From Technical to Product to Sales CEO: Hard-Earned Lessons Learned

Editor’s note: This article is based on an episode of the a16z Podcast, which you can listen to here.

Hi everyone welcome to the a16z Podcast, I’m Sonal; and I’m here today with David Ulevitch, one of our new general partners who covers all things enterprise. But honestly: that can mean so many different things to different people, so we briefly discuss what “enterprise” products really mean today, for entrepreneurs, companies, and users — especially given the latest shifts driving SaaS beyond the cliché of “consumerization of the enterprise”. 

We also cover specific advice on the topics of:

  • pricing & packaging;
  • how to balance being a product visionary with being a product manager;
  • when and how to scale out and hire your leadership team, and how do you know that’s working or not; plus
  • how to best manage your own time — and your own psychology! — as a leader while doing all this.

For context: David founded OpenDNS, where he went through a rough period in going from CEO to CTO in 2009 and then back to CEO again, in a company that itself pivoted, from consumer to enterprise. We discuss how did he make a comeback; it’s not like he changed instantly overnight, so what and how were the lessons learned? In 2015, Cisco later acquired OpenDNS, and David then ran their security business, where he also led the acquisition of three companies before coming here. So he’s seen startups from all sides: from being acquired to being the acquiror; from small to big to small to big again; from on the inside and from on the outside…

But the real theme of this episode is the journey many founders make — from technical to product to sales CEO — and while we end with the story of OpenDNS and the most important lessons learned there, we begin with what is the one piece of advice David has for founders?

David: So I think that there’s not one — you know, I’m not a big fan of platitudes, where you just say one thing and that applies to everyone — because there’s never one thing that makes the difference between success and failure.

As a founder, you’re generally at different stages of the company-building journey. Sometimes you’re a technical CEO, trying to build a product, to make sure it actually is feasible; then you are constantly in the market with customers, doing customer discovery, making sure that you are solving the problems you’re trying to solve. You end up becoming sort of a product CEO, making sure that you have product-market fit; then you end up becoming a sales CEO, on the enterprise side, where you’re trying to generate revenue and figure out how you can go acquire more customers. And then if that works out, you become this really general sort of manager or go-to-market CEO, and you’re thinking about how do you scale and accelerate a business.

And so, I like to think about those as different journeys, where there’s the right decisions for the right time — and really trying to help founders understand, what time is it, and where are they in that journey, and where do they want to go?

Sonal: Is it possible to be all four at once, or is it really tied to the stage of the company?

David: Generally, you want to be more focused than less focused. The reason you’re probably also not all those things at the same time, is a company is a set of these interconnected little knobs, and you can never just optimize one and then forget it and not come back to it. You end up going to another knob. If you fixed pricing  and packaging, then–

Sonal: It’s like a control panel.

David: Yeah, it’s like a control panel. Then you’re going to move to demand-gen (demand generation) to try to increase the top of the funnel. And if you fix that, then you want to make sure that your SDRs (sales development representatives) and salespeople are converting marketing leads into qualified leads. Then you’re closing, then you’re doing customer success. And once you tighten one of those knobs, it just creates slack in one of the other knobs. You might switch those hats from time to time, but I think you’re rarely going to be wearing more than one of those hats at the same time.

Sonal: So I have to ask, since we’re going with this theme of let’s not do the platitudes — a lot of people say “it’s about the customer”, and “the customer journey”, and “understanding the customer”… Honestly, when I hear that I’m like, they [customers] can pull you in a million different directions, you don’t even know what to do. Especially if you’re a technical founder, you don’t know who to sell to; there’s a bit of a chicken-egg. So how do you figure out how to sell to the right customer?

David: It’s okay for a company in the early stages not to know exactly who they want to go after, but they do have to understand the consequences of the customers that they’re targeting.

I think we’re living, today, in one of the best times to be an enterprise software startup. And, to me, one of the reasons is because so many companies today are SaaS and subscription-software companies where there’s a recurring revenue component — it’s better for the customer. Because they know that the customer experience is gonna be good… or they’ll stop paying for the subscription, right?

Sonal: It’s a repeat business; it’s not a one-time sale.

David: It’s a repeat business, right. I never think about the first sale when I look at a business, I always think about, what are you going to do in year two, year three, to make sure you renew the account, to grow the account? It’s actually a way of peeling back the onion to figure out how confident are you on where your product is today?

Because if you say, “Oh, we’re only doing three-year contracts”, well, is that because it’s really hard to implement and tough to get customers onboarded and so you need runway to get them happy? Or is it because you think you’re overselling your capabilities set, and you just don’t want a customer to figure it out within a year and not renew.

But if the startup I’m talking to says, “Oh, well, we did a couple three-year contracts, but we realized that we were priced really low, and so now, if a customer wants a three-year contract, we’re actually going to charge them more on the out-years.” Well, that tells me your product is really good, and getting better.

Sonal: That’s fascinating.

David: Another way to think about that is that what used to just be a product experience is now much more of a customer lifecycle experience: It starts before you sell, building evangelists; then there’s the onboarding part; then there’s making sure the customer is really happy. How do you market to your existing customers to make sure they’re getting full utilization of your product?

That customer lifecycle makes it much easier for a startup that’s getting started to really identify who is the target customer. And then thinking about does that actually map to the business I want to build: Is it the big Fortune 500, the Global 5000, is it SMBs (small and mid-sized businesses)? Because it has all these downstream effects.

It’s okay for a company in the early stages not to know exactly who they want to go after, but they do have to understand the consequences of the customers that they’re targeting

A lot of startups will come in here — and in my first six months here, I’ve now met with over 200 companies — and a lot of them have this ambition to go after SMBs. And one of the cool things about SaaS is that SaaS can take something that in the olden days of enterprise computing, you’d have to buy the biggest server, the biggest box, to get the best solution. But with cloud and with SaaS applications, you can now have the power to get the massively great CRM system, the massively great HR system…

Sonal: I like to think about it as SaaS is very democratizing, actually.

David: SaaS is totally democratizing.

Sonal: Because it enables smaller- and medium-sized companies to have access to big company resources. They don’t have the in-house engineers, but they can essentially “as-a-service it in” to their company.

David: Absolutely. Small companies have unlimited compute. They have unlimited storage. They have unlimited bandwidth now.

