Russ Heddleston, founder of DocSend, shares how nearly going bankrupt forced them to rethink everything—turning a failing startup into a product-led rocket ship that Dropbox bought for $165M. From spreadsheets of startup ideas, to the painful lessons of chasing enterprise sales, to doubling their prices and watching conversions skyrocket, Russ breaks down the hard truths behind building a breakout SaaS company. Plus: why he wishes he hadn’t sold, and what he’s doing differently with his next startup.
Timestamps:
(0:00) Introduction of Russ Heddleston
(0:40) Russ Heddleston's early career and founding Docsend
(2:02) Microsoft internships and Maru Networks experience
(4:38) Ideation and approach to selecting startup ideas
(6:54) Docsend's challenges and pivots
(10:11) Struggles with enterprise sales and self-serve model
(13:51) Product positioning, pricing, and packaging evolution
(16:12) Identifying target segments and use cases for Docsend
(19:04) Comprehensive pricing strategy for Docsend
(22:17) Docsend's growth mechanics and viral marketing
(24:30) Utilizing fundraising content for Docsend's marketing
(27:00) Considering and deciding on acquisition offers
(29:42) Reflections on the sale of Docsend
(32:11) Aligning stakeholders and understanding investor perspectives
(34:24) Emotional journey of selling a company
(36:05) Acquisition dynamics: private vs. public company considerations
(38:22) Post-acquisition founder sentiments
(40:27) Founder advice on liquidity options and growth
(45:01) Russ Heddleston’s post-acquisition role at Dropbox
(48:21) The significance of taking a break after company acquisition
(50:59) Planning the next venture and reflecting on motivations
(54:01) Establishing values and principles for a new company
(57:44) Iterating on startup concepts and finding the right idea
(1:00:39) Intrinsic motivations for founders and long-term commitment
(1:02:37) The fulfillment of creating sustainable value
(1:03:27) Founding Distill and the vision behind it
(1:04:21) Distill's concept of people and company profiles
(1:05:03) Innovations in search, information, and indexing with Distill
(1:05:32) Wrap-up and closing remarks
Key Points:
- Russ Heddleston's journey with Docsend highlights the importance of pivoting and perseverance, as the company transitioned from a product-led growth model to enterprise sales and back again, ultimately finding success with a self-serve approach.
- Effective pricing and positioning were crucial to Docsend's turnaround, as increasing the price and better targeting their messaging to specific user segments significantly improved conversion rates and revenue.
- Heddleston's post-acquisition insights emphasize the importance of intrinsic motivation and aligning personal and business values when choosing the next venture, ensuring long-term commitment and satisfaction.
Pete Flint: So I'm super excited today to have Russ Hedleston, who's the founder of Docsend, tell his story about starting the company, building the company, then ultimately exiting the company to Dropbox. And this story is a special one to me because Russ and I actually go way back. Russ was an early intern at Truly the company that I started back when we were, I don't know, probably like less than a dozen people and we met when he was a student at Stanford. So but maybe we start there, Russ. Like, firstly, thanks for coming on.
Pete Flint: Like, kind of, you know, I'm curious. I mean, we had a great experience working together that time. Like, did you always think you were gonna be a founder?
Russ Heddleston: I had no idea if I would be a founder or not. I was just being curious and seeing what was out there. And, in undergrad and grad school at Stanford, I did engineering, and it was really fun to see a bunch of examples. Big companies, small companies. I did decide that startups were more fun to me than, you know, working at a big public company.
Russ Heddleston: So I love the internship I had at Trulia. And, I mean, in in retrospect, like, I it would have been great to have stayed. I wanted to go try other things. So as one does, I went off and tried other things. But, yeah, I really appreciated just experience I had at Trulia and seeing what you guys built and how you built it and being a part of that was really fun.
Russ Heddleston: So, you know, I think after seeing a few things, I was like, you know what? Yeah. I need to go try this myself. So Docs was actually my second company. And the first one, we ran for not that long, but, yeah, I love startups.
Russ Heddleston: They're great.
Pete Flint: You know, one of the piece of advice I give kind of people early on their career is just to sort of a a b test your your life. And so doing internships are a great way to do that to kind of try different things and see if it's a fit or not. And it I guess it's sort of that startup life felt like a fit. What did you what did you do after Trulia?
Russ Heddleston: I actually worked at a hardware company called Maru Networks for the summer. Another internship is part of this Mayfield Fellows program that I did at Stanford, which was awesome. Really fun. Nine month work study program just focused on learning about startups. And so yeah.
Russ Heddleston: My takeaway from working at a hardware company was that I like software more. It's just more straightforward. It's more fun to work with user interfaces. It's it's just a lot more fun for me. So that was but I learned a lot the the summer afterwards.
Russ Heddleston: I also had an internship at Microsoft after that before ultimately deciding. I actually really love the the size that that Trulia was when I joined. It's just like because I was still in school. It wasn't a summer internship. I was just working for you guys, you know, during the year.
Russ Heddleston: And so when I left Stanford, I actually joined another startup that was only nine people at the time.
Pete Flint: And then what was the what was the inspiration behind Docsend?
Russ Heddleston: The inter inspiration behind Docsend was it wasn't a problem where I knew I wanted to solve it. Sometimes I hear a founding story, and someone will say, I've been wanting to solve this since the age of four or, you know, they have some, you know, really deep backstory. And it's not like since the age of four, I've been trying to get rid of attachments in email. That hasn't been a life passion. But the idea came from just being at Dropbox, another internship I had while I was in business school.
Russ Heddleston: And they were also pretty small. They were, like, 15 people at the time. And I remember thinking with Dropbox that it was great. You didn't have to email yourself attachments. You know, this is in, you know, 2010 while I was in business school.
Russ Heddleston: And I noticed that people kept sending attachments externally. Like, people are still sending lot of attachments. So I had my other startup. We sold to Facebook as more of a talent acquisition, and then I left Facebook and joined up with two other friends of mine from Stanford, Dave and Tony. And we went through a few different ideas and just really kicked the tires on them.
Russ Heddleston: My one of my learnings from the first startup was that it's it's good to look before you leap And before you start writing code, really try to dig into the idea. So we went through a few different ideas. We didn't write any code for, like, four months. And, the idea for Docsun, we just kept coming back to. And then when we dug into it, we couldn't find a reason it wasn't gonna work.
Russ Heddleston: It just seemed like something smart that someone should do. And the concept was very simple, which was don't send an attachment. Send a link to the document, and we need to make that very easy to do, and we need to add enough value to the sender that they're gonna change their behavior. So that was the thread we were pulling on. And then as we just listened to a lot of users and a lot of people, we just kinda followed the thread and turned into, you know, what is now Docsent.
Pete Flint: I'm curious just the sort of ideation phase. Was that you know, I I'm curious how that process was. Was was that somewhat kind of methodical, or was it sort of a random walk? Kinda did you sort of put a bunch of ideas on the board and then sort of critique them all and then prioritize them? Curious if how that process was.
Russ Heddleston: Yeah. It's a great question because I'm like, I don't think I have the right answer to it, and it seems very personal how people approach it. It kinda seems like depending on if the startup was successful, people look back and say, like, oh, that was the right way to go through the idea of Mays or not. Although that's not necessarily clear to me. The way we did it was more methodical, and it's not very romantic.
Russ Heddleston: It was like we had this spreadsheet, and then, you know, we'd all put up our ideas, and then we'd review, you know, every day and or every few days. And when someone's like, I like this idea. It's like, well, how much? And so we'd have a point system. We have a 100 points.
Russ Heddleston: We had to treat them amongst, you know, the ideas that we're looking at. And so we kinda divide and do research on the different things. We looked at selling software to car dealerships because Tony loves cars. And so we actually went off and talked to some car dealerships, and we're like, no. No.
