You have to move really, really quickly. You need to make the right decisions fast.
And I think that that's, a really, it's a huge skill when you're building a company is your ability to kind of rapidly make good decisions. And I'm not saying I always get it right, but I can tell you that I I really don't like being slow. I don't like sitting in place. Got it. So one thing for sure is the speed that they notice. What Beller? It's, I think, just a focus on efficiency. So, you know, from top to bottom, you know, I, I've stared our P and L at the end of every month.
I go through the Beller spreadsheet with the team. Beller single department. I I I Flint to customer service calls. I take customer service calls. You know, I I help write marketing copy. I think as being part of all the different parts of the business is really Morgan. Also, you know, I think having a good rapport with the team, and we have, like, a pretty tight knit team now. It's a great culture. I mean, you could talk to the employees.
I'm probably biased, but there's a really tight knit group of people. And I think that, you know, I, part of my motive is really keeping a really tight ship, making sure that everyone is there understands why they're there and why they should be there and what they need to do and keep that ship going. And so I really pride myself on. So focus on culture, speed, order to have speed, what do you need to make fast decisions or good decisions? Obviously, data. I think first thing's data.
I I think second thing is really foresight. Right? I think you have to have an understanding of where you wanna be. Think a lot of people go too extreme on one or the other. They go, okay. In 5 years, we're gonna be X. But I think you forget what you need to accomplish this year. Again, not that we always get it right, but I think you need to have a pretty good blend of what do I have to do today that's gonna get me to a spot I need to be in 2 years?
So a balance between overly visionary and overly reactive. Correct. Right. And then you're talking about building rapport with your team. So that sounds to me like, human relationships. Culture. Culture. Yep. Right? Actually getting in the weeds with the with the product itself, looking at whether those numbers are are real. And not not maybe not deceiving yourself, maybe being honest.
I mean, it's pretty easy for founders and CEOs and entrepreneurs to to get into this I think especially pre COVID, this kind of loop of, I'm amazing. I've raised all this money. Life is great. Nothing can go wrong. I think you have to be really honest with yourself each, each scenario, what's actually happening in your company, what's actually happening in your business, and, and have people around you that are holding you just as accountable. Got it.
So it sounds to me like, this is the fundamentals. I mean, it sounds to me like what you're preaching is is fundamentals of being being an honest person, being communicative person being a data driven decision maker. Yeah. What are some of those metrics that you think that people should be looking at? I really like, Alfred Lynn's approach at Sequoia, of a metric that only matters to your business. To a WAG, we have 2 metrics that really are specific to us.
One is our average time to fill a request. Like, we're an on demand marketplace. It's, it's an expected, you know, consumer reactions, how quickly we're refilling that request. And the second one is actually specific to, like, the network, which is, services within a given neighborhood or density. And we know that as those increase, that ratio increases, we we see more kind of organic installs and the business grows faster. So those are there's like wags specific. Right.
And and each company is gonna have their own metrics but figuring out what metrics matter to your business is a core thing that founders need to do to give you a unique perspective on how to win in your market. Is that what you're think that's right. Although, to your point Currier, I think it is back to basics, back to fundamentals. Like, retention is always gonna be important. Right? Like, frequency, CAC, LTV, all those things are always gonna be important.
Like, if you don't know your NPS, I I think you have a bigger problem. So I think I think there are just fundamental metrics we can't get away from that are, like, more important than ever. So so you had five other people at WAG. The board says, okay, Garrett. We've watched you now for a year, year and a half. Working inside Morgan. We see that you have the cultural data driven Pete.
The things that this company really needs to go back to fundamentals to be thoughtful about the operations, to drive toward profitability, to be efficient. We want you to be the CEO, and you said, okay. Fine. And then you you need to do surgery to save the patient. Can you tell us a little bit about the surgery that was required? Yeah. So if you if you just take a step back, I, I actually built the plan to say that was the right path forward.
