Most founders think product-market fit is about traction. Revenue, growth rate, number of customers.
That’s not how Arun Penmetsa sees it.
After more than a decade investing at Storm Ventures—and years building inside Oracle and Google—his view is simpler and stricter: if your product isn’t solving an urgent problem, nothing else matters.
This conversation breaks down how strong enterprise companies actually get built, why most teams stall after early traction, and what investors really pay attention to when deciding who to back.
Product-Market Fit Starts With Urgency
Founders often point to metrics to prove they’ve hit product-market fit. Arun looks at something else first.
Do customers need this now?
If the answer is no, you’ll see the symptoms:
Long sales cycles
Endless pilots
Budget delays
Low conversion
You might still close deals, but growth won’t compound.
The goal is to find problems that sit at the top of a buyer’s priority list. The kind that forces action, not consideration.
A useful test: if your product disappeared tomorrow, would your customer scramble to replace it?
If not, you’re early.
The Hidden Gap: From Founder-Led Sales to Scalable Growth
Many early-stage startups get their first customers through the founder.
That works—until it doesn’t.
The real bottleneck shows up when you hire your first sales team. Suddenly:
Deals slow down
Messaging gets inconsistent
Conversion drops
The issue isn’t talent. It’s missing structure.
What worked in the founder’s head never got translated into a repeatable system.
Storm Ventures focuses heavily on this transition. One key idea: build a customer journey alongside your sales pipeline.
Most teams track internal stages like:
MQL → SQL → Close
But they ignore what the buyer is going through:
What pain are they solving?
Why should they trust you?
What convinces finance and procurement?
If you can’t answer those clearly, scaling sales will break.
Enterprise Buying Hasn’t Changed as Much as You Think
Tools have changed. Buyers haven’t.
You can automate outreach, use AI for targeting, and close deals faster. But the core questions inside every enterprise are still the same:
Does this save money or time?
Does it reduce risk?
Will this make the buyer look good internally?
Winning in enterprise means aligning with those incentives.
The best founders understand how decisions get made across teams—not just by a single champion.
Why Go-To-Market Mismatch Kills Startups
One of the most common mistakes Arun sees is misalignment between product and go-to-market.
Example:
A company sells a $15K product using a heavy sales team
There’s no clear path to larger contracts or expansion
The math doesn’t work.
You either need:
A low-cost, high-volume motion (product-led)
Or a path to higher contract value over time
Without one of those, growth stalls.
This is where many startups fail—not because the product is bad, but because the business model can’t scale.
AI Changes Speed, Not Fundamentals
There’s a lot of noise around AI replacing SaaS.
Arun’s view is more grounded.
AI will reshape how software is built and delivered. It will:
Speed up product development
Improve automation
Increase efficiency
But it won’t eliminate the need for software companies.
Instead, it will change what good looks like.
Winners will:
Own critical workflows
Control valuable data
Deliver clear outcomes
The deeper you sit in a customer’s operations, the harder you are to replace.
The Most Overlooked Risk: Deployment
Founders celebrate closing deals.
Customers feel stress.
Signing a contract is the moment of highest risk for the buyer. They’ve committed to a new system that might fail.
If deployment drags, risk increases.
That’s why speed to value matters more than closing speed.
The faster you:
Integrate
Show results
Prove ROI
The more trust you build—and the more likely that customer expands.
Early Metrics Can Mislead You
ARR shows up in every pitch deck.
But the definition has gotten loose.
It might include:
Usage-based projections
Unactivated contracts
Annualized short-term spikes
The number alone doesn’t tell you much.
What matters:
How predictable the revenue is
How quickly customers expand
Whether usage translates into long-term retention
Strong companies don’t just grow revenue. They build reliable revenue.
What Great Founders Do Differently
As companies scale, founders naturally move away from day-to-day details.
That’s where many lose their edge.
The best ones stay close to customers:
They join calls
They hear objections firsthand
They see where the product breaks
That direct exposure shapes better decisions—especially around product and strategy.
Distance creates blind spots.
Where the Next Opportunities Are
Arun sees several areas where startups can still win big:
AI-driven enterprise applications
Still early. Most workflows haven’t been rebuilt yet.
Cybersecurity (especially AI-driven threats)
Attack surfaces are expanding fast.
Manual, overlooked workflows
Many industries still rely on spreadsheets and fragmented tools.
Retail and physical operations
Large markets with slow tech adoption.
The pattern is consistent: big opportunities exist where complexity slows incumbents down.
Final Takeaway
Enterprise startups don’t fail because of lack of demand.
They fail because:
The problem isn’t urgent
The go-to-market doesn’t scale
The product doesn’t embed deeply enough
The companies that win do three things well:
Solve a real, immediate problem
Turn founder knowledge into a repeatable system
Become critical to how customers operate
Everything else—funding, timing, even technology—follows from that.
If you get those right, growth stops being unpredictable. It becomes something you can actually build.
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Chapters:
00:01 Intro & Arun Penmetsa Background
01:06 Early Career at Oracle & Google
03:00 Transition from Operator to VC
05:03 Is an MBA Necessary for Venture?
07:00 Joining Storm Ventures
08:26 Shifting to Investor Mindset
11:04 Storm’s Enterprise Focus
14:25 Storm’s Go-To-Market Playbook
18:55 Defining Product-Market Fit
20:52 Evolution of Go-To-Market
24:05 Investment Stage & Check Size
25:04 How Storm Evaluates Startups
27:58 Platform vs Feature Risk
30:07 Common Investment Mistakes
31:55 Cybersecurity Market Insights
33:29 Capital Efficiency in Startups
35:28 Technical Differentiation Debate
38:08 Where to Build in the Stack
42:20 Future of Work & AI Impact
43:48 SaaS vs AI Debate
46:00 Rapid Fire: Enterprise Insights
48:41 Future of Cybersecurity
50:05 Manual Workflows & Opportunities
53:21 Metrics VCs Don’t Trust
Transcript
Brian Bell (00:00:42): Hey everyone, welcome back to the Ignite podcast. Today we’re thrilled to have Arun Panmetza on the mic. He is a partner at Storm Ventures, an early stage VC firm focused on building enterprise leaders. Arun leads investments across SaaS, cybersecurity, and digital health. And before stepping into venture, he built enterprise software products at Oracle and was part of the early Google apps for enterprise team. Very interesting. He brings a rare mix of deep technical grounding and over a decade of early stage investing experience. Thanks for coming on, Arun. Yeah, great to be here. Thanks for having me. Yeah, so I’d love to start with your origin story. What is your background?