Russ Heddleston: We're definitely not gonna go after this. So, you know, we just kinda, like, followed through and got rid of ideas and then for for docs. And when we got to that idea, you know, we just kept at it and kept asking questions around like, hey. Why is this gonna fail? Why is this a bad idea?
Russ Heddleston: And and so that was it was more methodical, I think, in that sense, but it's hard to know if it's optimal. I think it's just that the other ideas, we were able to be pretty certain, like, it wasn't gonna make it in that incarnation that we were thinking of it as. And then it is a little bit emotional to be like, I don't know. Okay. We'll look at the next one.
Russ Heddleston: And then, you know, we were our excitement about the concept for Docsend, we could not dissuade ourselves from it. And so at a certain point, you just have to go build the thing.
Pete Flint: Yeah. Yeah. This sort of often, like, I can't not not do this. It's like once this sort of an idea sort of starts to infect you and you start thinking about it, it's like, okay. This is kinda clear that this is the kind of thing I wanna spend, you know, the next chapter of my life doing and the next, you know, the next sort of spending sixty, seventy, eighty hours a week.
Pete Flint: If you're not kind of affected by it, then it's it's clearly not gonna succeed. So so and, you know, and I'm you know, I'd love to you know, I know there's a few chapters to the story. Like, what I'd love what are some of the kind of pivotal things that you kind of figured out in that journey and the sort of the the inflection points of of that startup?
Russ Heddleston: Yeah. I feel like I got a three startups for the price of one. Trulia was what it was at the beginning all the way through, so a lot of credit to you and props around, like, having a sticking to your guns around the vision. Maybe it felt differently from your perspective.
Pete Flint: I think that's I think that may be the external view, but internally, that was very different. Believe me. There's there are many inside stories, but that's that's that's another time.
Russ Heddleston: That's another conversation. Well, maybe we have more in common on that front then because from the outside, it does look like Dachshund was a very smooth straight shot and like, ah, just got lucky with that one. But the inflection points the first let's say, the the three start ups for the price on. The first start up was a product led self serve growth, like, document analytics company. And so we launched a TechCrunch disrupt.
Russ Heddleston: There was it was just free. It was a free beta, and we're like, oh, it's gonna go viral. It'll, like, take over everything. And they've told me I all kinda like the Stanford design school thinking, and so we wanted to build something that was usable, built for the end user. And we're just, like, follow follow the thread and see what people are doing with it because people liked it.
Russ Heddleston: They they were using it and creative in different ways. And, yeah, we did that for the first couple years. We raised the seed round for for the company. And, at a certain point, I think the saying is something like, no business plan provides contact with revenue or something like that, where when you try to start making money, things can become hard. So when we did that for Docsend, we found a few early deals where we sold 50 k deals to sales teams.
Russ Heddleston: And one of our investors are like, hey. Maybe go sell up market to sales. And in retrospect, I didn't know enough to know, like, really how big of a shift that would be. So we started sell and marketing to sales enablement. We changed our marketing site from document analytics to sales enablement, and that was, like, the second startup I got.
Russ Heddleston: We raised 8,000,000 for a series a from Howard Hartenbaum, who is amazing as an investor and was awesome to be someone I got to work with. And we so, like, in his his view was like, maybe this isn't it for you, but I think you'll figure it out, which I thought was funny at the time, but he was totally correct. That wasn't it for us. I learned a lot about enterprise and about outbound sales, and I got a whole education around that. We hired up a sales team and a VP of sales and started selling at market, And that lasted for a few years, and we we burned through most of the at that point, 10,000,000 we'd raised, the 2,000,000 seed and then 8,000,000 series a before we realized that it wasn't really what we set out to do.
Russ Heddleston: We weren't really in it for enterprise sales, and the way we've been building our product was more for the end user than the economic buyer. So we had some upmarket competitors that raised a ton of money, kinda boxed us out, and it was it was brutal. And so
Pete Flint: Is is what happened in the second phase?
Russ Heddleston: We almost went out of business in the sense that we were not growing revenue fast enough, and it was very expensive to acquire that revenue. So we ended up pivoting back to self serve and figuring out our messaging. You know, if you're you're using the business school stuff, it's like pricing, packaging, positioning. We changed all those things, but we didn't change the product. It's really funny.
Russ Heddleston: And so the third company we got was back to product led but with different messaging.
Pete Flint: And just just going back to the sales thing, I'm just I'm just curious, like, the failure the sort of failure points there. Was that you know, and often, you know, when you know, it it seems natural kind of like I know venture investors, they love the idea of kind of going after sales team because there's more of an incremental ROI. You've got if you can increase productivity of an expensive sales org, then it's kind of a no brainer to invest again invest against it. Was it was it just that the willingness to pay and the kind of ROI for that team was was low, or was it kinda sales process was low? What what was the sort of what was the realization that you had in in failing in to go after that market?
Russ Heddleston: There are a few realizations. I'd say the biggest one is that the person who's, like, signed the check for us was, like, not the same as the person who was using our product day to day. And so, you know, your VP of sales, your head of sales op, maybe sometimes it's a CMO. So it's complicated as a sale because our buyer would be somewhat different at the company depending on how the company is structured. And so a CMO is gonna want these aggregate dashboards.
Russ Heddleston: They're gonna want, like, other things that will make them look good. There's a sales and marketing rift that can happen at companies. When the sales leader is trying to buy a tool, they care more about, like, onboarding and training of the salespeople. They care about, like, hitting their number. They also kinda want analytics.
Russ Heddleston: They're not, like, as concerned as you might think they should be with the productivity of an individual sales rep. They also get sold to a lot because of what you mentioned. Everyone's like, oh, yeah. Sell sales team. It should be easy.
Russ Heddleston: So it's just really crowded. And it's hard for them to differentiate between products. And my view coming from the outside was, you know, if I was gonna be, like, just trying to help the sales team, usually, it wasn't like the documents weren't their biggest problem. It was, you know, education. It was training, onboarding.
Russ Heddleston: It was, like, market segmentation. Who are you targeting? There are all these other problems that I'm like, yeah. No. These are bigger problems than, like, tracking the proposals you're sending and finding the right white paper and, you know, kinda like the document, content management problems and tracking problems.
Russ Heddleston: So we weren't something urgent for them. And when we sold, it was sticky, and they liked it, but ended being a high cost of sale, ended being a long sales cycle, and then it ended being competitive sales. So we had some other competitors that weren't as good as Dachshund. Like, you would never use them over Dachshund, but they had more features for that CMO. And if you squinted at it, you're like, that's good enough.
Russ Heddleston: So for me as a product founder, that was hard to see people choose what I thought was the worst product over our product for reasons that were, like, unrelated to, like, what our product was really good at. So those learnings were were tough. I learned a lot about how to do enterprise sales and what that looks like. But, ultimately, for us, we're like, the self serve thing actually finally was doing better, and I'm very happy we went back to our roots.
Pete Flint: So you went back and sort of changed your product, changed your packaging, changed your pricing. Like, kind of what was was that as you know, was that a sort of last ditch attempt to kinda to figure it out? Or kind of what was, you know, what was the sort of catalyst to drive that pivot?
Russ Heddleston: The the catalyst was we're running out of money. So it wasn't something I talked about with our team. But, you know, we you know, kinda watching our bank account come down. And I went to our existing investors, and they're like, this doesn't look great. We had about well, we were at 4,000,000 ARR.
Russ Heddleston: We had about 2,000,000 from self serve. It was growing very slowly, like $10 a user month. And we had 2,000,000 from this, like, outbound kinda, like, sales use case where the average, you know, deal size was maybe 20 k a year type of thing. And so it's, like, split half and half, but I couldn't find anyone to give us more money. Like, no one wanted to invest because it was kind of weird in terms of, like, the go to market.