So I think, you know, I James to the board and I said, look, I think fundamentally it's a great business. Do they ask do that, Garrett, or did you do that on your own and just bring it? I did that proactively. Yeah. I think that's an important point to to to point out to founders. Is that you sitting inside of this 500 person company. You are an important person, but you weren't running the company. You proactively created your own plan for what would save this company.
Yeah. I mean, I think it's it's just a different path, but I I I had a strong opinion that there was another path for the company It probably was the right path. And I was gonna stake my, like, I, obviously, want to stake my, kind of, my current career on it. But I think fundamentally, it's the belief that I do believe this is a great company. There's a lot of reasons why it's a great company. We have really high average frequency for our customers. Attention is strong.
We have a strong consumer brand, but I do think that it really required you to question every single assumption. So we did things to, I mean, to be clear, I've never done before, right? So we bought out our largest investor, part of ways amicably. We decided it was the best path forward for kind of the current business. We, refundamentally then restructure the board. So we have 3 amazing firms in our board who are deeply committed to the company.
Niko from General Catalyst, Roger Lee from Battery and Scott Stanford from Acme, previously Sherpa, so still deeply committed board. We resized the whole company Right? Like I said, we went from 500 to less than a 100 in less than 90 days. And I it's an unbelievably humbling experience. Like, these are great people move the headquarters from LA to the Bay Area. Do we actually shut down our LA office? And and it's it's it's painful. Right? These are great people.
They're they've been deeply committed the company, but we have a new, we had a new Pete, and we had, and we had to make some difficult decisions. We resized the whole leadership team. So new had a flanist, new head of marketing, new operations leader, had a product, literally overnight, whole new team. And, and we fundamentally rethought and rebuild our whole strategy.
We have a whole new kind of, you know, way of operating the business And I and we just do to be totally clear, like, our business is still great. Like, we're as big, if not bigger than we were, we're still helping tens of thousands of pet parents we're still helping, you know, drive this service across the country. So this is radical surgery. I mean, for founders who are going through sort of a laying off of 10% or reducing their their salaries by 25%. Like, you went through everything.
You move remove people from the cap table. That never happens. You changed your board. You you changed the headquarters location. You, had to let go, you know, 80% of the employees you've you've changed the numbers and the metrics and the dashboards and everything about how the business is perceived and run and communicate internally. 100%.
Yeah. Absolutely. So I just I say that because, right, you're getting all the badges from the founders and and that that sort of extreme surgery, I think, is it sounds very daunting. I know it was daunting. I know it was difficult, but I also think it's a great example for founders to realize how far you can go. And that, probably what you're going through isn't as radical as what Garrett's gone through.
I got some great advice early on is, you know, look, I don't think you can make extreme enough decisions. Was like, I think you'll, you'll think they're extreme, and you'll look back and be like, that was the right decision. I mean, to be clear, it's a first time for a lot of us, right? Like, a lot of founders are still first time founders. A lot of them are are first time kind of in a big company. A big company could be 50, 150 people, 500 people.
And when you think about removing 50 people, you're like, that's a lot of people. But like, what's a 100 what's 200? Like, when you're going through what the world is going through and I think there's a fundamental shift happening of what going back to the fundamentals. Pete are gonna actually look at retention and profit contribution margin and marketing expenses. What's in marketing expenses? And you show me your cohort tables.
Like, there's gonna be a whole, like, reckoning how we evaluate these businesses. I don't think you can make extreme enough decisions. I think I think it's a board responsibility to tell you if they're too extreme. And what sort of mental shifts can you encourage people to make? I mean, isn't that the fundamental problem? Is that we all have been operating with momentum model. It grow at all costs or, you know, defeat my competitor or whatever whatever the mental model was.
What's that shift that that you were able to make more easily, apparently, than others? Well, I wouldn't I I wouldn't say it was more easily. I would say it took some time. It took some it was some heavy heavy weekends. And it's it's very uncomfortable, right? It's it's an extremely uncomfortable thing to have to question even your own assumptions because you think like, oh, we're crushing it. Right? Like, that's what everyone tells crushing it. This is great. This is awesome.