So when I meet with startups, they often want to ambitiously and altruistically go satisfy this pain for SMBs. But it turns out that the reality is, if you want to charge a higher price point, if you want to pay an expensive sales force, then you’re going to realize that your average deal sizes have to be higher. If I really want to go after a target market where the price point is going to be lower, then I have to think about bottoms-up sales, about self-serve offerings.

I mean, nowadays, think about how many emails you get where it reminds you of a new feature that you may not even have known existed. For instance, I’m using an email product called Superhuman, and every week, I basically get an email from the team saying, “Did you know that you could use this functionality? If you press [command] ⌘ + I, it’ll automatically route someone to BCC in the reply. Or you just press ⌘ + C, it will copy the whole email; you don’t have to select it first.”

Sonal: Actually, I saw this awesome tweet from Patrick Collison, the CEO of Stripe, where he said, I feel like Rahul Vohra, the CEO of Superhuman, is essentially inventing new user-experience interaction paradigms that will eventually cascade into other products. Much like Steve Jobs did with letting us learn new behaviors like how to touch a phone.

David: Patrick’s tweet was right on. In Rahul’s weekly marketing email to existing users, it helps teach me these new things that they’ve unlocked. They become very intuitive, but you still have to learn about them.

I love when I see startups that think not just about who they want to go after, but then they build that into their whole customer experience model — marketing programs, pricing and packaging, renewals, sales — and the whole business model. One of the best things about building a company today is it’s easier than ever to get close to customers, to constantly get iterative, real-time feedback: both from an analytical standpoint and from customer surveys, NPS scores, all these kinds of things. You have all this telemetry through SaaS products where you actually see how people use your product.

We’re living, today, in one of the best times to be an enterprise software startup… You have all this telemetry through SaaS, where you actually see how people use your product

But the second thing that’s happened is, people talk about this bottoms-up SaaS motion, but it’s not always just that. It’s really about making sure they understand that there are evangelists in the company that you have to win over, before you’re going to get sign off from the CFO, the CIO, the CSO, whoever he or she is that makes a decision — you’re going to have to get some champions underneath that person to be your evangelist internally.

Sonal: So this is a little counterintuitive too, though, because the other piece of advice I’ve often heard from folks is that the #1 mistake a lot of consumerization-of-enterprise type of founders make is that they go TOO heavy on bottoms up, to the point of ignoring the importance of top-down sales. What’s your view on that?

David: I like to frame it a little bit differently. When people talk about the consumerization of enterprise, enterprise customers today are being bombarded by so many different vendors, their attention span is so limited. I think when people say consumer, they mean “easy”. They don’t really mean “consumer”.

The value proposition that I’m hearing when I talk to customers is that the time-to-value needs to be short. It’s actually two parts: The first is, I want value almost immediately, sometimes even before I pay for it. I want a trial, or I want to get up and running on my own, and then I’ll talk to a sales person. The time-to-value can either be t- minus zero days (negative time), or it has to be very short from hours to days.

I always encourage founders to think about the first hour, the first day experience, the first week experience, the first month experience.

The second part is that enterprise software can get quite complex. Zoom is in the news because they went public, and Zoom’s a great example of something where they earned the right to be more complicated.

Sonal: Wait, let’s pause on that for a minute: Earn. the right. to be. more complicated.

David: So this goes hand-in-hand with a short time-to-value. The short time-to-value gets you in the door. We know that you and I could download Zoom on our phones and be in a video conference call, but now we’re like, “Well, wait a minute, maybe all of our conference rooms should have Zoom. Maybe we should integrate Zoom with our Google Calendar.” You’ve earned the right to do that complexity because you’ve already proven so much value. And not only that, the value you get by doing the integration with G-Suite, or by adding some cameras to your conference room so that you can have Zoom-rooms — that complexity is commensurate with the value you’re getting.

When people say [that] “consumerization of enterprise” means it has to be easy or simple, that’s not quite what it is. To me, it’s two things: It’s a short time-to-value; and then the complexity curve is commensurate with the value proposition.

Sonal: So then I wanna ask you more about what needs to go into that “time-to-value”. So, let’s be a little bit more specific.

I mean, I get the point that it’s incredibly competitive, so you’ve got to differentiate fast and show the value. But what are the things that drive that? Is it a great… like, a cute little JIF-y, <chuckles> that, you know, that jumps out at you and makes cute — like, a Clippy-type of thing? I mean, what is it?

“Sonal’s right, dammit” (image: Giphy)

David: Did you say a JIF-y, like a GIF?

Sonal: Ugh… are we gonna rumble?

David: Wait, I know how we can do this. <laughs>

Sonal: Are we gonna just stop and, like, end this?

David: I can’t have you trolling me.

Sonal: We can’t be… I am not trolling you! I’m one of the people who calls JIFs, not GIFs (I hate that). You know there’s a world of people that think they should be J!

David: Hold on… I don’t know if I would have agreed to this podcast if I knew you called them JIFs.

Sonal: It’s like nails scratching on a chalkboard. You’re literally right now in my ears. It’s like someone’s poking pins in it right now.

image: Giphy

David: How have you been so successful in your career this whole time calling them JIFs??

Sonal: I actually feel like I kind of hate you right now, to be honest.

David: Aw, this is amazing… <laughs> Oh, my goodness. <laughs>

Sonal: You don’t have any friends that pronounce “GIF”, “JIF”?!!

David: I don’t think so. Like, you’re it.

Sonal: Chris Dixon, is he a friend of yours?

David: He is.

Sonal: So I’m outing him on the podcast, because I’m not gonna go down in this ship alone. He’s another one.

David: You might have to edit that part out, because I don’t know if that can be out there… There’s, like, this dissonance in my brain, because you and him are so smart, but you also call it a JIF. <laughs>

“David thinks he’s right” (image: Imgur)

I don’t know what to do right now… <Sonal giggles> All right.

Sonal: Okay, so, Slack, for instance, they did a lot of really creative things. I remember I was at Wired, and the product that we used was HipChat. And the thing that eventually got me into Slack was the fact that you could do all these GIFs (whatever;) — <David: yup> you could do more fun things.

David: And they have the integrations, other things could drive information into your Slack channel. And that was not something that happened to HipChat for a long time.