Russ Heddleston: It was expensive from the go to market. I didn't have a good story about why we were gonna win against the competition. So we couldn't find investors, and then also no one wanted to buy the company. I went around and was like, would anyone buy it? People were like, no.
Russ Heddleston: So we were like, uh-oh. And it was the last ditch effort to basically, what was the responsible thing to do? The responsible thing to do is probably to just invest in what was working easily, optimize it, and we didn't change the product. We actually just changed pricing, the packaging, the positioning, what it said on our website. And we were just trying to, like, make sure that we could be responsible and just cash flow the business, run it at breakeven if we if we needed to because, you know, that was, like, kind of the only option we had.
Russ Heddleston: In the process of optimizing that self serve business, we learned that we were just leaving so much money on the table in terms of how we were going after all these other segments and all these other users. And so that's really where we had this moment, but we wouldn't have hit that moment if we weren't forced to go back and, like, relook at all of our usage. So I panicked in a panic, kinda interviewed a few 100 of the Docs End users back in 2018, and it kinda came up with the positioning that we had all the way through the acquisition of the company. And that just ended up working a lot better and being a much better business.
Pete Flint: And I and just doing my research for this, you were you know, I think you called it sort of horizontal product that was marketed vertically, which, you know, I think is quite quite common these days, but it's you know, I guess, how did you kind of identify those segments you were going after? Was that was that just through these interviews that you were you were doing with your users? Like, what were the specific use cases they were using it for?
Russ Heddleston: Yeah. A lot of it was just looking at our users and just asking them what are you doing with it and why. And so the the it is it was a horizontal product. It is just sending instead of sending attachments, you're sending links. You're seeing what happens to them.
Russ Heddleston: It's really smart. The controls you can put on top of it because it's easy as a recipient to get into it, but you as the sender still have control. And so control kept coming up again and again as, like, the the brand value. Like, I like the control. It wasn't the analytics.
Russ Heddleston: It was I like the control. And the different use cases of it would use different language to describe the value they got out of it. So in just going and talking to people using Docsend, they talked about it differently. If you're an investment banker, if you're a salesperson, if you're fundraising, they just these different use cases had different language to describe the same exact product. So it wasn't a product problem.
Russ Heddleston: It was why don't we do the obvious thing and just put up on our website all the things that people say about it by use case so that we don't have to tell them they can just read about what everyone else is saying. And it just was stuff we'd observed in the user base because it was like a freemium product, $10 a month, so it was cheap. And those stories were, like, really fun to hear. And for me, like, listening to them, it was painful because you're hearing things that, you know, you're like I'm like, no. That's not how you should think about it.
Russ Heddleston: And it's just, no. We're just gonna give up on that. Like, how do you think about it? And once we put that messaging back on the website and made it vertically kinda marketed, our conversion rate went way up. We were also charging too little, a concept I didn't even know was possible.
Russ Heddleston: But when we went from $15 a month to $250 a month, conversion went up. Because for important situations, you're an investment banker. You don't trust the tool that's too cheap. You're like, are you selling my data? Is this safe?
Russ Heddleston: Like, you can't be making the business out of this, so I don't I don't trust it. And so we were often competing against data room products like Intralinks for situations where control was important. And relative to an expensive data room, we had to charge more. Otherwise, they just wouldn't trust us at all. So it was a few different things that came back, and I agree it's more common now.
Russ Heddleston: But at the time, it was really just observing our user base and being like, what do we do about this? Are we picking one? It's like, I don't think we're picking one. I think we're just kind of documenting them and then putting them up so other people who are less creative can see how people like them are using the product.
Pete Flint: And I'm curious just in that kind of pricing analysis. Was that was there an analysis there or, like or is it just a case of, like, you know, I've I've, you know, heard some advice from folks just to, like, double price until people object. And and, you know, as a as a very simple methodology. Did you kind of do some kind of econ supply demand price elasticity thing, or is it just like just try it and see what happens?
Russ Heddleston: We didn't do the try it and see what happens because the it's hard to a b test it if you're kind of a self serve product Sure. At least the end that we had. And it's hard to run a, like, a statistically valid kinda econ approach, but I did learn enough about how it works to, like, try to do that. And so we would we went through and asked people, you know, how much would be, like, too much you wouldn't pay it for at all? How much would be, like, way too little?
Russ Heddleston: What would be fair? Not surprisingly, everyone just told us they wanted to be way cheaper. But when we started to ask them what they would compare it against, we kinda realized that there's this big range where people were comparing us against, like, you know, Dropbox on the low end or Google Drive or something. But then on the higher end, they were comparing us against Intralinks, Datasite, like, these kind of clunkier, older, really expensive tools. And so the the range was quite large in terms of what people would expect to pay for it and also their expectations of what they wanted to get out of the software.
Russ Heddleston: So it wasn't perfect. It could have been a higher price. They were really cheap relative to the alternatives for data rooms, but we're also kinda, like, capped at how much we could charge relative to, like, really cheap consumer products. So it was, like, kind of our finger in the air. But if we just done the doubling it thing, that wouldn't that wouldn't have been enough.
Russ Heddleston: We would have to keep doubling it. So we decided to do $250 a month, month to month, and have three seats included. We we primarily put that up so that we would sell our middle plan that was $45 a month, but it was more like the sales the sales plan. And we left the $10 a month one, $10.50 bucks a month because I'm like, I think those people just aren't gonna pay more than that. But what I was really surprised was how many people paid for the $250 a month plan.
Russ Heddleston: That was the the shocking thing because we were putting up messaging around what people wanted with it. And so they were just paying for it without even knowing what features were behind it. So a lot of the features that we added after that were things that we figured out when we put up that plan, which is fascinating. To your point about, like, doubling the price in our kind of manually sold deals before we put up pricing program, like, just anyone could could do it because we had a $10 a month plan or, like, call us pricing. Our prices varied from, like, 20 to 200 and, like, $50 a month per seat on sales teams.
Russ Heddleston: Enterprise sales teams, if you're paying a few thousand dollars per salesperson per year, but this is really important, that was fine. But other people are very price sensitive. So what we arrived at was got rid of free, and then it was $15.45 $2.50 a month when you're paying month to month. And so that looked like a reasonable spread. We thought people would pay for the middle plan.
Russ Heddleston: 80 plus percent of the revenue ended up being from the advanced plan at $250 a month.
Pete Flint: Amazing. It's so interesting, the psychology around sort of you know, for these kind of these very important sales conversations, confidence is key. And it's marginal. Right? If you're raising money, raising $5,000,000, then, like, 250 is is is marginal on the whole scheme of things if it improves your confidence.
Pete Flint: And so that's
Russ Heddleston: 100%.
Pete Flint: Yeah. Fascinating psychology. You changed packaging. You changed pricing. Like, how did it grow from there?
Pete Flint: I I remember some some, like, reports you put out just, like, analyzing kind of user behavior. Like and, obviously, the product itself is viral. Like, what was the what was the kind of growth mechanics you employed? I'm sure it wasn't just accidental.
Russ Heddleston: Some of it was accidental, and some of it was not understood. Like, we weren't wrong at the beginning about it being viral, but it was actually less viral than it was just word-of-mouth, like, being the mechanism it spread. People who receive documents don't often send them. It's not always the case. It's not like a perfect symmetry, like, you know, Hotmail or, you know, email use case.
Russ Heddleston: So what would happen is that, you know, founders would use it for sending a pitch deck. VCs don't raise money very often, so they didn't use it for, like, the first four or five years, but they eventually did. But they would tell all their other founders about it. Like, at first, they would complain. Like, I don't like this thing.
Russ Heddleston: Give me the PDF. I don't wanna be tracked. And that's reasonable psychology, but it's also reasonable for the founder to be like, it's really important to me. Can I please see if you opened it or not? You know?