And suddenly overnight, you're no longer thinking you're crushing it. And you have to you need to figure out why. And fundamentally, I think that you know, as as the founders, as the CEOs, we have a fiduciary responsibility to make sure we're maximizing shareholder value. Well, that's the simplest way to put it. And shareholder value are your employees or your customers. They're yourself, there's your board. And what's the best way to maximize shareholder value?
Well, if you know you're not gonna be able to raise as much money anymore, which I think a lot of companies aren't, or they're not gonna be able to get great terms, then it's to preserve cash and focus on maintaining and acquiring customers. That's like the only 2 things that matter, right? Like there was a great, Harvard question they ask every incoming class that have NDAs of why do businesses fail?
And they go through they go through almost everyone in the room, and no one says because they don't sell they don't sell products. Right? That's the reason. Like, the reason business fails because they don't have Pete buying the products. And so I think that with this new fundamental shift, like, the founders have to realize that it's not gonna be as easy to go raise 50 at 2 Right? Like, I have, I had friends literally being like, Oh, yeah, I'm gonna go raise 5250 next week. I'm like, well, how?
It's like crazy to me. And it was like kind of easy. I think that that 50 at 2 50 is now gonna have a whole different, you know, set of expectations with it and a lot more competition. Right. I heard somebody said the other day that the best form of financing is revenue. Yes. Once again, it goes back to the fundamental the fundamentals. I think Buffet and and I just think, like, that whole Berkshire model will come back and, like, full swing.
People are gonna love these profitable network effect businesses that churn off cash and have great leaders, and that's gonna be back in full swing. I think you're gonna see more Pete on Buffet than we have in the last 5 years. Right. I mean, we've got a generation that just has never seen a downturn. Right? It's been 12 years since things have just been going up. And so you could you could be could be 34 and never haven't seen a downturn. I mean, and it's it's it's sectors too, right?
Like, for so long, if you look at these portfolios, real estate has been this driver of returns. And it's because real estate's just been this continue year over year, beautiful growth led by kind of the financing of all these companies. And now you just, it's weren't for reckoning. And I think you're just gonna see a whole sector. I remember when I started thin rise, when we started thin rise, no one would invest in travel.
No. That was like travel was the no no. You weren't supposed to start a travel within 24 months, everyone was starting traffic. Right? Everyone's traveling. Well, I get I bet you for the next 2 years, travel is gonna be dry. When you went through these layoffs before COVID, you learned a lot about those experiences. It's not easy to lay people off. These are these are good Pete, hardworking Pete. They know what they're doing. What then happens later?
How did you, first of all, build your culture backup, so that, you know, right now, people have the excuse of COVID back then you didn't. How do you build the culture backup to a point where it's is now where it's a good culture again, or some of the tips and tricks? Yeah. So first things first is a founder, or CEO, whatever you are. I think the most important thing is to cut deep and fast So, like, whatever some first time, you can't trust your team to decide who to cut.
I think that's, like, incredibly responsible. Like, these people are managing usually their team, and they're gonna have strong emotional connections with the people on their team, and they're gonna fight really hard to keep them. It's gonna be really tough mentally for people to get rid of people. And so, as the founder CEO, whoever you need to be in the driver's Pete, say, let's look at every single, let's look at every single person. And I'm sure they're all great.
They have no doubt that they're, they're Pete, they're gonna be great. If they're not great, then we have a bigger problem. And if you need to go really deep and really fast on who you cut and why. And the second thing you need to do with your leadership, which is the most important exercise is say, okay, now that we're cutting all this, what's going away? What are we actually sacrificing in the business? Okay. Got it. Okay. So we don't have a CRM marketing team anymore.