Arun Penmetsa (00:01:14): Yeah, so I was born and raised in India. I came to the US for undergrad many years ago now. I would say I have a somewhat traditional engineering background. undergrad and masters in computer engineering and then I spent as you briefly mentioned about five years briefly at Google but mostly at Oracle working on the in with enterprise teams there and then business school and then I joined storm about more than 11 years ago now so time has really flown by
Brian Bell (00:01:40): Yeah, I mean, it’s very, very standard background for Silicon Valley. You started your career building enterprise infrastructure. What did that teach you about, you know, deploying capital today? Like, what do you kind of still draw on from your Oracle and Google days?
Arun Penmetsa (00:01:54): Yeah, so it’s interesting if you think about just how technology trends evolve. Every time there’s a new wave, the infrastructure tends to get built first, you know, the picks and shovels, as people say. And then eventually you get to the application layer because a lot of the applications require that infrastructure to truly scale. Obviously you know being at Google for a little bit and then Oracle it was a completely different time and this was like 15 plus years ago. The cloud was just starting out. Companies were moving their products to the cloud and it was still very, very early days. But it was interesting to see that trend from the perspective of, let’s say, someone like Oracle, who even today and obviously at that time too, had a massive customer base. And at least someone like me who was just out of college, it was great to get the perspective of being able to watch these large companies support their customers through a technology transition one of the benefits of being at these companies was that you didn’t have to go find customers right like they would sort of they already had these customers they would come to your HQ for briefings and it was wonderful experience to interact with them understand how they thought about buying software what their priorities were how would sales marketing customer success engineering everybody work together So I think that was helpful to as I think today and obviously it’s a different world right now given everything with of how these big businesses operate and how they think about their incentives when they’re adopting new technology.
Brian Bell (00:03:17): So at what point did you realize that you wanted to move from building products to backing the people building the products?
Arun Penmetsa (00:03:23): Yeah, I mean, there wasn’t any master plan or anything like that. So after Oracle, you know, I had applied to business school and I was fortunate to go here at Stanford. And so I happened to meet a lot of investors on campus, either teaching classes or there were guests in class. and I just got more curious about venture so it’s an interesting story I literally cold emailed a number of GSB alumni who were in venture at that time and I was just curious like you know what their journey was what it takes to become an investor and I think maybe this speaks to one of the strengths of going to business school there but I would say like 80-90% of them responded and they were open to having a short conversation and I yeah eventually i ended up at storm over the summer and that you’re almost
Brian Bell (00:04:07): obligated right to take those calls yeah i mean those alumni reach outs i take i take them i you know you said 80 90 i probably take most of them as well most of
Arun Penmetsa (00:04:16): them yeah i think that’s one of the benefits especially because being in the valley there’s such a good concentration of alumni here as well so it kind of works out
Brian Bell (00:04:24): well i have a question for you actually and i want to get back to your story of gsb because i have an intern i won’t say his name that’s been working on team ignite for a while I have actually two one that got into Berkeley and deferred I have another guy who’s applying now to get his MBA do you think it’s like necessary or helpful I guess that’s a two-sided question we’ll take both parts of that to get an MBA to work in venture is it helpful and necessary.
Arun Penmetsa (00:04:48): So I don’t think it’s necessary at all. There are many paths into venture, as you know, you know, I think having an operating background, especially in today’s era where you’re building a lot yourself, I think is probably a really good way. I think what’s helpful is if you don’t have an established network to source from or to help you with diligence or to kind of break in. It can be helpful to have a network from a top tier MBA school to kind of get started. And let’s say in my case, I was coming from a pure tech background. I didn’t know really anything about investing or finance or all those areas. So having that network definitely helped a little bit. I was living here, so I did have an established network through my colleagues, you know, the school I went to and so forth. But I think it can be helpful if you don’t have that. So yeah, that would be my view.
Brian Bell (00:05:38): Yeah, I think especially if you come from an engineering background and you’ve never operated, you’ve never shipped a product other than you’ve coded products, but you’ve never like ran an org that shipped a product or you never went zero to one as a founder or anything like that. You don’t have the business side of things. You’re very strong technically.
Arun Penmetsa (00:05:54): I think it could be I don’t think it’s necessary, as you said, at all, right? I mean, I think the best learning is just by doing, right? So if you go work at a startup, you’ll get that experience. Or start a startup. Yeah.
Brian Bell (00:06:05): Or start a startup company. That’s probably the best, yeah. That’s what I tell young people. Don’t try to work in VC. I mean, yeah, get an intern at a VC, whatever, get some experience or be an associate, but go start a startup as soon as you can. Exactly. especially today there’s just so much greenfield opportunity out there and it’s
Arun Penmetsa (00:06:23): never been easier to start a company given all the infrastructure and resources and
Brian Bell (00:06:27): tooling you have today so you’re reaching out to your network you’re getting some informational interviews as they say and then at some point you landed as an
Arun Penmetsa (00:06:34): associate at Storm tell us about that yeah so I spent the summer here at Storm it was a great experience I mean Storm and I can talk more about the firm but It’s a relatively small team It’s been around now for a little over 25 years You know, a great track record And I have to really credit the culture at Storm Because I got great mentorship over the summer Everybody engaged with me really well And again, because it’s a small firm It’s just partners Everybody kind of does their own work
Brian Bell (00:07:02): Kind of like a benchmark model Everybody’s a partner Everybody does their work Yeah, that’s right
Arun Penmetsa (00:07:06): so everybody did their own work and I was involved we didn’t actually end up doing
Brian Bell (00:07:10): a deal when I was there over the summer so it’s a very concentrated firm so you guys are sitting on boards writing bigger checks and
Arun Penmetsa (00:07:18): yeah so i would say we’re relatively concentrated and the number of deals per year fluctuates it depends some years we may do like six to eight some years we may do three to four but we obviously spent time looking at a lot when i was there and i really enjoyed it and i really enjoyed working with the team so when i graduated you know i was fortunate to have you know i met the team after i graduated and i was fortunate to get an offer and uh yeah now it’s 11 years later that’s awesome
Brian Bell (00:07:40): what was the biggest adjustment for you you know going through GSB and shifting into investor mode.
Arun Penmetsa (00:07:47): Yeah, I think between operating and investing, I guess there’s a couple of things you really need to think about. One is you are looking at many different opportunities whether it’s new investments or companies you’ve already invested in so I think you need to be able to context switch quite often right but still be present and very thoughtful about each engagement so a simple example would be you know as you go through the day you may meet four five six companies and each of them may be doing slightly different things in different sectors at different stages I mean generally because we are early stage the stage doesn’t That’s the hardest thing actually about being a VC is the context switching, I think.
Brian Bell (00:08:29): Because every half hour is something different. Exactly.