Sonal: That’s right, like Google Documents and…

David: That’s right, Dropbox files. Even automated updates, like, if you’re a developer, when somebody would do a push to production, it could notify people inside the Slack channel.

Sonal: Right. But now that’s not a case where IT has to decide the integrations.

David: That’s right. And they made it easy for individual users. As long as you could use Google Auth to authenticate, anybody could basically set up a Slack channel inside their organization.

After a while, IT says, “Hey, wait a minute. We have all these teams that are chatting on this thing, they’re doing integrations, files are being shared. We need to have a little bit more visibility, a little bit more access control.” And for security and compliance reasons, it became an enterprise sale that went wall-to-wall. It’s now already entrenched in the organization. There’s already integrations happening with some of the developer tools and workflows, and at that point, they’ve earned the right to be more complicated.

Sonal: I’ve noticed this resurgence — and I don’t know if it’s just like a zeitgeist thing or anecdotal evidence — of design-focused startups, precisely because of the thing you’re saying, because that’s one of the ways to instantly differentiate.

David: “Design thinking” is sort of another way of saying…

Sonal: Oh, I hate that phrase.

David: I know.

Sonal: Talk about the platitude-of-all-platitudes. That phrase drives me fucking up a wall.

David: So here’s a better way to frame it. <Sonal: Okay> Cuz I also don’t like that phrase. <Sonal: Yes> Is it’s really about that extension of the product experience, and really taking that more holistic approach. It’s not just about the UI, it’s not even just about the user experience of a particular workflow, it’s about that whole customer experience.

We’re actually entering a period of time where more and more people in the workforce are digital natives, and they want to be power users. You know, why isn’t there an equivalent Microsoft Excel on the web? Like, Google Sheets is not Excel. The current state of collaborative tools in SaaS apps is just so weak, and they don’t let you be a power user.

What used to just be a product experience is now much more of a customer lifecycle experience

Sonal: It’s also, I think, ignoring the realities of organizations today.

David: Totally.

Sonal: Which used to be so siloed. And now you have people collaborating cross-functionally in different ways…

David: You could argue though, Google Docs did create a multiplayer mode where you could have collaborative editing, but it was just such a garbage experience from a functionality standpoint, that…

Sonal: It was an afterthought. It wasn’t baked in natively. That’s, basically, my rule of thumb for all of this: If it’s an add-on, it’s not important.

David: I would say Google G-Suite is an add-on too. Google should just shut down G-Suite altogether <chuckles>, even though the whole of Silicon Valley would go crazy. I mean, they’re a rounding error in their business, they’re a rounding error to productivity, versus what Microsoft has. I don’t think they’ll do that, but strategically, it’s just so unimportant for them.

Sonal: Right.

David: What I would say, though, is that I like software that is easy to use, that has that short time-to-value, but that also allows me to be a power user if I want to be.

And in fact, as an investor, when I talk to companies, I always try to figure out what is their pricing and packaging strategy.

Sonal: So tell me, what is packaging, actually?

David: So, packaging is usually (I mean, it can be a bunch of things) — but to me, packaging is: What set of features are you going to put into an offering to a customer?

I always try to think that you want to make it easy for your customer to give you money — like that is a foundational principle for me — packages are a way to do that. We’ve all been to the restaurant where the a la carte menu is all over the place, but sometimes restaurants just say, “Well, here’s the three options: Comes with one of these appetizers, you get this main course, and you get this dessert.” If you want to make things easier for people to give you money, generally, people come up with packages. And the friction is removed to becoming a buyer.

In the SaaS world, sometimes there might be a tier that says, you’re going to get the full functionality of the product, but you’re not going to get archiving and logging and all this detailed reporting and analytics. It allows the company that maybe doesn’t want to spend as much or isn’t as big to get the full functionality of your product, but then there’s a hurdle. When I think about packaging, usually there’s a key product milestone that happens that forces somebody to jump to the next tier.

Sonal: Interesting. What do you mean? Give me an example of that.

David: Well, sign-on is a good one. Lots of SaaS offerings let you create accounts and use a product, but if you want to tie it to your Okta directory or some other directory service, you’re going to have to jump to a much more expensive tier. But, generally, the customers that have to jump to that tier are more enterprise companies. They have a directory service. They have a single sign-on service. They might want two-factor authentication with tokens. The security person in me doesn’t love that one being a tier because I always think you want all your customers to be secure. But there are other tiers, like compliance. If you’re in a regulated industry, you might not just be satisfied with 30 days of logging. You might need 365 days of logging. You might need to be able to export your logs to another data store.

When people say consumerization of enterprise just means it has to be easy or simple, that’s not quite what it is. It’s two things: a short time-to-value, and the complexity curve is commensurate with the value proposition

Sonal: So far, if I heard that as an entrepreneur, though, I would assume that all packages are tiered. Are there un-tiered packages where it’s just a different combo that’s kind of horizontal?

David: You know, I don’t think I’ve seen that. Generally, it’s much more of a ladder — <Sonal: That’s what I was wondering> Where the next package includes everything in the previous package. And I think that, while there’s usually a number of features that get unlocked when you go to the next package, to me, there’s always one that has that forcing function.

In fact, when I think of packaging, it’s often a way to segment your customer base. Because you’re going to say, we know SMB mid-market (under 1,000-employee companies), they’re going to be in this package. Everything we do, the product manager on that package is thinking about those features, thinking about our persona. And then the next package, the person is saying, wait a minute, I want to go after the 1,000 to 10,000-employee company, and this is what they need: This is how I communicate with them; this might be how I do webinars to them; this is how I’m going to do pricing that more fits their model. Maybe you can’t do a three-year contract if you’re on the low-end product.

All these things are puts and takes that reflect where is the product, who is the customer you’re targeting, and then how do you want to market and create demand with that audience?

With packaging, usually there’s a key product milestone that happens that forces somebody to jump to the next tier

Sonal: Is there a balance or a rule of thumb — I’m sure it must vary by business — in what the ideal number of packages are; or, how many customer segments you should be trying to reach as a startup?

David: Well, I think fewer is better because focus is key.

Sonal: “Less is more”?

David: Yeah, less is more. Time is always the most valuable currency in an individual’s life, in a company’s life. Aligning all that time behind the most important — putting more wood behind fewer arrows — is much more important.