That's that could be a problem. Is there some that could take that on? Do we bring on agency? What do we there's all these roles, right, that you need to now somehow put somewhere and you need to figure out are they still important? They're still important. Let's keep doing them. If they're not, what do we move it to?
The third thing is, obviously, once you do the riff, and I, and I strongly recommend that you do it, like I flew to LA and shut down the office, with with my, with my, you know, my now I call my co founder Mazzi. I threw up on the plane. Like, it's a nerve wracking thing. Like, I knew I was gonna show up in LA, was gonna have to lay off hundreds of people. It was a terrible, terrible thing. It's gut wrenching, but you better do it. Like, it's your decision.
And I think, so then the third thing is to make sure that you are now setting the tone of why we're gonna succeed going forward. So you've made the decision of, you know, fast, you know, deep cuts made sure that everything's gonna be picked up and the things that need to be picked up are gonna be picked up. And now you've reset the expectations. Why are we gonna win now? Right? We just laid off all these people it's usually the sign of a company in distress.
Why is now the time for us to believe? So you better have a really thoughtful mission and incredibly articulate strategy. And a really, really well thought out plan on how you're gonna get there. And the new KPIs, you need to be oversharing, right? I call it the 3 c's. I call it culture communication customers. You're gonna be oversharing kind of what matters going forward. Got it.
And you had that all prepared in a PowerPoint in spreadsheets on the plane as you're flying down to say this is this is the riff. I hate it. I'm throwing up on the plane, but now that now that we're down to a 100 a 100 get in a room, let me explain what's going on. 100%. Yep. And how long did that take? Was that a 2 day period? Was that a 3 day period? I flew to LA, I think, on a Monday Morgan, and I flew Tuesday night.
And by Wednesday, I was back in the other office, making sure everyone felt onboarded and and successful that we were here together, and we were gonna do this. Got it. How would you describe the culture now? I think it's move fast. I think Pete, I think people actually now get restless when they're, you know, sitting for too long. There's static. People would need to be moving in in shipping and releasing and learning. Still very data focused, huge reliance on data.
I actually have more people learning SQL than ever before. I mean, we used to have a huge team of Now we people PMs are pulling their own data, Andrea's pulling their own data. Scrappy. I think, like, they're, they're questioning their own assumptions. They're not looking for guidance. They're, they're making their own decisions.
And still, I think customer centric, we have, we have people, you know, all over the organization calling customers when they need help, responding on social media, taking those calls, it's just a huge sense of ownership. I think people feel really deeply committed to the new kind of go forward WAG. And how do you create an environment where they feel safe, their own assumptions rather than showing you that they know all the answers or or or that they're right all the time.
Well, it starts with you, the leadership team, I, I'm, I openly admit when I don't get it right. And I do it relatively frequently. I said, I thought it was going to be x and it was y and here's what we did to change. Also think we, we celebrate the failures. Obviously, you don't want to fail, but we, we celebrate it.
We go like, look, this was, this is a thing we did, probably shouldn't have done it, but we're gonna learn from And threes, I think, making sure the people around you that everyone else looks to are not just saying yes. Not going, yes, that's great. Yes, that's awesome. They're they're questioning just as much as your question. And I think it then bleeds down. Right?
It's a delicate balance to have a a question and a skeptical, culture and the communication style, but all have enthusiasm and energy. Right? It's like what churchill say, you know, success is going from failure to failure without a loss of enthusiasm. Yeah. It's on me every day to wake up and have energy. And to be excited about being here. And to be clear, I am very excited about being here. I wouldn't have taken the job if I wasn't still passionate about the business and what we're doing.
I think you have to have that same level of passion. You can't go through a riff and then show up at 10:30 the next day on a call, bummed out depressed wearing a hoodie. Like, it's on you to rekindle energy. Like, we did it. We're moving forward time to go. Right. And talk to me about some hard conversations. Like, how do you have hard conversations? I I feel like this is something that that you can learn.