Arun Penmetsa (00:08:32): But you still have to be present, you have to think through, you know, because this could be the next big deal, right? And I think that is something, that is a muscle I think you need to build. And obviously this happens with portfolio too, right? You can have a board meeting, then you can go to a different company and my founders call me all the time or text me. So I think that’s one aspect. I think as investors we have to be comfortable sort of realizing that we don’t have as much control over the business even though you obviously hear stories about investors being very involved and I think there’s a lot of value we can add but ultimately it’s the founders that are running the show. Right. And that’s the way you want it. I mean, ultimately, you back this team to go execute and you want to support them in whatever you can. And obviously not every, as you know, most investments probably don’t work out as well. But but that the idea that, you you have limited information ultimately because you’re not in the company day to day and being able to still be helpful and thoughtful in the kind of advice you give and the questions you ask is a delicate balance because you know when things are not going well if you come from an operating background or I suppose any background the instinct may be to like oh I want to roll up my sleeves and help but you have very little information in most cases and you have to be careful how you how you show up in that moment as an investor because it has a huge impact on the team
Brian Bell (00:09:51): Yeah, it’s a delicate dance. So you guys have a long-standing focus on enterprise. How do you kind of keep that focus and stay disciplined over all the different hype cycles that have occurred over the last 11 years that you’ve been there? Right.
Arun Penmetsa (00:10:07): So I think, first of all, I think enterprise, and it’s B2B more broadly, so it’s not like we’re only looking for companies that sell into large customers.
Brian Bell (00:10:15): Could be like SMB, B2B, things like that. Yeah, exactly.
Arun Penmetsa (00:10:20): I think one, obviously it’s a very big market. Huge amount of software spend goes into these companies as they procure products. I think two, the team realized over the years and the team has been investing together in some form since 99, that One of the key aspects of selling into these businesses is the way you go to market has a lot of similarities across sectors. So whether you’re selling into cybersecurity or sales tech or healthcare, obviously every sector has some nuance and the way they buy there’s potentially regulation, the sales cycles are different and so forth. But the way businesses make decisions The way incentives are set up, the way you go to your champion, then you have to convince the rest of the org, including finance and procurement. There’s similarities across sectors and businesses that you can learn and work on over time. One of the things that the team has really developed over the years is this really deep understanding of go-to-market, whether it’s sales-led, whether it’s product-led, whether it’s using channel or marketing-led. And we realized that using that context and playbooks that we’ve built can be beneficial no matter, like I said, whether you’re selling to hospitality or you’re selling to healthcare or some other sector. So the combination of one, this is a very big market and two, the expertise we’ve built on the go-to-market side is what keeps us really excited about this because we think we can find good opportunities but also help these companies, you know, as we say, get to unlock, as we say, they’re able to unlock growth, which is essentially go from that early product market fit stage to a stage where they can predictably scale growth.
Brian Bell (00:11:54): So I think that’s interesting. And the last thing I’ll say is, you know,
Arun Penmetsa (00:11:57): I think B2B also in some in some ways tends to come a little bit after the hype because these are larger companies making decisions. So it doesn’t it’s not like a trend hits it and then the next year everybody’s buying it. Right.
Brian Bell (00:12:10): It’s more like Web3 will do that. Yeah, that’s great. They’re going to evaluate it and say, how does this drive? You know, how does this save us money or save us time?
Arun Penmetsa (00:12:19): Yeah, yeah. Primarily, right? If you think about AI, right, as a trend, and we can definitely talk about that. I mean, now we’re seeing a lot of adoption, but you know, 18 months ago, a lot of people in CIOs, CTOs, CPOs, they were trialing products. They weren’t ready to like jump in and So there’s time and there’s a playbook you can run to get these companies successful.
Brian Bell (00:12:41): Love that. So what is that playbook for founders listening? Why would they want to take money from Storm? What have you guys developed and how do you guys help founders repeatedly get to that product market fit? Let’s say go zero to one, one to ten, things like that.
Arun Penmetsa (00:12:56): Yeah, yeah. So I think a lot of the learnings, one of my partners, Tehi, has actually written books on this. And there’s a website called Survival to Thrival where he’s published a lot of this. But the brief summary of it is we think a lot of go-to-market playbooks tend to focus, are more internal facing to the company selling. So if you think about the traditional pipeline, right? You get an MQL,
Brian Bell (00:13:17): you qualify it, then you go to the SAL, SQL, and there’s a whole sort of sales pipeline.
Arun Penmetsa (00:13:22): That in our view is great and obviously every company needs to run it, but it’s very internal facing and ultimately it doesn’t really address what is happening in the customer during the sales cycle. So one of the things we encourage our companies to really do is in parallel build Build a customer journey that mirrors the stages in your sales pipeline. So thinking through, you know, what is the urgent pain that you’re solving? And we spend a lot of time with our companies on urgency because we really try to understand, is the problem you’re addressing truly urgent? Like, do they need the solution today?
Brian Bell (00:13:53): Is it a hair on fire problem or is it just like a nice to solve problem someday? I mean, there’s many, many sort of ways of saying it, right?
Arun Penmetsa (00:13:59): Like, like pain killer versus vitamin and all this kind of stuff.
Arun Penmetsa (00:14:02): So we document that. Then we think about, okay, you really found a hair on fire problem, but why would they pick you? What do you have to say in the sales cycle? And we call them wow factors. And there's many different names for it as well. And as you go through the sales process, we encourage our companies to, and we work with them on this. I mean, literally I've sat in like three hour long sessions going through each prospect. We encourage them to come up with these wow factors for every meeting that you're coming up with because essentially we need something that will get you to the next meeting, right? And then we talk about how do you convince the finance team? How do you convince procurement? How do you convince the executive team? What are the things you need to build into your sales process to do that? And it's not like we have a right answer for each of these questions but I think what ends up happening is a lot of this information is in the founders head when they start because the founders are the ones who are truly understand the market they're very passionate they're able to go sell and convince those initial customers but when you bring in a sales team or even the first AE oftentimes downloading those insights from the founder into a playbook that you can give to a rep and say go execute this because we have figured all this out is a big sort of stopgap in the growth of a startup. and we are trying to bridge that so a lot of our efforts are like we sit with the team with the sales folks the marketing folks the product folks the founders and then try to build this out when we invest right so that's sort of the I don't know really high overview
Brian Bell (00:15:33): yeah and a lot of founders need that help too right I mean because a lot of founders are usually a couple technical people maybe a product guy and a technical coder CTO kind of guy or gal and they need help on the GTM that’s very common
Arun Penmetsa (00:15:48): that’s right and in many cases the information is in their head it’s not structured in a way where you can just give it to someone right but it’s in their head and we see a few times this plays out right great team they hire a really good AE or a head of sales and the instinct of the founders is well it can go in both ways but one is they continue to be hands-on which can cause some friction because if you don’t have a playbook then the founder is like still selling or like there’s a different methodology or they say I’ve hired these great people I’m going to step back which is also a gap because that knowledge is now not passing on to the team so anyway that’s what we think one of the which is why you know I mentioned this concept of unlock growth right like we believe when you go from product market fit to scaling there’s like a step in the middle where you have to like unlock the growth before you can scale it so a lot of our methodology is focused on doing that now again I’m using a lot of terms here but yeah yeah I love to unpack the three
Brian Bell (00:16:42): stages that you just talked like you just breezed right through them yeah like one I’d like to like you know from a storm perspective the storm ventures what is product market fit look like for you guys yeah so I think for us product market fit ultimately goes back to urgency
Arun Penmetsa (00:16:56): right there are different ways to look at it how many customers you have how much revenue you have when we meet conversion rates churn rates exactly right and I think a lot of those are like symptoms of what you are essentially trying to achieve and for us what we believe is if you can truly find something that’s urgent and the customer desperately needs it I think that’s the first step to finding product market fit right I mean obviously I mean I don’t think anybody any decent startup is building something that nobody wants right but I think it’s
Brian Bell (00:17:27): At least half, you know, because half go out of business, right?
