Vested Capital
Vested Capital

Episode 22 · 2 weeks ago

(EP22): Russ Heddlestone, Co-Founder DocSend, Sold To Dropbox For $165 Million

ABOUT THIS EPISODE

Russ Heddleston is the co-founder and former CEO of DocSend, which was acquired by Dropbox for $165 Million in early 2021. Russ currently works at Dropbox continuing the vision he had for DocSend.

During this interview we hear how Russ went from studying at Stanford, to working at a startup called Greystripe, then as an intern at Dropbox, and then launching his own startup Pursuit.

Pursuit was later acquihired by Facebook, where Russ continued to work for two years. He shares some interesting insights into why Pursuit didn't take off and the lessons learned, which he then took into his next startup, DocSend.

We spend a good amount of time talking about what marketing Russ and his team did to grow DocSend, how they revised their positioning and copy on their website to add fuel to their growth and how eventually the deal with Dropbox happened.

If you like B2B SAAS startup stories, this interview is for you.

Enjoy the podcast.

Yaro

Podcast: https://www.yaro.blog/pod/ 

Blog: https://www.yaro.blog/

Hello, this is Yaro and welcome tovested capital Episode Number Twenty Two featuring my guest Russ Heddlestone,the Co founder and CEO of Du End, which was acquired in March of two thousandand twenty one by drop box for one hundred and sixty five million dollarsinvested capital is a podcast about how people make money and put their capitalto work. I interiour up founders Angel Investors, venture capitalists, Cryptoand Stock Traders, real estate investors and leaders in technologytoday, you're in for a treat with my interview with Russ Huttleston, as heshares the story behind the creation of docks and a company that allows you tosecurely share and get analytics about documents you send across the Internet.So we hear about the origin story behind that idea, what they did toinitially grow it. The focus on pro development as a marketing technique,some really unique insights into a content marketing strategy. That's abit counter intuitive at first, but makes you listen to the whole story,because I think it's very relevant for anyone who's running marketing. Icertainly took it as the chief of marketing for my own company. I wasthinking hmm that might be an opportunity for me to kind of replicatethis idea that Russ and his team used to grow docks end and then we, ofcourse we hear the completion of the story. Well, maybe it's a completion ofthe start of this story, because doc, San is still an ongoing unit now withindropbox, but we do hear about that acquisition, so how docken waseventually sold to draw Fox for one hundred and sixty five million dollars.Of course, we also go back in time and hear the first origin story of Ross andits prior company before starting Docken, which is a company calledpursuit which was acquired by facebook when I say acquired those more of anAqui hire, so they were acquiring the company to get the talent, includingRuss, behind the company. There's some really interesting insights, in fact asto why his first company, which was called pursuit, didn't become you know,a rocket ship didn't really work in the traditional sense of a start up, eventhough they were acquired very counter intuitive to why it didn't work, andthat led to some interesting insights which Russ carried forward with his cofounders when they started Dochan around this idea of doing research intowhy your company might not work or why it hasn't been done already in the wayyou're thinking about doing it. That was definitely counter truder for me tothink about so really good lesson from pursuit which they carried forward intoDosan Great Startup story here, really great technical founders, so lots ofinsights from Russ on growing a SASS company. He especially loves businessto business SASS as you're. Here in the end of the interview and speaking ofthe end of the interview, we also talked about what he's done with someof his winnings. Obviously he was a CO founder. So had a large chunk of thatone, her N, sixty five million, went to him. He didn't give us too many details,but it was interesting to hear what his philosophy is around, how it uses someof that money. Investing you know, being an angel investor as well or alimited partner and some funds, and so on. So you love this if you'reinterested in starting your own Sass, and on that note, if you do want toshare this interview with anyone who is darting their own SAS start up. This isdefinitely one of those episodes to share lots of insight into themarketing side, the growing of the team side and the getting investment side.That's pretty much the focus of this interview and also, if you have notdone so ready, please do subscribe to vested capital. Why haven't yousubscribed right now we're at twenty two episodes, so you should be asubscriber hit, the plus the follow or the subscribe button on the APP yercurrently using to listen to this podcast. It could be google or spotifyor Amazon or apple with Itunes, they're all great places to get vested capitaldownload it that way. You'll get every episode as I release it. Pus You can goback through the entire back catalogue or, if I can choose which ones you likeand have a listen to them, also share this episode and share rest, thecapital with anyone, who's interested in growing their capital or just instartups, or prop investing or crypto. I've got lots of intestine guestscoming up in all those topics: property, Crypto, more start up founders storiesto share coming up on a future episode very soon, but for now we're going todive into this interview with Russ Haddleston, the CO founder of dock, andhere we go russ. Thank you for joining me today, thanks sor, oh great to be onso I mean, if anyone googles your name they're, going to find out that you arethe CO founder and Co of drop box and also the story of being acquired byDosen I'd love to dive into the startup story of Dockhand and leading throughthe acquisition. But I always start my podcast by going back in time and justfinding a little bit about Y R ly day. So where were you born and raised yeahsure, so it's actually born in San Francisco, but my that is in themilitary. So I have a moved around to fair amount like farace to Berlin, toDenver, Colorado and then did Middleston high school and to fallSouth Dakota and then moved out to California to go to Undergrad and Gradat Stanford and that's kind of where the I got into techne been lovingit,never says so. You did like computer...

