Charles Fry, founder of CODE Exitos, joins us at ibble Studios

What is up everybody, this is Moby, and today I'm having a conversation with Charles Frye, founder of Code Exodus.

Charles, hey, I'm fantastic. It's the best day of my life. How are you?

I like that energy. You've had quite a career in many different things, and now you're not in the US. I love to learn. Before you were doing Code Exodus, was Zengistix the first company that you founded?

No, no. It's a great question. I've got a long history, about 30 years of startup work. In fact, I'd have to think about what the first one was. Syngistics was an interesting opportunity, and I had some business partners who were doing a startup out in Silicon Valley. To keep the story really compact, they needed an operating company. They were doing a software platform company. Both of these companies have since been sold. So we were building a SaaS platform company out in first Palo Alto and then Sunnyvale, and it was all Valley-based VC money. We thought strategically we needed an operating company that would actually use the SaaS platform to produce client work. So we started Zengistix, which was an operating company. I think it was 2014. That's how I got to Austin, Texas, because we could start that anywhere we wanted. Austin's just an incredible entrepreneurial community. I landed here sort of in stealth mode, and the directive was to ramp this thing to $100 million in revenue as quickly as possible. We had a five-year shot clock. We hit an ARR of $100 million a year in about three and a half, just under four years, I think. It was pretty exhausting. We checked all the boxes, and then I bopped out to start Code Exodus, which I jokingly tell people is my retirement company. So Code Exodus is a really different formula. I own it. We have no debt. We have about 125 people in the company, but we call the shots. Unlike VC-backed companies, which I've done several of, the playbook is different. At Code Exodus, the playbook is substantially different in two ways. The first is we have a public benefit mission, and we're a B Corporation. Our public benefit is to discover and enable technical talent in Latin America. We can talk about that more if you want. The other thing that we do is we talk about Code Exodus internally as being a 100-year company. I don't think statistically there's any chance that I'm going to live to see the 100 years go by, but I've been really surprised at how profoundly your thinking changes when you go from the hyper-growth hockey stick VC way of thinking and operating a business to getting this really gigantic mind space of, hey, this thing's got to last a hundred years. So what I'm doing today has this long tail that I'll never see. That's what I do now to keep myself happy and engaged.

I hear that. I absolutely see that the mindset of an entrepreneur or a team member in a company which is VC-backed, which has a time limit, there's pressure to produce results in a specific amount of time. Versus being able to say, all right, we're going to grow this and see where it goes. In the first example of VC, there's a lot of being reactive and adapting constantly. While that is the case with bootstrap companies with longer vision, you also have more space and time to think about where this could go in the long run and start working on things today which would see benefits in the next 5, 10, 20, 30 years.

Yeah, it's a different playbook for sure. In the... I have this list of books that I'll probably never write. One of those books that I'll probably never write, I have the title. I usually get after the title I sort of get off track. You're like, this is exciting, I love it. But I think for a lot of entrepreneurs, I want to challenge the listeners and I want the feedback and the interaction around this. However you start your business, whether you're bootstrapping it, whether somebody's giving you a $5 million seed round, it doesn't matter. I think that VC should stand for venture client or venture customer. Because in my experience looking back, I realized it's like, holy, my customers are actually taking a bigger risk on me than the venture capitalists. Venture capitalists, and I've been on that side of the table too and I invest in businesses, there's a certain amount of understanding that you're going to lose money. Not every bet is going to pay off, so it's in your formula. But when I look at our first customers, and I mean literally think about customer number one, they bake my promise into their dream building. It's really profound. If my piece of software turns out to be a piece of... and I negatively impact my customer, that's more harmful I think than the VC that says, oh, I have to write this investment off. And right behind customers come my employees, or they're right there at the same kind of level. So I think that the focus on, oh, I've got to get money because you got to survive, but I think about venture clients, venture customers, and venture employees almost before I think about the money guys.

