Belsky, a venture partner at Benchmark and the CPO at Adobe, talks about his book “The Messy Middle” on the latest Recode Decode.

When we talk about startups, we overemphasize the exciting launches, exhilarating exits and demoralizing defeats — and we don’t talk enough about the middle part of the story, Adobe Chief Product Officer Scott Belsky says.

To rectify this problem, Belsky — the former Behance CEO who now spends his time at Adobe and Benchmark, where he is a venture partner — has written an advice book called “The Messy Middle.” On the latest episode of Recode Decode, he shared some of his favorite pieces of advice, which he said could apply to creative projects and new products as much as they apply to new companies.

“When [founders] have to let someone off, lay someone off, or kill a product that’s working but doesn’t have the growth rate that is required to break out … these are always the difficult decisions to make because the easiest decision to make is to not make a decision yet,” Belsky told Recode’s Teddy Schleifer. “Sometimes you just have to whisper to yourself, ‘just do your fucking job.’ And then you liberate your team to be so much more productive and focused.”

“And so, how do you hold yourself accountable to doing that?” he added. “What are the little tricks or hacks? And I would always, literally, whisper to myself, ‘DYFJ,’ before some of these moments just so I could kick my ass.”

Killing projects or laying off employees can be fraught, emotional tasks, but Belsky said successful creators have to find the line between ignoring those emotions and blowing past them.

“The sensitivities we have to the people that we will impact with our decisions are good,” he said. “This is what makes us effective leaders, is understanding how people will feel, but that doesn’t necessarily mean that decision shouldn’t be made. Because by not making it, you contribute to that organizational debt … that’s where you end up losing your A players who would rather work with a team where they can make the fricking decisions and move on.”

You can listen to Recode Decode wherever you get your podcasts, including Apple Podcasts, Spotify, Google Podcasts, Pocket Casts and Overcast.

Below, we’ve shared a lightly edited full transcript of Teddy’s conversation with Scott.


Teddy Schleifer: I’m here with Scott Belsky, who’s the chief product officer of Adobe. He’s also the author of a new book called “The Messy Middle: Finding Your Way Through the Hardest and Most Crucial Part of Any Bold Venture.” Scott, welcome to Recode Decode.

Scott Belsky: Thank you.

So, Scott is someone who I feel is very well known in the startup community overall. I feel like you have a lot of different hats. You’ve done a lot of things, right? You’ve had a company. You are obviously very tied into the design community. You seem to be like a seed investor in seemingly every interesting company. I don’t know how that happens. It’s just like every company that … Part of it’s that I think you were early to the seed world and to the angel investing world.

Yeah. And a little bit of luck.

A little bit of luck, but …

We talk about that, though.

I feel like your name’s everywhere. You’ve also had a formal job at a venture capital firm, and now you’re back at kind of a big, bad corporation, at Adobe. And your new book is sort of a memoir? I mean, in some ways it’s a memoir, of kind of … It’s not, “Hey, on Thursday I had a great omelette.” But …

I think I’m too young to write a memoir, but you know, this definitely was influenced by a lot of the experiences I had as a bootstrapped entrepreneur for five years, venture-backed for two years, three years of integration and acquisition, an adviser to many startups and also a venture investor. There was certainly a lot of prompts that came from my own experiences, but I also interviewed over 100 different folks for this book.

Yeah, so this was a journalistic project, in some ways. You were certainly using your relationships, but able to kind of …

I was trying.

To, you know, put people on the couch and ask about what their life was like. So, just start off with … Most folks don’t know who you are. How did you end up … Let me ask this. What was your first Silicon Valley experience? I think you were at Goldman after college for a couple of years?

Yeah. I studied design and business as an undergrad, and had to kind of decide which path to choose. This is 2001, 2002, and at that time you kind of cut your teeth in business if you wanted to, or went the design route. And so I went to, of all places, a job on Wall Street, where a year and a half into it I was just very … It was very clear to me I didn’t want to be in finance for the rest of my life. And then went to my manager, talked about it. She said, “Well, if you could have another job in the firm, what would it be?” I ended up taking this role in the executive office, focused on organizational development, leadership development, succession planning. It was almost like an internal management consultant job.

This is in New York. This is not here.

In New York.

Okay.

And I found myself actually using design again. I had Illustrator on my computer and I was actually trying to use visual and design to address the projects that I was given. And again, it was a kind of theme in my career, of using design to organize information and organize people.

So it’s during that next three years, still in this job at Goldman, but this new job … that I was thinking, “Gosh. The most disorganized community on the planet is the creative world. This is hundreds of billions of dollars of creative production annually, done by people who are ultimately represented by agencies and headhunters. They never get attribution for their work.” And they were using, at the time, DeviantArt and Myspace and some of these other products to showcase their work online, and I thought there was an opportunity there. Which was the genesis of the idea of Behance, and getting into something that was well beyond what I was capable of doing at the time.