...science in Stamford. I assume I startedoff actually not knowing what I wanted to study and as I to study engineering.So I started in electral engineering and built robots and then ended upliking, the software side of it more so the Damastes and computer science, butyeah so yeah. It's kind of that worked on a few different things, but leftsamber being very, very sitting with just software, the Internet and youbuilding technology companies. So it was the plan while you were in Stamford.I know that's a unique situation where it's not uncommon to be thinkingentrepreneurial as your next step, even while you're in Stanford, as opposed tomaybe other universities, where it's more I'm going to get a job in a career.You know lawyer doctor whatever were you thinking, I'm going to be anentrepreneur upon graduation or what was your thought process? I wasn't sureit wasn't like a thing I had to do. I did a fellowship poron called theMayfield tellos program at Stanford. It's a nine month, work study program.That was just really really excellent and I learned the ton about Panchrestaand met some really great people leaving hammered. I didn't didn't thinkabout starting a company, but I did you know, interviewed a bunch of places anddecided to to join a very early stage company that just raised a series, awhere one of my mentors was to lined investor for the series a called graystrive, so I joined when there were like six or seven people there and thatkind of like started in my full time. ENTRERA Journey, although I did in turna different start up, swallows at Stanford as well just kind of getting afeel for it and meeting fun people and it's just a really exciting atmosphereto start up in general, where it's new, it's risky and we're trying to make aworld a better place like interesting ideas, and you have a lot of agency andcontrol over what you work on, and you have a very quick turn around to likethe impact of your work, and those are always things that I've really enjoyednice yeah. So did that initial start up you an early employee. So did you ridethat all the way to it? Leaving or did you leave earlier and start your ownthing? I left to go to business school out of Harvard, so I was at gracestrike for a three years and is not uncommon at start ups, you know I movedaround a few different times. There ended up running the engineering teamand then you kind of rebuilding the company pivoted over to the earlyiphone and advertising on it and that worked out well. So after I left theyended selling the business to value click. It was a good outcome for, foreveryone involved. Okay, so you chose an NBA as your your next tot I did. Itwas funny in the interview I had there. They were basically like. Why do youwant to go to business school and my response was like well, you know, Ithink there is a big opportunity cost and as an engineer I I don't need to,but I like, I just thought, I'd be a lot of fun and I thought that thecurriculum would be useful and then I er bed useful, and so you, those things,had a definitely turned out to be true for me. So whenever you like, Oh,should I go back and get in Dan? I I well. The answer is it. It depends.Most people don't need to, especially if you're already in tech, but you knowI thought it was a really great experience for me, but mainly becausethat's had a lot of interest in that and just kind of it's an overview ofthings. I know didn't know anything about, and it was also a great place tostart. My first business was to go. Try starting a company, while I was an anNBA program. Is that what you did yeah? I interned a drop box for my summer,while I was out of Harvard- and there were fifteen people there at the time Iwas very, very small, a track down drew with that Ay I'm going to do some greatwork for you the summer to let me- and it did you know, but then after thatstarted by on company, call pursuit with a couple of engineers that Iworked with at Trulian, and we raised a see round money for that and kind oflike built and launched to our first product and that company didn't make itmainly because we chose not to keep going because the stats just didn'tlook at like we wanted them to with the product that we launched. We were in apivot and ended up selling to facebook as a towel acquisition interviewed atlink in and face bark, and so anyway, yeah. That pursuit was something I gotoff the ground while, while I was in business school yeah, just tell me alittle more about pursuit. I know it was like a referral network forsourcing talent. was that the sort of summary like you were trying to monitisthe process of hiring and sourcing good employees? Is that roughly a prettymuch as they say there are no new ideas in the world, other people that triedthat as well? I think it's probably better as a feature of the you knowlike a talent or something or the ats staffing, a tracking system, but yeah.The idea is that referrals are a really great source of high quality candidates,but if we can motivate people to share those opportunities in their networkfurther, then you'll get even better quality candidates being referred, andso we're hoping to use the kind of referral bonus that companies often useas an incentive and split that amongst multiple people. So you know it's areasonable idea at the time. Yeah I mean you when you say it sounds like amakes complete sense, but I think I remember hearing another podcast. Youtalked a little bit about the counter in truter reason why that didn'tactually work out. You might just sharing. You know what that was yeah,and this is a good example of something for all founders. You know, like youknow, when you go start something like I for pursue. We were solving a problemthat we ourselves had as engineers and trying to source good talent, and so hejust got right in and started building and the reasons that it didn't work.For probably reasons we could have been able to understand before we evenstarted writing code, which was that...

