Vested Capital
Vested Capital

Episode 22 · 1 year ago

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


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.




Hello, this is Yarrow and welcome to vested Capital Episode Number Twenty Two, featuring my guest Russ Heddleston, the cofounder and CEO of Docks End, which was acquired in March of two thousand and twenty one by dropbox for one hundred and sixty five million dollars. Invested capital is a podcast about how people make money and put their capital to work. I interview start up founders, Angel Investors, venture capitalists, Crypto and Stock Traders, real estate investors and leaders in technology. Today you're in for a treat with my interview with Russ Huddleston as he shares the story behind the creation of docks end, a company that allows you to securely share and get analytics about documents you send across the Internet. So we hear about the origin story behind that idea, what they did to initially grow it, the focus on product development as a marketing technique, some really unique insights into a content marketing strategy. That's a bit counterintuitive at first, but make sure you listen to the whole story because I think it's very relevant for anyone who's running marketing. I certainly took it as the chief of marketing for my own company. I was thinking, Hmm, that might be an opportunity for me to kind of replicate this idea that Russ and his team used to grow docs end. And then we of course, we hear the completion of the story. Well, maybe it's completion of the start of this story, because doc send is still an ongoing unit now within dropbox, but we do hear about that acquisition. So how docs and was eventually sold to dropbox for one hundred and sixty five million dollars. Of course, we also go back in time and hear the first origin story of Russ and his prior company before starting docks and, which is a company called pursuit, which was acquired by facebook. When I say acquired, those more of an Acqui hire. So they were acquiring the company to get the talent, including Russ, behind the company. There's some really interesting insights in fact, as to 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, even though they were acquired. Very counterintuitive to why it didn't work, and that led to some interesting insights which Russ carried forward with his cofounders when they started docks and around this idea of doing research into why your company might not work or why it hasn't been done already in the way you're thinking about doing it. That was definitely counterintuted from you to think about. So really good lesson from pursuit, which they carried forward into docks, and great startup story here, really great technical founders. So lots of insights from Russ on growing a ASS company. He especially loves business to business ASS, as you'll hear in the end of the interview. And speaking of the end of the interview, we also talked about what he's done with some of his winnings. Obviously he was a CO founder so had a large chunk of that. One hundred 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 some of that money investing, you know, being an angel investor as well, or a limited partner and some funds and so on. So you love this if you're justested in starting your own Sass and on that note, if you do want to share this interview with anyone who is starting their own SASS start up. This is definitely one of those episodes to share lots of insights into the marketing 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 not done so ready, please do subscribe to vested capital. Why haven't you subscribe right now, or at twenty two episodes so you should be a subscriber. Hit The plus, the follow or the subscribe button on the APP you're currently using to listen to this podcast. It could be google or spotify or Amazon or apple with itunes. They're all great places to get vested capital. Download it that way you'll get every episode as I release it. Plus, you can go back through the entire back catalog or pick and choose which ones you like and have a listen to them. Also, share this episode and share vested capital with anyone who's interested in growing their capital or just in startups or property investing or Crypto. Have got lots of interesting guests coming up in all those topics, property, Crypto, more startup founders stories to share coming up on a future episode very soon, but for now we're going to dive into this interview with Russ Heddleston, the cofounder of Docs end. Here we go, Rus, thank you for joining me today. Thanks, sir, great to be on. So I mean, if anyone googles your name, they're going to find out that you are the CO founder and CEO of a drop box and also the store area being acquired by Docs end. I'd love to dive into the startup story of Docs end and leading to the acquisition, but I always start my podcast by going back in time and just finding a little bit about your early days. So where were you born and raised? Yeah, sure, so. It's actually born in San Francisco, but by David is in the military, so I find I moved around a fair amount, like Sanrancisco to Berlin, to Denver, Colorado, and I did middle school in high school and who falls Health Dakota, and then moved out to California to go to Undergrad and Grad at Stanford, and that's kind of where the got into tech and I've been loving it ever since. So... did like computer science since Stanford, I assume I started off actually not knowing what I wanted to study and decided to study engineering. As I started electoral engineering and built robots and then ended up liking