Got it. So you never thought about joining a massive design firm, or kind of going into the design world full-time, professionally? That was never something you …

Not really. You know, I always loved design, but I always felt like I would do something in the intersection of both business and design.

Well, what was the … I mean, was it seen as just not … You know, obviously there’s a lot of designers who work in-house.

Yup.

You know, chief designer at Uber. Or folks who do nothing in technology at all, right? You could have a very nice life doing that.

Sure. I think at the time … And I didn’t know the language of product design and user experience design. In fact, back then it wasn’t as common of a term. Like, you weren’t thinking beyond just a few companies. Every business wasn’t thinking about the experience that their customer is having, and all of the stuff we use today.

But that was always what I had a knack for. And I guess I was always trying to figure out how to apply that. That’s not just a traditional design skill set. It’s actually more about customer psychology, and what do they have to see as a default, and how do things stroke their ego as the user product that breeds retention? These are the things that I have language for now, but didn’t then. But I was always trying to find out what the application is of these interests.

Right, right. So you leave Goldman in like mid-2000s. 2005, 2006?

Yup.

And you start Behance immediately?

Yes.

Okay. So, what was the moment? What was the moment where you thought, you know, “I want to do a startup.”

Well, I think it was frustration. I actually think that most great products and projects are born from some degree of frustration. For me it was all my friends, who were creatives of different kinds, whether architects or illustrators or designers.

Because you’re in New York at this point.

I was in New York. And again, I went to school with a lot of folks who became designers and I had a lot of friends in this community, and I felt they were some of the most talented, yet disorganized, people I knew. And I figured, you know, they always go to conferences and read books about creativity and design. That’s actually the last thing they need. They don’t need more ideas. They need more execution. They just need to have a better system for how they showcase their work and keep their portfolios updated. And so, the idea behind Behance was a company to organize the creative world, as opposed to boost productivity or creativity or connect people with each other.

That was always one of those principles of the company was we’re not gonna use the word “creativity.” We’re actually always gonna focus on organizing and boosting productivity in the creative world. And that started, of all things, as a paper product.

Paper. That’s like the white, eight-and-a-half by 11?

Yeah. We actually made notebooks for creatives to get organized. There’s a funny story we can get to later, the fact that one of our partners of Behance was Garrett Camp, who had just bought back StumbleUpon, and he was …

Yup. This is, later, the founder of Uber.

Right, and he was using our action books for his own work. I was actually in a meeting a few years later where he whipped out a little sketch of a little side project of his to get cars on demand. And it was one of our action books that he was showing me this idea that became Uber.

Okay. There you go. So you guys didn’t, you guys were … Just, you were very tapped in at that point to the New York creative scene. You don’t raise any money, right? You were using the word startup. This was a startup at the time.

So, we were bootstrapped. I mean, this is back in …

Okay, so maybe you just thought of it as, like, a company?

What smart VC would invest in a company that’s doing a paper product and has a conference to bootstrap themselves and has this idea of building a massive online network yet doesn’t have any experienced engineers on their team that have done such a thing?

So, were you bootstrapped intentionally, or was it that you were pitching and people were saying no? What was the experience there?

We weren’t pitching. Maybe it was partly because I knew what the answer would be.

Okay.

We were resolute on being a bootstrapped company that could actually choose its own destiny. And always in the back of my head I was wondering during that five-year period, “Maybe we’ll go solo.” You know?

I knew Jason Fried and those guys, and I kind of looked up to the way that BaseCamp had been built, and I thought, “Maybe we can kind of own our own destiny here and be somewhat a lifestyle business.” And in fact, we were set up as an LLC, where everyone had compensatory units and could be compensated based on profits. And so, we had that going for a period of time, up until a moment where I realized I was strangling the potential of the team.

Bootstrapping, by the way, is just a company without venture funding.

Correct.

So then, you guys eventually take some money from Benchmark, right? Is that the …

No, from Union Square Ventures.

Okay. It’s not from Benchmark, okay. How soon was that, in between that and the company being sold?

Yeah, so it was actually, it all happened pretty quickly. Five years in, we raise a round from Union Square Ventures, Chris Dixon, Jeff Bezos, a few other angels, and then we’re off to the races.

Regular angels, like Jeff Bezos. You know, making angel investments all the time.

We got lucky on … And then these … You know, small, syndicated folks, we probably raised probably around $6 million, but we had not really raised any venture funding before, so it was kind of our first round, but also an A.

And then, the long story short, about a year later, it just became very clear, after Adobe had made this transition from software to services, it needed to build a community to build the relationships with their customers, of which they didn’t have, really … You know, it used to be you’d fill out this postcard and send it in if you bought a boxed software. Now you were, on a monthly basis, having a relationship with a company.