...the people who are the best atreferring other candidates generally, do it for reasons other than money. Soas soon as you involve money, it gets weird for them. So with our system,what in happening is that yeah, we were refering candidates, but they werereferring them outside of the system, so the money, rather than acting as amotivator, to share these things actually detracted from the people whoare best able to like get these things referred out there. So the behavioralpsychology of what we built just didn't fit super well and for my master thatSanford, I studied human computer interaction and I picked that one justbecause I think that there is a lot of new ones to like how we, as humans,interact with website software, the Internet, other humans and baby.Psychology is like just super relevant, so you know a great learning.Experience would pursue going through the whole process and- and itdefinitely has informed my thinking on when I talk to other founders likewhat's all the research you can do ahead of time and like how far down theline can you think about what you're building and the implications to it,and if it's actually going to work and solve the need or if they're going tobe unintended consequences to the way in which you set up and sentence in theSoftware Youre building and whatever kid of software that is yeah. I canimagine it be difficult to discover that, while you're building theplatform I can imagine, you could certainly do some exploratory researchwithout the software. But you know I wouldn't necessarily jump to thatconclusion. I'm even thinking back to Mon experience right now with mycurrent CO founder we're talking about like we have an Filia program thatconfers a commission, but then we have a natural word of mouth and there'ssomething about offering the money to stimulate word of mouth kind ofdiminishes the natural aspect of the word of mouth. So it is interestingpsychology, I'm curious with your complete from beginning to end processwith pursuit and then working at facebook. What did you take away fromthat experience in terms of what you would do differently with your nextultimate starter, which I believe you know was duck end yeah? I mean whetherthe takeaways was you know, most things don't work, and so, if it's not goingto work, you want to get to know quickly. So I'm happy that we didn'tkeep working on pursuit. I don't think it would have worked out at the end ofthe day, I'm very happy that we decided to go into facebook got to work onamazing stuff. There meet some really really talented people have a ton ofimpact and then, when I left and started docks and I've got two foundersDave and Tony, we all went to Undergrad at Sandbar. Together, we all worked agrace track together before we started writing code. We actually interviewed abunch of potential users and just did a lot of research in the market on thisconcept that was docked and why might it be a bad idea? And you know ifsomething is a bad idea. Hopefully, with a couple months of research, youcan figure out why talk to other people, who've tried to do that in the past, orwho's failed at it, or just generally do as much research as you can. But ifit's a good idea, you basically can't prove it's a good idea you just to andto fail to prove it's a bad idea so for docks that we spent a few months beforewe started writing code being like why on Earth hasn't anyone else done thisbecause a lot of the value, props and features and docks and already existedin other systems- and there is you know, a list of companies that have tried andfailed something similar. And then we also went around to big companies andsaid why don't you build this internally and so the kind of the endof it were like well, someone should build this like it makes sense ifyou're sending documents that it's better to be a link than an attachment,and it makes sense that you as the sender would like to see if they'rereading it and for how long and they forward it to anybody. Those things allmake sense. So someone was away. A certain point rely like way we just gotto go. We just got to go build it. One of the interesting behavioralpsychology parts of Docendo that there was a common concern that hey bytracking people's usage- maybe that is creepy and maybe that's like a badthing, and so maybe you're going to fail because, like people don't likebeing tracked and throughout the whole history of Dochen, that has continuedto come up, but what we found early on was that it's a pretty small minorityof people who push back on it like that for a lot of the scenarios in whichdocent is used, like you is the the sender and then between you and therecipient. You know that's really important information, that's beingshared, and so, just as if you and I were having like you, know,conversation I this, I can tell if you're paying attention, I can tellyour body language. I can see that you're giving me your attention, whichis awesome, and if I send you a Dockan link, can you read it? You could eitherdo that is hey that's kind of creepy, I'm tracking you or I is the sender andof just being very appreciative like thank you. You are a for spending threeand a half minutes reading my pitch deck that I've poured a lot of timeinto, and so there are enough people for whom, like this adds value thatDochan been able to take off, and so it ended up not being a concerned and hasnot impacted any of our growth numbers. But it's interesting to me that it wassuch a big potential concern early on and a lot of people pointed it to it aslike. Every reason that doctin might fail but and were well over twenty zecustomers now growing really really fast, and it has continued the case.The docks and just adds a lot of value, and that is not a concern. Yeah, I'mthinking back. I listen to your...

...interview with Jason Con Canis on thisweek and started up San. You guys certainly had a bit of a back and forthabout the different pros and cons around that sense of the securityaround both just sending an email and the acknowledgment of receiving it andopening it and then, of course, the same thing with Dosan receiving adocument opening it. What slide did you read in a presentation for a pitch, forexample, and I could see both sides of the fence there, where certain people,even just for the sake who you know like to argue about privacy, will justsay, that's dangerous, but then, for all the reasons you just said, there'sbenefit to it. Just you know enhances a relationship. You know keeps the flowof communication going better and then, of course, you don't really know whento put it out to the world and see what kind of backlash if there is any at allthat you get so I'd love to no just even take a quick step back. What wasthe initial thought process around this idea, because I you know clearly youresearched it a lot, but was there a moment in time where you guys were likewe need this, let's build it. I certainly for me personally. It wouldhave been helpful when I was fund raising for pursuit sending around mypitch deck there, but in turning a drop box. I really like drop box early onbecause it got rid of the need for me to email, myself attachments. You knowlike that. That was the thing people had to do. You know fifteen years ago,and so you drawback thought that you could have all your files sinteffortlessly between your devices, like that's fantastic, and so it got rid ofthe need for attachments there and the summer I was there. They came out withthe link sharing model or the shade where I could send you a link to a file,or I could invite you to like be an owner of that file or folder, and so,like cool you'll, never have to email attachments again, but people juststill send so many attachments, and so we talk to sales people. We talk topeople in finance financial services, quite a few different roles where thosepeople are sending information in the form of a document to someone externalat some other company, and they were using attachment so were as for peoplelike. Why are you sending it as an attachment? You know it there all sortsof problems where you know sending you a powerpoint file. You might not havehirer points and do Kino. You want to have Kino like maybe the fonts aren'tembedded. You don't have the Hollins your computer, it's like so you knowthe state of the art is like okay, I'm gonna, send you a giant, pdf attachment,and then what we realized is like all these. These cases are kind of the samewhen people are doing there and that we just had to add enough value to thesender and make it easy enough for the recipient that we would change, feelsbehavior, and so that was a whole bunch of incremental things, but that endedup being the the insight that got from all those early interviews and therewere a lot of competere at the time, there's still a lot of competence.Today our thought process was like. Why don't we just be the best at it likethe best way to like, send a link to a file and see what happens to it andhave control over that file? There's another benefit to which is that, ifsomeone sending this important information feels that it's more secure,they're more likely to share more as opposed to hey, I need to be in personand give you like a look book, because I take away at the end of it. So I, bycreating a more trusting environment, you actually intent sharing more so youknow, like dock said, we try to keep it really simple, really intuitive andthen we've over time built it to cater to more and more complicated workclothes around extera file, sending so yeah people like the product. It tendsto spread itself. Organic inbound word of mouth is still our number onechannel. So a lot of those things that we figured out early on continue to betrue Hm. You know, as a result of just researching yourself for us, Iresearched dock and a lot more than I had in the past. I certainly heard ofit, but I didn't sort of connect. The DOTS to my use case right now, mycompany, it's called in Buxton. We basically provide the executiveassistance to specialize in email management and we have a lot of clientsthat are like doctors, lawyers, Metrorail Angel Investors and they'restill sending a lot of attachments, as you can imagine, often with very eitherpersonal financial information or medical information, and we realizedthe exposure we have with our assistance just potentially sending theattachment to the wrong place, or something like that. So we're likewe're actually instigating tox Hend across our company now as a requiredclient service that we're just going to bundle with what we do for them. Justfor that, you know protection for ourselves as well. It's funny we didn'tthink of it beforehand. So it's taken doing this podcast that made us go. Wereally need this yeah, that's funny, yeah. What you talk about Dochan is ahorizontal technology. We have to market vertically because you know wethought about going really deep on like one particular vertical, but the workclothes are kind of all the same. So if you go to our website, you'l see ourmarketing is targeted to certain use. Cases like fundraising, for example,like undrying, is something I had to do for docks end. It's something I care alot about. It's really interesting and you know docent is an awesome fit forthat. So we do a lot of marketing Taylor to fundraising and I've gottento be really well educated about it as a result and because Oxon is used there,we have so much data that we can use to public research on it, but tuck on as aproduct super horizontal, so yeah I get that a lot of people like. Oh, I hadthis knee and I needn't e think about it, but inert like Dacan is great forthat and re in like yeah. It's a a is...