the software side of it more so did a master's in computer science. But yeah, so, yeah, it's kind of worked on a few different things, but left standverd being very, very sitten with just software, the Internet and you building technology companies. So it was the plan while you were in Stanford. I know that's a unique situation where it's not uncommon to be thinking entrepreneurial as your next step even while you're instant for as opposed to maybe other universities where it's more I'm going to get a job in the career, you know, lawyer, doctor, whatever. Were you thinking, I'm going to be an entrepreneur up on graduation or what was your thought process? I wasn't sure. It wasn't like I think I had to do. I did a fellowship program called the Mayfield fellows program at Stanford. It's a ninemonth work study program that was just really, really excellent and I learned the ton about entrepreneurship and met some really great people. Leaving Sandford, I didn't didn think about starting a company, but I didn't, you know, interviewed a bunch of places and decided to join a very early stage company that just raised the series a where one of my mentors was the lead investor for the series a called gray stripe. So I joined when they were like six or seven people there. That kind of started in my full time entregarial journey, although I did in turn at different start up swallows at Stanford as well, just kind of getting a feel for it and meeting fun people and it's just a really exciting atmosphere to start ups in general, where it's new, it's risky, you're trying to make a world a better place, like interesting ideas and the a lot of agency and control over what you work on and you have a very quick turnaround to like see impact of your work and those are always things that I've really enjoyed nice. Yeah, so did that initial start up? You and early employee. So did you ride that all the way to it leaving, or did you leave earlier and start your own thing? I left to go to business school at a Harvard. So it is a great stripe for three years and is not uncommon at startups. You know. I moved around a few different times there and ended up running the engineering team and it kind of rebuilding the company. Pivoted over to the early iphone and advertising on it and that worked out well. So after I left they ended selling the business to value click and it was a good outcome for foreveryone involved. Okay, so you chose an MBA as your next out I did. It was funny. In the interview I had there, they were basically like why didn't want to go to business school, and my response was like well, yeah, I think there's a big opportunity, costs and as an engineer I don't need to, but I like, I just thought I'd be a lot of fun and I thought at the curriculum would be useful and the network to useful, and so those things I definitely turned out to be true for me. So whenever you like, Oh, should I go back and get an NBA, and was well, the answers it depends. Most people don't need to, especially if you're already in tech. But yeah, I thought it was a really great experience for me, but mainly because that's had a lot of interest in that and just kind of it's an overview of things I know didn't know anything about, and it was also a great place to start my first business. That's the ghost. Try starting a company while I was a an NBA program. Is that what you did? Yeah, I in turned to dropbox for my summer while I was out of Harvard and there were fifteen people there at the Times. was very, very small attract down Druid said Hey, I'm going to do some great work for you the summer if you'd let me, and it did. But then after that started my own company called pursuit with a couple engineers that I worked with. That truly a and we raised a seed round money for that and kind of like built and launched our first product. And that company didn't make it, mainly because we chose not to keep going because the stats just didn't look at like we wanted them to with the product launched and we were going to pivot and ended up selling to facebook as a talent acquisition. Interviewed at Linkedin and facebook and so anyway, yeah, that pursuit was something I got off the ground while I was in business school. Yeah, just tell me a little more about pursuit. I know it was like referral network for sourcing talent. was that the sort of summary? Like you were trying to monetize the process of hiring and sourcing good employees. Is that roughly. Yeah, for it pretty much as they say, there are no new ideas in the world's other people have tried that as well. I think it's probably a better as a feature of the you know, like a talente or something, or the ats, that applicantracting 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 network further, then you'll get even better quality candidates being referred, and so we're hoping to use the kind of referral bonus that companies often use as an incentive and split that amongst multiple people. So, you know, there's a reasonable idea. At the time. Yeah, I mean you when you say that sounds like a mixed, complete sense, but I think I remember hearing another podcast you talked a little bit about the counterintuitive reason why that didn't actually 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 you know, when you go start something like I, for pursued, we were solving a problem that we ourselves had as engineers and trying to source good talent, and so we just got right in and started building and the reasons that it didn't work we're probably reasons we could have been able to understand before we even started writing code,...