So, it just became clear to me that we were the perfect fit, and the opportunity was right, and we had so little dilution. And I figured, “Okay. Are we gonna raise a series B and then a series C?” I kind of did the math on that part of the outcome, and then I also thought about … For our customers, and for the team, where did we belong, and where would be the best sort of mothership, so to speak?

Yeah. You sold it for, like, I think 150-ish, right?

Yup.

And then you spent a couple years in round one in Adobe.

Yeah, so three years.

Okay. This is round one.

And I went in saying, “I’m not sure how this is gonna go.” At first I was overseeing just Behance and the integration. And then I really started to get excited by this promise of Creative Cloud, which was really, at the time, a business model innovation as opposed to a series of product innovations.

But I was thinking, “You know, if we’re actually delivering updates every month, as opposed to every 18 months, and we have these services that we can build … “ Like, what does that really mean? And at the time, Dave Wadhwani was head of the Creative Cloud business. He went on to become CEO of AppDynamics. You know, right before …

Sure.

And then they ended up almost going public, and then getting acquired. But he was my boss at the time and he said, “Well, what do you want to do here?” And I figured, “Well, let’s start to build some of these services and mobile products.” So that was kind of my second job at Adobe, beyond Behance, during my first three years there.

Got it. And so, then you had this really interesting part of your career, which was very public in some ways, which was the joining of Benchmark. Right?

Mm-hmm.

So, Benchmark. Obviously one of the most well-known venture capital firms. Hire people pretty rarely. Very small, very tight-knit.

Yup.

You joined when? From Adobe? Straight there from …

Yeah. So, I think … You know, I learned a lot about myself in this process.

At this point, you are a well-known seed investor, kind of on the side. This is not your full-time job.

Right. So, all along the way, being at the intersection of design and technology. My role with Behance, being in the right place and some of the right times, like the story with Garrett.

Yup.

And working closely with people like Ben Silverman, you know, from the seed stage of Pinterest, and working with Kayvon and Joe from Periscope, and going through, with them, the acquisition into Twitter … That’s actually how I originally met Peter Fenton. And so, having this role with a number of different entrepreneurs, I became convinced that I should be an investor.

It’s one of those things where everyone’s telling you, “This is what you should do next. You should do this next.” You start to believe it, potentially, if you don’t know this part of yourself yet. And I always love working with product teams and investing in the potential of a product and the potential of people. And then I said, “Well, if I love doing this, and I think I’m pretty good as an investor, I should just join a great firm.” And so, the opportunity to join Benchmark and spend a lot of time with that team, you know, it just seemed like the perfect fit.

And then, I think pretty quickly, I realized, or I felt like I had hung up my spurs, and it just wasn’t the application of my own superpowers. You know? Everyone has to feel like, where are they in their zone most, and I just realized I love the earlier stage of working with products and helping sort of develop product strategy. And I think that from an operator’s standpoint, that means that I should be building products, and from an investor’s standpoint, that means I should really be in the seed stage.

Yup.

So then I found myself in this kind of awkward position where, you know, “Do I want to do this for the next 15 years?” — I mean, it’s a major commitment — “or not?” And I think with my partners, the question was, what’s the right fit for me and what should I be doing? And that’s when, six or so months in, I made that transition to venture partner, and then figured … Which I remain to this day.

But then, went back and said, “Okay. Well, where am I most happy and where do I feel fully utilized?” And to me, there was no question. My perfect balance is building products and solving product problems, and working with early-stage teams to find their product market fit.

Right. That was very unusual, though. Right? I mean, obviously in Silicon Valley, people join these venture firms, especially august ones like Benchmark, and it’s seen as, like, “you made it” sort of career moves.

Yeah, it’s hard. And it also makes you wonder, like, “Gosh.” You know? I had never really had a moment in my career until that point where I felt like I had made the wrong decision, or that I sort of failed, and how I felt I would take the next 10-plus years of my life. And so, it’s hard not only to extract yourself from a decision you’ve made, but also to keep the relationships strong.

Yeah, right.

And then, also figure out what you want to do next after that point. Because, as you know, when you join a big venture firm like this, you’re suddenly labeled as, “You’re a VC. This is what you’re gonna do forever.” And I was …

Venture people are almost sort of famous in Silicon Valley, right?

That was difficult. Right. And then of course, the headlines don’t always help in this regard.

Sure.

But I think what I learned from that period, and I certainly … You know, this had an influence on some parts of the book, as well. First of all, life is iteration, right?

Yeah.

Trying to do things. And should I be beating myself up for taking a step, just because everyone says this was what I should do, as opposed to really validating that myself? You know, I think I certainly learned something from it. But at the end of the day, I also learned a ton from being a full-time part of the Benchmark team for over six months, and having these ongoing relationships with the firm that I do now. So, it’s hard to have regrets.

