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Surviving Layoffs: A Conversation with PJ O'Neil, Nomad's Co-Founder & CEO
15 Plays2 years ago
Among the difficult things founders have to face, layoffs may be the worst. We sat down with a CEO who draws back the curtain on a difficult but often necessary part of startup life. Join us in today's conversation with PJ O'Neil, Co-Founder and CEO of Elements, and investor Gavin Christensen of Kickstart (a VC firm for startups in Utah, Colorado, and the Mountain West) as we bring you both sides of a Perfect Pitch. In this episode, we'll talk about:
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What makes Denver and the Mountain West ripe ground for founders
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Why PJ's cold email pitch stood out to Gavin
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PJ's experience in making difficult layoffs at Nomad
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Layoffs: what you should and shouldn't do
Recommended
Transcript
Challenges of Layoffs in Startups
00:00:00
Speaker
Among the difficult things founders have to face, layoffs may be the worst.
00:00:05
Speaker
We sat down with a CEO who draws back the curtain on a difficult but often necessary part of startup life.
Introduction to Guests and Startup Journeys
00:00:11
Speaker
Join us in today's conversation with PJ O'Neill, co-founder and CEO of Nomad and investor Gavin Christensen as we bring you both sides of A Perfect Pitch.
00:00:30
Speaker
Perfect Pitch is a podcast from Kickstart that reveals the minds of both investors and entrepreneurs throughout a startup's journey.
00:00:39
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I'm your host, Karen Zalmuk, and I'm excited to introduce you to today's guests.
PJ O'Neill's Background and Experience
00:00:43
Speaker
PJ, before you founded Nomad, you were the general manager at Opendoor, a leading digital platform for residential real estate.
00:00:51
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You were a co-founder of Home Slice, which I originally thought it was a pizza place.
00:00:56
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It's not.
00:00:57
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It's a startup that makes real estate more accessible through shared home ownership.
00:01:00
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And you earned your MBA from UC Berkeley and your bachelor's in economics and mathematics from University of Colorado.
00:01:07
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And what else would you like us to know about you?
00:01:10
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Thanks for having me.
00:01:10
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I'm PJ, founder of Nomad, based out of Denver.
00:01:15
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I am here with my co-founder, Matt, and then my family.
00:01:19
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So my wife, Hannah, my little daughter, June, who's 14 months old.
00:01:23
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My wife is pregnant with our second girl and our dog, Pearl.
00:01:28
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We were born and raised here in Denver, came home after spending time in New York and the Bay.
00:01:34
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And it's really pretty amazing to build a startup here in Denver, given how far the ecosystem has come.
00:01:40
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My dad growing up was an entrepreneur, and it always felt like he was kind of swimming against the current.
00:01:46
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All of my friends' parents were doctors and lawyers and in the oil and gas industry, and he kind of stood out.
00:01:53
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Now building a company in Denver, this is
00:01:56
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much more mature ecosystem.
Denver's Supportive Startup Culture
00:01:59
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And a lot of the reason that the ecosystem has matured the way it has is because of firms like Kickstart that have invested in the Mountain West that took that early chance to invest in entrepreneurs.
00:02:10
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And it's been cool to be a part of the Kickstart family.
00:02:12
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That's cool.
00:02:13
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Well, we're big fans of Denver.
00:02:14
Speaker
What did you say, Gavin?
00:02:16
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Absolutely.
00:02:18
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And I just would piggyback on what PJ is saying there, which is that we definitely believe that the
00:02:23
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entrepreneurs in Utah, Denver, Colorado, and the surrounding kind of mountain and Southwest states are different in the sense that there's a little scrappier, take nothing for granted.
00:02:33
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And I think what we see with PJ and Matt and others is this desire to build a company, but also build an ecosystem to kind of pay it forward for other entrepreneurs because you feel like you're building a community as well as building your own company.
00:02:47
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And we love that about Denver.
00:02:49
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We certainly experienced that in Utah.
00:02:51
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Probably a good point for me to tease this with our audience, which is we've been investing in Colorado since our first fund that was back in 08.
00:02:59
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We have great partners on the ground in terms of other funds and service providers and existing companies that are helping new companies to fund.
00:03:08
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And the next few months, we'll be announcing that Kickstart will have someone on the ground in Denver.
00:03:16
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So exciting.
00:03:16
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Yeah.
00:03:17
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So exciting.
00:03:18
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Yeah, that was a great, that's a great teaser.
00:03:20
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But yeah, Gavin, it's great to have you back on the show as always.
00:03:24
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I want to dive a little more PJ into what other benefits do you see to starting a company in the Mountain West versus Silicon Valley?
00:03:32
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A number of benefits, I think.
00:03:34
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One, the founder community here is ultimately not a competitive vibe.
00:03:39
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So in San Francisco, whether you're a founder or whether you're a product manager, the first question someone asks you when you introduce yourself at a bar is, what do you do?
00:03:49
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And who do you work for?
00:03:51
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In Denver, the first question you ask is, where are you skiing this weekend?
00:03:54
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Yeah.
00:03:56
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When I'm talking to other founders in the ecosystem here, it's not how much money you've raised, but we actually get right into therapy.
00:04:02
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Like, man, this is hard, isn't it?
00:04:05
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Let's talk about what are you going through?
Nomad's Team and Business Model
00:04:07
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Where can I help?
00:04:08
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It's a much more supportive ecosystem across the board.
00:04:12
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As I think about talent, Denver increasingly is at parity talent-wise per capita versus some of the coast.
00:04:22
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Slack is here.
00:04:22
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Google is here.
00:04:23
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A lot of the big established public brands that we all know have outposts here.
00:04:29
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And then maturing startups, right?
00:04:31
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So Guild Education, Ibotta, Evolve Vacation Rountles, really big private companies have built an entire stack of really talented folks who really understand the startup world.
00:04:43
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So folks, when they join a company, they're joining a company because they really buy in and they want to build something.