...exactly what we built a fort alltechnology that is rusell across a variety of situations and often timespeople kind of stumble into it and then they're like. Oh, it's perfect for meand I'm like great I'd love to just talk a little about that start out face.I know you said you've got about twenty thousand clients for customers rightnow. Right than that, first, you built the MV version of the software. Youwere ready to actually have customers use it. Could you talk about that phase?And just I don't know the first one hundred first, two hundred first timeon her customers like what was that initial girth strategy, sure yeah so like we didn't, have a great bothstrategy when we started talk and we launched it. T crunch this rupt and wejust put up kind o lie marketing side that a document analytics how it's kindof it and it was free, it had to pay for it and we thought maybe it'll justtake off like crazy. It Lee viral ill, be like you know, hotmail or something,and it wasn't, but it also wasn't zero so like it was kind of growing linearly,and then we thought, Oh okay. Maybe this is going to be great for sale team,so we went and sold that up Arceti like big sales teams, and we still have alot of like enterprise customers for Dochen and that's what they use docksand for and it's great for that, but we kind of arrived at at what it lookslike today, it's just by talking to more customers. So the first thing I dois like hang your shingle out. You know put up your sign that says: Hey here's!What we've got you know lemonade stand. You got to put up the stand first andthen I just paid attention to like hey who's coming by WHO's, the most engagedwith it who likes it of us. What are they using it for and like that kind ofongoing discovery process, helped us make the product better helped usrepresent the value that the product brings more accurately on our marketingsite and so those things just kind of like steadily built on top of eachother, and so, if you zoom out, it looks like a pretty perfect hockeystick, even though a lot of it was this very incremental long way. So there, Ithink, has to be some faith at the beginning that, like hey, if this endsup being a useful service, it's going to have some very specific properties,and one of those properties for Toxen is that the product generates awarenessfor itself. So we can capitalize on that. It ends up becoming exponential,so it didn't take off accidentally at first, but it's always been better thelinear, her by just being patient and by like making the product better andbetter better. It just continued to perform really well, which has beenawesome to see. So we always joked that we were going to be an overnightsuccess after a decade, and I only took eight years have schedule Nice yeah, the Emballe ofsending a document with the link that says dock, and that then gives you theexperience of using it. It does hearken back to the old hotmail dais when yousend a hot mail with Cotman from hot mail, and then you want to know whatthat is so yeah. The the only other intuitive thingthere is that it's not as common that the recipients are also senders. So youknow, for example, in the startup fundraising, useage venture capital.Investors, actually don't send that many documents like they're receiving alot of documents. They do eventually send their own documents when they gothrough their own fund rades or they only go through their own fund, Rais.Typically every like two three four years, so it's much less common. Butwhat we found was that a lot of those investors end up being advocates fordocks and for their own investments, because they would get links and theymight grumble a little bit about it. And then they click on them anyway,because it's just faster than like responding back like Hey, send me theattachment which is just like. I got the link final, quick on it or look atit. Then other founders they're, like hey, you should use docked when yousend around your deck for your fund race that I'm a part of, and so enterbeing word of mouth more so than product virality O tow. There is stillsome product virality, whereas hot mail or like a super human. Anyone whosending email or receiving email is also doing the inverse right. Youreceive an email and also sending eels, and so anyway, every product categoryis different. That's just part of the new ones to talk yeah yeah! This isanother new. Once a little bit like the new Antou had to with pursuit the samething, you don't necesse it until you start practicing, I'm as a tar founderand a lot of listeners of the same. We face this decision about how to put ourmarketing budget to work, and you know you've got paper, Click on whatever itwas: Google, facebook, instagram son PR. You sponsor tech crunch to SRA thatwould have been an investment of some money, not after the you know, word ofMouth Miral part before you got to that phase. How did you guys navigate thatdecision making process? You know where to put money and test a new marketingtechnique. We've never really had a great marketing engine. I think kind ofa paid acquisition marketing engine can make sense if you're doing Hercules. Soif we had stayed a hundred sent focus on the sales enablement, one throwingconferences and then you know, you're like a gain sit trying to define acategory type of thing or like sales force, and so you yeah, you can end upputting a lot of dollars to work. The traditional marketing means product andwe did early on experiment with different marketing budgets, but noneof that really moved the needle. So we just put all of our money in time intojust making the product better and then I think a lot about message. Market fitis something that's independent from...