...which was that the people who are the best at referring other candidates generally do it for reasons other than money. So as soon as you involve money it gets weird for them. So whether our system would end up happening is that, yeah, we were referring candidates, but they were referring them outside of the system. So the money, rather than acting as a motivator to share these things, actually detracted from the people who were best stable to like get these things referred out there. So the behavioral psychology of what we've built just didn't fit super well. And for my master to Stamford, I studied human computer interaction and I pick that one just because I think that there is a lot of the nuance to like how we is humans interact with website software, the Internet, other humans and babe psychology is like just super relevant. So you know, that was a great learning experience with pursued going through the whole process and to end, but it definitely hasn't informed my thinking on when I talk to other founders, like what's all the research you can do ahead of time and like how far down the line 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 to be unintended consequences to the way in which you set up in sentence, in the software you're building and whatever high of software that is. Yeah, I can imagine it be difficult to discover that while you're building the platform. I can imagine you could certainly do some explorer toy research without the software, but you know, I wouldn't necessarily jump to that conclusion. I'm even thinking a back to my own experience right now with my current co founder. We're talking about like we have an affiliate program that prefers a commission, but then we have natural word of mouth and there's something about offering the money to stimulate word of mouth kind of diminishes the natural aspect of the word of mouth. So it is interesting psychology. I'm curious with your complete, from beginning to end, process with pursuit and then working at facebook. What did you take away from that experience in terms of what you would do differently with your next ultimate start, which, I believe you know, was docks end. Yeah, I mean one of the takeaways was, you know, most things don't work and so if it's not going to work, you want to get to know quickly. So I'm happy that we didn't keep working on pursuit. I don't think it would have worked out at the end of the day. I'm very happy that we decided to go to facebook. Got To work on amazing stuff there, meet some really, really talented people, have a ton of impact and then when I left and started docks end, I've got to founders Dave and Tony. We all want to Undergrad it Samper together. We all worked a grace trick together. Before we started writing code, we actually interviewed a bunch of potential users and just did a lot of research in the market on this concept that was docks end and why might it be a bad idea? And you know, if something is a bad idea, hopefully with a couple months of research you can figure out why. Talk to other people who've tried to do that in the past or who's failed at it or just generally does much research. As you can, but if it's a good idea, you basically can't prove it's a good idea. You just got to fail to prove it's a bad idea. So for docs that we spent a few months before we started writing code being like why on Earth hasn't anyone else done this? Because a lot of the value props and features and docks and already existed in other systems and there was, you know, list of companies that have tried and failed something similar. And then we also went around to big companies and said, why don't you build this internally? And so they kind of the end of it. We were like, well, someone should build this. Like it makes sense, if you're sending documents, that it's better to be a link than an attachment and it makes sense that use the sender would like to see if they're reading it and for how long, and they forward it to anybody. Those things all makes sense. So someone was a certain point where I like way, we just got to go. We just got to go build it. One of the interesting behavioral psychology parts of docks under early on was that there was a common concern that hey, by tracking people's usage, maybe that is creepy and maybe that's like a bad thing, and so maybe you're going to fail because, like, people don't like being trapped and throughout the whole history of docks and that has continued to come up. But what we found early on was that it's a pretty small minority of people who push back on it like that. For a lot of the scenarios in which docks end is used, like you as the the sender, and then between you and the recipient, that's really important information that's being shared. And so just as if you and I were having, like, you know, conversation of this, I can tell if you're paying attention, I can tell your body language, I can see that you're giving me your tension, which is awesome. And if I send you a docs on link and you read it, you could either view that as hey, that's kind of creepy, I'm tracking you, or I, as the sender, end up just being very appreciative, like, thank you are all for spending three and a half minutes reading my bitch deck that I poured a lot of time into. And so there are enough people for whom like this adds value that Docsin's been able to take off and so ended up not being a concern and it has not impacted any of our growth numbers. But it's interesting to me that it was such a big potential concern early on and a lot of people pointed it to it as like a reason that docks and might fail. But we're well over twentyzero customers now growing really, really fast and it has continue the case. The docks and just adds a lot of value and that is not a concern. Yeah, I'm thinking back. I listened... your interview with