00:04:49
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My last couple of years in the Bay, you wanted brands on your resume.
00:04:54
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I don't experience the same thing here in Denver.
00:04:58
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People truly believe in what they're building and commit to it.
00:05:01
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And then, yeah, I think just the Western attitude towards life and work is more sustainable.
00:05:07
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People bust their butt during the week and then enjoy their time on the weekend.
00:05:13
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Life is a little bit more balanced here, I think, generally, which makes for happier people and more productive teammates during the week.
00:05:19
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Does that align with what you kind of see, Gavin?
00:05:22
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It does.
00:05:23
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I think here in the West, there's much more of a focus on what have you done and what are you going to do versus what family do you come from?
00:05:30
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What schools have you been to?
00:05:31
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What pedigree sifters can I evaluate you with?
00:05:34
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It's like, well, what have you done?
00:05:36
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What did you accomplish?
00:05:38
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So it's very much a roll up your sleeves, make something happen.
00:05:41
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and try to stay down to earth, open tent, which I really appreciate.
00:05:45
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And I think that's contributed to why some of these ecosystems are becoming very attractive.
00:05:49
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Denver is a great example to all people all over the world are coming, voting with their feet, saying, hey, I want to be part of this.
00:05:56
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And I actually think they want me.
00:05:58
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I totally agree.
00:05:59
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And voting with their feet out of places like San Francisco, as I look at our team, there are more people from Denver here now, but as we were first getting Nomad off the ground, of the first 10 people that were on the team, I think almost half of them had either moved here from the Bay during the pandemic or had spent time in the Bay before joining Nomad at places like Uber, Snapchat, Opendoor.
00:06:20
Speaker
Unfortunately, real estate prices in Denver reflect that, which makes it a little harder to go to home.
00:06:26
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But yeah.
00:06:28
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Yeah, I really like that insight.
00:06:30
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Thank you.
00:06:31
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There's so much about your founding story that I want to talk about, especially given that it was, you know, at the beginning of 2020.
00:06:37
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But why don't you tell us, first of all, what Nomad is?
00:06:40
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What does Nomad do?
00:06:41
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Nomad guarantees rent for the mom and pop landlord.
00:06:46
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Most of the single family rental industry in America is owned by individuals like us, someone who maybe moved out of their first home when they started a family, but decided to keep that home as a rental rather than selling it.
00:06:59
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That's the vast majority of rental properties, especially in the single family world in America.
00:07:04
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The biggest pain point for that customer is the risk of vacancy, of delinquency, of that home not renting.
00:07:11
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If you're a big institutional Wall Street investor who owns a ton of property, you experience vacancy as a percentage of your portfolio.
00:07:18
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It's just a part of your cost structure.
00:07:19
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When you're an individual landlord and you don't have rental income one month, it's a really binary, very visceral thing that many small-time landlords feel.
00:07:27
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And so Nomad, it's our goal to help those landlords smooth their cash flow over a long period of time and deliver value in a lot of
From Landlord to Startup Founder
00:07:35
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other ways.
00:07:35
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But the primary value prop is that guaranteed rental income.
00:07:39
Speaker
Did you come up for this idea at Opendoor?
00:07:41
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Were there learnings and experiences you had there that fueled this?
00:07:45
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I graduated from CU Boulder, as did my wife.
00:07:47
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We both moved to New York City after we graduated.
00:07:51
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We wanted to see what that was like, and we spent five years there.
00:07:55
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My first job was at a small strategy consulting firm called Monitor Group, which totally coincidentally, Gavin had worked at
00:08:03
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A few years before I had started, Gavin left.
00:08:05
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So we had that connection from the very beginning.
00:08:08
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It was a really, really awesome little boutique strategy firm where I really cut my teeth, learned what client service was all about, learned how to build spreadsheets and do presentations for execs.
00:08:20
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It was kind of the perfect job right out of college.
00:08:23
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Monitor wasn't known for giving big bonuses, but I got a small, a relatively small bonus after my first year.
00:08:28
Speaker
And I used that to buy an investment property here in Denver across the street from the University of Denver, directly across from the first Chipotle ever.
00:08:38
Speaker
That's a great location, yeah.
00:08:40
Speaker
Yeah, right?
00:08:40
Speaker
And that's, so talk about a really successful Denver startup store at Chipotle.
00:08:45
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So my first one was right across from there.
00:08:47
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I rented it to college students the first year, quickly learned that I should be aiming for PhD grad students the next tendency.
00:08:56
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I had no business owning this.
00:08:57
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So I mean, I was like, I put 2% down or something.
00:09:00
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And I was lucky that I didn't feel all that much vacancy.
00:09:03
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Because if I had, I don't know if I could have stomached it.
00:09:07
Speaker
So I became a landlord at the ripe age of 22 and built a small portfolio from there.
00:09:12
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So as I was leaving for business school out at Berkeley, I realized, man, I want to focus on business school, my studies.
00:09:19
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And so I said, I want someone to manage these properties and take it over for me so I can focus on school.
00:09:25
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I surveyed the sort of property management landscape in Denver at the time.
00:09:29
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It wasn't all that impressive.
00:09:30
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They were charging a lot of money to manage these homes.
00:09:33
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I figured, you know what, I'll just continue to do it.
00:09:35
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In fact, I'll start my own property management business.
00:09:38
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We'll start with my properties and we'll grow it over time.
00:09:41
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And so I started a property management business with my mom and my brother.
00:09:45
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We built this property management business from scratch and grew it to about 300 doors under management.
00:09:50
Speaker
which is pretty modest.
00:09:51
Speaker
And in fact, we sold that business earlier this year to focus 100% of my time on Nomad.
00:09:56
Speaker
So from the very early days, I was a landlord myself.
00:09:59
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Through that business, got to understand the pain points of the small-time landlord, the clients that we were servicing.
00:10:06
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After business school, I went to work for a company called Opendoor, which makes it seamless for someone to sell their home.