Yeah, and we talked about the role of external pressure, which, I think, it sounds like part of it is listening to other people.

Yeah.

That’s something that entrepreneurs think about. Very quickly … Just as of, what? Six months ago? 10 months ago? You’re now back at Adobe for round two. How’d that happen?

Yeah. You know, rotating into this venture partner role, I started to kind of stick my finger into many different things. And one of those things was serving as a consultant for Shantanu, who’s the CEO of Adobe. He knew me, obviously, very well, from my first three years there, and was very excited about some of the prospects for the creative products.

I mean, the company’s been doing extraordinarily well, but I think the products are starting to reach an inflection point now where they can transcend the desktop and actually legitimately be multi-surface systems, and also, there’s a market expansion opportunity now.

Adobe has a great reach to the creative professional world, but these days everyone wants to be creative and express themselves visually. Social marketing teams want to be able to output professional-grade creativity. The YouTube generation wants to be able to cut professional-grade video without having to learn a tool like Premiere Pro, which is pretty complicated. And so there were just these various inflection points and he asked me to come in and work with the teams a little bit, which I did. And I didn’t really have in my mind that I would come back. I, in some ways, severed the umbilical cord to my own company.

“Never again at Adobe.”

Oh, it was 10 years from start to finish at Behance and Adobe. That era of my life, even though I actually really enjoyed it, I just said, “Okay, it’s time to move on.” But when he started to socialize this notion of a chief product officer role and what that could entail in terms of bringing design and product and engineering together and starting to cut through a lot of the decisions that should have been made but weren’t, what I like to call it organizational debt, I thought it was a really interesting thing that I thought I was the right person to do. And the fact that they were willing to allow me to continue to do my noncompetitive seed investing and have this venture partner role and continue this book project, I think that I really appreciated that about the company’s flexibility.

Let’s talk a little bit about the bones of the book here. We were talking before about, you seem to have taken incredible notes. I’m always amazed whenever I read some book from … It makes me think I’m not taking enough notes in my life. Though maybe it will be easier with email drafts and … But you read all these political books and it’s basically like people have contemporaneous notes of meetings with Nixon.

But you have these great anecdotes from various parts of your life, also have done some interviews. I’d love to just hear how you tackle this. I know this has been a book that you’ve been thinking about writing for a while. Obviously, when you start signing up with professional people in the book industry, it puts fire under your ass a little bit.

Yep.

How did this come together?

About five to seven years ago, I started an Evernote file called “A Journey In Between Insights.” That’s what I called it at the time.

This is on Evernote. This is not, it’s not note cards that are like stuffed in between …

That is correct. It’s an Evernote notebook, I guess. And whenever I would find myself on a phone call with an entrepreneur at 1:00 a.m. making a very bold and gut-wrenching decision, or find myself in a board meeting, or found myself in an interesting moment, whether it was as an entrepreneur or post-acquisition, big company or in a venture pitch, right? When there was something that I would think about that was somewhat counterintuitive that I wanted to think about more, I would just write it down. And then I would come back to them oftentimes.

It was just a way of me processing my own set of tactics and prompts that were relevant to me and I would want to share with other entrepreneurs and that sort of thing. And this book, this notebook over the years, amassed over 800 or so notes. I know I was on a flight at one point a few years ago and said, “I should just start to actually tag them. Figure out if there’s some theme.”

At this point you’re not thinking about it as a book, you’re thinking about as observation.

Yeah, sort of personal way.

It’s almost like things you wish you could tweet.

Yeah, and some of them I would tweet occasionally. So I went through and I realized that there was actually an interesting theme amongst them. First of all, they were all about, generally, navigating the volatility between the start and the finish. And I’ve always been frustrated by our obsession with headlines, no offense.

No, no.

Right?

That’s fair, yeah.

But the starts. We love to celebrate when people leave and start something new or people get funding and then we love celebrating whether it’s an acquisition, an IPO or a bankruptcy. We love the pithy starts and finishes, and then there’s volatility in between, it’s very hard to tie a bow around. It’s a little too dynamic to be summarized, and therefore basically goes overlooked.

The fascination for me was, all of these insights essentially relate to volatility and they really fall into three camps: During the lows, optimizing whatever is working, and then that final mile, how to not screw it up.

Yup. So let’s talk a little bit about each of those. I totally agree. Obviously, people, not just the press but observers, right? If you’re an entrepreneur and you have a friend who is another entrepreneur, it’s like, “Oh, you started the company, great.” And then like, “Oh, how’d the company go?” And obviously in terms of the actual hours spent, most of it is just grinding away.

Totally.

Things are on fire or slightly better. But I guess people would say, “Yeah, he’s doing his job. How’s it going?” “It’s still going on.”

Right, right.

Move on. So the beginnings. Do you feel like the way that people begin companies these days is … What’s the lesson in this book for people who are thinking about beginning companies?