Arun Penmetsa (00:17:32): I think there are other reasons they go out of business, right? I think if you get customers, I think you’re building, there is value you’re delivering. But I think the challenge is, especially when a market turns, you are not in those top one, two, three, four things that they need, right? And we see this all the time. I mean, there are customers, We’ll keep piloting your product, but they never pay. You know, you see customers who say we don’t have budget, which is a genuine problem. But anyway, so I think if we can truly get to urgency, and that’s what we’re trying to find out through the first 10 customers. Like, have you truly struck oil? Right. And it’s not easy to figure that out. And, you know, if we knew how to figure that out, all our companies would be successful. Right. But I think that’s the way I think about part marketplace.
Brian Bell (00:18:15): You’ve seen a lot in 11 years. What do you think has changed about go to market over the last 11 years? I mean, you have a lot of AI, SDR, AI outreach, AI ads, AI this and that. What’s changed? What remains the same?
Arun Penmetsa (00:18:27): Yeah, I think I think what’s changed is how automated things have gotten. Right. I mean, 11 years is not that long a time, but, you know, a couple of decades ago, you had to get on a plane. You know, cloud marketplaces have come about in the last decade or so. So you can go to AWS Marketplace and say, I want to buy this.
Brian Bell (00:19:06): Yeah, I came from AWS Marketplace and Azure Marketplace. I ran the category team at Azure, actually. How are you guys leveraging that in your portfolio? We’d love to hear the latest.
Arun Penmetsa (00:19:14): We are in the early stages, a handful of companies. Actually, you may be, this is maybe a side discussion and we can do it later, but we’re actually investors in a company called Flywheel that is kind of building out the buyer side platform for cloud marketplaces. And that team came from AWS Marketplace as well.
Brian Bell (00:19:29): Oh, wow. Okay.
Arun Penmetsa (00:19:30): so they’re trying to automate that entire journey from when a procurement person decides to buy to connecting with the vendor on the other side automating the transaction and making it much easier to find more of these deals so yeah there’s
Brian Bell (00:19:45): some unicorns on the seller side too like tackle and yeah
Arun Penmetsa (00:19:49): Right so anyway so that’s a new phenomenon probably in the last decade so I think there’s a lot more automation in how you find information about your buyers reach out to them move them through the journey build out the playbooks and all that I think what’s not changed is still kind of going back to the basics about like I mentioned right like why are they buying your product how do you price things How do you think about the incentives of your buyer in there? How do you think about making them look good? How do you think about showing ROI so they can go to their CFO and fight for the budget that you want them to fight for? How do you manage churn? Even though there’s some automation there too today. So I think the way and the reasons people buy is still the same. You can move them through the process faster. You have more data to leverage today than maybe 15-20 years ago. I mean, there’s companies in the portfolio you can talk about, you know, there’s this whole category of revenue intelligence today that didn’t exist 15-20 years ago on how do you really think about each customer, the revenue potential, risk, expansion, all of that. So that’s some ways I think things have changed, but in other ways not.
Brian Bell (00:21:00): So what stages are you guys investing again?
Arun Penmetsa (00:21:02): So we mostly, so there’s some variants, but I would say the traditional target would be sort of late seed and series A. I like to call it traditional series A because we write checks sort of in the $2 to $6 million range.
Brian Bell (00:21:14): Yeah, which is kind of seed now. Which is kind of seed now, $50 million A’s.
Arun Penmetsa (00:21:16): Yeah. Fund 7 which we’re investing out of right now is 230 million so that would be the ballpark in some cases we’ve gone early like Flybeal was one where we invested at inception because we had a thesis in the space it’s a great team and they’re doing very well so in some cases we go early but that would be sort of the one I mentioned previously would be the sweet spotter
Brian Bell (00:21:41): Got it. And then what’s the kind of the scorecard look like internally for you guys? How do you guys make decisions? What’s important to you? And what might be differentiated versus other VC firms that you know?
Arun Penmetsa (00:21:51): Yeah. So I think there’s a lot of commonalities to other firms. I mean, obviously the team matters a lot. I mean, given that we invest early and we tend to be very long term oriented.
Brian Bell (00:22:01): Yeah. Somebody on my podcast, I forget who was like, well, I care about five things and the first three are people. Right.
Arun Penmetsa (00:22:06): Yeah. And I think that’s true in many cases, right? It also goes back to what I said earlier. Ultimately, They are driving the ship and no matter how much influence or control you think you have, it’s actually very little, right?
Brian Bell (00:22:17): Yeah. You’re more like a coach. Yeah. You’re on the sideline and you can’t even call plays. It’s not even like being a coach. It’s more like being like, I don’t know, some sort of junior assistant coach that doesn’t call plays.