00:10:12
Speaker
So rather than hiring a real estate agent and listing your home for sale, Opendoor would pay you a fair market value for the home, charge you a fee, and you could kind of walk away.
00:10:22
Speaker
Open Door was a very ambitious real estate technology startup, raised money from SoftBank, very high-flying.
00:10:28
Speaker
And when I joined, we were still in the early days of our market expansion.
00:10:31
Speaker
We were in Phoenix and Dallas, and I was hired as our first sort of expansion general manager.
00:10:36
Speaker
So I'd fly into a city, stay there for a few months, hire the team, see us through our first 100 acquisitions or so, and then move on to the next city.
00:10:45
Speaker
I did that until I launched the Denver market and decided to stay here as the GM of the Denver market.
00:10:51
Speaker
So through that process, really learned what it took to scale a boots on the ground real estate technology business from scratch.
00:11:00
Speaker
And also learn the power of venture capital, of being well capitalized, having the ability to hire the very best and brightest people to take a very archaic industry and really disrupt it in a meaningful way.
00:11:13
Speaker
That was about the time the idea of Nomad kicked in,
Testing and Launching Nomad
00:11:16
Speaker
right?
00:11:16
Speaker
How could we do for residential landlords what Opendoor was doing for home sellers?
00:11:21
Speaker
And so at the end of 2019, that was sort of the plan.
00:11:26
Speaker
I met Matt actually the summer of 2019, and we kind of kicked it off.
00:11:31
Speaker
We both went to CU Boulder, and we both went to Berkeley for grad school.
00:11:35
Speaker
He was a few years ahead of me, so we'd actually never met until I moved back to Denver.
00:11:39
Speaker
I pitched the idea to him and the next morning he texted me and he said, man, I can't stop thinking about this.
00:11:44
Speaker
Let's figure out how to side hustle on this in some way.
00:11:48
Speaker
And so we were able to side hustle on this idea by just pitching it to the existing portfolio of property management clients.
00:11:53
Speaker
We said, hey, would you like guaranteed rent in addition to your property managed?
00:11:57
Speaker
And so we could kind of MVP it quickly.
00:12:00
Speaker
Started having a lot of conversations with angels, got some commitments, and I left Open Door at the end of 2019, two months before the pandemic as we were raising.
00:12:09
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Matt quit his job at Twilio about six weeks later, a couple weeks before the pandemic.
00:12:16
Speaker
And here we are, we'd had these commitments.
00:12:18
Speaker
We had like half a million dollar in angel commitments.
00:12:21
Speaker
Then everything goes dark and the angels disappear as their stock portfolios dip by 30%.
00:12:29
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Matt at the time had twin three-year-olds and a one-year-old.
00:12:33
Speaker
Oh my gosh.
00:12:33
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His boss at Twilio, in fact, called him and said, hey, we can just pretend this never happened.
00:12:38
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We can just keep working at Twilio.
00:12:40
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We won't say anything.
00:12:41
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And Matt said, no, I'm committed to this.
00:12:43
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We're doing this.
00:12:45
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Our commitments had dried up.
00:12:46
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We had $300,000 in the bank, but we weren't allowed to spend it until we hit $500,000 in the bank was the agreement we'd had with early angels.
00:12:54
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So like, man, we got to just start getting on the phone and calling people.
00:12:57
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We must have done 50 to 75 Zoom calls with investors around the country in a two-week span.
00:13:03
Speaker
And we cold reached out to Gavin.
00:13:06
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Again, credit to Kickstart.
00:13:07
Speaker
Most of the cold reach outs to VCs, as you all probably know, don't go anywhere.
00:13:12
Speaker
We're in the middle of a pandemic.
00:13:13
Speaker
These investors are just trying to keep their own portfolio alive, much less field cold inbounds from two dudes in Colorado.
00:13:21
Speaker
Like, what?
00:13:22
Speaker
Yeah.
00:13:23
Speaker
And so Gavin, again, this is a guy who is a very successful investor, not only respond to us, but he himself responded to us as opposed to someone else on the team who didn't have any contacts or maybe didn't know about us.
00:13:39
Speaker
We got on the phone, quickly pitched him and kind of the rest was history.
00:13:43
Speaker
We ended up raising, instead of the $500,000 pre-seed we were initially raising, we ended up raising $1.9 million from Kickstart, Peterson Ventures, Range Ventures, a new firm here in Denver.
00:13:55
Speaker
And so raising in the pandemic actually was in some ways a blessing in disguise because again, the world opened up.
00:14:01
Speaker
Scary time, but ultimately really, really fun.
00:14:05
Speaker
So Gavin, you answered that cold outreach.
00:14:08
Speaker
What was it about PJ's email that stood out to you that made you say, okay, I'm going to reply to this.
00:14:14
Speaker
And maybe there can be some like tidbits for listeners on how to do it.
00:14:18
Speaker
You bet.
00:14:19
Speaker
I don't always respond to cold outreaches.
00:14:22
Speaker
And I actually should go back to the original emails to even know, but I think what happened with Nomad, one, it was kind of in our region.
00:14:28
Speaker
They did a good job of kind of briefly describing the story.
00:14:31
Speaker
I think there was also some people that we knew that pinged us about Nomad.
00:14:35
Speaker
Brandon from our team also had a lot of interest in the real estate space and so quickly took an interest
00:14:42
Speaker
But yeah, I thought, wow, this is an interesting team.
00:14:44
Speaker
I like the way they're framing this up.
00:14:46
Speaker
It's worth our time to talk to them.
00:14:48
Speaker
In terms of what we were thinking, sort of like dating game, we were kind of wondering, Kickstart was started in the Great Recession.
00:14:56
Speaker
So in some ways, we see recessions as opportunities.
00:15:01
Speaker
But I believe that first call, or I think the second call, I was actually on a one-wheel ride as we were
00:15:07
Speaker
As we were trying to figure out how to cope with it, ultimately we decided to lean into the pandemic and really didn't slow down our pace of investing at all.