I hear that. I think today a lot of people are coming around to that, especially this week, this month, if you're active on LinkedIn with what people are calling the venture capitalist winter. Companies are still raising money, companies are still going, but who are being affected are the employees. It's a very different world completely. What's one lesson from the playbook that you used to go from zero to $100 million ARR in three years that you still use in your company right now or train people on?

That's a great question. As I was listening to that, I think the first thing that comes to mind is that every conversation matters. When we hit that $100 million ARR and we sustained it, every customer conversation matters, every employee conversation matters. We had this really wacky way of thinking about how we would capture the important data from being told no. A lot of times when you're selling and you're selling maniacally and you need to close the deal, it becomes very transactional. A lot of people say no, okay great, if you're a salesperson you've always heard it's a numbers game. But we wanted to know what we were learning when we got told no. You didn't just no, hang up, pick up the phone and dial another one. I think that I could summarize all that stuff in the slogan of every conversation you have matters, and you have to accept the fact that it matters and embrace that. I think ultimately you learn from it, you change your mindscape a little bit from that. I think that's relevant to both salespeople and also executives at a company. Because in the job of sales is to close, close, close, and that learning you get of why a person that you had specifically targeted and started a conversation with, why they said no even though you had this notion that they're the perfect customer, is it because they're buying from somebody else, you can't solve their problem, is the pricing too different, is the service model not something that they want? I agree, you learn a lot from those no's even though they stink. I'm going to go back to another company earlier than Syngistics. I was part of a really special company called Pillar Technology. A great CEO, a guy named Bob Myers, he's a hell of an entrepreneur, you should interview him sometime. I was the EVP of Corporate Development, so I ran the sales team, client-facing activity. We got on a call with a senior executive at the Nielsen Company. I'm sorry, I can't remember this guy's name because I owe him a shout out. I've thought of this conversation many, many times. We were running and gunning, jump on the call, I'm the big exec to get on the call with my account exec. The guy asked good questions, and we got to the summary. He asked me a question that's almost exactly what you were talking about, Moby. He said, 'Charles, what about the Nielsen Company makes you believe that we would be the ideal customer for you?' I remember clearly, even telling you the story now, a cold sweat ran down my back because I hadn't done my homework. I hadn't thought about it that deeply, and it was just a killer question. I forget whatever crap I made up at the time. We got done, he was very professional and very polite, and I hung up and I looked at my sales team and I said, 'Guys, I just blew that because we didn't invest the thinking.' His question was such a killer, appropriate question because he realized that even as large as Nielsen was, he was a venture customer, and I didn't answer that question clearly. We didn't get to work either, so sorry to my account exec for not helping him close that deal. So customers are key, and so are employees. It's the same calculus for your employees when you're building a company.

Absolutely. With employees, especially in startup world, there's a lot of managed chaos because that's what you're doing, that's how you get a startup. It's like, oh, this thing, that thing, you're jumping here and there. With salespeople, there's always a sales process and a playbook. With investors, you know you have to give them updates at a certain time or decide you talk to them. What jumps out at you when you think about a principle a lot of entrepreneurs should instill in their brains when it comes to talking to and leading their teams?

Well, I want to start by asking you a riddle. We're talking to entrepreneurs and we're talking about entrepreneurship and startups. Here's a riddle I came up with years ago when I was talking to MBA classes. It's simply this: we'll have a little conversation here, I'm not nervous at all. So you're Moby, you're starting your company, of course you're driven by passion and vision and all of that, and it's time to hire an employee. You need to hire your first employee. So the riddle is, who do you hire as your first employee in your brand new startup?

Does the context of the startup or my needs matter, or is this...?

No, it's sort of an open-ended question. I got no cheat codes here. Who do you hire? There's no wrong answer, that's just your answer, and then my answer.

That's a great question. I would have to make the decision between somebody who can grow the business by selling more or by taking stuff off my plate.