Jason Kulcannis on this weekend startups, and you guys certainly had a bit of a back and forth about the different pros and cons around that sense of the security around both just sending an email and the acknowledgement of receiving it and opening it, and then, of course the same thing with docks and receiving a document opening it. What slide did you read in a presentation for a pitch, for example? And I could see both sides of the fence there, where certain people, even just for this sake, who you like to argue about privacy, will just say that's dangerous. But then, for all the reasons you just said, there's benefit to it just, you know, enhances a relationship, you know, keeps the flow of communication going better. And then, of course you don't really know when to put it out into the world and see what kind of backlash, if there is any at all, that you get. So I'd love to know, just even take a quick step back, what was the initial thought process around this idea, because I see you know you clearly you researched it a lot, but was there a moment in time where you guys were like, we need this, that's build it. I certainly, for me personally, it would have been helpful when I was fundraising for pursuit, sending around my pitch deck there. But in turning it, dropbox, I really like dropbox, really on because it got rid of the need for me to email my self attachments, you know, like that's that was the thing people had to do, you know, fifteen years ago. And so yeah, dropbox solve that. You could have all your files, seemed, effortlessly between your devices, like that's fantastic, and so it got rid of the need for attachments there and the summer I was there they came out with the link sharing model, or this model 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 two email attachments again. But people just still sent so many attachments, and so we talked to sales people, we talked people in finance, financial services, quite a few different roles where those people were sending information in the form of a document to someone external at some other company and they were using attachment. So we're asking people like why are you sending it as an attachment? You know, if they're all sorts of problems where I'm sending you a power point file. You might not have higher points and do Keno you want to have keynote, like maybe the fonts aren't embedded and you don't have the Hans your computer. It's like so, you know, the state of the art is like okay, I'm this and you giant PDF attachment. And what we realize is that all those use cases are kind of the same when people are doing there and that we just had to add enough value to the sender and make it easy enough for the recipient that we would change fuel's behavior. And so that was a whole bunch of incremental things. But that ended up being the insight that we got from all those early interviews and there were a lot of competitors at the time. There's still a lot of competitors today. Our thought process was like, why don't we just be the best at it, like the best way to like send a link to a file and see what happens to it and have control over that file. There's another benefit to which is that if someone 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 person and give you like a look book I take away at the end of it. So by creating a more trusting environment, you actually and sent sharing more. So, you know, like docs, and we try to keep it really simple, really intuitive, and then we've over time built it cater to more and more complicated workflows around external files sending. So yeah, people like the product. It tends to spread itself. Organic inbound word of mouth is still our number one channel. So a lot of those things that we figured out early on continue to be true. HMM, you know, as a result of just researching yourself. For us, I research doc send a lot more than I had in the past. I certainly heard of it, but I didn't sort of connect the dots to my use case right now. My company, it's called him books done. We basically provide the executive assistance that specialize in email management and we have a lot of clients that are like doctors, lawyers, venture capital, Angel Investors, and they're still sending a lot of attachments, as you can imagine, often with very either personal financial information or medical information, and we realize the exposure we have with our assistance just potentially sending the attachment to the wrong place or something like that. So we're like, we're actually instigating to send across our company now is a required client service that we're just going to bundle with what we do for them, just for that, you know, protection for ourselves as well. It's funny, we didn't think of it beforehand, so it's taken doing this podcast that made us go we really need this. Yeah, that's funny. Yeah, we do talk about docs and as a horizontal technology, we have to mark it vertically because, you know, we thought about going really deep on like one particular vertical but the work clothes are kind of all the same. So if you go to our website, you'll see our marketing is targeted to certain use cases, like fundraising, for example. Like fundraising is something I had to do for docs and it's something I care a lot about. It's really interesting and you know, docs end is an awesome fit for that. So we do a lot of a marketing tailor to fundraising and I've gotten to be really well educated about it as a result, and because oxid is used there, we have so much data that we can use the public research on it. But docks and as a product super horizontal. So yeah, I get that a lot of people are like, Oh, I had this need and I didn't even think about it, and then then it like docs and is great for that, and I'm like yeah, it's. It is exactly what we built a horse all technology that is...