00:15:15
Speaker
And we're very glad that we kept funding companies like Nomad because the entrepreneurs just had a level of determination and commitment that is really indicative of success in our view.
00:15:28
Speaker
It's always hard being a founder.
00:15:29
Speaker
It's just a different type of hard during a recession, you know, downturn.
00:15:33
Speaker
So that's interesting.
00:15:34
Speaker
And I like too that you mentioned that they did a good job of telling what their company did.
00:15:40
Speaker
I want to reiterate that point of as a founder, it's very important to be able to tell your story and to tell it well.
00:15:46
Speaker
But
00:15:47
Speaker
PJ, I want to jump back to something.
00:15:50
Speaker
Matt had a call from Twilio.
00:15:53
Speaker
I'm sure you had thoughts about like, what am I doing?
00:15:56
Speaker
How did you know when it was time to make the jump to leaving a big company, a stable job, to founding your own thing?
00:16:03
Speaker
And what were some learnings from that?
00:16:05
Speaker
Before Matt and I decided to do this full time, I remember we had a dinner with our wives and we kind of pitched the idea to them and they were very skeptical.
00:16:12
Speaker
But Hannah knew me well enough and I think seeing it through Hannah's eyes helped me actually make the decision.
00:16:18
Speaker
And it's one of those things, she knew that I just would not feel like I had lived a fulfilling life if I hadn't scratched this itch.
00:16:26
Speaker
The opportunities to scratch that itch only come around every so often.
00:16:30
Speaker
When you feel it, you have to do it.
00:16:33
Speaker
It's existential.
00:16:34
Speaker
almost to me, that I did this.
00:16:36
Speaker
It was something I've been wanting to do for many years.
00:16:37
Speaker
As you mentioned in the intro, I founded a company in business school called Home Slice.
00:16:42
Speaker
We were in meetings with all of the top VCs in the Valley talking about it, but we didn't have track record yet.
00:16:50
Speaker
You look at a company like Picasso, Picasso became the fastest company to do a unicorn in history.
00:16:57
Speaker
And Picasso is the exact same idea as HomeSlice, actually.
00:17:01
Speaker
And so that was frustrating to see, right?
00:17:02
Speaker
That like, I didn't have the right credentials.
00:17:05
Speaker
And so I couldn't breathe life into the thing.
00:17:07
Speaker
Now here I was, I had all this experience at Opendoor.
00:17:10
Speaker
Matt came from one of the best SaaS companies in the Valley.
00:17:14
Speaker
We had this itch and we had to take it.
00:17:17
Speaker
And so when Matt got that call from his old boss saying, you can stick around, the train had already left the station.
00:17:22
Speaker
We were doing this thing and nothing was going to stop us.
Commitment and Challenges in Startups
00:17:26
Speaker
Gavin, you founded Kickstart in the beginning of the Great Recession.
00:17:30
Speaker
You've done something similar.
00:17:32
Speaker
What's the sort of emotional toll of leaving that sort of stable position or that job?
00:17:37
Speaker
What do founders need to consider as they enter this arena?
00:17:40
Speaker
How do they know they've got the founder opportunity fit?
00:17:43
Speaker
I think for me, I was someone who post-business school, I kind of went back to the firm I was with before.
00:17:50
Speaker
I had no intention of being an entrepreneur.
00:17:53
Speaker
I think I look back and I go, oh, yeah, I had a lot of the classic characteristics of someone who does start something, but I just had no idea.
00:17:58
Speaker
I loved venture capital.
00:18:00
Speaker
So I was like, I'm going to do venture capital.
00:18:02
Speaker
What I realized is, oh, venture capital is a lot more fun if I get to drive and choose the strategy.
00:18:09
Speaker
I get to create the culture that I think can win.
00:18:12
Speaker
We can make building the community part of our DNA instead of always having to swim upstream in a firm that had different priorities is kind of what I learned.
00:18:21
Speaker
In the process of building Kickstart, and this is true for most entrepreneurs, there's a lot of personal sacrifice of family and stress.
00:18:28
Speaker
And, you know, once you cross the threshold, you can never go back because you're always changed.
00:18:36
Speaker
And so it's really hard to go back.
00:18:39
Speaker
And I had multiple opportunities to go back that were actually much more lucrative than what I'd left, but ultimately chose to stay with it even when it was pretty dicey.
00:18:48
Speaker
And most people thought Kickstarter was pretty freaking lame.
00:18:51
Speaker
It was small, but it was beautiful and it was working.
00:18:56
Speaker
And I realized that so many other places I've been were, you know, hey, they paid big salaries and there's a lot of pedigree, but they were broken.
00:19:04
Speaker
They were big and broken and complicated.
00:19:07
Speaker
And I was like, man, small and beautiful and working will actually, with time, beat most things that are big and complicated and broken.
00:19:17
Speaker
Big respect for all entrepreneurs because it is a tremendous personal toll.
00:19:22
Speaker
They experience it along with those that love them.
00:19:25
Speaker
And thankfully, if it works, which it sometimes does, to some degree, it often does, then the benefits accrue to the broader set of relationships, which is as it should be, because that's who gets the cost as well.
00:19:39
Speaker
I've learned a lot from that in a few ways.
00:19:42
Speaker
One, raising an early stage venture round is all about storytelling.
00:19:46
Speaker
It's about creating that narrative and making that narrative compelling and getting people's hearts and minds bought into that narrative.
00:19:54
Speaker
And then as an investor, hearing the story from Gavin got us fired up to work with him, right?
00:19:59
Speaker
This is the guy who's going to be in the trenches with us and we really are excited about partnering with someone like this.
00:20:05
Speaker
The power of storytelling, the power of narrative continues to live on even
00:20:09
Speaker
as we get to be a bigger business, it really helps to frame what we're doing not only for investors, but to our employees and to ourselves even, right?
00:20:17
Speaker
Like this is a story I tell myself every day.