Yeah. Well, a few different things. I think that when you embark on a bold project that is likely to span the course of years, right? A few things. First of all, there are too many companies, especially in Silicon Valley, that are started out of a passion for a solution to a problem, as opposed to empathy with the customer suffering the problem. I actually think a lot of work …

“I want to do x because I’m interested in x,” rather than someone else …

Yeah.

Someone else, people care about …

There needs to be a better this, there needs to be a better that, or the world suffers from this and I’m going to solve it. And then we embark and build a team of people who are passionate about the market opportunity in the solution. And then you end up with something …

It’s kind of like a hero complex.

It is a bit and you end up with something that’s typically at least, if not more, 30 degrees off what the customer ultimately needs. The really mundane yet critical thing to do in this process, of course, is to be shoulder to shoulder with the customer suffering. Which is why a lot of the best teams in the early stages are not building scalable solutions yet, they’re just building something that really hits the nail on the head for the customer. And then once you figure that out in a non-scalable fashion, then you start to think, “Okay, how do we do this in a way that might be, dare I say, profitable in the future?” So I think that the the empathy-before-passion piece…

I also think that we typically fool ourselves into thinking that the vision for what this might be five years from now is enough to keep the team engaged on an everyday basis. And I talk about, in the book, this notion of short circuiting your reward system so that the stuff that you typically rely upon for progress indication, like revenues and customers, when that stuff isn’t there, how do you keep people engaged? I would go on the record saying I think the competitive advantage of most startups is just sticking together long enough to figure it out.

Right. Just not giving up.

Especially hard, by the way, in Silicon Valley with all these headlines of companies that seemingly are doing better than you are. And you’re constantly questioning, should I be here? I’ve been heads down, grinding for two years, seems like we’re not making any traction. And so-and-so just raised $30 million from this company. What am I doing wrong? And that’s one of the disadvantages, I believe, of being in a hot spot, is that your loyalty and the collective perseverance of a team is at risk at all times.

Yes, totally. And then in the middle stage, which is the whole point of the book.

Yeah.

Do you think that too many people are … I think that the value of the book here is the fact that if there’s an entrepreneur out there who is going through a messy middle, they probably think, “I screwed up,” right? Like things aren’t getting better. And the whole point of the book here, it seems to me, is that there’s a way to … That this is common. And this isn’t just entrepreneurship or startups. Marriages have ups and downs, friendships have ups and downs.

By the way, it’s the best-case scenario.

Yeah.

The volatility, first of all is … There is something to be mined from this volatility. It’s — at its lows is where we build the muscle memory. I like to say that resourcefulness is more important than resources, and you only get resourcefulness from having to be constrained.

And when I think about Joe Gebbia and the team at Airbnb and their two iterations before the third that worked, or I think about Ben Silbermann consistently being underestimated by the tech media and being discounted because a lot of his customers were middle-American moms in the beginning. And I think about, the teams that I actually most admire are those that have endured a lot of anonymity, ambiguity, uncertainty, and have in some ways mined those lows to build great process and great culture.

And I would just say that in this volatility, we’re not our best selves at the lows, obviously, because we make decisions out of fear. We’re not our best at the highs because we are making decisions, oftentimes falsely attributing the things that we did to the things that worked. And so the message of this middle part is to have tactics, to make the most and endure the lows and then optimize the hell out of anything that works.

Yeah. So the book is organized into these little five-page … It’s very easy to read even if you only had 10 minutes on the bus or something like that.

Yep.

What are some of your favorite lessons? My favorite one is the “Do your fucking job” one, which … Do you want to explain that?

Yeah, sure. In the endurance section — which was the hardest part to write, by the way, it’s painful to write and read — it’s just about the moments where you’re not sure how to do something or where you are, where you’re going. And it’s actually the reality of anyone’s journey. This is not particular to people that are not doing well. It’s a part of any bold journey.

But the “do your fucking job” piece is about what I and others that I interviewed do for themselves when they have to let someone off, lay someone off, or kill a product that’s working but doesn’t have the growth rate that is required to break out. And these are always the difficult decisions to make because the easiest decision to make is to not make a decision yet, but when you’re just … Sometimes you just have to whisper to yourself, “just do your fucking job.” And then you liberate your team to be so much more productive and focused.

And so, how do you hold yourself accountable to doing that? What are the little tricks or hacks? And I would always, literally, whisper to myself “DYFJ” before some of these moments just so I could kick my ass.

Well, you need to be … you need to be a cold, emotionless killer.

Yeah. I think that I also talk in the section about how the sensitivities we have to the people that we will impact with our decisions are good. This is what makes us effective leaders, is understanding how people will feel, but that doesn’t necessarily mean that decision shouldn’t be made. Because by not making it, you contribute to that organizational debt, right? That accumulation of decisions that should have been made but weren’t. And that’s where you end up losing your A players who would rather work with a team where they can make the fricking decisions and move on.

