Hi everyone. I'm Iran Resnikov, partner at Vintage. I drank two gin and tonics. So I'm a happy camper.
I'm very excited to host you today. So we have here Dick Costolo, the former CEO of Twitter, managing partner, co-founder of 01 Advisors, and Josh Kopelman, founder partner of First Round. And I thought to do something a bit different today. Maybe I can ask a question for Josh about Dick and a question for Dick about Josh. So let's make it a bit more interesting.
I want to ask Josh. Okay, Josh, you've seen Dick operate both in the trenches and at scale. And maybe you can also kind of elaborate on that. What's a decision that he made that is memorable to you and that you think other founders should learn from?
So I first met Dick when he started FeedBurner — was that 2005?
Um, but if I had to say the thing that I'm most impressed by was some of the work he did at Twitter on developing talent. And so if you're a founder, you have robust networks of advice. There are other founders. You're in WhatsApp groups with them. You have angel investors. I'm good.
Gives double-fisting a new meaning.
They're angel investors, you have venture investors — there's a lot of people to give advice. But I think what Dick realized or at least what we saw outside watching Dick at Twitter was that if you are an engineer and you get promoted to an engineering manager or if you're a sales rep and you get promoted to a sales manager, there is no network of advice and much of the time you're figuring it out by yourself and you're figuring it out wrong. So what we saw Dick do at Twitter was basically build an entire curriculum, and we've partnered with hundreds of founders starting companies and we rarely see the level of investment in training for those first-time managers. And Dick just built a whole curriculum on how to manage.
And it's something that we were really inspired by at First Round. And so we realized that while Twitter had the scale to do that, a lot of our companies did not have the scale, so we didn't do it nearly as well as Dick did, but we tried to build a curriculum so our founders could send their first-time engineering managers, first-time sales managers, first-time product leaders when they were managing people to try to provide some counseling and professional development. And I thought that Dick investing the time at Twitter was really meaningful.
That's amazing. And maybe a question for Dick about Josh. What's something about Josh's approach to backing founders that you really appreciated?
Um, well, first of all, I'll say two things. One, my favorite thing about Josh and Noah. And I've known Noah for 20 years, and he has had the Israeli flag hanging in his office for that long alongside a slightly smaller Chicago Cubs flag. But these two guys are the same people they were when they got started, which is, as you may or may not know, super rare in Silicon Valley. You know, my chairman of the board at Twitter, Jack Dorsey, was a super clean-cut, normal, nice dude from St. Louis when we got started, and now he's a crypto guy with a really long rabbinical beard surfing in Costa Rica. So it's very rarely the case that these people are the same people they were before they made it. And Josh and Noah both are.
Secondly, the thing that I learned from Josh about investing is when we used to go into investment committee and we would go around the table and ask everyone what they thought about a deal, it became obvious that once we started discussing the company, people would change their minds and go along with whoever spoke first. We have a bunch of charismatic, forceful speakers in the room and one of them says, I really love it for this reason, and two of the associates change their mind without telling anybody. So what Josh did, and I didn't know this until we got started on a second fund, is everyone has to fill out a rubric about what they think about the company along a bunch of different axes before the meeting so you know where everybody stands before going into the room. And at least if you don't want to expose those before you go into the room, you can see them afterwards and know where they stood at the beginning of the meeting. It's perfectly fine to change your mind, but let's all understand where everyone is going into the meeting. And we do that now. And it's a much healthier and livelier discussion because you know where the associates stand and if they don't like it, you can turn around and ask them, you completely disagree with Adam, why do you disagree with him, etc.
That's amazing. Kind of creating a white space for people to express their opinion.
Yeah. Another — actually one of the things I talked about in my management class at Twitter, to complete the circle here, is you have status as a manager over the people who are reporting to you. And you have to just assume in a discussion where you want them to disagree with you — if they disagree with you, you have to give them the right and the ability and the space to do that. If you go into every one of your staff meetings and you speak first instead of asking what does everyone think about this, they're just going to go, 'Well, Dick's already decided, so it doesn't do any good to disagree with it.'
That's a great trait for a CEO to have or a manager to have. And maybe that's a good segue for a question for Josh. What's a trait in founders that investors consistently overestimate or underestimate when they make the investment decision?