Russ Heddleston: So both sides have a point here. But the VCs would not like getting the links, but then they turn around and tell their other founders to use DocsZen because they wanted them to have an advantage when they raise. And so the word-of-mouth and virality spread happened slowly, but it did compound. So while we were off selling to sales teams, that just kept compounding over time. We did do some content marketing, like what you mentioned, the fundraising research.
Russ Heddleston: It's really data driven. We tried a bunch of marketing stuff. Nothing stuck. Nothing mattered. No one cared except for this data driven content marketing around fundraising because founders were just very insecure about what should go in my pitch deck.
Russ Heddleston: What do other people put in their pitch deck? What works? What doesn't work? It's really hard to get anything that's not a VC's opinion. And no offense, Pete, but, you know, it's like everyone has their own opinion on what they wanna see from a founder, but it's those opinions can vary a lot.
Russ Heddleston: Right? So the content we put out was trying to be some semblance of, like, I don't know, a little more objective, and people love that. That content stood on its own. Didn't need Docsend as a product, but the the content obviously spread awareness of Docsend. We also saw this knock on effect where people would use Docsend for fundraising, and then they'd be done with fundraising.
Russ Heddleston: They're like, cool. I don't need the tool anymore. But then they'd, like, hire a sales team or they'd use your recruiting or they'd be sending their SOC two report. They would just have other documents they'd wanna send in situations where it was important to understand what happens to it or to have control over it, even your investor reporting after that. So we did see this, like, kinda, like, churn because it's an episodic use case, but then everyone reactivated.
Russ Heddleston: So when you looked at the cohorts, it's fascinating. It took years to see it, but it would kinda, like, drop off and then kinda grow again. And so we would acquire sales teams that way, but it was much more effective to just see where it would shake out rather than trying to bang on doors and get them to adopt it. So when we went back to the the self serve from the, like, sales enablement stuff, it was really just looking at some of this stuff and just saying, hey. What's working, and what do we double down on?
Russ Heddleston: So we just really leaned in to the fundraising use case. We did more content around it. We put up more on our website, and then we really started catering to the control, like, promise that we had in the product. So a lot of it after we made that change was just us capturing the demand we were already creating because of the word-of-mouth because people really like the product. It just was slow.
Russ Heddleston: So we weren't wrong at the beginning. It would just took a while to to see that, like, start to compound over time.
Pete Flint: Okay. So you you figured out the growth. I imagine you kind of, like, either sort of, like, let go or kinda paused more the outbound enterprise sales motion, and then the business was growing. And so and with you know, as you tell me about the kind of process of thinking about a sale. Was that inbound, or was that a kind of conscious decision?
Pete Flint: And and what and just give me dimensionalize the company at that time, like like revenue, headcount, profitability, etcetera.
Russ Heddleston: Sure. So I'd already been through this in, you know, 2018. We're five years into the company. I'm like, will you buy my company? And everyone's like, no.
Russ Heddleston: We will not buy your company for any amount of money. I said, dang. And so then we went back, did this stuff. And then when our revenue passed 10,000,000 ARR, my investors or one of them was like, you know, you should probably tell people that you're, like, not dead and actually doing pretty well now because we got it to breakeven. We raised we we didn't let anyone go, but we just kinda let revenue catch up, which it did really quickly.
Russ Heddleston: Like, it was really fast. I could see the numbers being like, oh my god. This is gonna be great. You know? So we could see the numbers.
Russ Heddleston: It took a while. We got to breakeven, didn't let anyone go, and we started adding more engineers as we could afford it. But when we passed 10,000,000 in ARR, investors, people don't know that you're doing well. Maybe tell them. So I got a banker who wasn't running a process for us.
Russ Heddleston: He's more of, like, just a coach to me. And then that was really helpful. This guy, Mike Marquez, was wonderful. He's not in it anymore, but he was very helpful to me. And then the way the acquisition came about was one of the CEOs I talked to at this point years before, because this is the end of twenty twenty, came back to me and he's like, Russ, my board says I have to do something different.
Russ Heddleston: And so I thought about your company, and I really want that technology because that could be something different we could do. And it's just kind of funny to me because it's years later, and, you know, it's like, oh, okay. I guess that is a rationale. I was like, but we're actually doing pretty well now. So I, like, gave him our numbers.
Russ Heddleston: I've been I'm always, like, very transparent with things. And his reaction was, dang. You are gonna be more expensive. So I went to Dropbox where I had interned before. And, yeah, Drew looked at it and came back and said, like, yeah.
Russ Heddleston: This makes sense for us. Like, understand your good market motion. Seems like it's aligned with how we do things. And so they came back with an offer. This is all in, like, a month period.
Russ Heddleston: The banker I had said we probably shouldn't run a process because, you know, we should decide if we wanna take one of these two offers, which happened very fast, or ignore them and kinda, you know, wait till later. And I went around to our board members just as my fiduciary obligation, you know, go, you know, like, go tell them what's going on, told their cofounders. But then the whole thing happened pretty quickly within, like, a month that, you know, diligence our company's really squeaky clean. It's a 100% inbound. It's 95% self serve.
Russ Heddleston: So there weren't any skeletons in the closet. There's, like, nothing weird about the company. It's like, it is exactly as it was represented. Like, the problem some people had with it was was, like, oh, you've spent no money to get to where you're at. Like, how do we know it's not gonna fall off a cliff tomorrow?
Russ Heddleston: And PLG is more common now. But with any product led growth company, the answer is always, you don't know that it will fall. But if if you look at the cohorts and look at the stickiness, it's like, it's not. It's just not. The the company is pretty buttoned up around how we report on things and how we track things, and so there wasn't a lot to do in diligence.
Russ Heddleston: And it happened pretty fast.
Pete Flint: And how just just and just for your I mean, like, you spent five years at least kind of, like, you know, really pushing this idea, really building a team and and culture. Like, the the decision to sell, like and you sound very kind of rational about it now, but I'm sure it was kinda non you know, you're you don't it sounded like you don't need it to you didn't need to sell in the sense that you were kind of you're about to go bankrupt. You were growing, break even. Like, what what was going through your mind at that point?
Russ Heddleston: Well, to answer your early question, where were we when we sold? Dropbox shared the numbers because they were proud of them, but we were 15,000,000 ARR profitable. We were growing revenue faster than we wanted to add engineers to the team because that was the primary lever we had is just improving the product. And we were finally kinda hitting this hockey stick. And and so, you know, it was it looked the best that it ever looked.
Russ Heddleston: In terms of, you know, how I thought about it and, you know, how my co founders, Dave and Tony, thought about it, it's like, well, you know, we've been at it for eight years. We almost died five years in, which is really stressful when you think about, like, the commitment to your employees, to your investors, just your own time. Like, you know, that was that was really scary to have kinda that near miss kind of experience. And so we were, like, very excited that it was working well. And I did run around to get advice from people like, what do you do?
Russ Heddleston: And then one school of thought was like, well, how certain are you that you're gonna get to, you know, public company level revenue? And at 15,000,000 in ARR, even growing quickly, the answer is like, not that certain. We're gonna have to do a couple more smart things here for this to, like, get to that scale. I got a big range of opinions. I will say at the time, I was quite rational, not dissimilar from how I'm describing it now, but, emotionally, I did not wanna sell.
Russ Heddleston: It was finally working. We've been at it for a long time. Was like, it was working. It was very exciting, and it very much felt like giving up or letting go. We could have raised money at two x what we sold for.
Russ Heddleston: Like, if we the the hockey stick continued afterwards. So, you know, there's the in retrospect view. But even at the time, it was sad for me, but it felt reasonable. Like, it was a fair amount of money. We hadn't raised that much money.
Russ Heddleston: Raised $15,000,000. We sold it for a $165,000,000. It was a great deal for Dropbox. Like, our lawyers, as we're going through, were like, ugh. They're getting it for so cheap.