Arun Penmetsa (00:22:29): I mean, you’re absolutely right. I mean, that happens a lot. And it’s interesting. Ideally, listen, I want to be involved and I I do tend to get involved in in some aspects with my companies but ideally you want a company that’s doing well where you don’t have to do anything right like that’s
Brian Bell (00:22:44): that’s what I saw my LPs is like you know the best companies don’t need my help they don’t need team ignite exactly I never hear from them I just get I get their series A B and C announcements and I’m like great right so that’s that’s the best case scenario yeah
Arun Penmetsa (00:22:59): So the number one, as you said, is team, right? Then we try to have a good thesis on the market. We look at, you know, this storm through its history has done 200 plus investments. So we have a good sense, although markets change really quickly. Right. We have a good sense and I would say network in some of these markets where we try to have a view on what companies are doing. And the third, I think, is sort of the go-to-market side. Like we really want to understand is the product they’re building and the team really well tied to the go to market they want to pursue and it’s not like you can’t like like if it’s if it’s if you’re doing a sales led motion then the way the product is structured and the way pricing is set up has to support a sales that motion like the economics have to work out and that’s a very simple example but we think a lot about those things and can we truly help because if the economics are off there, it’s just very hard to build a business. You may need a tailwind or something in the market to really pull you along. So yeah, those are maybe three or four things. Like I would say team, you know, the market slash urgency thing is something we think a lot about. yeah and then severity yeah yeah and then and then we think about sort of the go-to market there’s probably other factors like we think about like obviously we think about traction you know how fast you’re growing and all these other things but if I had to boil it down it’s probably those three things
Brian Bell (00:24:19): yeah I love that how do you guys assess you know as I look at a lot of early stage companies a struggle I have as an investor is assessing the bundling risk of the incumbents yeah you know I’ll look at something really interesting and I go you know that that’s kind of a feature inside of somebody else’s platform like how do you yeah
Arun Penmetsa (00:24:35): So one of the things we do quite a bit and is we spend a lot of time with the teams on their product roadmap, whether it’s new companies that we’re investing in or even existing portfolio because the markets evolved, right? We invested four years ago on a certain thesis and the market has shifted. So we spend a lot of time with the founders on how do they think about building this product in the next two, three, four, five years. And even though you have an insertion point today that feels like it’s something that could get bundled. Do you have the appropriate or at least you’re thinking about it the right way where you’re either collecting a set of data or you’re building into a certain set of workflows? Is there a moat here that will form over time or now? Yeah. Yeah. And people have different views on what is truly a moat, but I think ultimately, from a buyer perspective, if something is working really well and it’s getting their job done and making them look good, it takes a lot to remove that and put something new in, right? and this obviously comes up with AI all the time today right like every company so anyway to answer your question we try to spend a lot of time in product roadmap and we try to be thoughtful about it we try to think through you know how does the founder think about the next three years like have they thought about okay the wedge product and I know When you’re starting the company and you’re early, you have 100 things going on as a founder. And you may not have thought 18 months ahead, 36 months ahead. But that is something we really try to understand.
Brian Bell (00:26:01): What has changed over time, over the last 10 years, 11 years that you’ve been there? What have you guys kind of incorporated where you’re like, you know what, we made a mistake and we’ve learned that mistake. And now when we see that again, we don’t invest. Is there anything like that where you’re kind of like red flag, yellow flag? yeah not gonna bet we’ve seen the story before we know it doesn’t work yeah I would
Arun Penmetsa (00:26:22): say like go-to-market mismatch is something we’re very careful about and again it’s it’s not like a black and white answer because there’s shades of gray here but we’ve seen as an example and you know we can advise them but it’s not like we don’t want to invest and say change what you’re doing right because we want ultimately the founders to build what they authentically think is the right thing to do But as an example, we’ve seen companies that hire a sales team and sell $10k price point, right? And I understand in the early days you have to do whatever it takes to get customers, but then we looked at the product roadmap, there’s really no viable path to driving expansion, right? You have to move up market quickly because the math just won’t work. And I’m giving maybe a simplistic answer here, but I would say that’s one. The other thing, which is maybe an obvious one, is we tend to spend, I would say, a fair bit of time now with founders, especially founders. founding teams together. And this is maybe more my learning. Like in the early days, I was trying to do my first deals and I was trying to get them done. But I think just understanding founder dynamics, can the two, three, four co-founders, how they work together? What are their strengths? Where’s sort of the gap in the team that we may need to help support? That’s something we think a lot about as well because that’s probably the most painful one when you have founder conflicts after you invested because it’s just hard to recover from that kind of stuff.
Brian Bell (00:27:41): Yeah, you guys have done a lot of cybersecurity. What is some common things you’ve seen that creates a platform versus a feature?
Arun Penmetsa (00:27:48): Yeah, I think there’s a few things. I think one is, especially for the larger platforms, you know, do you have an asset inside the customer’s environment? I think that matters a lot, especially these days. And if you think about the bigger platforms like CrowdStrike, Palo Alto, Zscaler, I think them having that footprint inside customer environments helps a lot. Whether you’re in-line and you’re looking at the data constantly, I think matters a lot, especially now with AI and how the things are changing. Cybersecurity is always interesting because it feels like there’s always budget, but there’s like a million companies all vying for that budget.
Brian Bell (00:28:23): Yeah, and it shifts so much too. So it’s a great place to invest because it’s, you know, every three to five years, there’s just a new... a new edge that you have to protect exactly yeah and there’s a new piece of
Arun Penmetsa (00:28:35): software with an acronym that you need to buy but those are some things I think companies do well you know we recently one of our companies was bought by CrowdStrike and they had a really interesting product they started out sort of in the browser security space and expanded from there to endpoint but that was I think one of the big reasons they were bought is they were giving a perspective on what was happening on the device that was hard to get for the platforms
Brian Bell (00:29:01): what’s changed recently is you know I feel like The essence of what it means to be capital efficient has shifted, especially over the last five years. How have you seen that in your portfolio play out?
Arun Penmetsa (00:29:09): Yeah. So for the companies that we’ve invested in recently, there’s a handful that are growing well and quite efficiently. I think it ultimately goes back to what kind of product you’re building. If you can get a go-to-market that’s more product-led, I think it would be very, very I think if you can automate parts of the sales process through the AI tools I think you can get very efficient a lot of our companies do sell into large enterprises and in those cases you still need people to go and communicate and manage deals and there it’s harder but just the whole go-to-market process is getting more efficient with these AI tools so we’ve seen some of that It’s nowhere close I think at least what I’ve seen to what we see with sort of the B2C use cases like the lovables and sort of those companies and how efficient they can get prosumer kind of approaches kind of things but we have seen in a handful of cases just sales efficiency go up when the difference is you know if you are I think I think the other thing we’ve seen is the pace of product launches is getting faster across the portfolio which also means if you do a good job your net retention is higher so it’s okay to be a little bit inefficient early on but it doesn’t take you 12 months or 18 months to launch your next product you can probably launch your next product in three months as an example right so you can start driving expansion up much quicker so over time hopefully these companies will need to raise less but I still think we’re kind of in the very early days on the B2B side and how that plays out but I can see a path
Brian Bell (00:30:36): on how these companies can get much more efficient a big refrain I hear online is you know there is no technical differentiation do you believe that and what have you seen over the last five years yeah so I think it depends on what you mean by technical differentiation right and where in the stack you’re building I think I think if
Arun Penmetsa (00:30:53): I’m for the solution. But in general, they tend to be more horizontal and not best of breed in any individual one. So I think you can do that. If you go more to the application layer, I think it’s harder to build truly something that’s technically different because you own so little of the stack. But I think where you can differentiate, like we talked about earlier, right, is you get access to a data set that is hard to get access to. you embed deeply in workflow so you’re just managing a lot of what the customers are doing and you’re just taking that over right so you know it’s interesting for some of our companies they have this data set they start doing one workflow now they’re doing two five ten fifteen and it’s At some point, because AI is running a lot of it in the backend, even the end customer doesn’t know exactly what in their workflow is done by this company’s product, right? Because the results show up or the output shows up and you don’t fully know which parts of that workflow are automated. So the risk of pulling them out can be quite large because you don’t even know, like before it would be like, if I have a SaaS product, I know like this is the dashboard, this is the API. If I cut off the API, I know exactly this is what will happen. but you can get so far embedded now with AI that you just don’t even know and then obviously you can personalize to a company’s workflow you can fine tune to their sort of use cases and data so I think at the application layer you have to do some version of that I also think some verticals are interesting you know like if you think about healthcare and I do a little bit there where there’s all this nuance and regulation that is I think it would be it’s not the focus for the broader models to really go fix right and you need to spend a lot of time in this So even those are opportunities today.