...product market fit so for docks andmarketing, basically figuring out what is the right messaging for our productand who is using it and then how do we describe the way they're using it inwords that they're going to understand and so for docks and typically werelike a new product that people are using? Just like you were saying, oryour team is sating, I attachments and sort of replacing attachments. That'spretty common. Some people are searching a lot for it, which isprobably adic. So it's hard to throw a bunch of dollars at like instagrammarketing or something and people aren't really in market right there andso yeah. It is kind of tricky like how do you get into someone's Conconino set?How do you even convince someone that have a problem, and so a lot of that isjust making our product better and better and better the thing that didwork well for us on marketing and continues to has been data drivenresearch and content marketing. So one property docent is like Hay. If peopleare sending out their pitch decks as docks and links like, we can see allthat agregate and we're very securely oriented, so anyone who's part of ourresearch, ops into being part of our research, but and then we go throughand like analyze, those pitch decks like look at all their staff. You willtake surveys, and so this actually gave us really interesting takeaways for ifyou're, raising a preced round or a seed round or if you're, an investorraising around a capital like where do your lps come from? What do people careabout? What's in those decks? Where do people spend their time? What corelatesuccess but corles the failure- and it also was something I wanted, becauseback when I was starting pursuit or even with Dockan I get all. This is avice from people, but I'm like it's all anecdotal advice. Does anyone haveanything? That's slightly more scientific, and so those researchreports are awesome producant, even if people never end up using our product.There's this great pieces of content that educate and form a kind of makeyou specific to the fundraising market place just make it more efficient onboth sides by educating founders and kind of educating everyone, I'm likewhat our best practices and so that's a marketing playbook. We can also repeatby vertical you know if they get into like sales alone, content or investorrelations, or pick your use case, that their documents being sent there,there's some best practices, docks and could properly surface and help giveadvice to people around. HMM, that's interesting! So it's like you're, notpitching your actual software, but you're doing research on the users ofthe software producing content that sources data that's very relevant tothe target market, they're, not looking for doc en, but they find that researchrelevant and maybe get circulated through you know new, sights and so onor just google search. Then they read it. Then they realize it's all kind ofpowered by docks and that's where the daughter came from they're aware of theservice and then they discover it and then potentials are using it yeah, itvery circulateth. I've often found that, like the most obvious channels are theones that are already kind of over invested in. So it's like yeah, we, aDochan, is a great e signature product, but the key words for that are very,very expensive. So you know it's like how can you properly acquire customersto those channels or hey you're, going to go like sponsor big events and stufflike that, like those things have a really long Roi if they have any rl,whereas the content marketing it is expensive to produce in time consuming?However, it's an evergreen asset, so when people share it around, it's likewe just need people to aware of what is docked and then the rest kind of takescare of itself on there because of how much time we spent investing in theproduct experience itself, and so that's just one way to like, especiallywe only raised fifteen million dollars for docked. Then we're able to competewith really really big companies to create mind sharing to create like alarge user base, so I think from a marketing perspective for any start upor product. It's just good to ask yourself: Well what are the potentiallyunintuitive superpowers that this product has and then how do we use theproducts to like gain more awareness for ourselves in the ways that areother than just like? Let's just throw money at Google search and we do thosethings to for Dochen, but it's more like ten fifteen, twenty percent of ouryou sign ups should come from paid rather than you know. We've just gotlike a giant demand, gen engine, that's accounting for most of park, growth.Okay. That leads me to another question that so given product as marketing wasclearly a focus for you guys. You were relying on just producing the bestversion of this solution that correct from wrong would make a lot of yourfunding went into talent in the engineering side, and you know PROCdevelopment side. What did that look like you guys, because I know you camefrom a background of having- I don't know if you computer science, I'm notsure how much of developer you were yourself. So what was like the initialengineering team around ducked, yeah great question, so I cop hunders, Daveand Tony are also soft for engineers. So when we were starting out, we alljust sat around coding and it is great we would just beat a different personsapartment every day, kind of rotate around and you know it's down and justfright. Code together is great and at a certain point you know like okay, wegot to go talk some vental customers. Then we got to go to fund raising. So Iwent off and did the the fund raising and raise the seed round of one point:seven million from uncork and yeah that money all went to like hiring moreengineers to I work on the product. So...