Russ Heddleston: And I'm like, I mean, I think so. We they they bought us for 11 x ARR, which, you know, it was the kind of the median public multiple at the time. You get a haircut for being a private company, which a lot of people don't realize. You can raise money at a higher valuation than you can sell at typically. But we were also profitable and growing quickly with this, like, you know, great business model.
Russ Heddleston: So you could argue it either way. But because of our position not having raised a lot, it was a very reasonable thing to do to say yes to the deal, but it was it was conflicting for me. It there's real pros and cons on on both sides.
Pete Flint: And what and just the you know, you've got these stakeholders. Right? You've got your investors. You've got your, you know, your cofounders and then your employees. Like, was there was there alignment between you and your investors around the the path forward?
Pete Flint: And, like, how were those discussions?
Russ Heddleston: Those discussions are gonna vary, I think, from company to company. Like, in my case, our investors from the seed round, they invested eight years ago, and then they thought this thing was gonna be a zero. And then the thing is alive, and it's still going. I had one of our seed investors at one point send me an email. He's like, wanna catch up?
Russ Heddleston: And I was like, sure. And so we're catching up to call. He's like, I've just never seen anyone, like, putter along and then suddenly take off later, which it wasn't suddenly. It was, like, compounding, but that's just how compounding looks. He's like, can we give you more money?
Russ Heddleston: What are you gonna do with the thing? And I was like, oh, we don't need more money, and, like, we're gonna keep growing it. Like you know? So our seed investors, eight years in, they wanted liquidity from that fund. Their LPs were coming to them being like, show me a win.
Russ Heddleston: They had these big paper markups, but, you know, very little liquidity. And so Uncork had done our seed round, and it's very exciting for them to get liquidity for their LPs. And so I think from, you know, their perspective, it's like, oh, well, did we ride this thing further or, like, this looks like a good win? And then I think the scenario of, like, not having done well a few years before, having to figure it out made everyone's confidence less in what we're working on. My view is that it's it's, can take a while, but I was like, if you looked at the numbers, they were great.
Russ Heddleston: But, yes, to your point, my fiduciary obligation, seed investors want liquidity. This was a way to give them a very clean deal, all cash, a great return on their initial investment, win for their funds. But they're also they're the employees that are at Doc's End. We didn't consult them in this, but I was thinking a lot about them. And then there's, you know, me, my cofounders, I as well, like, what we were thinking about and what what they wanted.
Pete Flint: And and was there any sort of dissent in terms of, like, people wanting to some people wanting to sell, some people want to carry on? Like, you know, did you you know, was this, like, a deep dinner conversations you go through to have these things, or was it kind of bit a little bit more organic?
Russ Heddleston: We Dave, Tony, and I talked about it a lot, and I got advice from a lot of different people who had been through something before. Probably the most common thing I heard was it's a very personal decision to sell your company. And that always struck me as, like, an odd answer because it seems like the sort of thing one could be rational about. Do some math. You know?
Russ Heddleston: There's some fair market value, you know, fishermen markets and all that. But I do think in retrospect, it is a very personal decision to sell. So Dave Jung and I, we had various opinions, but we've all known each other for so long. We went to undergrad together. Like, we're still very good friends.
Russ Heddleston: And selling was a way to cash out. We thought about, like, hey. Do we recap? Do we do secondary if we raise it two x? We talked about, like, how realistic is it that Dropbox would actually compete with us?
Russ Heddleston: Like, that doesn't we've already done that. We had, like, a bunch of other companies trying to compete with us too. Like, it's never worked. We're doing great. Like, is that a real threat?
Russ Heddleston: And then it's like, yeah. Well, how certain are we? We're gonna get to public company later. And if not this, then what are we gonna do in five years? There's also the psychology of, like, hey.
Russ Heddleston: Take a win now, and 80% chance that amount will triple if you hold on to it for a few more years, but 5% chance it goes to zero. Suddenly, you're gambling with an amount of money that you might not wanna gamble with when you look at, like, you know, getting an exit. And so there is no right answer to it, and we had different opinions. But because we've known each other for so long, we kinda, like, thought through it, talked about it, and we're like, you know, this seems like a reasonable thing to to sell. But we certainly didn't need to, to your point.
Russ Heddleston: But, yeah, we've been at it for a long time, and it was a great win. And we're very proud of what we built, and it was very smart at Dropbox to have bought it.
Pete Flint: Yeah. It's and, you know, it might reflect on my own experiences. Like and and I guess Dropbox was public at the time and so like and, you know, when I was when Zillow and Trulieve were merging, it was, you know, we were two public companies and so it was like it was it was very sensitive to kind of have these conversations and and
Russ Heddleston: know and
Pete Flint: very kind of like you have to be very careful kind of who you told and so there's just this as a founder you're in this sort of like oh shit I've not you know I've not done this before I don't know Kinda who to talk to and then at the same time you you don't to actually your inner circle, it's quite hard to talk about some of this stuff because it's, you know, you're dealing with public companies.
Russ Heddleston: Yeah. That's true. And I think even when it's not a public company in both both sides, like us just being a private company, even people I talk to, most people just don't have any ability to relate to the situation. You know? And I still find it a little odd to, you know, explain why I was sad to have sold the company because, you know, it's like, hey.
Russ Heddleston: You made a lot of money. And it's like, well, I didn't really get into startups to, like, make money. Like, it's nice. I wanna make a living for myself and be able to sort a family and all that. But, you know, I I like it.
Russ Heddleston: I do it because it's fun to build software. It's fun to solve problems for people. And, you know, we were finally it was finally working. And so, you know, there's that that's the side that's, like, harder for people to relate to. And most people just grab on to the, oh my god.
Russ Heddleston: You did well. You made a bunch of money. It's a win. Like, that's binary in their minds, which is not entirely how it felt to me. I knew we had a winner.
Russ Heddleston: Like, we were doing great. Like, we were gonna do great if we sold, if we went, say, private, like, if we just dividended dividended the money later. It's a very profitable business model that we had. So, yeah, opinions vary. And to your point, I'm sure with Julia, like, you you you don't have people who have a crystal ball for you.
Russ Heddleston: It's it's a tough it's a tough decision, and you can't talk to a lot of people about it. So it it is hard.
Pete Flint: You're not gonna get any sympathy for selling your money. You're selling your company for a lot of money even though you have this sense of loss at the end of it. So it's quite present. Quite hard to talk about it.
Russ Heddleston: Talking to other founders, I've heard it mentioned repeatedly that people who sell often felt like they left money on the table. You know? It could have been bigger. And as the founder, that's very understandable. You're selling this huge vision.
Russ Heddleston: And then, you know, to sell for something less than that, it feels like you're left on the table. Most companies, though, I I find, like, in retrospect, like, yeah, I'm happy I sold. I think for for if I did it over again, it probably wouldn't just because it was taking off and and very profitable. But, yeah, most founders, I think, feel like some amount of sadness when they sell because they are letting go of, like, what it could have been independently.
Pete Flint: And so and so just if you reflect back, you you think you wouldn't have sold at the time if you kind of, you know, perfect twenty twenty hindsight?
Russ Heddleston: I would not have sold. No. No. It would have been if we had all just gone on vacation and just let the thing keep going, it would have done much better than what we sold it for. There is silver lining a silver lining to just being able to take a break to go off, traveled for a year with my wife.
Russ Heddleston: So I think about it similarly to going to business school where I'm unable to run the counterfactual because it's such a big decision. It's a couple years of life. You're like, what would it have been like if we didn't go to business school? Or, like, it's hard to say. It's so it's so big.