00:20:20
Speaker
Gavin has a lot of tidbits, a lot of stories, a lot of ways to orient to the problem at hand.
00:20:25
Speaker
It's been so helpful for me.
00:20:27
Speaker
I mean, it's true.
00:20:28
Speaker
He inspires all of us every day.
00:20:30
Speaker
And I know I say that.
00:20:31
Speaker
It sounds right when I say that.
00:20:32
Speaker
I'm not joking.
00:20:33
Speaker
I'm serious about that.
00:20:35
Speaker
But Gavin, we're talking about the highs and lows of leaving and starting things.
00:20:39
Speaker
But there are highs and lows once you've started and once you've crossed that threshold.
00:20:43
Speaker
obviously, that goes without saying.
00:20:44
Speaker
But PJ, I want to specifically talk about the roller coaster of talent management and specifically with layoffs.
Handling Layoffs: Strategy and Emotion
00:20:51
Speaker
I know you've had to unfortunately do some layoffs and we're entering a phase where a lot of people are going to have to be doing those, unfortunately.
00:20:57
Speaker
So I would love your insights on that.
00:20:59
Speaker
If you could tell us about how did you know that doing a round of layoffs was the best decision for Nomad?
00:21:04
Speaker
How do you make that call as a founder?
00:21:07
Speaker
Yeah, it's such a hard call because leading up all of 2020 and 2021 was about acquiring talent, telling that story, getting people bought in.
00:21:17
Speaker
And every new hire was like, yes, we did it, right?
00:21:20
Speaker
We got this amazing person to buy into what we're doing and who's fired up to come join us.
00:21:25
Speaker
In fact, in the early days, as we were hiring people, we started to actually get very legit people who wanted to join the business.
00:21:32
Speaker
And that was a pinch me moment.
00:21:34
Speaker
I'll never forget one of those legit people.
00:21:36
Speaker
Her name's Katie.
00:21:38
Speaker
She runs our customer team.
00:21:40
Speaker
I remember sending her an email and I said, hey, or maybe it was a phone call.
00:21:44
Speaker
I said,
00:21:44
Speaker
I want you to know this is early stage still.
00:21:46
Speaker
This is very risky.
00:21:47
Speaker
I did everything I could to talk her out of taking the job because it felt like a lot of weight to have someone that legit join this company, this vision in the early days.
00:21:57
Speaker
And that puts a lot of pressure on a founder that now you live up to the legit people on your team.
00:22:03
Speaker
And that's how I feel now.
00:22:04
Speaker
I look out of this phone booth and to see all these unbelievable people working here, having faith in what I kind of got off the ground still is this pinch me moment.
00:22:12
Speaker
But I'll never forget, Katie emailed me the next day and she said, in spite of your best efforts, I'm excited to be accepting a job at Nomad.
00:22:21
Speaker
For the last two years, we've been fighting tooth and nail to get these people on the team.
00:22:25
Speaker
And then the rules of the game changed overnight.
00:22:28
Speaker
What a company is measured against, the metrics that matter, change.
00:22:33
Speaker
The amount of runway you needed to have changed.
00:22:36
Speaker
The way future investors might look at your business change.
00:22:39
Speaker
It's easier now to think that way, right?
00:22:41
Speaker
Because now as I look back, it's like the math just changed.
00:22:45
Speaker
However you cut it, right?
00:22:47
Speaker
Whether it's the future cash flow model or the discounted cash flow model or the metrics used in fundraisers, all of that changed overnight.
00:22:54
Speaker
And so had I been a very...
00:22:56
Speaker
cool, cold, calculated person, I think I actually probably would have made the decision a lot earlier to lay folks off because the math was telling everybody that we had to.
00:23:05
Speaker
It took probably a little bit of hard conversations with folks like Gavin, others on the board, having these investors around the table
00:23:15
Speaker
who are seeing things happen across a ton of different companies, helps for founders who are very data-oriented.
00:23:20
Speaker
It's really nice to know that there are other data points out there that we can draw from.
00:23:24
Speaker
And so really what I was so amazed by, these investors with millions of dollars at stake are saying, ultimately, it's your call.
00:23:32
Speaker
Gavin's like, this is your business.
00:23:33
Speaker
We trust you.
00:23:34
Speaker
Here's what I'm seeing.
00:23:36
Speaker
And the conclusion now seems obvious, but it was really hard.
00:23:38
Speaker
And so all these people we'd fought tooth and nail to get on the team, we now were taking a hard look at.
00:23:46
Speaker
I felt all the stages of grief, right?
00:23:48
Speaker
You have denial, you have depression, you've got bargaining, a lot of bargaining, lots of bargaining, even up to the last second of the layoffs, right?
00:23:56
Speaker
Like, ooh, does this person really need to be on the list, right?
00:23:59
Speaker
Bargaining up to the very, very last second.
00:24:01
Speaker
And as we brought people into this decision, what was hard is I'd already worked through a lot of those phases.
00:24:08
Speaker
As people were coming into the decision, they had to start their grieving process fresh.
00:24:13
Speaker
And so it's one of those things, time heals all wounds.
00:24:17
Speaker
And the company is in really good shape now, but it was really hard.
00:24:20
Speaker
Happy to talk through sort of the logistics or anything you want to talk about.
00:24:25
Speaker
I would like to talk through some logistics, but first, Gavin, as a board member, as an investor, how do you perceive layoffs for a company?
00:24:32
Speaker
And also, how do you think through advising a company on them and letting it ultimately be the founder's choice?
00:24:39
Speaker
Our philosophy is, hey, we invest in founders, CEOs, and leaders, and we ultimately are backing them in their decisions.
00:24:48
Speaker
But we're also trying to provide the benefit of
00:24:51
Speaker
We've invested in over 200 companies historically, and we have a ton of companies kind of going through the same things and kind of say, hey, here's what we're seeing horizontally across the economy, and here's how we would think about this tricky situation.