Generally: two packages, three packages. When you make it too complicated for the customer to figure it out, that creates friction to the sales cycle. <Right.> Now, with that said, one thing that startups often do is they share their pricing publicly on the site. And the engineer in all of us, the pragmatic person in all of us, we’re like, well, of course, we want to share pricing because as customers we hate not knowing the price. But as products get much more nuanced, and organizations are buyers, you actually don’t know what your pricing discovery looks like — you’re better off not sharing your pricing.

Sonal: Okay.

David: One way you know you have a great product is when your salespeople are the ones demanding you remove the pricing. Because that means that they’re telling you–

Sonal: You can get more money.

David: You can get more money! Maybe you’re a technical CEO who’s becoming a product CEO who’s becoming a sales CEO; if you’re listening, you’re going to be like, “Wait a minute. They’re telling me we’re leaving money on the table.” That’s generally a very strong signal.

Sonal: I have a stage question on this, though, because if you think about the definition of “startup”, a startup, by definition, is a business under a high condition of uncertainty compared to a more established business — I wouldn’t even peg it to a particular size.

Given that, a startup is an experiment; and the product, you can run multiple experiments at the same time… We’ve heard of the famous pivot — you know, the dreaded “P”-word — there’s all these different flavors of this. How do you run multiple experiments, and also strike a balance with focusing the pricing-and-packaging strategy?

David: Well, that is <ahem> the art of running a business…

Sonal: Not a science!

David: Yeah, and everything is multivariate. But you can — if you have smart people paying attention to the numbers, paying attention to the data, collecting the analytics, and giving yourself enough time to collect that data — the worst thing for a company to do is to make a decision and then not allow there to be enough time to collect the outcome of that decision, and understand the consequences of that decision, and then they make another decision.

The question of how do you make decisions and run multiple experiments, I don’t think it’s that complicated — as long as you’re paying attention to: What are the outputs from those decisions that you should be looking for? And you should be looking at what’s changing across the business. We’re living in an era today of running companies where it’s much easier to collect and analyze data than it ever has been. You have data lakes where you can bring in product data, your CRM can tie into that product data. We’ve never had… we have BI tools now…

Sonal: Business intelligence tools.

David: That’s right. We have open-source business intelligence tools. We can actually run complex analytics and say, “Wait a minute, my West Coast territory is just doing so much better than my East Coast territory; what is the difference that’s pushing there? Is it because we actually are running more demand-gen campaigns on the West Coast, and the marketing team on the West Coast is separated, or is it just that the West Coast sales reps are better?”

Sonal: You need to be able to tease apart those.

David: You need to be able to tease those things apart. But it’s easier to get access to the data and analyze it quickly and avoid that analysis paralysis than it ever has been in the past.

Sonal: So you know, a big part of this — so the big theme I’m hearing from you, is a lot of these things have intentionality, even if you don’t know the outcome. And that you can actually control that intentionality by being introspective, understanding your decision-making, understanding what works; that sounds great.

Now, as the leader of the company, how do you, the CEO, figure out what to work on? And depending on what stage you’re at, this whole journey — from technical, to product, to sales, to go-to-market — that’s not necessarily perfectly linear, how do you figure this out?

David: It’s not linear at all. I mean, sometimes in retrospect, we like to look and think that it was linear. <Sonal: Of course, right> I think that there’s different ways to figure out how do you prioritize your time, where do you spend your mental calories?

Sonal: “Mental calories” — I love that phrase.

David: Yeah, I mean that’s how I think about my day: “Where do I want to…” You only have so many mental calories

Sonal: That’s how I think about my day, too! I think of “nutrition density”. <David: That’s good> I have a phrase that I use for all my editing, which is “ROE (return on energy)”.

David: Ooh, that’s good.

Sonal: So I refuse to spend time on something that the output is gonna be vastly low-proportion outsized win to what the amount of work I put in <David: right> in terms of energy, creative. I have a whole framework for thinking about this stuff because I’m ridiculously productive on this front.

David: Well, hopefully this podcast gets published <chuckles>, because then I’ll know that it had high ROE. <Sonal laughs> I think figuring out how you spend your mental calories is a really important question to ask, and sometimes, the act of asking that question itself is just part of the process of figuring out how to spend your time… and spend it wisely.

And there’s different things that happen along different stages. I always look at what is the problem in the company — is it that we can’t get customers? And then figuring out who that right customer is.

But as a company starts to mature — like, a lot of these companies get to this $2 million, $3 million in annual recurring revenue — that’s a huge milestone; very few companies ever get there. But, yet, it’s tiny when you should be doing $20 million, $30 million.

If you aspire to be there, you can celebrate the milestone, but it’s clear that you have a long way to go to build an enduring, iconic company. At that point, though, you start to have a leadership team.

Sonal: One of the biggest things that we see when we give technical founders advice, is they need to bring on a VP of Engineering, they need to bring on a Head of Sales. They keep resisting this thing because they’re attached to their early startup team. How do they figure out when to really– there’s a lot of religious advice and debates around this.

David: I always go to the question of: What time is it? What is the priority? Are you trying to figure out product-market fit, or are you focusing on going to market? What time is it? Are you hiring salespeople and ramping up? Are you figuring out the customers are churning and you’ve got to go fix your product?

Focus is so important. If you were to ask all your leaders and all the people in your organization — “What is the most important thing for our company right now?” — they should have an answer.

Just one of the more tactical conversations that I have with leaders — especially when they’re a startup and they have this core founding team and then they’re thinking about scaling — and they say, “Well, you know, I have this engineering manager. He or she was with me from the beginning, and I think they’re doing a great job managing.” One of the things I highlight is that bringing in a world-class VP of engineering that could rock the boat, it could cause issues, but it’s not an indictment of your current engineering manager.

You can celebrate the milestone, but you have a long way to go to build an enduring, iconic company. At that point you start to have a leadership team…

Like that’s not what’s happening. Part of bringing on these high-performing leaders and these really well-respected leaders — that have a cult-like following with the people that have worked with them and for them before — is that they are going to help you accelerate your ability to recruit world-class talent. When you deliver that message to that person on your team who’s been there from the beginning and is doing a great job, that should resonate. It’s like, “Oh, wait a minute… We can get way better people, way faster? Yeah, let’s bring that person on.”