...reasonable across a variety of situations and oftentimes people kind of stumble into it and then they're like Oh, it's perfect for me, and I'm like great. I'd love to just talk a little about that startup face. I know you said You got about twenty thousand clients round with customers right now. Right in that first you built the MVP version of the software. You were 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 five hundred customers, like what was that initial growth strategy? Sure, yeah, so we didn't have a great growth strategy when we started talks. Then we launched it, crunch disrupted and we just put up kind of a marketing site. That's a document analytics now. It's kind of it, and it was free to have to pay for it and we thought maybe it'll just take off like crazy, it'll leave viral al it'll be like, you know, hotnail or something. And it wasn't, but it also wasn't zero. So like it was kind of growing linearly. Then we thought, okay, maybe this is going to be great for sales team. So we went and sold it up market into like big sales teams and we still have a lot of like enterprise customers for docs end and yeah, that's what they use docks and for and it's great for that. But we kind of arrived at what it looks like today. It's just by talking to more customers. So the first thing I do is 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, and then we just paid attention to like, Hey, who's coming by, WHO's the most engaged with it, who likes it the most? What are they using it for, and like that kind of ongoing discovery process helped us make the product better, helped us represent the value that the product brings more accurately on our marketing site, and so those things just kind of like steadily built on top of each other and so if you zoom out, it looks like a pretty perfect hockey stick, even though a lot of it was this very incremental along the way. So there I think has to be some faith at the beginning that, like, Hey, if this ends up being a useful service, it's going to have some very specific properties, and one of those properties for docs end is that the product generates awareness for itself, so we can capitalize on that. It ends up becoming exponential. So it didn't take off exponentially at first, but it's always been better the linear and by just being patient and by like making the product better and better and better, it just continued to perform really well. which has been awesome to see. So we always joke that we were going to be in overnight success after a decade, and it only took eight years. Have scheduled Nice. Yeah, the in Buil virality of sending a document with a link that says docs and that then keeps you the experience of using it. It does Harken back to the old hot male dais, when you send a hot mail with hot mail from hotmail and then you want to know what that is. So yeah, the the only unintuitive thing there is that it's not as common that the recipients are also senders. So you know, for example, in the startup fundraising use case, venture capital investors actually don't send that many documents like they're receiving a lot of documents. They do eventually send their own documents when they go through their own fund raise, but they only go through their own fundraise typically every like two, three four years. So it's much less common. But what we found was that a lot of those investors end up being advocates for docs send for their own investments because they would get links and they might 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 the attachment, which is just like I got the link final click on it or look at it. Then other founders they're like, Hey, you should use docs, and when you send around your deck for your fund raise, that I'm a part of. And so and being word of mouth more so than product virality, although there is still some product virality, whereas hot mail or like a superhuman, anyone who's sending email or receiving email is also doing the inverse, right you receive an email or also sending emails, and so anyway, every product category is different. That's just part of the nuance to talk. Yeah, that's another nuance, a little bit like the nuance you how to with pursue the same thing. You don't Necessarie it until you start practicing. I'm as a start founder and a lot of the listeners are the same. We face this decision about how to put our marketing budget to work and you know you've got paper. Click on whatever it was, Google, facebook, instagram, so on. Pr You sponsored tech crunch to scrup that would have been an investment of some money. Not after the you know, word of mouth viral part before you got to that phase. How did you guys navigate that decisionmaking process? You know where to put money and test a new marketing technique. We've never really had a great marketing engine. I think kind of a paid acquisition marketing engine can make sense if you're doing vertical SASS. So if we had stayed hundreders that focus on the sales enablement one, throwing conferences and then you're like a gainsite trying to define a category type of thing or like sales force, and so you yeah, you can end up putting a lot of dollars to work via traditional marketing means for docs, and we did early on experiment with different marketing budgets, but none of that really moved the needle. So we just put all of our money in time and to just making the product better. And then I think a lot about message market fit, is something that's independent from product market... So for Docs on marketing basically figuring out what is the right messaging for our product and who is using it, and then how do we describe the way