00:25:04
Speaker
So we get a lot of reps on any one challenge in a company, which I think we're
00:25:09
Speaker
VCs can be very helpful to founders, especially, I think it's like on the one hand, VCs that are humble enough to offer up data and thoughts, but make sure that the founders feel like their hands are firmly on the wheel, that they're closest to the specificity of that company and the idiosyncrasies of that company.
00:25:26
Speaker
And so I think that's a really important way for VCs to think through this from their side.
00:25:31
Speaker
But I would say the broader perspective,
00:25:33
Speaker
The philosophical thing for me is, as a leader, there's a lot of ethics in being a great leader.
00:25:40
Speaker
And there's a lot of compassion necessary.
00:25:42
Speaker
The least compassionate thing is to actually, when you know something is really problematic and that your chances of survival is going up and you can change it and you don't do it, ultimately, everybody loses their job, just to be clear, right?
00:25:56
Speaker
It's like startups every day are basically showing the world that they deserve to exist.
00:26:02
Speaker
There's no tenure in startups.
00:26:03
Speaker
There's no guarantee.
00:26:05
Speaker
There's no pensions, right?
00:26:06
Speaker
I mean, startups are fighting to prove that they exist every day.
00:26:10
Speaker
And so, so much of the psychology flips when you say the goal is to try to have as many of these employees make it and hopefully a lot more and investor capital and time and talents get there.
00:26:24
Speaker
So getting there is kind of the ultimate goal.
00:26:27
Speaker
Yeah.
00:26:28
Speaker
If that doesn't happen, nothing else matters, right?
00:26:30
Speaker
Which is a very clarifying moment when you realize that as a founder and as an investor.
00:26:35
Speaker
In the general topic of how do you learn these things as an investor, there's nothing so visceral as having experienced these things and done it wrong.
00:26:44
Speaker
To have a lot of conviction about, okay, let's please not do it this way because I've seen that movie and I kind of know where it goes.
00:26:51
Speaker
Just it's hard to teach these things to other people without them experiencing it.
00:26:56
Speaker
So that's one thing that we've been through a few economic cycles and have experienced it.
00:26:59
Speaker
And so feel some of these things very viscerally, which is like, hey, let's do this.
00:27:04
Speaker
And letting the founders feel that viscerally with their hands on the wheel.
00:27:07
Speaker
I think this moment has put real founder hair on my chest.
00:27:14
Speaker
This is something that I'll never forget.
00:27:16
Speaker
And one that I will, one, hopefully continue to make really smart decisions as the founder so that we don't have to do this again.
00:27:23
Speaker
But then hard things happen at companies all the time and startups a lot more often.
00:27:27
Speaker
And so you kind of need to be practiced to deal with those as they come.
00:27:32
Speaker
PJ, I'd love to get into the best practices that you talked about or how you actually conducted these layoffs.
00:27:38
Speaker
Once you made the decision, walk us through your process after that.
00:27:43
Speaker
I think the first was Matt and I just acknowledging it and being fully in this together.
00:27:50
Speaker
So I think that's where having a co-founder is most important is these hard times, especially if you can rally around each other to get through this.
00:27:59
Speaker
I don't know how I would have done this as a solo founder because the weight is immense.
00:28:04
Speaker
The second thing was we probably needed to make some adjustments in the business anyways.
00:28:09
Speaker
And so we actually used this as a moment to take a really hard look at the business to decide what do we need to continue doing and what can we stop doing?
00:28:18
Speaker
What will not scale as we grow?
00:28:21
Speaker
And then the parts of the business that we didn't think were critical were the first places we looked.
00:28:26
Speaker
And so in our case, we made the decision that we did not want to have a physical presence in the markets we operate in anymore.
00:28:34
Speaker
That was open door.
00:28:36
Speaker
It was a good learning.
00:28:36
Speaker
We learned how difficult it was to scale with people on the ground.
00:28:41
Speaker
And so made some choices based on functions we may not need as we grow the business.
00:28:48
Speaker
And then from there, we kind of unfortunately kind of constructed the list of folks who may not fit into the new world that we're moving into as a business.
00:28:56
Speaker
And then from there, it's just really hard.
00:28:59
Speaker
Some things I found to be helpful was leading from a place of vulnerability.
00:29:04
Speaker
I was an EMT in college.
00:29:06
Speaker
And the thing that always stuck with me as an EMT was like, this is not your emergency.
00:29:11
Speaker
This isn't your time to panic.
00:29:12
Speaker
This is your time to stabilize that person.
00:29:15
Speaker
And so you have to be vulnerable.
00:29:17
Speaker
You have to be empathetic.
00:29:18
Speaker
This is not about you.
00:29:20
Speaker
You have to constantly remind yourself of that through this process, right?
00:29:24
Speaker
The thing I'll never forget is everyone at this business knows how important this is to me.
00:29:29
Speaker
The first thing that people did when I walked out of the room after delivering the really hard news to our team, the folks who remained came and gave me a big hug.
00:29:37
Speaker
that vulnerability, people understood how hard this was, but how necessary it was.
00:29:42
Speaker
And then so much of it is about galvanizing the team after this to help people understand the why and being really transparent about the why and opening the floor for questions and then being really, really deliberate about where are we going next and helping to paint that vision.
00:29:58
Speaker
And so I think people were able to wrap their heads around all of this news a little bit more easily.
00:30:02
Speaker
But man, morale all of December was just like, it doesn't matter how good of a job you do, it sucks.
00:30:09
Speaker
You just have to rely on time to get you through it.
00:30:11
Speaker
And people have to start seeing the light at the end of the tunnel.
00:30:13
Speaker
The changes we made, people have to start seeing that it's actually working.
00:30:17
Speaker
And so we're at a place now where we're like, our operating team is 30% less than it was.
00:30:21
Speaker
And yet we're not missing a beat today because we made some really rapid changes in the business to ensure that we could get through this.
00:30:28
Speaker
There's nothing easy about it.