Russ Heddleston: So same with selling docs and a lot of really great silver linings to take time off, to be able to step back, to reflect on life. But from a monetary perspective, I think I've definitely gained an understanding of the benefits of the product led growth strategy when it's working and that some of the advice I got was less relevant to, you know, like, worrying about the downside. You know, if it's sticky, if it's growing, you know, you just have a lot of flexibility when you can if you want to print a ton of money because you have no acquisition cost and it's organic growth. And so I think those are some of the learnings that are only in hindsight, you know, apparent to me, and I still don't think it was a terrible decision to sell at the time given what I knew. But, yeah, that is that is a learning for me.
Pete Flint: I mean, just to sort of think about in terms of kind of framework advice for founders. I mean, you're you're growing profitable, you know, category leader in in the niche that you're in. You know, that that sort of field, like, okay. If the if the rules of the game haven't changed, then keep going. But there's clearly some sort of terminal value to the business.
Pete Flint: Like, if you were to if you were to do it again differently, would you have explored some sort of secondary opportunity for for the investors? Or or kinda how would you how what would you have done if you had perfect hindsight now?
Russ Heddleston: I probably would have done a recap to, like, buy people out. Just early investors if they need liquidity and an up round. And then we would have just kept going if, you know, we needed to have some people change out on the team, try to get them liquidity as well, or even structures like just like debt if we're gonna be doing payouts. But I think if we followed the thread, it would just even the trajectory was on without anyone adding anything to it, We would have able to print a lot of money. That free cash flow is worth, like, a fair amount if you wanted to go to a PE buyer or, like, anyone.
Russ Heddleston: Don't don't even look at what the product does. We don't care about the product. Just look at the financial statement. You're like, oh my god. This is just printing money.
Russ Heddleston: I think you have a lot of flexibility if you're you've created something that can print money. So if I did it over again, maybe recap, yeah, for existing investors if they want liquidity and then be patient. But being honest, there's also so much I learned in the process of the company. I would just do so much stuff differently that, you know, it's in I'm on my third company now, which has been fun. I get to apply a lot of those learnings to your cap table to you know, Truly, if you if you did it over again, like, you know, it ended in spectacularly well.
Russ Heddleston: I'm sure you had a lot of lessons and might do some things differently if you were to go through it again and kinda same for me this time around.
Pete Flint: Yeah. I think that, you know, I kind of, like, reflect back on the kind of you know, we were kind of public profitable. I think the you know, part of the decision to kind of demerge truly in Zillow were kind of I kind of reflect back and think of it kind of a sort of a number of different buckets. The the big thing was really the rules of the game changed. It went from a product battle to a marketing battle.
Pete Flint: So Truly and Zillow were kind of like we were spending like a $150,000,000 on marketing a year together. And so it was and because the products were basically almost identical. You know, we had the same features. We had the same functionality with the same listings. And so it became a sort of, like, marketing battle as opposed to a product battle.
Pete Flint: And then, you know, as a public company, it's sort of fair price today for future execution. And so we could you know, it was sort of a purchase price somewhere between 2 and a half and 3 and a half billion. So it's like, okay. This is a big it's kind of a big number. But I think there's I don't know.
Pete Flint: There's there's also this sort of experience of going through the journey, which I think is worth a lot because you you know, that that experience, that journey is is super valuable and interesting and, you know, enough you know, the the money is important, but it's it's not because it's singular singular. There's there's an element of, like, going through the journey and seeing kind of what this what this can be and what this should be.
Russ Heddleston: Yeah. That's a great insight for you with the truly at Zillow. I remember when I was an intern, we're sitting around looking at Zillow who hadn't launched yet being like, why do they have so many executives? And when they finally did launch, yeah, the similarities were were striking, and it makes sense to combine when it became the marketing battle. And being a public company, you had, like, a comparable.
Russ Heddleston: I think for, you know, docs end at much smaller amount, 165,000,000, but it's hard to get comparables when you're a private company. And I think, yeah, to your point, the journey is worth so much. So I am incredibly proud of, like, the product we built. You know, we did well by all of our investors. We did well by all of our employees.
Russ Heddleston: Dropbox had a great asset that they were able to learn from within the company. So all those things were were great. I just don't think it that, like, I learned something about, like, how to run the process. But, yeah, on the whole, when I zoomed out, just very happy it went well and that I got such unique and interesting learnings out of the whole experience.
Pete Flint: And did you stay on afterwards? Did you and, obviously, you knew Drew. So, like, I mean, it's a kind of amazing sort of round round trip from being an early intern at Dropbox. Like, was was that did you stay on, and was that or did you okay. This is my time to depart post acquisition.
Russ Heddleston: They had a holdback period. And so we all joined. The whole all of Dachshund joined. I think the experience being an employee of Dachshund is probably a little weird in the sense that, hey. This just happened.
Russ Heddleston: I was like, okay. One thing I thought was funny was some of the Dachshund employees didn't really understand equity, and they're like, woah. That's great. You know? I was like, yeah.
Russ Heddleston: It is great. So we all joined Dropbox. It was gonna be a multiyear period for it. After about a year, it was a good time for me to transition. So I caught up with Drew and was just I moved into an adviser role for a year and went and traveled and then just kinda took a couple of years off afterwards.
Russ Heddleston: But we left it in a good spot there. So, I mean, after we got there and kinda took a lay of the land and kinda figured out, like, how to set the thing up for for success, it didn't take as long as we thought. And I could have found another thing at Dropbox, but I don't know if I feel more drawn to, like, well, one, take off time and then, you know, two, go go try something different after having worked on the same thing for so long.
Pete Flint: What was the employee reaction? How many people were you at the acquisition? And, like, just imagine that's, like, there's certain conversations you have with your team, and that was one of the probably the biggest ones ever.
Russ Heddleston: Yeah. We had because of that period of time where we weren't doing well, we'd already kinda gotten off the train of having employees that are expecting us to be, like, a rocket ship. And, like, if you're on a rocket shipping, I'm out. So we didn't have those expectations. We were, you know, 60 something people, half remote.
Russ Heddleston: During the pandemic, we started hiring a bunch and kinda found people wherever we found them. And and so, yeah, people's expectations weren't, like, super high because the whole team was going along with it. I think people were like, oh, that's weird. What does this mean? And then once we told them, like, it doesn't actually mean that much different for you other than, like, this is how much your equity is worth, and then here's the, you know, amount that you'll get paid to drop by.
Russ Heddleston: It was, like, financially good for everyone. So everyone's like, oh, this is this is strictly better. Like, I don't no one had, like, an expectation of being like, you should have been 10 x this. So from the employee perspective, I think they're all excited. They liked it.
Russ Heddleston: You know, they went along with it. It's a great name brand to go to. It's a good story to be part of. So it wasn't hard news to break to people. People were uncertain about what it meant for them personally, and we went through that with everyone.
Russ Heddleston: But it wasn't, you know, huge team being being 60 something. So we were able to get through that all. And then mostly people were just kind of curious, excited, wanted to learn a lot, meet new people. So all those all those things came came true. So it didn't it didn't feel that actually, from my perspective, that hard to to go and talk talk to the team.
Pete Flint: It's a it's a great positive story unlike, you know, selling your company to be shuttered or shut down or so you know? And Dropbox is a kind of incredible brand, and everyone knows it. So it's a it's a great story.
Russ Heddleston: Yeah. Those those aspects were all were all true, and so made it definitely easier as as news to break.
Pete Flint: So post acquisition, you took a year off, and then kind of what was the what was that like, and how did you how did you think about your next chapter?
Russ Heddleston: Yeah. I'd be I'd be curious, like, how you thought about it too. But for for me, it was you know, we decided to do this thing. We've been at it for eight years. Like, Dave, Tony, and I talked to with each other.
Russ Heddleston: Like, how much are we drinking our own Kool Aid with this startup? Is it really gonna do that well? Have we just convinced ourselves it's gonna do that well? So deciding to sell, like, it's done. It's over.