I get it. We don't have quite the audience, although I'd love to have people send in a message about what they... I'll put this on LinkedIn. You get a lot of really smart operational answers: I need a head of sales, I need a product lead, I need a CFO. That comes up a lot, somebody to do that administrative work that most entrepreneurs are really excited about doing. So here's what I found. The first person that most entrepreneurs hire is whoever will take the job. That's actually very true, right? Because somebody comes in and you're like, 'Oh, we're changing the world, it's going to be this, it's a billion dollar thing, I'm going to raise $100 million in VC, here's some stock options.' And now imagine this other person, they're looking around the room and they're going, 'Dude, there's nobody here. Who are you? Who are you talking about?' Now they've got to go home and they have stakeholders, usually called a spouse or a partner or kids or pets or parents, and they're like, 'How did that interview go?' And they're like, 'I don't know. Moby was kind of a cool guy, I liked his mustache, and he's got a pretty neat idea, but dude, there were crickets chirping. I don't think there's any there there.' So the Harvard MBA CFOs are like, 'Hey man, I've got options, no offense.' So the punch line to my riddle is whoever will take the job. If you embrace that reality and then you believe in that for every but the first hundred people you hire, the first 200 people you hire, I think you're closer to the center of understanding that the people who come in to join building your vision are deeply, deeply committed in their own way, maybe not the same way as you as an entrepreneur are, but pretty damn close in my experience.

Absolutely. There's something about those people who joined that quarter-made boat. They're like, 'We're going to do this together.' If you get a quarter of it made and you get somebody to work for you, you're way down the road compared to where I've been. I've been the lunatic in the room more than once. I really love that riddle. I'm going to use it if you don't mind. I want everybody here to... The reason I communicate this way, with storytelling and these little punch lines, is because when you're busting out the 20-hour days and 100-hour work weeks, and maybe people don't do that now, the style's changed a little bit, but it is a hustle and it's all consuming. I'm not smart enough to remember great big MBA style case study stuff, but I can remember the little things. I've just sort of boiled my world down into little slogans and one-liners.

I absolutely agree. In entrepreneurship, you have these very personal wins that when you look at them, you distill that into a slogan or a phrase, and they're very universal. For example, entering 2022 for my business, I decided to really up my pricing. I realized that the people that I'm serving right now, my pricing is not for them. Instead of changing my pricing for them, I'm going to go ahead and find those people who are willing to pay that price. I went into a conversation with somebody that I thought was qualified, and this is the first time I'm pitching this pricing. It's 4x what we usually charge. I understood what they were doing, and I said, 'This is the price.' They're like, 'Yeah, cool.' I was like, 'What? Yeah, all I had to do to make more money is charge more money.' I've gone through that exercise as well. That's a great lesson for everybody that's listening. Sometimes you just have to ask for it, and people say okay. But now let's turn that around a little bit and look at what I've been rambling about with our venture employees and our venture customers. This is really for entrepreneurs that are in that zero to $100 million kind of curve. I've spent my whole life working in that. I sometimes say that I'm a guy who helps build from nothing to something, because at $100 million in revenue, you kind of have a real company at that point. There are departments and people are executive smarter than you and all that other stuff. That's not my superpowers. Being the best CTO or being the best CEO is not my... I'm a builder. For the people that are going through that curve, the first employee, the first dollar, the first customer, what happens when you do, and you're very smart in what you did by saying I've got to reposition, but it has repercussions internally. Suddenly you have clients that don't fit anymore, and you sometimes have employees that don't fit anymore, or they don't fit where they are. You have to bring somebody in over top of them. That can be a soul-crushing experience for everyone involved. If you have your first hire who's been highly loyal, they were the only person that would take the job, which means they may not be the ultimately most qualified person. Now you need a VP of Sales who can run a global sales team, and you have to say to your first sales guy or saleswoman, 'Hey, Jane Saleswoman, no offense, but I'm going to kind of promote over you.' Those are really hard conversations. Not to scare anybody, but it's just the kind of stuff that you have to deal with. That's why I think entrepreneurs need a community like this that they can reach out and say, 'Wow, I'm stuck, or I feel like I'm getting my butt kicked, or I'm really scared about this thing,' because it can be a pretty lonely place. But I love what you did with recognizing your value and repositioning yourself. In the wake as you were building the business, you still have a responsibility to be thoughtful and careful with the people that have gotten you to where you are. Good job on the 4x, by the way. Check this guy out to get more money. I really like what you said about butt kicking, because that's pretty much entrepreneurship. Every day is another kick in the butt and a lesson and a way to improve. It reminds me of the book 'The Obstacle Is the Way' by Ryan Holiday. I'm a huge Stoic fan. Brilliant. I really like that you go through something hard, and that becomes the path. Going through that intentionally with eyes open, even with pain and suffering, that becomes the path to improvement in your life and your business.