You know, it's not just a matter of, gridding it out, but it's rather something that you can realize you're going into what could be a hard conversation and you have techniques and approaches for both yourself and the person you're talking to about how to not make them hard. Do you approach hard conversations? Hard conversations, I feel really bad when people don't know they're coming. And so I, I really try to set the tone ahead of time.
Like, when someone isn't figuring it out, That's usually the hard conversation. Right? Hey, you're not we're not making progress here. Like, we said we would do X and you told me you would do y. We it doesn't seem to be going forward. Don't want my conversation to be the first time they hear that. Like, they should know along the way that we're not moving forward. We're not we're not figuring out. And that quickly, right?
Like, when we, when we figure out that the job someone has isn't the right job for them, which is right, it's the right way to put it. They're probably a great person. We only hire, we only wanna hire phenomenal people who are excited we realize that the James on it were not the right fit for them anymore, they know. Like, when we, when we sit down, they're not like, oh my gosh, I wish you told me, you know, a month ago. Beller, I totally get it. I'm not, I'm not figuring out.
And I think if you take another step back, I really try to avoid hiring people who I think I have to tell how to do their job, right? Like, that's just like we we should hire smart people to go figure a smart pro hard problems Like, that's it. That's it. So I do think hard conversations are learned, and there's a lot of language you shouldn't use things like you, you know, you're doing this. You're making it happen. It's kinda like arguing with a spouse.
Like, you really, you wanna come across it as really nonemotional, really thoughtful. Hey, we, you know, we said this would happen. What happened? We're we're when you told me this, why is this no longer happening? And I think a really a everything I really like is a clear cut agenda at a time. Hey, I'm gonna come to you we're gonna talk for 30 minutes, and here's exactly what I wanna talk about. No surprises. I don't want this meeting to be, oh my gosh, well, I had no idea, Garrett.
It's, hey, you know, we need to talk about this thing that's supposed to be happening and it's not. How do you have hard conversations up? Because you talk about hard conversations down where an employee isn't doing it, but how do you have hard conversations up? Part of this is where I actually think, founders, especially first time founders need to have a little bit of ego.
You have these VCs most of the time, We're talking about venture capital back, VC backed startups and companies who are on probably 6, 7, 8 boards. They are, this is what they do for a living. They show up at board meetings. They source companies. They deal with founders. They have probably really strong opinions, but they're gonna delay on telling you them if they're smart.
And, they're gonna wanna hear what your opinion is first, and then they're gonna provide some sort of feedback, and you probably feel like you have to listen. Well, I get to founders a couple of things. One is there's no way the VC knows more about your business than you do. There's almost no way. Like you are the founder of the company. To be clear, you still own a lot of the company is your company. Like, you needed to make, you needed to make a decision.
So if you disagree with the VC, if you have, if you have a different perspective, you need to call that I, I have a general rule with my board where I give them bad news over the phone beforehand, and I share all good news together. So I don't surprise anybody. When I show up at a board meeting, and I have monthly board meetings. I love high frequency board meetings, especially during this crazy time. They're a long zoom.
I, you know, I call, I call everyone ahead of time and say, Hey, we have board meeting Wednesday. I wanna talk to all of you by Morgan, and I wanna tell you some things that we need to get through, one on 1. They all get to form their opinions. Then when we get together in person, they're not you know, plain energy off each other. They've already had time to sit, digest, come to the Beller, and provide thoughtful feedback. But again, I think it's helpful.
I had ego here too many first time founders think the VCs are like these gods. Right? Like, they they make all the decisions. I need them. They give me all the money. Like, it's your company. Like, you need to, you know, give tell them honestly, and earnestly what's going on. Ask for feedback when you want I also think it's really important to just be honest, be like really, really honest. Like, don't hide it.
I I have too many bad experiences, not mine, but friends, who waited 6 months until they told me, by the way, they only had 6 months of runway. Like, there's just Pete wait too long. It gets good to do it early and be open or not. What else can you tell people how to get that confidence? Cause it's confidence in both ways. Right? You need to tell your board and your VCs how it's gonna be.