Again, you have to be very careful about knowing what are the problems you’re trying to solve in the organization, but oftentimes — and I think VCs have a bad rep for this — they shove in somebody who’s way too senior <Sonal: Yes, exactly!> who comes from way too big of a company. You have to think about what is the right team I need for the right time.

Sonal: I think Ben wrote about this in his book, actually, which is the mistake that people hire for the future instead of hiring for the thing you need now.

David: This often comes up with VP-of-Sales hires, where somebody maybe has run a 10- or 20-person team, but you’re like, can they run a 500-person sales team? Well, you don’t have a 500-person sales-team problem! People often think about the executives they’re hiring and is this person going to do anything for four years, or five years, or six years; I think that’s not always the right question to ask.

In fact, I had a board member once — Dave Strohm, who was a mentor to me, I think of him as the Yoda in my life — and he once said an expression that I’d never heard before, “horses for courses”. Have you ever heard of “horses for courses?”

Sonal: No, I don’t even know what that is.

David: It’s sort of an archaic expression. In horse-track racing, there’s like dirt courses, there’s grass courses.

Sonal: Ohhh I get it!

David: And you want to run the right horse for the right course.

…There’s a bad part of this phrase too, though. <Sonal: Uh-oh> There’s a bad connotation, which is that, sometimes when horses, run their few races and then they’re finished, you don’t have–

Sonal: They’ve “run their course”! That’s where it comes from, that expression!

David: That’s right, they’ve run their course. And do you know what happens to horses that have run their course?

Sonal: Nooo, I don’t want to know:( …Are they turned into gelatin?

David: Something like that.

I always used to joke (it wasn’t very nice probably) — but I would joke with the VP of Sales I had at OpenDNS — that every quarter was his last quarter because he just constantly outperformed, and we always wondered when we hired him, is this guy going to scale? Now, he scaled wonderfully; he’s an incredible sales leader. He went from a 20-person sales team to, ultimately, a 200- or a 400-person sales team. Then once we got to Cisco, he did wonderfully. But we didn’t know when we hired him how far he’d get past 20 people.

You gotta hire horses for courses.

Sonal: The right team for the right play.

David: And this is a good way of really figuring out, is my leadership team adding capacity for me? Are they helping me understand what’s happening in the business? Because, at a certain point as a CEO, you’re going to start to spend less time on engineering, less time on product. Ideally, you’re going to spend more time in the field with customers, with partners, with customer success. As you start to spend less time with any individual function, you’re going to need to have leaders in place that really are spending all their time really understanding closer to the metal with what is happening.

Sonal: I love that you said “close to the metal”, because that’s the exact phrase I use when I think of this: It’s like “bare-metal leadership”.

David: Totally.

Sonal: Because that’s actually the biggest challenge: As a product-oriented person — or a visionary for whatever the product is, in any field — how do you kind of keep that “close-to-the-metal insight”… yet, you can’t actually be close to the metal if you’re scaling.

David: So this comes up a lot in startups, this idea that if you’re the product visionary, you’re the founder of the company, that means you are the product manager for the company. But at the same time, you need to scale an organization. And I think it’s important to differentiate the product manager from the product visionary. <Sonal: Oh, great>

As the founder and CEO, you can always be the product visionary, but there is going to be a time where you’re not going to be able to spend hours of time with the engineers hearing how they’re working on a product, or how it’s technically going to work. You’re not going to spend hours and hours of time looking at all the NPS survey data or the customer support tickets that are coming in.

And so, oftentimes, I’ll meet these startup CEOs who are like, “Oh, I can’t hire a product manager. I am the product manager.”

Sonal: That’s a common thing for technical founders.

David: Totally common! It feels like it’s your baby, you don’t want to let it go. But you’re only going to have five seconds a day to think about different decisions you make. And if your engineering team and the rest of the organization is constantly coming to you, you’re going to end up getting paralyzed. The worst thing for a product visionary is to make some decisions that they know were the wrong decisions — because they lack data, or they lack the time to be thoughtful about it — and then they start to undermine their own thinking about whether or not they even are a product visionary.

When the reality is, just hire a product manager! You’re not offloading the product vision to that person, what you’re offloading is the day-to-day ground war of figuring out: What is customer support telling me? What is sales telling me? What is engineering telling me? What are customers telling me? Synthesizing, analyzing, prioritizing, sorting that data. Obviously, as the founder and visionary, you have the ultimate say, but you’re going to be armed with so much more insight/information, that your intuition — which plays a big role, too — is just going to be further enhanced.

As a visionary, you’re going to have some special secret, some earned power, that you have over the lifetime of your experience, where you’re the domain expert in a problem set and know more about it.

Sonal: Right, because you’ve gone through the idea maze. <David: That’s right> You’ve literally lived and breathed this thing; you’ve built the company, started it. You literally have it seeping out of your pores.

David: That’s right. But how you build a product is not the same thing as having a vision for a product.

Sonal: We had a recent podcast with Safi Bahcall, and he described how Steve Jobs had both the artists and the soldiers, and so not only did he have himself, but he had Tim Cook and Johnny Ive. And when you think about the story of the iPhone, the app store was actually a result of his team coming up with the point that, hey, you can’t just have only Apple apps on this, <David: That’s exactly right> if you want people to use this.

David: Your product managers will come to you when they have conviction on something, and they have the data, and they have the view. You will then be able to make those bets. And nobody would say that he wasn’t a product visionary just because he didn’t come up with the app store.

Sonal: On that note, though, just to probe on one bit — because I’ve always wondered about this — there is a tension between this idea (I hate this idea) of “the head”, and “the hand”. You can’t have one person be the “head” and the other person be the “hand”. How do you reconcile that bit? I guess what I’m asking is, how do you calibrate along this line of visionary to manager?

You can differentiate the product ‘manager’ from the product ‘visionary’… how you build a product is not the same thing as having a vision for a product

David: You want to know what you’re hiring for. Because there are product managers that are much more analytical, and there are product managers much more visionary. You might need different kinds of people at different kinds of times. I think you have to be self-aware and be really intellectually honest. Because, if you actually need someone who is more visionary, then you’re going to have to deal with the fact that you’re going to be going to battle and sitting in a room and duking it out over ideas.