00:30:30
Speaker
And leading from a place of vulnerability, empathy, but conviction, I found to be the most useful way through.
00:30:38
Speaker
Kez, I'd just add maybe a couple things to that.
00:30:41
Speaker
I think PJ and Matt and the team did an excellent job.
00:30:44
Speaker
And I think it's important to just know it's going to suck no matter what.
00:30:47
Speaker
Maybe the biggest principle here is it's really hard and it's hard on the culture of the company.
00:30:52
Speaker
If done well, it can be a galvanizing moment that actually improves the culture.
00:30:57
Speaker
But what you don't want to do is underdo it and do it again in a quarter.
00:31:01
Speaker
That does not help any culture.
00:31:03
Speaker
It's not so great of an event that you want to repeat it every quarter.
00:31:06
Speaker
And that's a really common mistake is to be a little timid about it because it is so painful and underdo it and have to redo it again.
00:31:14
Speaker
That's a really good learning.
00:31:15
Speaker
Yeah.
00:31:15
Speaker
It's so easy when you're doing the really callous spreadsheet.
00:31:20
Speaker
You always think you're done.
00:31:21
Speaker
You always think, you know what, this is enough.
00:31:23
Speaker
I couldn't possibly imagine doing more than this.
00:31:25
Speaker
You usually can do a little more and it sounds even callous saying, but the reality is you put the business at risk if you don't go deep enough.
00:31:33
Speaker
And you put the other folks who remain on the team at risk if you're not going deep enough.
00:31:37
Speaker
Again, I'd worked through all the stages of grief and waking up the next morning, I did feel a sense of relief.
00:31:42
Speaker
Maybe just relief because it was over, but also relief that this business gets to live to fight another day.
00:31:47
Speaker
And the other thing I'd say is the folks who are staying, you've got to bear hug your best people.
00:31:53
Speaker
It's been our top performers who have helped get us through this craziness.
00:31:57
Speaker
So yeah, if you're a founder listening, I think it's really hard.
Refocusing Post-Layoffs
00:32:00
Speaker
Talk to other founders, talk to your board.
00:32:03
Speaker
It's very therapeutic to have these conversations with others who have gone through it.
00:32:07
Speaker
Lean into the community wherever that is as you're making this decision.
00:32:11
Speaker
Totally.
00:32:11
Speaker
And just quickly, what I like to do, and PG and I did this, which I said, hey, this is a simple visualization, but this is sometimes very helpful.
00:32:19
Speaker
Imagine that your company...
00:32:22
Speaker
All the people, all the technology, the patents, the code, all the customers, all the channel partners, you all get into a big bus and you're going on this road trip and you pull into a parking lot.
00:32:35
Speaker
Maybe it's at Yellowstone or something.
00:32:37
Speaker
And everybody gets out.
00:32:38
Speaker
So everybody is now out of the bus.
00:32:40
Speaker
And you realize, hey, the bus only has enough gas to get to somewhere less than back where you wanted to go.
00:32:47
Speaker
Everybody's out.
00:32:48
Speaker
Nobody is in the bus.
00:32:49
Speaker
It is an empty bus right now.
00:32:51
Speaker
what do you put back in?
00:32:53
Speaker
You know, you only have so much gas.
00:32:55
Speaker
So it's like you have to choose and some things are not going to make it back in because so much of the mental block is, well, I can't imagine living without that person and that piece of technology and our two products and those customers.
00:33:07
Speaker
Because really most companies in order to get through times like these and almost any company to be successful is going to have to make really hard choices about what they can do,
00:33:18
Speaker
what they can't do.
00:33:19
Speaker
Both PJ and I, our first day at Monitor, we got an article called What is Strategy from Michael Porter.
00:33:24
Speaker
I think you probably did as well.
00:33:25
Speaker
The number one takeaway from that article, which is one of the seminal articles on strategy, is strategy is more defined by what you choose not to do than what you do.
00:33:35
Speaker
The secret weapon of a startup is focus and surgical precision.
00:33:39
Speaker
And so a lot of the clarifying aspect of that visualization is saying, hey, everybody's out.
00:33:44
Speaker
Who gets back in?
00:33:45
Speaker
And it doesn't mean they're bad or good.
00:33:47
Speaker
It's just we're just choosing to do one of three things.
00:33:50
Speaker
And we're going to probably have to fire some of our customers and we have to fire some channel partners and we have to throw away some IP.
00:33:55
Speaker
And some of our people aren't going to make sense, but they're going to go get great jobs.
00:33:59
Speaker
Anyway, that has tended to help focus the conversation of we're all out now, which is actually the right way to think about, which usually is like, if we don't all get out, we're all just going to be stranded together and no one is going to get there.
00:34:11
Speaker
So maybe we have a smaller group get there and then maybe we can hire back those people and more people and have something to talk about.
00:34:18
Speaker
I love the tactic of inverting the question where I actually was reading an article on difficult decision making and how inverting it is often one of the most helpful things of, yeah, not who do we take off the bus, but who do we put back on the bus?
00:34:30
Speaker
That's really helpful.
00:34:31
Speaker
Thank you.
00:34:31
Speaker
Can I say one thing now on the other side of it?
00:34:35
Speaker
Now on the other side of this, again, like if you're a founder, I think this is helpful to hear.
00:34:38
Speaker
It would have been helpful for me.
00:34:39
Speaker
But folks who I had to lay off, they have a job again.
00:34:43
Speaker
And some of them doubled their salary.
00:34:45
Speaker
They didn't need you anyway, PJ.
00:34:48
Speaker
Yeah.
00:34:50
Speaker
You have to remind yourself sometimes these early stage businesses, the pace of learning is so, so, so fast that you've actually now given them a leg up in their next role.
00:34:59
Speaker
And so these people are getting unbelievable jobs elsewhere.
00:35:02
Speaker
And guess what?
00:35:02
Speaker
They're all also exercising their options.
00:35:06
Speaker
They're still rooting for us from the sidelines and they are excited to watch us succeed.