they're using it in words that they're going to understand? And so for Docs, and typically we're like a new product that people are using, just like you were saying. Are Your team is sending attachments and sort of replacing attachments. That's pretty common. So people are searching a lot for it, which is problematic. So it's hard to throw a bunch of dollars at like instagram marketing or something and people aren't really in market right there. And so yeah, it is kind of tricky. Like how do you get into someone's consideration set? How do you even convince someone they have a problem? And so a lot of that is just making our product better and better and better. The thing that did work well for US on marketing and continues to has been data driven research and content marketing. So one property of docks and is like Hey, if people are sending out their pitch decks, is docs and links, like we can see all that and aggregate and we're very security oriented. So anyone who's part of our research ops into being part of our research. But and then we go through and like analyze those pitch decks, like look at all their staff, people take surveys, and so this actually gave us really interesting takeaways for if you're raising a precede round or a seed round or if you're an investor raising around a capital like where do your lps come from? What do people care about? What's in those decks? Where do people spend their time? What correlates to success, what correlates to failure? And it also was something I wanted because back when I was starting pursuit or even with docs, and I get all this is advice from people, but I'm like, it's all anecdotal advice. Does anyone have anything that's slightly more scientific? And so those research reports are awesome for docs and even if people never end up using our products, is great pieces of content that educate and form. It kind of make you specific to the fundraising market place. Just make it more efficient on both sides by educating founders and kind of educating everyone on like what our best practices, and so that's a marketing playbook we can also repeat by vertical you know, as we get into like sales, ailant content or investor relations, or pick your use case, that their documents being sent there, there's some best practices docs and could probably surface and help give advice to people around. HMM, that's interesting. So it's like you're not pitching your actual software, but you're doing research on the users of this software producing content that sources data that's very relevant to the target market. They're not looking for docs and but they find that research relevant and maybe gets circulated through, you know, new sites and so on, or just google search. Then they read it, then they realize it's all kind of powered by docks and that's where the daughter came from. They're aware of the service and then they discover it and then potentials are using it. Yeah, it's fully very circulary, but you know, I've often found that like the most obvious channels are the ones that are already kind of overinvested in. So it's like, yeah, we know Docs and is a great e signature product, but the keywords for that are very, very expensive. So you know, it's like how can you probably acquire customers to those channels? Or Hey, you're going to go like sponsor big events and stuff like that. Like those things have a really long Roi if they have any R hi. Yeah, 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 like we just need people to be aware of what is docs end and then the rest kind of takes care of itself from there because of how much time we've spent in resting in the product experience itself. And so that's just one way to like, especially we only raised fifteen million dollars per docs end. Then we're able to compete with really, really big companies to create mind share and to create like a large user base. So I think from a marketing perspective for any startup or products, just good to ask yourself, but what are the potentially unintuitive superpowers that this product has? And then how do we use the products to like gain more awareness for ourselves in the ways that are other than just like, let's just throw money at Google search, and we do those things too for docs end, but it's more like ten, fifteen, twenty percent of our new sign ups should come from paid rather than, you know, we've just got like a giant demand gen engine that's accounting for most of our growth. Okay, that leads me to another question. That so, given product as marketing was clearly a focus for you guys. You were relying on just producing the best version of this solution. That, correct me from wrong. Would make a lot of your funding went into talent in the engineering side and product development side. What does that look like? A few guys, because I know you came from a background of having, I don't know if you computer science. I'm not sure how much about develop where you were yourself. So what was like the initial engineering team around ducks end? Yeah, great question. So I cofounders, Dave and Tony, are also software engineers. So when we were starting out, yeah, we all just sat around coding. There is great. We would just beat a different person's apartment every day, kind of rotate around and you know, it's down and just write code together. Is Right. And as certain point you know are like, okay, I gotta go talk some ventral customers. Then we got to go fundraisings. I went often, did the fundraising and raise the seed round of one point seven million from on Cork and yeah, that money all went to like hiring more engineers to work on the product. So I think having...