I think having a good engineeringculture is something you've got to start early and it helps if thefounders are engineers, because the founders are able to create theengineering environment that other great talent wants to be a part of, andthat's always something we've prioritized and at a certain point indachshunds history. You know our growth was happening fast enough, that we werejust profitable and in that situation we actually didn't want to grow ourengineering team too quickly. It's just really hard to maintain culture if youare growing at a crazy rage and some companies have to, but we tried to growengineering about fifty percent year of a year just so we had time to onboardpeoples really invest in them. Er understand there swim lanes, and sothere's just multiple philosophies on how you can build a great engineeringorganization. I do think it is important for any companies engineeringorganization to be motivated to be focused because that ends up showing upin the product. You know like we've, never really had any downtime forDochen and everything we've built has made sense and that's because behind itare people who enjoy their jobs and are motivated, and you know, have a prettytight nid culture and especially if you're company anster lying on productof that growth, that's really really important. So I get a lot of credits.My Cup hounders Tony and Dave for just how they've built great teams over theyears and like created such a great engineering culture for a docent, andyou know you can always just pay more for people and we have to be verycompetitive in compensation. But that's only part of the story right, like it'sreally important, to have a manager that respects you for you to feel likeyour work is impactful, and that really shows up. Just in the interviews and alot of like the people who work on Dochan like came through referralsbecause act like the pursuit thing or it's like fels are awesome, but theyonly work if it's a place that people really want to work at so just toconnect the dult with the financing as well. You said earlier about fiftymillion dollars you raise in total before you were acquired by dropbox,and it sounds like you were the point man for raising funds being this he oand front facing, for that was that realtive easy to raise because itsounds like you guys became profitable, pretty quickly or was a challenging toraise, because you were basically building software initially, maybe thefirst seed round was the hardest, because you didn't maybe have the usersyet, and you were trying to go out there and say we're going to lead withproduct. We don't know how well it's going to do. Give us your money. Isthat kind of how I went or well yeah, you think for the seed round wasdefinitely the hardest brown to raise. I think it was a helpful that you havethree engineers who were building this together. I think it's helpful thatDave tolly I've all worked together before going back to like leavingStanford. You know I didn't start my own thing. I went and worked at someoneelse's company and met some great people spent a lot more time with DavidTony built relationships, and so you know it also helped that I already soldthe company to facebook. So we went out to fundraise for docks and the messageis basically like hey great founding team. We are going to be able to buildthis thing. We've done a lot of research and think that it's somethingworth building and he's kind of like the evidence we have. That says likeHey. This could be something big and we got a lot of nose. A lot of people likewe want to see more traction or you got to use more revenue or hate. There's nodefense will note here or why? Wouldn't Microsoft do this or like this sort ofthings, but you only need one: Yes, which is nice, so my goal forfundraising for docken seed round was like hey. Let me go talk to a wholebunch of really smart people and two weeks and see if we can get aroundraised and if we can we'll just go back to build it and so having thatconfidence was really helpful going into the process and so yeah Jeff. Thatuncork said Hey I'll la the around and said awesome great and then that as theSedro, the sers a was from Howard August capital and he looked at the seabrown for us, but they had a five hundred million dollar fund, which isjust too big of a fun to bother with a seat round. You know they got to putmuch more money than that to work. Then they let her series a this, becauseHoward started getting docks on the links from other founders. So evenbefore we started charging for the product, you know he'd been followingus and he's like hey. I think you guys can build it and you know I thinkyou're going to figure it out. So we raised the eight million dollar series,a which is really fortunate right, but it speaks to keeping in touch anddelivering on what you say. You're going to do so, when I checked in withHoward, it's like hey, yeah, we're building it we're doing exactly what wesaid, we're going to do, it's working and here's what we're doing next. In acertain point, you know we had the confidence say like okay, yeah. Well,we'll do your series a so we raised ten million bucks at that point and I thinkfor every company. Typically, there comes a point in time where you need tocreate a business out of it. You know, by the time we got to seriesB metrics, we didn't need a whole lot of money, and so we only raised fivemillion from DC, and that round was also one where cal Louis joined theboard, and he and I knew each other from business school. So again, that'ssomething of benefit from business school and he just was really intriguedwith what we were doing and really like the product led growth and thought itcould compound into something. Pretty interesting, and so the question was:how much money do you need, so we had another offer for a lot more money andI said: Well, I don't think we need a ton of money right now, like money isnot our bottle neck, but a little bit more would help. So we only raised fivemillion and it just helped us like have confidence in two thousand and eighteen,two thousand and nineteen really to go through and like red or marketingmessaginge. So we revamp a lot of like...

...our pricing or packaging, ourpositioning for docks and which then actually really started to fuel the flywell and then, by the time we could have raised a much larger round. Werealize that. Well, money is not our bottle, thack anymore, because we'reprofitable and it's actually growing quickly. Access to more users is thebottle ECK, and so that's a heol. Why I was decided the cell to drop OK,because they just have all the users that you know we would want to goeventually acquire so yeah yeah. I honestly want to talk about that in asecond. I can really see the almost like a beach head market. You guys hadwith the pitch decks and that naturally get to in front of well, obviously, theusers being the company's raising, but then their end user was the investor ofthe investors hes there using doc an what's his company and then it kind ofreinforces for raising funds. I don't know if that was deliberate, but thatcertainly sounds like an advantage. You might just tell me a little about yousaid like the repositioning and the pricing started to. You know a bit offuel to the fire. What was the change there yeah? So what had happened wasever we started with document analytics, that's what it said on the website andthen we said: Hey we're able to sell this thing to like big sales teams.Let's just do that. So we changed the messaging on website to be sales andAbleman, and all we talked about was just the sales use case for it. Butpeople kept signing up for all sorts of things, like our support team would getthese questions like. Are you the service that does Blah Blah Blah andthen we be like yeah and then they just go off and pay us, and then we liketried to gate things behind this like enterprise wall, I talk to the salesand a lot of people are like. No, I get it your product make ses. I don't needto talk to sales. His word about O my credit card in right, so getting twentyteen, I just you know, as I mentioned earlier, is just chatting with lots ofusers and like looking to interesting use cases and be like what are theydoing with our product and after having enough conversations, you know wedecided like. I don't think that sales enablement is the right messaging onour website, like yeah sales team should use docken or something likeDoan. That makes the ten of sense, but what we're doing is much broader thanthat, but we were also were not charging enough. I didn't realize, likewe were here talking to one investment banker and the managing director andhe's like. I love your service. I send documents to my secretary. I send thelinks, then she sends me screen shots of people reading my documents, like Ohcool, he's like it's crazy, we just don't pay you for your service is likewhat your secretary pays this tenda a month and he's like, like I said wejust don't pay you for your service. So when we read it our pricing, weincreased pricing by a lot, so we took everything out from behind. Like theEnterprise Pay Wall, we made everything self served and we came out with whatis now the advanced plan which cost a hundred a D. fifty bucks a month andthree seats are included. That's a lot more expensive than ten dollars a monthright, but conversion went up because what people started using Dackson foras we expanded the product was as a data room. So if we're competing withinterlinks, which is charging fifteen twenty dollars for it and you'relooking to buy a date room provider, if Doctors Ali charging ten oars a monthlike that, cannot be the same category software, that's just insane thatdoesn't make any sense. It becomes much more important that you buy the rightspot wore than you save a little bit of money near there, so by increasingpricing up to a hundred and fifty dollars a month. So it's eight hundreddollars for a year. You know that's at least in the right ball park, you knowand then, in order to do that, we had to change up all the messaging on ourwebsite. And so, if you milly for keys thing, you know we left the product thesame, but we changed pricing, packaging and positioning and getting into datarooms. Data is like two and a half billion dollars a year in revenue is ahuge market for us like we're able to be quite successful there. We also havegot into e signatures, and so, as we continued to add, more Marfutkin docksand it increases the LV and increases engagement and increasing virality allthat sorts of stuff. But it was so interesting for me a few years ago likegoing through, and that's why I said message: MARKET FIT is so important sofor docks. I'm kind of figuring out that right messaging on the websiteallowed us to take advantage of the product spreading aware in as foritself and reduced a ton of user confusion like really smart, creativeusers be able to figure out how to use de Ochon for different things, but foreveryone else like we had to make it audience for them right like if you goto a product website, and it doesn't speak to you and your use case for it-you're not going to go, buy and figure out. If you can shoe horned into youruse case generally speaking like the product ast to say, like Hey, I knowwho you are and here's exactly how you're going to use our propt and so bydoing that that just increased conversion of time- and it was thatmostly driven by your research into your current customer base. Right, likeyou, weren't guessing, you knew by seeing segments within your customers-okay, they're using it. For this. We haven't really presented ourpositioning and our marketing materials around that left. To that, is it right?It's like the intrepert few we'd find you know, there's like the the peoplewho were using it for something and we're just like. Isn't that interestingyou, a few of them, would chat with us and answer our questions and be like.Why are you using it t yeah, so they were already in our user base, but byhaving a relatively cheap product that meant that it was pretty accessible. Itwasn't like you know. Fifty thousand dollar MINU anual spend, which is justa different way to go about things. So, by having dock and as a product besomething that you have a free trial with it. We used to have fremin for itas well. We were just able to like...