Brian Bell (00:32:48): So if you were starting a company today, which layer on the enterprise feels most ripe for reinvention?
Arun Penmetsa (00:32:53): I think multiple layers can be. I think we’re very early on the application side. And I think that’s true of most waves, right? As I mentioned earlier, The infrastructure gets built out first because that’s where the initial opportunity is. People build on top of that. Otherwise, you have to go build a full stack yourself.
Brian Bell (00:33:08): You know what’s interesting about AI is it kind of started at, you might call it the, I mean, it’s foundational model layer, but it’s really the platform layer. But then it kind of like I think it’s it’s it’s just changing so fast that people have had to reinvent
Arun Penmetsa (00:33:30): You can see more of the stack quickly to realize the potential, right? It’s just really interesting because if you think about the cloud wave, which obviously was a very big wave, a lot of the benefits initially were somewhat invisible to most people, right? Like you had to go convince a company, You’ll get savings over the next two, three, four, five years.
Brian Bell (00:33:48): Digital transformation is what we call it at Microsoft.
Arun Penmetsa (00:33:50): Exactly. We make this huge initial investment, but there’s value. And I fully believe in that. There’s a lot of value. But even now, after all these years, it’s not like everybody’s converted to the cloud. We’re still sort of, I would say.
Brian Bell (00:34:01): No, there’s still the laggards out there. And I think we’re probably just right in the middle if you kind of do the crossing the chasm.
Arun Penmetsa (00:34:06): That’s right. We’re probably right in the middle of digital transformation. Early to mid-innings, right? Yeah. But I think with AI, because the consumers can see it, like it’s like the phone moment, right? The mobile phone moment, the iPhone moment.
Brian Bell (00:34:17): Yeah.
Arun Penmetsa (00:34:17): Really, the demand picked up so quickly that, as you said, people were building I am a And then, you know, eventually you get to the application stages. And I think we’re still early in the application. Obviously, there’s some great examples out there of companies doing really well, but I would say a small percentage of the workflows in the enterprise are truly...
Brian Bell (00:34:58): It still takes 10, 15 years for it to play itself out, right?
Arun Penmetsa (00:35:03): Yeah, well, I mean, we’ll see. I mean, a lot of people are betting that it’s faster, but it’s probably in that range, right? So, and especially if you think about other verticals, like as I mentioned healthcare or construction or oil and gas where every decision you make is very consequential it’s not like a and I’m sort of oversimplifying but like
Brian Bell (00:35:23): yeah you can’t have like one nine of accuracy you need you need like email that suddenly like went out it’s it’s like you know the reading of somebody’s life on a rig or something
Arun Penmetsa (00:35:32): that’s right So you are going to be much more careful, which is why we’re seeing this entire way of, you know, simulation labs and guardrails and all these other ways of companies. This is the tooling that’s getting built out, right? And then I think we’ll get to true applications. I think we are still very early in seeing if you go back to sort of the iPhone era, like seeing the big, you know, like the Facebooks of the world, like those, the Twitters.
Brian Bell (00:35:59): I mean, you could argue that Facebook and social media was kind of a late internet thing. And then, you know, and then the iPhone created a new platform and, you know, the Ubers, you know, and the other, you know, unicorns. you’re right yeah you know that took 10 years really that took a while right and if
Arun Penmetsa (00:36:15): you look at the cloud wave and you think about the data dogs of the world and all they took a few years to emerge as well so I think we’ll see those companies coming up hopefully some of those in our portfolio but but I think that’ll come out in the next couple of years right
Brian Bell (00:36:26): so what do you think people are missed you know underestimating uh over the next decade in the enterprise shift
Arun Penmetsa (00:36:34): I think some things will change in the way products are built and delivered and used. And I think some things will still stay the same. I don’t think we’ll see as much job losses as people are fearing. We’ll see some and we’ll see some shifts. There’s certain kind of tasks that will fully be automated. I think when you are buying products for your business or you’re buying from a business, there is a level of port and reliability and assurance and planning and all this that’s required always require humans. Now, what those humans are doing will change. And in fact, some of the early studies that have come out, right, are showing that, right, in some cases, AI has improved productivity, but in many cases, that time has just moved to some other work, right? So it’s like, it’s not like people have more time. They’re just doing more work now, right? Right. I guess you classify that as productivity in the sense that more work is being done per person so we’ll see how it plays out but I think we’ll always there’ll always be something to do as we build products especially especially in complex industries so so yeah so I don’t think we’ll see the level of job losses that people are
Brian Bell (00:37:40): fearing I don’t think so either yeah speaking speaking of you know market overreactions you know recently we had the SaaS apocalypse right where a lot of SaaS companies lost 50-70% of their value seemingly overnight. Do you feel like that’s just a market overreaction or do you feel like the incumbents like, I don’t know, Salesforce and other SaaS players like that are really threatened in this new wave of like...
Arun Penmetsa (00:38:04): Yeah, so I think AI is definitely a real trend that will impact these businesses. I think the stock market reaction is overblown. I think the way that SaaS companies operate will evolve. to incorporate AI. So the way I think about it, it’s not SaaS, it’s like AI plus SaaS. So it’ll just look different. And you still have to do these workflows. I don’t think AI will do everything for you for a while, at least. And depending on where you are in that stack, you’re at different layers, different levels of risk, right? If you are a pure UI layer analytics product, then you’re probably at significant risk because the product can be replaced quickly. And there’s a lot around the business, like I said, around support and reliability and all that. So it’s not like you’ll suddenly drop off a cliff. But if you’re further down and you control You know, if you think about Salesforce and where they sit and the system of record, we may see layers on top that will pull data from them evolve quite, quite quickly. But I think just displacing Salesforce is just going to be so hard like you’ve built on that for like 15-20 years and you know they’re obviously building their own new AI products on top so I think they’ll evolve so I don’t think it’s like the SaaS apocalypse the SaaS companies have to evolve into something different they have to leverage more of the tooling they have to like like I said go deeper into workflows and all that and some will survive and some won’t but I think a broad market correction across everyone is is the overblown
Brian Bell (00:39:35): yeah I’d love to wrap up with some Fast questions, rapid fire. What’s one technical misconception founders consistently have about enterprise buyers? Technical misconception.