It leads to a secondary insight: Which is that, if you’re a CEO of a company and you do not trust that the information you’re getting from one of your leaders is what’s actually happening on the ground, that’s a tremendous problem.

Sonal: That’s a huge red flag.

David: Massive problem…

Sonal: Fire and move on…

David: Or it could be you, if you’re just not a trusting person. I think you have to work to resolve these things. You don’t just cut and move on immediately, but you have to work to understand, do they understand what’s happening, and are they able to communicate it to you and the rest of your leadership team?

I always like to think of leadership teams, it’s not just, oh, the head of sales reports to the CEO; the head of marketing reports to the CEO — you have these like siloed, pair-wise conversations. The leadership team needs to be working together as a team and communicating with each other because, as a CEO, you don’t want to be interjecting and intervening in every conversation and every decision. You want to start to figure out, are they collaborating? Are they sharing each other’s experiences? Do they understand what’s happening in each other’s businesses? Are they meeting on their own?

I think as a CEO, you actually want your leadership team to meet independent of the CEO.

Sonal: That’s actually really interesting and counterintuitive.

David: Yeah, I think it’s really important, and I think it does happen in a lot of high-performing teams very commonly, maybe not explicitly, but it happens. Then, obviously, in some places, you can do it explicitly — when it’s done in a productive and positive way, not because the CEO is a distraction. <Sonal laughs> Ideally, the CEO is out doing something that’s of high value to the company.

But if you get to this place where you do not have confidence that you are getting the best information from your leaders, if you don’t resolve that, then you have to find someone who’s a better fit. When I talk to a CEO who’s having a tough time in the company, and they’re telling me what’s happening, I’m like, “Just tell me, do you really believe that that is what’s happening?” You either have to go deep (and as a CEO, you do get these occasional bullets where you can cause a little bit of organizational stress to go three levels deep and really figure it out) — and if you find out what’s happening is not what you were being told, you’ve got to make a change of leadership.

You have to think about what is the right team I need for the right time

By the way, I should just say that all my lessons about leaders and management, I have pretty much learned the hard way. So I’m just trying to help save other people from making the same mistakes I made.

Sonal: Yeah well speaking of that, let’s talk about your story. You’re the founder of a company called OpenDNS. First of all, what is OpenDNS?

David: So OpenDNS is a cybersecurity service that delivers a faster and safer internet. We really innovated on a 25-year-old technology that used to be a cost center, that nobody wanted to innovate on. We proved that you can actually build a business on top of this thing that used to be free, if you make it better. Speed was one part, but then the other part was security.

Let’s say you type in Zamazon.com, you’re meaning to go to Amazon.com, but that could be a phishing site trying to steal your credentials. We would say, wait a minute. We know that from our tens of millions of users, what you really meant to type in was Amazon.com, so we’re going to show you a page that says, “Hey, you typed in zamazon.com, we think it’s a fraudulent site, did you really mean to go to Amazon.com?” And that may help protect you from getting phished.

It was the first third-party DNS provider. In fact, when we started the company, some of the greats of the internet told me: a) what I wanted to do was impossible; and b) even if it was possible, nobody would want it because guys would get it from an ISP (internet service provider).

Sonal: Oh, my God. This reminds me of Marc with Netscape. One of my favorite stories is I saw these old forums that he was on when he was proposing a more of a graphical user interface.

David: The image tag?

Sonal: Exactly. And the thing that I thought was so funny is the people who are the established, kind of old fogies (for lack of a better phrase), they don’t like the change, ironically, even though they were very revolutionary at the time.

So, you mentioned a 25-year-old technology… Why was that almost impossible to them?

David: Think of the DNS like a phonebook. Except that what we wanted to do is not just give the same phonebook to everyone, we wanted to give a custom phonebook to every person. Let’s say you typed in Playboy.com. For some user over here, they may not want content filtering, so they want the answer for Playboy.com, but maybe for someone who has small kids at home, they want a different answer. Doing this at very high speed was thought to be impossible. <Sonal: That’s fantastic> But it turned out that it was possible, and we could do it faster than even if you had no preferences and settings.

Sonal: I have to ask you, how old were you when you had the insight that you wanted to build OpenDNS?

David: So, I had started a DNS company in college that did a different kind of DNS. And through that, I had gotten super interested in cybersecurity. I met an investor when I moved out to California who had asked me, basically, why I wasn’t doing more with my original company. Then, he and I ultimately came up with the idea for OpenDNS.

That original business model that I worked on with him, it was an advertising-supported business model. We pivoted the business at the end of 2009 to having the people that use our service be the people that pay us for our service — it was just a much better alignment of interests, and that journey took a long time. By the time we pivoted the business, it really was a different business than when we started it. When we sold it in 2015 to Cisco, it was really a full-blown cybersecurity company.

Sonal: Why did Cisco want it?

David: If you looked at what happened in between 2007 and 2015, the iPhone came out:

You had more and more people working from coffee shops that all had Wi-Fi; you had workers working from the road, people using mobile devices. So you couldn’t just put… installing like Norton Antivirus or McAfee Antivirus on your desktop was no longer sufficient security. And so our service, Open DNS, was cybersecurity delivered as a service. It happened intrinsically and as a part of your internet connection, so you didn’t have to have special software, you didn’t have to install an appliance or a piece of hardware. As people we’re working differently and the networks were becoming more ephemeral, Cisco (which is a major cybersecurity company, it’s actually the largest cybersecurity company) wants to evolve to match that shifting IT landscape. It’s actually been a great acquisition there.

Sonal: You mentioned “The Pivot” a few times. Tell me about that because that’s such an overused — one of those platitude-y words, like, big P, little p, whatever — I know you mean it in actually what happened, but give me a little bit more texture around the pivot. What was that like?

David: The best time I never want to have again. <Sonal chuckles> This might be a podcast unto its own, because there was an 11-month period where I wasn’t even CEO of the company. My original investor had fired me.

Sonal: Oh, my god, I didn’t know that.

David: I was CTO. I’d been demoted.

Sonal: CTO is awesome, though. I think the CTO is the most powerful person in the company.

David: Not when you wanna be CEO.

Sonal: I guess that’s true.

David: We pivoted the business in 2009. What we thought was a consumer business, actually turned out to just be a free business.