00:35:10
Speaker
So time heals wounds and people move on and people keep fighting and oftentimes end up in even a better situation as a result of all of this.
00:35:21
Speaker
Thank you for sharing that.
00:35:21
Speaker
And that's important to remember.
00:35:23
Speaker
That was really good.
00:35:24
Speaker
I was also thinking, you mentioned that you woke up the next day with this feeling of relief.
00:35:28
Speaker
I heard an author speak one time and someone asked her the question, like, do you like writing?
00:35:32
Speaker
She's like, no, I don't like writing, but I like having done it.
00:35:35
Speaker
And I think that's true of so many things you do, especially in startups.
00:35:38
Speaker
It's so hard and you don't like doing it, but having done it, it was the right thing.
00:35:42
Speaker
And it was the thing that's going to get you where you need to go.
00:35:44
Speaker
And so I appreciate that insight of after you did it,
00:35:47
Speaker
People were okay.
00:35:48
Speaker
You were okay.
00:35:49
Speaker
Your startup is in a better position.
00:35:51
Speaker
And it was the right thing to do, even though it was immensely, immensely hard.
Support Networks and Mental Health
00:35:55
Speaker
We have one question, PJ, that we like to ask everybody on the podcast.
00:35:58
Speaker
And that is, what's an effective practice you've implemented in your work or personal life that you think has had a great impact on your success?
00:36:08
Speaker
Bringing others along for the journey.
00:36:10
Speaker
You don't have to do this alone and letting other people in to how hard this is and being okay with that.
00:36:18
Speaker
So whether that's other founders, whether that's your co-founder, whether that's your significant other, this is a really lonely, lonely path if you let it be.
00:36:26
Speaker
And so surround yourself with people who love you, with people who support you, with people that'll be there, whether this thing is a success or not, and lean into that community.
00:36:35
Speaker
Thank you.
00:36:35
Speaker
Thoughts on that, Gavin?
00:36:37
Speaker
This is maybe a little bit contrarian, but I would say this is a hard time, but it's always hard to build startups, right?
00:36:45
Speaker
It's just always hard.
00:36:46
Speaker
It felt like it wasn't for a little while, but that was a bit of an illusion.
00:36:49
Speaker
But I would just say, I would challenge people who are feeling like they want to get coaching, get a counselor first.
00:36:56
Speaker
Chances are the things that you think you need to fix as a leader are probably things you need to fix about yourself and your personal life.
00:37:03
Speaker
And a lot of coaches are really expensive and experienced version of a counselor, to be honest.
00:37:08
Speaker
And so I would start there.
00:37:11
Speaker
Man, that's such good advice.
00:37:12
Speaker
I'll admit one thing on this podcast that is vulnerable that I think, again, is helpful.
00:37:18
Speaker
I took anti-anxiety pills before the Series A. I've never been on medication before.
00:37:22
Speaker
And it reset my brain.
00:37:24
Speaker
And I got off them three months later.
00:37:26
Speaker
But resetting my brain, talking to somebody, and building that stronger foundation has led to a much more successful last year.
00:37:35
Speaker
And being okay with that.
00:37:36
Speaker
Us founders are often type A, like,
00:37:39
Speaker
Nothing can get us down.
00:37:41
Speaker
We're the best, but like you got to take care of your mental.
00:37:46
Speaker
Absolutely do.
00:37:47
Speaker
PJ, I think it's great that you shared that.
00:37:49
Speaker
It was marriage counseling that pulled me into account.
00:37:51
Speaker
And I thought, wow, I did counseling every week for years.
00:37:56
Speaker
You know, and I think I'm someone that always felt like I had to be okay.
00:38:00
Speaker
and I had to have it all figured out, and I couldn't talk to anyone about it.
00:38:03
Speaker
And you move from a place of defensiveness to curiosity about yourself.
00:38:08
Speaker
As an evolving and improving case study, or even like story, you kind of just get interested in your own story and the ups and downs.
00:38:16
Speaker
For the sake of your own pocketbook and your mental health, if you have never had counseling, you should.
00:38:22
Speaker
Most of the things that affect us as leaders that are really bad
00:38:25
Speaker
have less to do with like, oh, try this style or read this book.
00:38:28
Speaker
It's like, maybe you should stop being a freak in this way.
00:38:32
Speaker
You know, like maybe you should, you know what I'm saying?
00:38:34
Speaker
Like maybe you should stop being so dang selfish or broken in this way.
00:38:40
Speaker
Like, you know, it's hard to be a founder.
00:38:42
Speaker
It's extreme.
00:38:43
Speaker
And people that can do it have had some hard things often that have happened to them.
00:38:48
Speaker
So it's like work through those and then see where you are, you know?
00:38:51
Speaker
And then pay $400 an hour for a coach.
00:38:54
Speaker
Yeah.
00:38:54
Speaker
Yeah.
00:38:54
Speaker
You know, I just, I, it just can be awesome.
00:38:58
Speaker
Like they can be amazing, but I would start with first principles.
00:39:02
Speaker
I think that's a terrific insight.
00:39:04
Speaker
And PJ, thank you for being willing to share your experience with that.
00:39:06
Speaker
Thank you.
00:39:07
Speaker
This was fun.
00:39:08
Speaker
And of course, thank you for listening as we dive deep into what it takes to create the perfect pitch.
00:39:13
Speaker
If you want to learn more about our investor, Gavin Christensen from Kickstart or our CEO, PJ O'Neill from Nomad, we'll have a link to the company and a longer bio in our show notes at kickstartfund.com.
00:39:24
Speaker
You can listen to more episodes of Perfect Pitch wherever you listen to your podcasts.
00:39:27
Speaker
And if you like what you're learning, leave us a reviewer rating.
00:39:30
Speaker
We'll be back next time with more insights from entrepreneurs and the investors who fund them.
00:39:34
Speaker
So be sure to subscribe so you don't miss a thing.