Because you know it, but you have to also be confident to be open enough to hear the right advice when it comes along. Advise is a has a funny word. So I think every single board meeting I've been in in my life, there has been advice. And I always, always write down that advice, and I sit on it, and I think about it, honestly, I probably take 10% of the advice I receive. Maybe 20% depends on the person because that's what it is. It's advice. It's an it's an open opinion.
What I try to do is I try to get as much advice from as many smart people as I can, and then I reach my own consensus. I think one of the founder failures is only listening to one person. Garrett told me this. I'm sure that's right. Well, if I talk to 5 more people, do they feel the same way? Maybe maybe not. So I think I think it's better to have multiple thoughtful opinions than just one. I also think it's really important that there's a difference between advice and telling you what to do.
There are some things the board might tell you you need to do. Right? Hey, we gotta update the cap table. It's been too long. We just need to, we need to clean that. That's not advice. Like, they're clearly, you know, Fisher responsible to clean up the CAT cable, get something done. Now, you know, they're telling you that you might wanna reconsider, you know, your CX vendor tool because they have a portfolio company that happens to do it. I mean, that's that's a little different, right?
So I think I try to, I do try to take all of it. I listen. I write it down. I try to balance all of it with other This might be a point to to talk about, the the venture debt you got at Finrise and the impact that that had on. I mean, consumer lending. Right? So for those who don't know, so I to Finrise with 2 incredible co founders who I've known for a very long time. And, our first brand was called Beller, it was veterinarian point of sale financing.
So there's this huge incumbent called CareCredit process billions of high interest rate loans every year in in offices, dental, veterinary, etcetera. We thought we're gonna we're gonna break these guys. We're gonna go in. We're gonna lend them better terms Morgan better underwrite. All these people were getting ripped off. And what we learned was that consumer lending is really hard.
You not only do you have to have a proprietary consumer acquisition channel, so you have to get really efficient, low cost, you know, customers also have to have a proprietary capital channel because you're not selling a a service. You're selling a Beller, and so you have to figure out how to sell these dollars for, you know, more expensive than you're getting them. And I can tell you venture debt did not work for that business. Vendor debt is expensive. It's dilutive. It calls pretty quickly.
You don't have a lot of time to revolve it. And so fundamentally, venture debt kinda killed us. We had we had we'd raised, I think, almost $6,000,000 to deploy a lot of that in, consumer loans that were getting repaid, but we we just couldn't cycle through a fast time. We we did we couldn't raise more on good terms. So we're actually gonna become the one thing we hated, which is a high interest rate lender. And so we just decided it was the best path forward was to sell the company.
And that venture debt really accelerated the demise of the company. I mean, of time. Right? Like, venture debt is like a ticking time bomb. You sign up for a year, you sign up for 2 years, and then that, you know, you're you're paying it back. If you if you haven't cycled that capital quickly enough, it just rucks you. I think there are certain businesses that could re I don't know if they've raised venture debt.
You might just consider raising like debt that has know, like, every RBB has done a great job at this, but there are, there is times to raise debt. Dropbox being the most notable. I think Dropbox raised a seed in an A from Sequoia and a 2,400,000,000 debt facilities.
The only reason I think they could do this is because they cycled so quickly on the ROI and customers that they were able to, like, deploy and return the capital, and it just became much more efficient to do that then to raise equity. You don't have that, like, do not raise debt. Right. And it seems to me I bring it up because you said there's a difference between advice and then the board is telling you what to do.
And this this is kind of an in between example where a board could say, we should not take on venture debt. You know, we've only raised, you know, 3a half 1000000 of of equity you know, we we don't really have that repeatable, model. We will not take on venture debt, and that would be a pattern recognition that a VC might have that would be valuable to listen to, whereas, you know, you might not know much about it as a first time founders.