One day we got a call from a major oil-and-gas company that had been using us, and we knew they were using us globally on oil rigs of their headquarters and other distributed offices. And then, finally, we got an email: “Look, we need to have a support contract, as a matter of our corporate hygiene. So, figure it out, and give us a quote. We need to have a way to call you if there’s a problem.”

And so we went and got one of these virtual phone numbers on the internet that would route to an engineer’s phone number; and if that person didn’t pick up, it would route to the next engineer’s phone number; and if that person didn’t pick up, it would route to my phone.

Sonal: Oh my, so you were like the support desk?

David: Yeah, it was like a tiered call system. It went to three people, and we sent them a quote for one-hundred grand, and they signed it immediately and returned it. And now it went from us making $2 dollars a year in advertising — which we hated — to paying us $100,000 for something we’re already doing, and we get to turn off the ads.

You don’t need to be a rocket scientist to figure out, wait a minute, maybe there’s something here. We had two or three other companies that had asked previously for something like that, so we went and sent them quotes, and they all signed them and returned them.

Sonal: Why do you think you didn’t know that this would be the business model up front? Why did you have to pivot? Honestly, not to sound judgmental at all, but it seems obvious to me when you say it in hindsight <David: totally> — so I’m confused why you didn’t see that coming up.

David: I think we were sort of enamored with this idea of keeping the whole internet safer, and that meant going after individuals. <Sonal: Idealistic> We had partnerships with Netgear and D-Link, and these people that sold consumer routers, and so we ignored the opportunity that’s right in front of our face.

But as soon as you realize you’re not going to be able to raise money, and you actually have to build a business, you start to open your eyes a little bit. We did that, and then I hired Michelle Law, who actually spent seven years at Greylock, to run BD for us. Ultimately, she became my COO — a wonderful person, and a good friend — she had seen enterprise companies many times, and so she realized as we wanted to go enterprise that a bunch of the team had to change.

First of all, half the team just didn’t care about building an enterprise software company, so they just quit. Then, the other half of the team just could not internalize that we can’t just change the UI overnight. Because it turns out some of our big customers had their own manuals that they had built with screenshots of our product. We got a nasty email once from this major oil-and-gas company that said, “We have all this training material and screenshots and videos we made, and you just totally changed your whole dashboard. You can’t do that.”

You just have to learn how to manage those things, and then you do feature flags, which are things that are common today, but in 2009, feature flagging things and…

Sonal: What’s feature flagging?

David: Feature flagging means some subset or cohort of customers gets the access to a new feature, our new look and feel. A lot of people use it for A/B testing to see if something works, but you can also use it just to keep certain customers on certain packages, or on older features or an older look and feel. You still have one code base, but people have slightly different experiences.

We were starting to do those things. We started implementing feature flags and things of that nature, but it meant that over the course of about 12-18 months, of the 30 people before the pivot, I think only 3 were left at the end.

Sonal: When did you go from CEO to CTO?

David: So right before all that happened, for most of 2008. The only good thing that ever came out of the total global recession and economic collapse was that my early investor needed cash, and so we found two investors (and that’s actually when I first met Mark and Ben) to come in and buy out my early investor. Those investors came in, started to rebuild the company.

Sonal: But the biggest thing that’s fascinating to me is you came back as the CEO. So, what changed that you didn’t make this — I mean, ‘cause you’re the same person; you didn’t change overnight. <David: Right> Like, how did you… pull that off?

David: Coming back as CEO the second time, after spending almost a year as CTO, one of the things I saw when I wasn’t CEO was all these things that weren’t happening in the company that should have been happening. Of course, I blamed the current CEO, but the reality was, I actually was not doing them either when I was CEO.

Sometimes you just have to have this outside-the-glass-box kind of view, and you’re like: Wait a minute, people don’t know what’s important. Wait a minute, we’re not making it clear what the priorities are. Wait a minute, we’re not firing these low-performing people. But I wasn’t doing any of those things either!

That, to me, was very eye-opening, so when I came back as CEO, I was a much better listener. I think I had this belief the first time I was CEO that I’m expected to have all the answers. It’s just not possible. What is important is CEOs have to make decisions, and I think they have to be able to articulate their decisions, but they don’t have to have all the answers, they don’t have to be the smartest person.

Sonal: That’s a really important point… There’s actually a big difference between an answer and a decision. That’s actually something to reflect on, because I think most people conflate those two things.

CEOs don’t have to have all the answers, but they do have to make decisions, and be able to articulate their decisions

David: Totally. In fact, it turns out, actually, the opposite is true about having the answers. I often tell CEOs — because even before I joined Andreessen Horowitz, people called me for advice — and that’s one of the things I really enjoy.

Sonal: It’s why you’re a VC now.

David: Yeah, it’s why I’m a VC. That’s one of the best parts about the job. I like being the first phone call for a CEO when they’ve had the tough moment, or they need help.

One of the things I often tell CEOs is: When you think about the table of leaders around you, there’s actually room around the table for one person who has no idea what they’re doing. And that’s you, as CEO.

If you have the right leadership team, they’re adding intelligence for you.

I had gone from technical CEO, to product CEO, to sales CEO, but my fault as a sales CEO is that that I loved the dog-and-pony show: I loved the pitch, I hated the close.

Sonal: Why is that? That’s fascinating.

David: You know I thought… you could say that it was ego or ignorance or naïveté. I didn’t like asking for the purchase orders because, first of all, I always thought our pricing was low. So if the customer… customers often like to negotiate.

Sonal: Oh, and you’re ready to fight, like, “Fuck you, I want you to pay more.”

David: Yeah, because the customer goes, “Oh, $100,000? I think it should be $70,000.” I’m like, “Fuck you, it should be $140,000.” <Sonal laughs> Like, “I’m raising the price!”

Sonal: You’re the wrong guy to bring at the close, basically.

David: My sales will be like, “Yeah, so, you can’t negotiate with this customer because you’re going to just blow up this deal.” I’m in a much different place now, obviously, but at that time, and where I was as a CEO, I hated the negotiation. I got uncomfortable.

Everyone, they taught me so much. Because there was only room around the table for me to really not know all the answers.