...observe how it's being used and thenunwoken people there, which is actually a super valuable lesson from facebookearly on to remember Chris Cox, talking about how they would just observefacebook users running into walls and then unblock those things for them likewhen facebook came out with the news feed it's because people were justrunning around all their friends profile to see if anything was a newwhich is insane, doesn't put that in a new speed you know, and for Verdon itwas like. Okay wow people are really wanting to send one link to multipledocuments. We should probably build that feature. Oh now we're a data roomprovider, okay cool. What does that mean and again like following thethread incrementally along, and it must be fun too. As a founder, I know wealmost getting cost the last for ten minutes here Russ. I love to know,obviously the decision to exit so a bit of a loop here. You were in turning atdrop box, so you clearly now was early days. A drop, ok to, I think you said.Only five employees at the time was that when you entering Tony Ten okay,so you clearly were in touch with everyone on staff. Then you would haveknown the founding team very well how much of that play into the decision toultimately partner and sell duck and the dropbox. I don't think very much ofmy personal relationship mattered like I mean so. The drews found her in theCEO dropbox and it certainly didn't hurt that I worked with him in the past,so I think that there is some amount of trust there. That was useful, but wejust created a great business, and so certainly drop box was inspirational tous as we created Dockan. You know, product led growth just make theproduct really intuitive like just make it work. So there's a lot of overlapthere in terms of like approach to building products that draw box,certainly liked, but you know the end of the day. It was one where we didn'treally shop it around. There's one other interested buyer and then itended up being more of like a personal decision that you know we were desiredto work with drop box like this kind of fit into their vision of the future,and for us it was exciting to think about having access to their reallyreally large user base. So it is kind of a rare and interesting full journeyto come at me back to drop pox years later is funny because then they turnedon my dropbox account like I still had all my old back stuff in there. Youknow ten years ago, like it's still still here, but it just happened to bethe case that what we built with docks and sit in really well to what drop boxwas moving towards the in the future, and you know big comes involved too, soyou know I kept in touch with dropbox and some other Fingal strategics and wedidn't need to sell the oxen it just something that we did, because it wasexciting and interesting and a good fit yeah. I want to ask it sold for acurtain of him wrong. It's tack crunch, I'm quoting for here in sixty fivemillion. How do you determine your price? Whatever your council wassharing in terms of numbers, I'd love to hear about it. Yeah I mean itdepends on like the situation in the scenario. Sometimes founders use like aterm sheet to drive up the price, sometimes just willingness to pay, butfor Doxie we haven't raised a whole lot of money so that that that everyonecould make money and that what they reported is it like eleven x Arr, soit's like it could have been a lot more sure. Could Ave been a lot less sure inour situation, there's just the big middle zone, so there's just somenegotiating, but I'm sure it's different in every single scenario, butfor us it seemed like a reasonable exod a the time. I think any deal thathappens. Probably both sides feel like it should have been more in their favor,but you know for dock box. Keeping our eye in the prize is like yeah. This isan exciting combination between the two companies and it was great forinvestors, it's great for our employees and it's great for Dackson customers,as we you get to to you to build out, involve the product and just communicatmore and more useful for them, so everyone on, which is the situationsthat doesn't happen. All t often so, for me, my co founder is, you know,were excited about it and we're going to be working on Dochen and help thedrop box for the forsee future yeah. I think it's very clear that you're verymuch committed to the continuing journey of ducks and you weren't likelooking to exit and then you know leave completely, but I am curious, obviously,a big proportion of that hundred sixty five million hit your bank or yourequity in shares, whatever I m not sure what it was whatever the case me beingis a lot of money. Did it change your thinking even around investing, andwhat to do like? Did you say any thing? Now, I'm going to angel invest a lotyou more conservative, my podcast is called bested capital so where I wasinterested in when you get a big capital in fusion, what do you actuallydecide to do with it? Yeah I mean I've been investing for years before,because you know I was at facebook early as well, and you know I my bartypically for investing is like. Do I like the founder enough that I wouldhelp them anyway and if I'm going to health anyway and there's anopportunity, then I definitely will put money into so that's fun and I justlike being a part of different software companies. So that's a lot of funhaving a back system more capital. Now it dur become an LP and a few differentadventure funds. You know if it hasn't really changed the day to day stuff andfor me I always remember that I think buildings offer is just reallyinteresting and fun and they're just so much value to add in the world likecreating great software. So I mean that's what all continue to do and beinvolved in and the lots to do lift with with Docken, but it didn't likeFundina change this like how even I my day today or how I think about it,because it's like great this is an awesome financial win for everybody. DoI need to go t, invest the ton in other...