Yeah. Look, I I think VCs the three things I lean I lean on VCs for particularly my board, is understanding sectors and spaces. Clearly, they should be excellent at that. Right? They should have broad knowledge and specific sectors and spaces preferably ones that are relevant to you. 2 is, like, finances. Like, they understand P and Ls and spreadsheets and core tables and know, how to calculate LTV? Like, they they intimately understand that.
That's I really wish more founders relied on their seed investors for that. Like, hey, is this calculate am I calculating LTV, right? Is this a marketing expense or not? Like, that, that, they really get that. We don't need that anymore, but it's still fun to kind of bounce ideas off each other. And the, and the third thing is actually like financing, like, particularly the next round of financing. Hey, what's what are you guys seeing?
Okay. If, look, if we're thinking about raising a 100,000,000, what are you guys seeing in in in comparable comps? What are public markets telling us? Like, they should have those things priced out for you. You shouldn't have to do that. Those are like three things where I kind of always listen. I'm like, okay. Cool. They have comparable marketplace comps, We're seeing 6x Pete. The company's growing 30% year on year with some profitability. God, super helpful baseline. Thank you.
You know, those are things that they're experts in. You've got, got a hundred people now. Are you looking forward to raising more capital or do you think you're gonna go to distance? I I think we'd be opportunistic. I think the market's gonna be really interesting in 6 or 18 months. Look, I think my gut says, you might strongly disagree with this, that 70 to 75 percent of companies are bad to okay. Meaning, they don't have product market fit. Customers are drying up.
They are oh, they're overspending too many employees too big of an office space, which is not, there's a lot of signals, but they're backed. They still have raised anywhere between 100 k to 10,000,000 dollars. Those companies need to fundamentally pivot quick and I think very few of them will because they don't have that they don't have that reflexology. They're not ready. I think 20 percent of companies at best are good companies. Right?
Good companies possibly on their path to being great companies, but also maybe going to be okay companies. Those companies that have some sort of product market fit, some repeatable acquisition engine, CACLTV to make sense, some sort of path may lead to profitability. Hopefully, if they make the right decisions, hopefully it's not removing marketing expenses or, you know, stock based compensation or anything crazy. And then you have 5% of companies that are Like, Stripe is a great company.
Like, everyone wants to own a piece of Stripe. I think great companies will continue to be able to raise large pool to capital albeit slightly decompressed valuations because of public market comps. I think good companies will, either figure it out or they'll get super diluted.
And I think what I mean by figured out is, I mean, I think that they're all out of their businesses mostly have been compressed by 20, 30, 40% through COVID, and they'll either okay, we need to expand our runway by 6 months or 12 months, or we don't because we think we can raise another 50 or 250. I think all the good to battle will be And so I think for, for good to great companies, you're gonna have an environment that has a lot of capital ready to be deployed on fair terms. It's interesting.
You know, this is the the other side of the sword for Silicon Valley because when you talk to people who don't live Pete, who move here, they often say, the biggest thing I learned to look at that was how to think big. And where I come from, people just don't think this big. And with the bigger thought, you have bigger ideas about how to grow faster and how to make your product Beller.
And that positive feedback between thinking big getting the fundamentals right at scale is a positive feedback loop, but it feels to me like the last 13 years, we've gotten away from that toward just sort of the saccharin or the sugar of growing fast, which is I want my metrics to go up, but I'm not gonna pay attention to the fundamentals of the business. Because we need to think big. And if we don't think big, then we can't raise more money.
We can't attract the top Pete, and the top people are still gonna go to Facebook or Google or whatever. And so I think I think that what we're finding now is to be a sort of deadly mindset that needs to shift is one that it actually took some time to train people in.
That would actually produce some of these larger outcomes that get everyone all excited in Silicon Valley and around the world about, you know, the the incredible garage, the creative cookie garage of of Silicon Valley where these amazing things come out of. Yeah. They're amazing because they're at scale, but they're few and far between and and most of them, companies like LinkedIn and others had real fundamentals built into them all the way along. And and we've just gotten away from that.