Russ Heddleston: It is out of our hands. Like, you know, we work at Dropbox now. It is, like, their asset. We are not on, like, the executive team at at Dropbox. And so, you know, being able to kinda step back and have some kinda, like, perspective on things is is quite helpful.
Russ Heddleston: I will say that it wasn't actually that stressful running Docsend at the end. It wasn't for me, like, oh my god. You know? Thankfully, I don't have to keep working this hard. After we figured out the pricing and positioning, it's a 100% inbound.
Russ Heddleston: It just kinda ran. It was really fun. So, like, for me, I was it wasn't like a, oh, I can finally take a load off. Was like, actually more stressful for me afterwards. So in that year, I just wanted to I wanted to leave things in an okay state.
Russ Heddleston: I've talked to other founders, and that's generally a pretty stressful time if you're running around stepping on toes to make sure that, like, value isn't destroyed. So that year was pretty exhausting, and it was very nice of Drew to let me take off early because he's really happy with how it performed and, you know, made them look great, and they're learning from it. And so everything was great. Took off after a year and then just traveled with my wife. We just did a lot of bucket list traveling, ran around, wrote a lot of sci fi, played a bunch of video games.
Russ Heddleston: It was great. Didn't really do anything productive for a year, and then I just started to get bored. I went and did interviews. You know, the way we ran to OXEN was suddenly popular. I'm like, oh my god.
Russ Heddleston: You were growing fast and profitable. How are both of those things true? And we made a great business out of it. But the CEO jobs I interviewed for all felt kinda like people asking me to turn this PowerPoint into a real company, raise a ton of money. I was like, ugh.
Russ Heddleston: And then I looked at DC and also decided that I don't know if this is what I actually want to do and then kinda loop back around to, why don't I just go back and start playing with kinda go back to that idea of May's phase? So it took me a while to kinda come around to that, but it was great to just take some time, gain some perspective, think about what matters to me. Did I just wanna retire and, you know, go back for a PhD in history, or, you know, do I wanna work on something something else? And so after all that thinking, I just like startups. They're fun.
Russ Heddleston: I like working on software stuff, so that's what I came back to.
Pete Flint: Yeah. I I think the one of my piece of advice to founders who kinda go through that exit process is absolutely to take the year off. And and it sort of and a year is not just a kind of is not just twelve months and a period of time. It's actually I kind of feel that there's a resetting of your of your rhythm and your cycle because that is the calendar year, you know, and I think you you know to go through any major change whether that is change your life or someone passing away. It just takes that time to just like see the the sun the earth move around the sun that distance which is which just kind of helps to reset things.
Pete Flint: Because you I think you can very easily sort of over over steer in that period. You know, if you have a kind of tough exit, then you can sort of you go the other way to perhaps a corporate job. If you have a kind of glorious exit, then you kind of make it wrapped up into kind of some sort of hobby that really is not what your is gonna be really fulfilling for you. But that that period of time is just kind of necessary to to reground yourself.
Russ Heddleston: I couldn't agree more. I I didn't get that advice explicitly from anyone. I wish I had gotten it from you, Pete, but, thankfully, it's what I did anyway. And so I'm I'm very happy.
Pete Flint: And the the the other piece of advice I remember speaking to Rich Barton who started Expedia and then before he started Zillow and he said like, okay, go and go and travel because there's a bunch of people that will kind of like come and pick your brains and kind of spend time with you and you'll get wrapped up and it's like this is a unique opportunity. So so I actually had a I had a newborn at the time, so I didn't quite do the bucket list travel. I was more changing diapers at home, but but I think the travel thing is also just like that's just the perfect thing to do at that time. What was I'm curious. What was the one of the best trips?
Russ Heddleston: I love just getting a rental car and driving around Greece. There's so much history in Greece, and people don't talk about it as much as Italy. It's just kinda like, I don't know, as popular. People are so friendly. People don't expect you to speak the language because it's not as common, and that was great.
Russ Heddleston: We spent, like, a month just driving around and just going to all these historical sites. I love history. So that was really fun to just kinda be able to just go go where we wanted to go, go explore, read about stuff, show up. We also went to New Zealand, did a bunch of hiking there. I've never been.
Russ Heddleston: That was that was amazing. Went to the Galapagos, went around Ecuador. We we did a whole bunch of stuff in that year that, yeah, I think the the Greece stuff was the surprise for me where it's just beautiful there.
Pete Flint: Yeah. Yeah. Thank you, Dropbox. Deserved. And and the how did you just know, what was the kind of process of kind of rethinking of startup ideas?
Pete Flint: You know, some founders are kind of burnt out. They kind of, like, you know, they they lose that sort of creativity of thinking a kind of new things. So, you know, what was the process that you went through to think about where you wanna spend your your next chapter? Was there was there an element like, okay. To think about the next startup, I really want it to be similar in this way, but different in that way with the what what did you wanna bring to your next company from Doc's End, and and what did you wanna kinda take out if if there was anything there?
Russ Heddleston: Yeah. I asked that question a lot. I also just asked the question, like, is it crazy to start something else? That was my process of elimination. And then I also went through and asked people, like, hey.
Russ Heddleston: For repeat founders, what goes wrong? You know? Like, what have you seen, like, people regret later? Like, what, like, what might my instincts be that, like, I'm gonna regret later as my instincts? And the answers there were pretty helpful around people will try to assume will assume that they're really great in some other domain.
Russ Heddleston: And so it's like, be aware that, you know, you're not great at all the things. Like, maybe it was 100% luck, but you learned a lot about what you were doing. I don't think it was a 100% luck in our case, but we didn't have to grind through it. But those that knowledge doesn't transfer to whole things. I didn't wanna start a a beauty brand or something.
Russ Heddleston: Didn't really seem like, another cautionary tale was, like, starting something for the sake of it. Like like you mentioned earlier, make sure it's something that there's intrinsic motivation for. Otherwise, you're just gonna lose interest in the thing. So I was my cofounders, Dave and Tony, were also good friends. They're still retired.
Russ Heddleston: I think they'll get bored eventually, but they're having a great time as, like, new parents and and, you know, having a lot of fun. I got bored first, so I started to, like, shopping around and looking at ideas and then met up with my cofounder for this company, Tim. It's also his third company. And so, you know, our I ideating process was much more like dating where we, like, had our shared values we wrote down, and we kinda, like, got to know each other actually over the course of a whole year because we just kept building prototypes and testing out stuff. So we took that idea, Maze, and we really said, like, let's leave this open ended and make sure we wanna do whatever we pick and, you know, not have a time limit on it and not pressure ourselves.
Russ Heddleston: So what we're working on distill is actually our fifth, like, prototype that we built out and tested in a year. But we love the process together. It's just one where you have to ask a lot of questions, poke at things, why why is it wrong? We stuck to our guns around. We like building for the end user, not the economic buyer.
Russ Heddleston: We like it to be b two b. Like, there there are a bunch of factors that we wanted in the system that we were gonna build, and there needed to be a why now component to it. So I had some ideas from previous like, one of them was I wanted to start the inverse of docs and doc get because I just thought that'd be funny. But then as I dug more into LLMs, I'm like, no. LLMs, this changes a lot of stuff.
Russ Heddleston: So we just kinda got rid of everything we've been thinking before and just really approached what would be an interesting things to start now that we don't think is gonna otherwise be done by a big company. We don't think it's gonna get steamrolled as LMs make progress, but, like, something that we care about that's worth solving. So, yeah, that took a while. It was not the spreadsheet process that I used before. It was much more of, like, me and Tim just having a lot of conversations.
Russ Heddleston: I did 300 plus, like, interviews with people, either, like, need finding or asking for advice or, like, you started this and it failed. Why? Would you do it again? Does this change anything? You know?