Arun Penmetsa (00:39:44): I don’t know if this is the answer to your question, but one of the things that I see a lot is people underestimate the integration work that’s needed to get a customer live. And this happens a lot where they see signing a customer as sort of a big win. And it is a win and you should celebrate. I’d say that moment when you sign the contract is the moment of highest stress for your customer because they just agreed to work with the startup and they don’t know if this thing is actually going to work so one of the things we advise a lot of our companies is get the deployment done as fast as possible and it’s not if it takes weeks like it’s it’s just adding a lot of risk so I don’t know if this is a technical misconception, but I think not enough focus is put on deployment, integration, timeline, and we push a lot to shorten that.
Brian Bell (00:40:35): Speaking of deployment, there’s been a recent rise of forward deployed engineers in the field. Is that going to be more important, less important, or just as important in the next few years?
Arun Penmetsa (00:40:46): I think it’s going to be more important. And I think it’s a model I think more companies should take because as I said with the models the AI models not everything today is completely like it’s not like it’s not like software 100% predictable if this is what the code says it’s what the code will do so being in that environment understanding workflows trying to get your hands into more of the things that you can build quickly matters a lot and in some ways it’s the old model of having customer support and success but but with SaaS it was more straightforward you know what your product did you deploy it online it’s not like you have to do a ton of work after that but I think with with with the capability of these models, you should have people, especially in your large customers, trying to figure out, trying to make sure they’re successful. Like this is a big thing, right? And go to market, like it’s not selling the product. Ultimately, the goal is how do I make my champion look like a hero? Because if you can do that, that customer and champion will be very sticky and there’ll be a great reference for you. And I think that’s even more important given how quickly companies are growing and how rapidly sales cycles are changing with AI. So I think we should do more of that.
Brian Bell (00:41:48): Yeah. In cybersecurity, where’s the next CrowdStrike sized opportunity hiding?
Arun Penmetsa (00:41:53): I mean, I think a lot of it has to do with, well, maybe two areas, right? One, I think broadly across application security and how much AI can solve for that, I think will be a big trend in the next few years because that’s such a large attack system. surface and if AI can meaningfully solve a lot of the application security or address a lot of the risks in the application security I think that’s one I think the second one is more consumer is what happens to consumer security like our passwords our logins everything with AI like I think it’s authentic security
Brian Bell (00:42:24): basically
Arun Penmetsa (00:42:25): Yeah, because the volume of attacks have increased so much that how can we get consumers to better protect themselves? Because if you think we had scams before, now with AI, it’s like 10x.
Brian Bell (00:42:37): I saw a meme, it was a really funny meme on X. It was something like, all we have to do is just ask their AI really nicely for their password.
Arun Penmetsa (00:42:44): Yeah, yeah, exactly, right? So how do you build the next generation of consumer security companies that protect their users from the new threats. I think there’s probably a big company out there somewhere.
Brian Bell (00:42:56): Is there an enterprise workflow that you see that is still painfully manual and overlooked?
Arun Penmetsa (00:43:03): I think an enterprise workflow. I want to say something in the on the service maintenance side. It depends on the vertical too in some cases. I’ll give you maybe a slightly different example and I am going to list one of my companies here. You can talk your book on this podcast. It’s totally fine. There’s a company called Compa in our portfolio. It’s a really interesting company and they do compensation management and intelligence. I really like this use case because if you think about it, what compensation teams do is incredible work and compensation tends to be 80% of our company’s right paying people but typically these teams don’t have a lot of people the compensation teams are small right and they do a lot of manual work to figure out how much should an offer be How do I plan for the year? How do I plan out my budget for hiring for this year? They often have to go work with sales, marketing, engineering. How many people are going to hire? What should we plan for this? Oh, the market for AI engineers changed. Now we have to offer, I don’t know, million dollar bonuses or something, right?
Brian Bell (00:44:05): I think there’s this interesting thing too where, you know, I think it was about in the 70s. I think Congress passed a law or the SEC passed a law where you had to disclose executive salaries. I think this was around like 1970 and you know from that point forward you saw this just astronomical increase in executive salaries it was like why is that well it’s because executives could look and see what everybody else was making you literally had to disclose it if you’re a public company any officer of the company exactly what their stock options are exactly what their comp is right And I think something similar has happened in the last 10 or 15 years with online tools like Levels and others where you can actually see, oh, a Level 7 engineer at that company makes that. I want that. So creating the transparency has actually increased the worker’s ability, the employee’s ability to negotiate. Right.
Arun Penmetsa (00:44:56): So anyway, I think compensation is one workflow which is heavily manual. It’s not a broad answer to your question, but I think it’s an interesting one because it’s often not thought of as much.
Brian Bell (00:45:06): Yeah, some of the best startup ideas are just kind of taking things that are just done manually and just AI-powered SaaS-ifying them. Exactly, exactly. Like, oh, they’re doing this in spreadsheets. Great.
Arun Penmetsa (00:45:19): You take healthcare or oil and gas like you said I mean there’s some back office that’s responsible for getting a wheelchair out to a patient right or getting a piece of equipment delivered at the right time and it is mission critical but it’s buried somewhere in the entire workflow that you never think about yeah
Brian Bell (00:45:37): What’s an early stage metric you trust the least? That I trust the least?
Arun Penmetsa (00:45:41): I would say, I think ARR has, the definition of ARR has changed so much over what it originally meant, right? Like true recurring revenue that’s signed and I think we see ARR put in every deck today but what it means varies a lot between being usage based or it’s contracted but not live this is if you take our monthly number and annualize it like this is how much it would be so there’s many variations of what the ARR number is so I think you have to dig in a little bit to understand what exactly yeah what are we talking about here
Brian Bell (00:46:18): about some of your highest usage day last month and you’d multiply by 365 that’d be probably the most egregious yeah so
Arun Penmetsa (00:46:23): so that I would say is is one that yeah that’s funny if you you could
Brian Bell (00:46:27): institutionalize one habit and every early stage founder what would it be
Arun Penmetsa (00:46:31): I would say I think most early stage founders do this already, but I would say as a company scales to continue staying very close to the customers, you know, and so this is maybe not very early stage, but if you get to a B, C rounds and your role changes and it should change, you have a full team. I think the best companies the founders are still very involved with customers they still do customer calls they take support calls they go meet because you never lose that pulse on the business I would say that you know one of the one of the things that does happen sometimes is you have a founder when they’re early they know every aspect of the business every number every customer and obviously you can do that as you scale but as you put layers between the founders and the customers that perspective changes and if you go back to something I said earlier about having the product vision one of the one of the best things that a founder brings to the table is their vision for how this market should evolve and what product needs to exist in it and how do you build towards that future and I think the further away you get from customers you lose a little bit of that vision because you’re not just getting the raw data anymore so A lot of founders do this already but if I had to say that’s something important that you should continue doing
Brian Bell (00:47:41): Is there a vertical in SaaS or enterprise that you feel is underappreciated or inversely overcapitalized right now?