...companies for some reason like no, Idon't, but I do like getting involved in helping where I can and every boneydoes help with that in terms to like the size of impact I can have so I'msure that's something I'll continue to do anything else, cryptic currency,efts. Obviously you know you have to park money somewhere. Just I wascuriously here. We, you know, did you buy a nice car and no everyone loveshearing those stories? Maybe it was back with facebook when that was your.Your first sort of experience of an exit like that well t are usually fornot a not very showy people. You know so. We've been pretty conservative onthose fronts and then, in terms of like where to park money for like the bestreturn. It's always such a crap shoot. You know in terms of what the Futurihold it's the old business school added. You like pass performance doesn'tindicate future success, type of thing. So for me, I tend to stick to beingpretty conservative with what we do with our own personal capital and then,if we're going to make an investment in something it just has to make sense tome. So you know, there's plenty going on in the crypto ant world said thatyou know I kind of scratched my head and like that would have been a greatinvestment a few years ago, but it's not entirely clear to me exactly whatit's useful for or how I would use it. So I tend to stay away from things thatapparently make sense to other people, but, like don't connect with me as well,I'm happy to miss out on, like some big winds, just to stick with stuff thatI'm interested in and for sure understand. So, like me to be software,Bob set software, that's a grave category, man. There are a lot ofboring, profitable companies to be created and scaled in just bob asoftware and having een through this a couple times now I really enjoyedtalking to first time founders or companies are earlier because we'vejust learned so many lessons over the years working on the stuff, and I loveto pass that knowledge on. But those are the areas where I'm like yeah. Thatmakes sense. So much should have built this years ago and you're doing it andyou're going to market and people are paying for your software and I'm surethis will work come great, so yeah those are the ones where I get thoseexcited about the boring, obvious ones pair enough, so off for Guy Through andthrough Russ, any other sort of last words of wisdom. You want to pass on topeople, I mean I am kind of curious now. What your kind of vision is the future,because you are working not just in your own company, but now it's a bigger.You know you're in a larger company, with multiple missions, not just yourown, but is your focus just on getting as many uses to drop box. I mean it'sboth right like when you join a larger organization. It's you want to make theone Tuson equals three or five or ten, and so for now, yeah we're just focusedon doc en change. You improve it, but then doing that in the context of dropback so there's just so much integrating. That has to happen whetherit's support or sales or go to market or the product. Just getting all thesesystems to work together and then you knows drop box of all its own likestrategy, you know just being part of that influencing it. So you know thoseare. Those are really fun things to be part of that's my pain Serci like time.These days is work on that stuff and it's been a lot of fun so far, okay,nice! So where can people find you if they want to get in touch sure just onlinked in or on twitter or even just Russedon or Russa Jook? All thosethings work. Awesome breast. Thank you taking time to share the story. I lovehearing the origin as well. As you know, the nuts and Balt of of growing docksand and a few really insightful, almost psychological things more than justpure software development or marketing issues that you share it here. So I do.I do appreciate that yeah. Thank you. You are it's great talking to you. Ihope we enjoyed that episode with Docens Co, founder Russ hedstone. Ireally appreciated him, sharing the details behind the growth and eventualacquisition of Dochen, and I was just the fun interview, so I hope you feltthe same. You heard me mention several times during this interview, my owncompany in box Tono and, in fact, how we're looking at rolling out ducks andas part of our service. So what we do is we provide virtual executiveassistants who specialize in superior communication and they take overapplying to our email they take over managing your calendar. They take overyour social media direct messages. They can reply to those and they're,basically fantastic with the written word and having that attention todetail, to know how to manage something as personal and as private as those inboxes and we're looking to use Dochen as a tool to help secure theinformation that is shared by our clients. So, basically, our assistancethat we assign to clients will be using docked to provide the extra layer ofsecurity, and it's definitely something we see is a valuable addition to theservice we offer and that's why I'm talking about it? It's the sponsor oftoday's episode of the Best of capital podcast. That's my company in box donecom, so you want to simplify your life if you want to break free from livingin your inbox and you're, looking for an executive assistant service thatreally specializes in replying and managing to email, as well as all theother tasks that are associated with email, calendar scheduling, forwardingin voices entering data into other software tools, doing basic research,but mostly just getting into that in box replying to your messages, so youcan not spend all day in there and gain...

...back one two: three, maybe even fourhours a day and a lot of mental freedom as well. We are currently taking on newclients, as we wrap up two thousand and twenty one, so we do have some space toon board you in the months ahead. You can always get in touch with us bygoing to in box, done com and booking a discovery car where you can tell uswhat things you need to delegate to us. We'd love to hear from you. That's inbox done: COM! Okay, that's it! For me! I'm going to get this interview out toyou now, so I hope you enjoyed it and I look forward to talking to you on thevery next episode by by.

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