Russ Heddleston: It's really, really fun, but we would just kinda follow our interest until we got to the point where, like and then we kinda, like, follow the evolution of it. So, yeah, it took us about a year after we started together to to settle on what we're doing now.
Pete Flint: But you but you were specific about defining and agreeing on values before you figured out what product you were gonna build?
Russ Heddleston: Yeah. Yeah. It was that that part, I had done done with Dave and Tony, but I'd also known Dave and Tony since undergrad. You know? Like, we were roommates, and we'd been taking classes together.
Russ Heddleston: We'd all worked at another startup together. So we we knew each other very well. With Tim, even though he also went to Stanford, he's about the same age. You know, we just hadn't we didn't know each other even though we're in the same group. So we did reference checks on each other, but then we spent time together, and it did feel more like the founder dating thing where it makes sense to write things down.
Russ Heddleston: Let's not, like, make assumptions if if we can avoid it. And so it was it was a fun process just to write things down and to see what each of us cared about and just kinda settle on, like, criteria for for what we're looking for.
Pete Flint: And so, yeah, so you define the values, then you also define the principles. Kinda this is the kind of businesses that we're really good at, and this is what we wanna pursue. And then that created this sort of and out of that came all these the ideas that you narrowed down.
Russ Heddleston: Yeah. Exactly. Yeah. He Tim had some ideas he brought to the table. We explored those.
Russ Heddleston: I had some ideas, and then we would just kinda, like, look at themes that we were hearing back from people. And then it's it's kinda following the the thread and kinda digging around. And, like, one of the ideas we discarded right before Distill was one we call Datapoint. And as we were following thread around, like, LLMs doing data interrogations and, like, making analysis better, and we've all entered a company where you're like, oh, there's an analyst. There's all the engineers, but, like, we can't make sense of our numbers.
Russ Heddleston: Digging into that problem, what we realized was the best incarnation of that, like, insight was gonna be selling up market to CIOs, like, for, like, a data cleaning service. And that was just clearly outside the bounds of, like, what we'd already talked about. And we're like, we don't really wanna do an enterprise sale company that's an API to CIOs. We're like, someone should start this business, but I don't think this is the business that we're gonna be excited about in ten years, like, even if it's successful. We actually got an acquisition offer for it, which I thought was really funny because it was just a prototype.
Russ Heddleston: But, yeah, we would follow things until it got outside the bounds or until we started to question if it would actually work well or not.
Pete Flint: Yeah. This is sort of there's product market fit and there's founder product fit and founder market fit. And you kinda gotta get the trifecta there to just kind of to see the magic happen.
Russ Heddleston: Mhmm. And certainly for me and Tim to just make sure that we are enjoying working on what we're working on. It's something worth solving. We'll be doing this for a decade and, you know, still be excited about it in a decade. And, yeah, it takes a takes a while to find something like that.
Russ Heddleston: So, yeah, the the idea is this time around. I hope I'm better at it. I still don't know what the ideal process is for it. But, certainly, talking to a lot of people and trying to poke things to get, like, why no to this, I still really like that that part of it.
Pete Flint: And is that just, you know, some some founders after they have a successful exit have a, I don't know, a kind of a chip on their shoulder or kind of like, you know, or something which is like, okay. I really I really okay, I I wanted or they just say like this is great, I wanna do this again, you know, if I can be acquired for a 165,000,000, I'm there. Is there any is there anything there that's kind of driving you as you think about the next chapter?
Russ Heddleston: That's a good question. Like, where does intrinsic motivation come from? And and, like, for for me and Tim working on this, the year off was really helpful to make sure it wasn't a chip on the shoulder, because I wouldn't be that confident that would stick around as a motivation in five or ten years. And, you know, I I wouldn't feel comfortable building something that people rely on, that's got employees if I don't think I'm gonna be around for kind of the life of the figuring out the hypothesis. So, yeah, it's not a chip on the shoulder.
Russ Heddleston: Although with, you know, Docsend, if I did it over again, like, maybe we wouldn't have sold and just kept going. It was a great company. It was a great exit. Like, we did really well. Before that, had the company we sold to Meta, which was more just great timing.
Russ Heddleston: They weren't public yet, and, like, we built something for that as an acquisition. But I'm in a great spot in life. Feel really fortunate. And so the motivation to work on this deal comes much more from a place of, wow. LLMs feel pretty different in the world.
Russ Heddleston: This is a skill I've got, having gone through it twice here to, like, try to find message market fit, product market fit, build something that people like a lot. I'm much more aware of just how hard it is at a big company to innovate and to do things differently. So it's all positive motivation for me that this is something we wanna go work on. You gotta spend your hours on something. The year off was good to be like, okay.
Russ Heddleston: How many sci fi books can I read? And then, you know, like, am I, you know and you've got a hard job. Being a VC is not retirement as, you know, many people say it is. You've got investors to answer to. Like, you got that is that is a, you know, a lot of work.
Russ Heddleston: And so when I thought about what do I wanna spend my hours on, you know, then it kinda comes back to the, this is fun to create. It is really fun and rewarding to build something that people get value out of and to know that, you know, like, you know, no one else did it. You happen to be the person to build thing, you know, even if it's as small as Verdox and, like like, giving you, the founder, like, some idea of, like, are people reading it or not? Where is it going? What's happening to it?
Russ Heddleston: You know, I love it whenever people say, like, oh, thanks for creating it or love the tool. Been fun to see it kinda persist on. And so, like, that if I can do that again with another thing, that'll be really fun and worth pursuing.
Pete Flint: That's so good. You know, it's I think it's the one of the greatest privileges in life to be a founder that you choose the problems you work on, you choose the people you work with, and you choose the environment that you work in, which is like, you know, so few people get that privilege. And so if you can do it again and be fulfilled by it, it's phenomenal. What's the sort of elevator pitch for Distill?
Russ Heddleston: Sure. Well, I mentioned Datapoint before. This came out of that, and the idea or the insight I had was like, oh my god. Companies are willing to pay more money for the data they don't have than they're willing to pay for the analysis of the data they already have. And then I was thinking, oh my god.
Russ Heddleston: There's already so much data out there. People just can't make sense of any of it. So we came back to an idea or, like, familiar idea with working at Meta around the graph of people and companies. And so the concept with Distill is like, hey. Can we just remove the need to Google for a person or a company?
Russ Heddleston: There's so much data. Like, if you're googling for a person or a company, like, something has failed here because Google is not meant for, like, people search. It doesn't know who is this sort of different person and same for common company names. So the concept is just like, oh, can we build profiles out of people and companies and just tie it all together with LLMs? Because we can say, this is the right PEEP.
Russ Heddleston: It's the wrong PEEP. And it's been tried before, but no one's done it well. People are still googling for people and companies. So elevator pitch is like everything you could find out about someone on the Internet in a single profile. And then on top of that, the really interesting things you wanna do searching for new people, new companies based on kind of whatever it is that you're interested in.
Russ Heddleston: So, like, search is different now. People and company search is different now that we have more information, now that we have new ways of indexing it. And, you know, so following that, that's the thread we're currently following. And, mostly, it's great profiles. It's this intuitive AI search, and then it's the staying updated about people and companies that you care about.
Russ Heddleston: But, otherwise, like, it's really hard to know if a new blog post came out for you, Pete, unless I see it on LinkedIn or somewhere else. It's like Google alerts. So we felt like there's a hole there.
Pete Flint: Terrific. Well, awesome. Well, thank you so much, Russ. Great conversation. Great to catch up.
Pete Flint: It's been, like, such a joy to to kinda see your evolution and kind of knowing each other way back when we were kind of early on in our careers to see the evolution evolution to today. So thanks for coming on and sharing your story. Terrific.
Russ Heddleston: Yeah. Thanks, Pete, for having me on. It's been really fun to know you all these years and really fun to chat today.