Arun Penmetsa (00:47:53): I think I would say retail is probably underappreciated to a certain extent to think physical stores and you know this may be unfair I’m sure there’s a lot of a lot of retail startups now that that are like what do you mean but you know if you think about physical stores gas stations convenience store like like that’s a huge footprint across the country and they are slow to adopt there’s obvious reasons why it’s hard to break into that but that’s probably an underappreciated one I think go-to-market tech broadly is overcapitalized there’s so many startups building thought of it and there’s good reasons right it’s a very clear workflow it’s easy to test easy to get into but that’s what I would say my first instinct was to say healthcare but I think healthcare is not undercapitalized there’s a lot of healthcare startups out there it is a very difficult sector to get into and just manage everything that goes on in that sector but yeah that’s what I would say
Brian Bell (00:48:40): What’s something you’ve changed your mind on since you started investing? You were kind of sure it was true and then you’re like, no, it’s actually not true.
Arun Penmetsa (00:48:50): I think we tend to underestimate market sizes. Early in my career, I would be like, this can’t be a big market, right? I would do some diligence and be like, but I think this is not true of everything, but I think a lot of markets grow over time. So there’s value in in being a significant if you can capture a significant pocket of a small market as long as you as long as the market grows and there’s a tailwind I think you can build very big businesses and I didn’t appreciate that enough in the early days so so when we think about markets we try to be very careful about thinking bottoms up
Brian Bell (00:49:24): you kind of start from like first principles like how many people have this problem or how many good companies how much would they pay to solve it over what period of time kind of thing yeah
Arun Penmetsa (00:49:32): Exactly like that right but but I think I think because you’re especially in markets that are early that are late to tech adoption because such products have not existed they even the market doesn’t know that there’s a lot more you can do right like you you launch your first automation feature and they’re like this thing can actually be automated like like let’s take like and I’m you know let’s take oil and gas since you mentioned that earlier right and I don’t know much about oil and gas so I’m just sort of talking randomly here but like very manual very complex but I do think if you bring automation There’s probably things that will open up over time, whether it’s finding the location to drill in, whether it’s the right infrastructure to build, whether it’s around shipping, whether it’s about analytics, that you may be able to do things that are not possible now because of the technology that came in.
Brian Bell (00:50:21): You can bundle inside the vertical, basically. Yeah.
Arun Penmetsa (00:50:24): And I think your initial hypothesis on how much you could sell a company’s products for can grow. I mean, the price point can grow significantly. That may not have been obvious.
Brian Bell (00:50:35): What is a good rule of thumb from like a 10, $20 million company to a billion dollar company? How much do they expand their ACV over time over those five to 10 years?
Arun Penmetsa (00:50:44): Yeah. So I would say we’ve seen companies that have grown at least like next.
Brian Bell (00:50:50): Yeah, so it started with a 10,000 a year product and then went to a 100,000 a year product or 100,000 to a million.
Arun Penmetsa (00:50:55): Look at the cascade, right? You’ll get a few customers who will pay you a million because they’re at scale and all that. But I think I think there’s two ways to play this one is you find a very efficient go to market to land and if it’s truly efficient I think you can get away with like small price points but if you have a good product roadmap and you know you can get expansion then it’s okay to be inefficient upfront because your net retention will grow significantly right so your net potential will grow your revenue significantly so you can do either ones but I think it’s hard if you stay at a low price point because then you need tens of thousands of customers right and obviously there’s those companies that have sold and gotten at scale it’s just it’s just hard so yeah I think markets tend to be bigger than most people think they are at least in the early days because technology changes the buyer behavior and what they buy in those markets
Brian Bell (00:51:46): I’ll ask kind of a similar question in a different way what’s something that you believe to be true that’s a contrarian belief that most people believe to be false
Arun Penmetsa (00:51:54): and most people wouldn’t agree with you I’ll give you two answers I don’t know this is exactly what you’re looking for so one is like the job loss thing right I don’t know if it’s truly contrarian but like I agree with you there I don’t I think
Brian Bell (00:52:04): there’s actually going to be more jobs than ever created in the next 10 years yeah we’re going to invent so many new things to do yeah yeah
Brian Bell (00:52:12): and people just tell me it’s kind of like trying to explain to farmers what we’re going to do in factories right in the 1800s they’re like so wait we’re going to be in a building like you know on an assembly line like with a wrench in our hands like I don’t understand why that farms well won’t all the machines be building everything yeah no no there’ll be like things to do like we’ll be selling the machines to each other and servicing them and like maintaining them and it’ll be hard to explain to people what we’ll do in a post AI world like it’s just hard to explain
Brian Bell (00:52:41): It’s hard to have that imagination too.
Arun Penmetsa (00:52:43): Right. Because it changes so quickly, right? Like, I mean, imagine technology change over 20, like, I mean, in 1990s, can we, would you have imagined everything we have today?
Brian Bell (00:52:51): And the jobs are going to be so much more incredible because all the mundane, bureaucratic, lined up in cubicle work is going to disappear. And it’s going to be very creative and very collaborative and everybody’s going to have so much leverage now with AI. That’s right. Exactly.
Arun Penmetsa (00:53:06): So that would be my main thing. I think the second thing is, again, I don’t know this contrarian, but I think this is one of the best times to invest in venture. I mean, there’s obviously fear globally with prices being too high. We got a war now in the Middle East. Exactly right but I think the pace of innovation is so high that early stage companies somebody asked me the other day so many people are starting companies and it’s getting easier to start a company like should I start a company now like everybody else is starting a company and it’s so competitive and at least my view is I think it’ll get easier and easier to start a company like I think waiting doesn’t help if that’s your concern
Brian Bell (00:53:43): That’s what I tell young people they’re like hey should I get an MBA and I’m like nope start a company should I go work for Microsoft I’m like nope start a company it’s just never been easier to just start a company get somebody you like to work with and go talk to the customers and figure out what their problems are and go build it for them it’s as simple as that that’s right and now you can vibe code it you can just get cloud code to you know go figure it out and then you’ll just get more technical over time you’ll go deeper in the stack and you’ll expand your AECV all that stuff as you mentioned earlier
Arun Penmetsa (00:54:10): the learning around how do you sell how do you service a customer how do you manage your finances like all of that is so valuable no matter what you do in life right like being selling is a good skill no matter what you do in life right and VCs are just
Brian Bell (00:54:25): I tell people VCs are just salespeople yeah yeah We sell founders in taking our money and we sell LPs on giving us money. That’s basically a sales job. And we sell people to come on podcasts so we can learn for free and get a free education. But I really enjoyed the conversation. I learned a ton. I love doing this podcast because I just learn. I feel like every time I have a VC on like you that’s been doing this for a long time, longer than me, I take away nuggets and I get to improve my my craft my skills so thank you so much for coming on I learned a lot thank you thanks everyone all right take care bye