I will often say that my CMO at OpenDNS, Jeff Samuels — I think of him not just as my CMO but as a mentor to me — he taught me so much. I would say that about my VP of Engineering, my Head of Sales, my VP of Sales. I could take the inputs and use all that to make a decision, and I felt very good about those decisions I made. I think CEOs find it a huge relief when you tell them, you’re allowed to not know. In fact, if you have the best people, you’re going to know the least!

It is not uncommon for a CEO or a leader, a manager… this is good general life advice. You don’t wanna be the whiny person constantly, like, harping on something, but I would say is that you do sometimes need to present an idea more than once. <Sonal: interesting> My old head of finance, who ultimately became my best friend, used to always joke with me that he would just tell me everything he said twice because he knew the first time, I’d ignore him.

Sonal: <laughs> I think I have the same problem.

David: He would tell me some statistic about what’s happening with marketing spend, or with hiring, or sales spends, and I’d be like, “Oh, that’s not really a problem. Like, whatever. I don’t care. You’re just a crazy finance bean-counter.” But then, he’d come back a week later. He’d be like, “Hey, I have more data. I did further analysis. You ignored me, but I know, I’m right here.” And I’d be like, “Oh, you’re right… why didn’t you tell me this last week?”

Sonal: <both laugh> So, in that case, the CEO can get answers from all their management team and then make a decision based on all the answers you’re hearing.

David: That’s right. And I do think sometimes you do have to tell people more than once, and that’s just the function of how human beings operate.

Sonal: Speaking of this — telling people more than once and learning to listen — that was your big shift between when you came back to be CEO, and you kind of learned your lesson, so to speak.

I honestly feel like that’s kind of a trite thing people say all the time. Like, listen better! I hate the “design-thinking” mindset around “empathy for this scenario” and “this persona”; it’s just so– I can’t diagnose what’s off…

David: Yeah, I think when you’re building a company, being empathetic really means understanding — it doesn’t mean accommodating, right? This happens all the time as a leader, where you may not resolve that thing, but you can still understand it and be empathetic. I can be like, “Yeah, that is terrible. I understand what you’re saying, and I am hearing you.”

Sonal: Honestly, that’s half the battle in relationships. <David: That’s right> You don’t need an answer to 99% of this. You just need someone to say, “Fuck, I feel for you. That sucks.” And you’re already feeling, like, 80% better.

When you’re building a company, being empathetic really means understanding — it doesn’t mean accommodating

David: That’s right, that’s right. When I think about empathy, you really want to be a great listener.

A friend of mine, Wendy MacNaughton, she does this whole New York Times thing every other week where she really goes deep into a topic. She’s written these books. I think she thinks of herself as an artist. I think of her as an artist and entrepreneur. One of the things that she taught me a year or two ago was — when she’s trying to teach people how to be a really, really solid listener — is that when someone’s talking to you be like, “Tell me more about that.”

Sonal: That’s just the phrase: “Tell me more about that.”

David: Five words.

Sonal: So, just make that your first question.

David: When you’re talking to a customer, “Oh, what’s going on?” “Oh we’re doing annual planning?” It’s like, “Tell me more about that. How are you thinking about that? What is happening? What’s the frustrating part about annual planning? Tell me more about that.”

Sonal: So what’s interesting to me about that is, to me, this is the difference between a focus group and an ethnographer. Focus groups and surveys are asking questions for things you already know to ask. <David: That’s right> An ethnographer is embedded in an organization or a setting and is essentially just listening to learn and observe, and letting those patterns reveal things.

David: The deeper insights come out <Sonal: exactly> when you go down the tell-me-more-about-that path. That’s when you get these flashes in your brain of, wait, now I really understand what’s happening. It’s not that annual planning sucks, it’s that you’re having budget issues that aren’t being resolved in the way that you need, or that maybe your tools you’re using to do annual planning, or the way you communicate and collaborate with your team, or the way you work cross-functionally is not working.

Sonal: Totally, totally. I consider myself an “ethnographer-esque editor”. <David: Totally> Because I want the context to know what I’m not hearing, to really understand.

So, it’s interesting because, on the ethnographer side — I don’t think people know this about you, but you started off your career — or, academic career, because you actually started working when you were, like, what?

David: Eighth grade, what is that, like, 14 or 15?

Sonal: That’s when you got your first W-2, right?

David: Yeah, I’ve had a 1099 or a W-2 every year since eighth grade. I worked at a mom and pop ISP in San Diego and learned all about routing and networking. I went to Washington University in St. Louis. I applied to the School of Arts and Sciences. When I went there to interview, they actually then had me interview with somebody in the School of Engineering in the Computer Science department. By the end of first semester of freshman year, I had switched back to the School of Arts and Sciences.

And the reason I switched is I took a class “Introduction to Human Evolution”, and I just found it so fascinating. I’ve always learned in my life I do best in the things I really enjoy working on. I have trouble doing things I don’t want to do.

Sonal: Me, too. I’m the exact same way.

David: Yeah, it sounds obvious, but some people can actually just will their way through the other hard stuff.

Sonal: No, I can’t. I can’t. I have no energy — I have zero. Talk about return on energy, I have no energy to even DO the thing.

David: Yeah, I’m just like, I’ll be okay if I just don’t do this.

Sonal: Yeah, I feel the exact same way.

David: I had trouble in school with things that I really didn’t enjoy, so I learned how to optimize for the things that I like doing. And anthropology, like I just… every book I read I thought was so interesting. I learned about how women enforced power hierarchy in South America in a way that we don’t have elsewhere in the world. I learned about what happens in Southeast Asia around farming. I learned about the Green Revolution in Africa.

And then I find that in my life, I actually think about these things all the time.

Sonal: That was actually my next question, do you think it actually is useful in your career as a technologist?

David: Oh, absolutely. Absolutely. I think about demographic transitions; when I read about what’s happening in Japan, it makes me think about how’s that going to change my investing thesis.

I think it comes up constantly. It comes up both tactically as you think about yourself in leadership and organizational dynamics. It gives you an appreciation that there’s many perspectives in the world. In fact, it gives you an appreciation that more perspectives are better, and you want more.

Sonal: So that is a perfect way to close this episode… so, David Ulevitch — he’s made a journey from anthropologist, to technical CEO, to product CEO, to sales CEO, to go-to-market CEO… and now, investor. Welcome to the a16z Podcast.

David: Thanks. Glad to be here.

 

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