Yeah. What’s another one of your favorite lessons from the book?

Well, I think that another one is a … Gosh, there’s a lot. It’s breaking the long game down into chapters and I talk about how Ben did that at Pinterest. I talk about short-circuiting the reward system piece, which I mentioned earlier. I share a story about how in the early days of Behance, we would type in “Behance” to Google and it would always say, “Do you mean enhance?” “Do you mean enhance?” And it was like, “Dammit, we’re a mistake.”

And actually it was good, because that was one of those near-term things we could optimize towards and feel progress. And so lo and behold, one day we typed in Behance, it actually said Behance. And then I think six months later, it was back in 2007, 2008, Beyonce became super popular and we lost our SEO again. So lots of little …

Startups are luck, right?

Lots of little funny things like that. And there are a bunch of things … The last thing I would just say is, I equate this journey in the early stages with all the volatility, it’s like a five- to 10-day road trip with the windows blocked out and your team in the back seat and they have no idea where the hell they are. And if you just keep driving, because you know where you’re going, no one’s going to be with you anymore, they’re going to start to freak out.

But if you can narrate your team through the journey and merchandise progress to the team, manufacture wins along the way that are not fake wins but are celebratory milestones that matter but may have otherwise been ignored. There’s this whole system of narration that leaders need to do for their team in the endurance stage. And a lot of folks don’t do it because they’re freaking out, themselves. And it’s important.

Do you feel like this is something that … What’s the pitch here to someone who’s listening, who’s not in startups, not in tech?

Oh my gosh, this applies … I have some feedback from early readers. They’re like, “Hey, if you substitute the word relationship for venture,” or “new product in a company” to “venture,” or “book project.” I also did interview writers and artists for this book, as well, and I have a bunch of parallels for some of these other industries. Because in essence, anything bold enough has this volatility. Also, we’re not hardwired for this stuff. The average life expectancy in the 17th century was 27 years old or something.

There was no messy middle. There’s just life and death.

Well, I mean, the idea of spending five to 10 years on a project when life expectancy is so low is pretty unwise.

It’s very bold, though. So there you go.

It is bold, but we’re fighting against our own human tendencies, as well as society’s desire to kill off anything that’s new and threatening. So there’s a lot to be considered in any walk of life, for bold, creative pursuits.

You have been around a lot of really interesting startups really early. We talked a little about Pinterest, but I’d love to hear the story about … Probably the startup you’re most closely identified with outside of yours is Uber. How did that happen? We’ve talked before about Garrett Camp, who was the founder, one of the founders of Uber, but how did that relationship blossom? And you were a very early investor in it, presumably made a good amount of money on this. How did this relationship happen?

Garrett and I have known each other for many years and we’re both product-minded investors and leaders, and when he had bought back StumbleUpon from eBay… I forget the exact date, it was probably in the 2007, 2009, whatever time frame. I was a bootstrapped, meaning no venture capital-backed company, Behance CEO, way overwhelmed with my own responsibilities. We were doing a few different partnerships between StumbleUpon and Behance at the time, because Behance content performed well in StumbleUpon, we were finding more ways to work together and become friends.

He was in New York in my office, which was also adjacent to my apartment. This is back in the day, and at the end of the meeting, he whips out some sketches of what he was thinking about as a mobile app to be able to get a car without having to call and book and wait for … You know, schedule in advance. I remember my first thought being, “You gotta be kidding me. You just bought back StumbleUpon from eBay and you’re thinking about launching a mobile app livery company? This isn’t a good idea for you. I mean, literally, how do you handle that?”

He was just tinkering with this, and I think he was also, of course, in the process of bringing together some folks to run this full-time so he could continue doing his job and maybe serve in some sort of founder and chairman-type role.

Right. And how involved were you in the early days?

In the early days, we would just talk about product, so he would pitch, we’d talk about … I remember one story, which I talk about a little bit in the book, because I had learned from him around this was this importance of narrating or developing the brand and the message before the product. Because one of the earliest things I remember him talking about was the distinction between a brand that everyone aspired for, as opposed to one that felt accessible. So there was this question of, is it “everyone’s personal driver,” which is aspirational, or is it more like a “taxis on-demand,” which is an accessible …

You’re talking about what is the slogan, essentially, right?

Yeah. Well, slogan, but also, it informs the design. The brand itself, is it sleek and seems expensive, or does it seem affordable and accessible?

Right. “Everyone’s personal driver” sounds like, “Why do I need a personal driver? I make 60K a year.”

Yeah. I think that the idea of … They actually ended up going with the everyone’s personal driver as a way to make people want to aspire to have something that they wouldn’t ordinarily have been able to have.