We we've we've separated the the juice of the fast growth from the fundamentals that actually Pete you there on a sustainable basis. I I, but I totally agree. If these things take time. Building endurance, the enduring business takes a lot of time. It does. And it takes a lot of attention to the details, like being on the customer calls and looking really at the marketing spend. You have to do everything. You have to do literally everything. I I think it's a really hard job. It became glorious.
Being a founder, being a CEO, became this, like, glorious, amazing thing I've want to do, then you realize how exhausting and difficult and time consuming and stressful and anxiety inducing it is. And you're like, I don't know if I really wanna do this anymore. And I think there's gonna be a whole lot of people who really don't wanna do it anymore and go back to Facebook and Google. Yeah. No. I agree.
And I think that know, when we started to get the blogosphere in 2004 Morgan everyone could read about being a founder and everyone could read about what venture capitalist. All this was opaque until 2004. There's no way to learn about it. There weren't really any books. There wasn't any movies. There wasn't Silicon Valley on the TV. There was nothing, and and now it's become this lifestyle Pete who think they're choosing.
It's like a package, but it's very hard to describe the suffering that goes on with it. I mean, look at look at Bennett Pinterest. Like, that guy suffered for years. Like, endured, like, suffered Jeff at Twilio. I'm sure. I think he had a, like, really interesting starting story. Like, all like, these really amazing businesses that we all odd now. Like, it took so much time, and they went through 2008. Like, they really struggled. And, they made it, and they're doing it.
And, like, I whatever one claps their hands now. And given it so hard, but given that in most really interesting markets, you do need venture capital in order to Pete these days because if you don't take it, somebody else will. What do you look for in venture capitals? Because you've been dealing with them for 7 to 10 years. Right? It's a hard journey. You get married. Suffering. You're gonna have all the badges on your chest from the firings and the sufferings and the lost and whatever.
So you're you're on a team with someone for 7 to 10 years. How do you choose that person? So personally, and this is in no way reflective of the WAG board. So, again, I actually really do Morgan have a great relationship with. I, first thing I do is that, look, it did this person operate. I think being an operator is just a whole different mind There's a lot of VCs who have come up being VCs, which is fine.
I'm sure they're great, but one of the things that's really important to me, especially, like, early on when you're starting a company, it was for me at FinRISE. Is, has this person operated? Cause it had to make some really difficult decisions. They've they've been in it. They've been in the trenches, right? 2 is, how long have they been doing this? That action gets really Morgan.
And they don't mean not necessarily being a VC, but just investing and advising and working with companies, because at the same time, they're gonna have seen a lot, right? Like the bigger their portfolio, the more people they've worked with, the kind of more eyes they have, the better their network, like there's all these benefits to that, just the time in the world. And the third thing is your ability to be authentic I had far too many coffees where I didn't get anything out of it.
Like, I almost didn't remember the person's name. And to me, like, I love when a VC shows up and they've been really thoughtful about the email. They say, okay, cool. Got it. Thanks for the intro. Can you, you know, don't send me X. Like, if you just give them a blurb, they do their own research, they go to the website, check things out. They have an opinion. They come with thoughtful questions. Hey, there's this competitor. Hey, there's this thing. Hey, have you thought about this?
It's not just like this learning experience. They're actually, like, trying to get to know you. And I think that's a huge differentiator. There's too many VCs who look at this, like, a sales pipeline. And it they're just just trying to suck everything out of your, like, vampire I mean, that's just like a really awkward experience. I'm very proud of, what you've done with Wagman. It's a testimony to the board that they noticed who you are and what you can bring.
And also, I'm very proud of how you executed the whole situation and, brought WAG back to a place where it could be a great company and hopefully can have 500 people again someday. Alright, James. Thank you. You bet.