Yeah. I don't know if I'm quoting this out of the book, I apologize for stealing uncredited material, but it's not about how you get knocked down, it's about how you get up. I think you have to, if you're making the decision, if you're trying to make the decision if you want to start your own company and you're on that knife edge of, 'Hey, I'm going to quit my day job and go all in on this,' you're going to get knocked down. You're going to get your butt knocked down, and you have to determine that you're going to get back up. I think that's why you see so many competitive people start companies. Whether you're in competitive sports, I used to race badly motorcycles. You're going to wreck, you're going to get busted up, you're going to get knocked down, but you've got to get back up. So it's not about getting knocked down, it's about how you get back up. For the last tail end of this interview, I would love to hear a story from your experience going from zero to $100 million ARR, because that is the dream for so many entrepreneurs. What is one key lesson that you like to share with people who are listening who are maybe at $20, $30, $5 million and they're stuck and they're like, 'I don't see how I can possibly grow this beyond without metaphorically killing myself'?

Yeah, well you don't want to metaphorically kill anybody in the process. You have to get your head space to where you can be at peace with that. The one story, I think again it comes back to some really simple things, like one percent every day. You can't eat the elephant all at once, so you have to set the target and go after it. I'll leave you with nine words that I've managed several companies around, and these seem to be universal management tools. You can take these nine words and you can boil them down to three. I'll go out on this story for you. Know the focus, spread the message, keep the faith. Those are nine words. The three words are focus, message, faith. I think every entrepreneur can build around those words. Do you have a clear mission that you articulate to your team, and can your team articulate it back? That's your focus. How we give messages every day, we're giving an explicit message now, but how we treat people, how we react to customer problems, all of those are sort of silent messages. Maybe the message thing now today would be called, you know, what's our culture like? But what is all the messaging? Is it positive messaging or is it toxic messaging? As a leader, you have to manage the right kind of messaging. Then people have asked me, 'Okay, well then what's the faith thing?' I'm like, look, sometimes it's all going to... it's not going to feel like a good day. It might not feel like a good week. I've had times where it's not been a good month. But then you have to look inside and say, 'Am I really on the right track?' That's what I mean by faith. Do I feel like maybe I need a break, maybe I need some self-care, maybe my employee needs a break or a sabbatical? I've always found that I can troubleshoot almost every problem around figuring out is it an issue of focus, message, or faith. So that's my story. Know the focus, spread the message, keep the faith, and you'll get to your goal eventually.

Love it. Especially the part about keep the focus. There's a lot of times where we as entrepreneurs, we have chosen to build something specific, and we've chosen that, but there's also random ideas for different products, different services, different startups, this thing, that thing. Saying no and just laser focusing on something which may not work for a while because it actually... no, it won't work for a while. In the start, you will just lose and lose and lose. That's another conversation we can talk about the mythical pivot. Every time I cringe every time I talk to an entrepreneur, whether I'm going to invest or help them or coach or even work for them, and they talk about their pivots, I'm like, 'Oh man, you're just covering up for a mistake. Call it what it is.' But we'll do that another time. It's been great talking.

Absolutely. Thank you so much. I've actually done the mythical pivot many times.

We all have. Just don't be proud of it.

Charles, thank you so much for joining us today. I love it anytime, and I look forward to hearing whatever feedback we stimulate with this conversation.