I feel like that’s not very active in the branding now, but …

I think it’s probably evolved, for sure, but it’s actually another thing to think about, is that the right playbook at one time in the business can become the absolute wrong playbook at another time in the business. Both from how it’s led, as well as what the brand and the message should be and whatever else.

I think that the decision to make an aspirational brand to start probably got the right first adopters, and then launched it in the right way.

Yep. So then, another one is Pinterest.

Yeah, so Pinterest …

I’m sure that your background, obviously, in design helped.

Yeah, Ben couldn’t raise his seed round on the west coast, so he resorted to coming to the east coast.

Had to do with the Scott Belsky’s of New York rather than the real people.

I mean, the riffraff! And Pinterest was a grid-based design system. And it was extraordinarily visual and that was very much what Behance was at the time. And so that’s how we connected. And Ben has always had a drive towards engaging designers in his products. And what I also noticed when I first met Ben, even though they were just kind of testing an early version of Pinterest at the time, they just rotated from a previous incarnation of the business.

I noticed while the traffic was very low to Behance, it was like a high-growth low number. And I remember being curious about some of the decisions that Ben had made. Like, for example, this is at a time when bookmarking sites like Delicious didn’t even have visuals. And any other website that had visuals like Tumblr and others, when you click on an image, it would bring you within the site, because it was always an optimization for pageviews. Everyone on the web was optimizing for pageviews. You wanted to keep the customer in.

And what Ben did was the opposite. When you click on an image, you actually went out. You went to an external URL. Which, while it minimized their pageviews, which looked bad on paper to some investors and that’s maybe why they had struggle raising money, but they were driving traffic. And so all of the recipients of this traffic, these click-throughs, were like, “Whoa, what is this Pinterest thing?” And that, of course, led to them incorporating “pin” buttons and all the other stuff.

So I found that sort of contrarian view of developing a web product at the time very interesting. And that’s what brought me in as a product adviser. And when he was raising his seed round, I said sure, and I remember, this was actually my first-ever seed investment.

Oh, really, okay.

My wife was like, “What are you fucking doing?”

It’s like, “What is this, charity?”

”You’re barely paying yourself.”

But I also felt like I could learn a lot from him, and Ben had a west-coast network as well, and I think it was one of those decisions that I made for different reasons and it worked out.

Obviously paid off.

So far, so good.

You obviously have a full time job at Adobe, Benchmark … how much seed investing do you do these days? I feel like I still see your name on lots of stuff.

Listen, I get to meet a lot of folks now that are doing things that overlap … Overly value product design and are looking to build design teams and product teams. And when different firms introduce me to companies that they’re excited about, if I really resonate with the product and the vision, then I’ll participate as an investor. And I do try to save some time every week to meet with entrepreneurs because it keeps me on my toes, it helps me understand, also, how they’re designing their products.

I have products like Adobe XD now that I’m aggressively trying to help meet the market’s needs. And to be able to work with the most forward-thinking design product teams is really helpful in my day job, and it keeps me on my toes and it feeds another appetite that I have. So I try to make the time for it.

Do you feel like you gravitate, still, towards startups that have design at its core?

I do.

You’re not doing some enterprise software company, right?

Yeah, I’m not doing tons of blockchain stuff. I think, on the enterprise side, I do do a few things where I believe that they value that belief, that consumerizing experiences is actually a competitive advantage in the enterprise, which I do believe. And then I’m focused … I’ve been doing a lot of work on these direct-to-consumer brands and the picks-and-shovels companies.

Warby Parker …

And worked with Warby Parker, Sweetgreen, Roman, Outdoor Voices, a bunch of companies in that space. And then I’m also … I’m super interested in products like Airtable and others that are sort of enterprise, but also consumer. And they’re adopted, usually, on a one-by-one basis. But then before you know it, teams and companies get on board.

There’s a lot investors that would sit in your shoes these days, I think, that the opportunity set isn’t really there anymore. You hear this from some consumer investors who feel like …

It’s a lazy comment that they make.

It is a mainstream comment, though. It sounds like you think it’s lazy.

I think that whenever we start to discount the probability of something extraordinary going on, is when you find something extraordinary going on. So I love when folks are discounting the consumer sector or discounting the whole world of direct-to-consumer brands as non-venture bankable or … To me, that’s an example of where people are starting to get lazy, and they’re starting to generalize. So that gets me curious.

The thing about traditional venture capital is it’s transactional. You’re always trying to get ahead of traction. And so you can’t help but always be bringing in all the data around you of what people are saying is getting traction and not getting traction. It makes you very tilted on the world before you.

I always find that great investors really tune in to certain curiosities that they have that others don’t. And then through that insatiable curiosity about a topic or an area of opportunity, end up asking the right questions and finding the right opportunities.