So, it's hard to generalize to all investors. There are lots of — there's a wide lens there. I think what we could talk about is something we've learned, which is our investment process is typically we have a partner spend time with a founder and then that founder comes into a partner meeting and he or she will present for 45 minutes to an hour and then we discuss it afterwards. And when I look back at some of our biggest misses and mistakes in the partner meeting, if I had to say, it's because we initially viewed our investment decision as a vote on the founder's performance over 45 minutes.
So we over-indexed on presentation skills and we under-indexed on all of the work that he or she did for the months coming into the partner meeting. There was one time where someone just gave a bad performance in a partner meeting. They didn't have clarity of thinking. They maybe gave long answers instead of short answers. Yet when you actually look at the work that they did, it was impressive. The speed to revenue, the passionate and excited customers. And we said no to that company because we believed that storytelling was such an important part of being a founder. And we've really now tried to revise the rubric that Dick talked about because, yes, you have to be able to tell stories to raise money, to hire people, to get customers. But if someone's going to have spent five months on a company before they come in, you probably should weigh their performance during those five months a little more than their performance during 45 minutes at a partner meeting.
Yeah, no, most definitely. Maybe we can kind of switch gears. And Dick, you know, obviously a lot of companies feel pressured to manage their investors. What's the right balance between kind of being honest about things?
Nothing's worse than being dishonest about things. You should always — what I like is, and I did as CEO of Twitter, is just communicate super, super frequently. Just always be communicating. Bob Iger at Disney used to send — Sheryl Sandberg was on his board for a while and she was talking to me when she was on his board. Bob Iger would send out messages to the board like maybe even a couple times a day but they would just be like a bullet point or two. It wasn't like here's the nine-page update for the quarter. It was just, hey, just a heads up. I'm having some issues with Disney Cruise Lines and I'm working on it. Might see something in the press in the next few weeks and also movies getting ready to come out. We think it's going to do really well. And that kind of stuff gives the boards — if you're on his board at that point, you're super comfortable. It's informal. It's relaxed. You're never going, what's Bob hiding from me? So I tried to do stuff like that all the time. And you should always be communicating as a CEO. It's just good hygiene.
I think what CEOs underestimate is, to be perfectly frank, if the company's going well, the leverage they have with their investors. Nothing is more stressful for a CEO than everything's going great and they're fundraising and it's a growth round and everyone wants in and the lead wants to take the whole round and the total adds up to 150% of the available capital and the CEO ends up doing things like, well, I guess I'll dilute myself more or raise more money. You don't have to do that. I always tell the CEOs, just write your investors back and say, hey, you have to think about this like a wedding seating chart. As long as everybody is equally disappointed, that's the best I can do. And you're only going to get XYZ. And I just don't think CEOs realize they have the capacity and ability to do that with their investors. Investors have been through this 50 times. So they're like, 'How could you do this to me? I got you that $25,000 contract.' They underestimate the ability and leverage they have with their investors.
Do you see a difference between kind of first-time founders and serial? So of course you have a room here with first-time founders as well. Tactically, how do you help them?
I'll give you a quick personal extreme example that I don't recommend you do right away, but it's what happened when I took over as CEO of Twitter after being there for a year. There were 14, 15 people in the boardroom because it was only a Series C company, and I actually started off the first board meeting, my first board meeting as CEO, jokingly saying I'd like to welcome all the board members, all the board observers, and uninvited guests, because people would bring like two or three people with them.
So, you don't recommend doing that.
I don't — I mean, well, no, that's not the part I don't recommend. In 2011, I decided there's nobody in the room who can really help me at hyper-scale that we're going through. And I told all the investors and VCs in the room, I'm going to change the board from one of investment to one of governance and you can't come to the board meetings anymore because I'm changing the boardroom. And we did that. John Doerr left the board. These are all great investors. John Doerr left the board. Fred Wilson left the board. Bijan Sabet from Spark left the board. And there was one investor who will remain nameless who was like, I'm not leaving. And I just said, 'Okay, I'm going to change the location of the board meeting and not tell you where it is.'
So, this part you don't recommend just for...
Yeah, that's the part I don't recommend.
We could do it because we were, you know, we were Twitter and we're able to do that. But you have more capacity to deal with your board than you think you do. And don't let them push you around, I guess, is what I would say.
Curious, Josh, what do you think from your perspective?