Is there anything about the startup world … I know a lot of your book is about what individual leaders should do differently. Is there anything about the startup world, having done this … You’re somewhat of an old guard, even though you’re not that old, in the seed investment world at least. But what would you change? If you were in charge of designing the way that startups raise money or operate …

Oh man, where do I get started here?

Softball headed up.

Yeah, there’s a few different… They range in the spectrum from somewhat obvious to maybe a little bit polarizing in terms of my ideas on that front. But it goes without saying that the abundance of capital feeds laziness on all sides of the spectrum. From… The LPs become less discriminant where they put their money.

LPs are the investors, venture capital funds own investors who have endowments, hospitals, stuff like that.

Right. And then the venture capitalists and their intern have too much money, and they start to be a little less discerning. And then companies figure, “Since I can raise the money, I should raise the money.” And here’s the tricky part: Sometimes that’s right. I know Stewart Butterfield’s come on record saying, “Hey, I’m going to raise money for Slack at this foundation because I can.” And with his velocity of a company that makes sense for him.

But I don’t think it makes sense for most folks because then, that’s the whole … You have resources as carbs and resourcefulness as muscle. You’re going to just throw carbs at every problem and you’re not going to end up having anything …

The carbs were really good though, that’s the thing.

They taste so good at the time and they really make your problems go away for a moment. But not over time.

So I think that there’s constraints in the system that I would love to see. And I advise companies to not get ahead of themselves. Because I have seen so many businesses that I’ve invested in that haven’t done as well, go out after a big seed or A round. And then have to do either an even-money or down round, and then their employees get this message that the last two years have been for nothing and investors start to demand more aggressive terms. And it’s sort of the beginning of the end in many cases. So that’s one thing.

And the other thing I would say is, it would be interesting here on the bold idea side…

Yeah. What’s the most polarizing opinion possible?

We always have the SAFE notes and standard ways that companies raise money, whether it’s a convertible note or equity. But there’s no standardized way of companies returning capital and saying, “Okay, this isn’t working.”

I’ve been in some companies that started as a big data play and became an online car-sales thing and then switched to a third thing. And as an investor I’m just like, “I didn’t invest in the second or the third incarnation of what you’re doing. And you’re just kind of using the money at this point to triangulate in the ether.”

What if there was a way for companies to be able to, at some point say, “Hey, I’m just going to push the eject button because this isn’t working.” And then have a agreed-upon way that capital resolves all debts, maybe compensates the founders a little bit and just lets everyone go on their merry way as opposed to stringing out a long, painful, 10-year death journey.

Especially because you can be in there for a very long time. You invest in 2012, in 2018 the company’s pivoted four times, the founders are …

And founders struggle with this. I talk to founders who say they don’t want to let down their investors, therefore they’re going to keep at it. And I’m like, “Well, if you have less conviction now then you did when you knew nothing, then eject.”

But there’s no standard way of winding that down and returning, without questions asked. And it would just be interesting if it was more commonplace and accepted for the eject button, and for an actual incentives in that instance, that sort of take care of everyone at that moment.

That is very controversial, and I don’t know if it’s entirely a financial question as much as it is people don’t want to say they failed at it, right? And financially, yeah, you can certainly come up with a structure where… That’s why shareholders will sometimes sell their shares in the secondary, or find some other way to eject.

But most of it’s basically … I feel like there were times where founders basically just kind of ghost, right? And you don’t really get any updates and you sort of assume it’s shutdown.

It’s funny, I was talking to an entrepreneur the other night, he was telling me that at Google, they’re writing terms sheets to employees that have ideas that would want to leave. And they’re basically saying, “We’ll fund your seed, essentially, with a few million bucks.” Like large amounts. And your equity continues to vest for two years. Your Google equity.

Google equity, right.

But if it doesn’t work you just kind of pick up where you left off at Google. And so I think it was their way of saying, “Hey, these top people want to leave and start their thing, and we know that most of those things don’t end well. And the cost of recruiters and getting a Google employee that will perform really well is so high, we’ll just write these term sheets to people and have these conditions and keep their equity vesting, so that they feel like this opportunity to just come right back in if it’s not working.”

It’s interesting, because actually …

Google is sort of betting on the person’s going to fail.

Well actually, it’s funny, I was hearing this and I was thinking, “Oh, actually, this is super smart of Google.” Because it also gives the entrepreneurs this weird exit opportunity that in two years, if it’s not working, they can just kind of go back and pick up where they left off.

Save face and go back.

Which is not a healthy dynamic for a startup. You actually have to feel like you have it all on the line and you have everything to prove for yourself and there’s no safety net. So I’m actually not sure if it’s a good idea for the entrepreneurs. I think it’s brilliant for Google.

We’ll leave it there. Scott, it was great talking to you. Thanks for coming on the show.

Thanks, Teddy.

Recode – All Go to Source
Author:

Eric Johnson

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