...a good engineering culture is something you've got to start early and it helps if the founders are engineers, because the founders are able to create the engineering environment that other great talent wants to be a part of, and that's always something we've prioritized and at a certain point in Docsin's history, you know, our growth was happening fast enough that we were just profitable and in that situation we actually didn't want to grow our engineering team too quickly. It's just really hard to maintain culture if you are growing at a crazy rate, and some companies have to, but we tried to grow engineering about fifty percent year, every year, just so we had time to onboard people's really invest in them. So I understood their swim lanes and so they're just multiple philosophies on how you can build a great engineering organization. I do think it is important for any companies engineering organization to be motivated, to be focused, because that ends up showing up in the products. You know, like we've never really had any downtime for docs end and everything we've built has made sense, and that's because behind it are people who enjoy their jobs and are motivated and you know, I've a pretty tightknit culture and especially if you're a company is relying on product that growth, that's really, really important. So I get a lot of credits my cofounders, Tony and Dave for just how they've built great teams over the years and like created such a great engineering culture for a doc sent and you know, you could always just pay more for people and we have to be very competitive in compensation. But that's only part of the story, right. Like it's really important to have a manager that respects you for you to feel like your work is impactful, and that really shows up just in the interviews. And a lot of like the people who work on docs and like came through referrals. BACT, like the brew suit thing or thank referrals are awesome, but they only work if it's a place that people really want to work at. So just to connect the dots with the financing as well, you said earlier about fifteen million dollars you raise in total before you required by dropbocks, and it sounds like you with the point man for raising funds being the CEO and front facing for that. was that relatively easy to raise, because it sounds that you guys became profitable pretty quickly, or was a challenging to raise because you were basically building software initially? I maybe the first seed round was the hardest because you didn't maybe have the users yet and you were trying to go out there and say we're going to lead with product. We don't know how well it's going to do. Give us your money. Is that kind of how it went our well, yeah, I think for the seed round was definitely the hardest round to raise. I think it was helpful that you have three engineers who were building this together. I think it's helpful that Dave tell me I've all worked together before going back to like leaving Stanford, you know, I didn't start my own thing I want and worked at someone else's company and met some great people, spent a lot more time with Dave and Tony, built relationships, and so, you know, it also helped that I'd already sold a company to facebook. So we went out to fundraise for docs and the message is basically like hey, great funding team. We are going to be able to build this thing. We've done a lot of research and think that it's something worth building. And here's kind of like the evidence we have that says like, Hey, this could be something big. And we got a lot of nose. A lot of people like we want to see more traction, or I get to see more revenue, or hey, there's no defense, will mode here? Or why wouldn't Microsoft do this or like this, sorts of things, but you only need one yes, which is nice. So my goal for fundraising for docks and for the seatground was like Hey, let me go talk to a whole bunch of really smart people in two weeks and see if we can get around raised, and if we can, we'll just go back to building. And so having that confidence was really helpful going into the process. And so yeah, Jeff that uncork said Hey, I'll leave around and said awesome, great. And then so that's the sea dround. The series a was from Howard at August capital and he looked at the sea round for us, but they had a five hundred million dollar fun, which is just too big of a fun to bother with the seat round. You know, they got to put much more money than that to work. Then they let our series a just because Howard started getting docs and links from other founders. So even before we started charging for the product, you'd been following us and he was like, Hey, I think you guys can build it and you know, I think you're going to figure it out. So we'd raised the eight million dollar series a, which is really fortunate right, but it speaks to keeping in touch and delivering on what you say you're going to do. So when I checked in with Howard, that's like hey, yeah, we're building it. We were doing exactly what we said we're going to do. It's working and here's what we're doing next in a certain point and you know, we had the confidence say like okay, yeah, well, we'll do your series a. so He'd raised ten million blocks at that point and I think for every company typically there comes a point in time where you need to create a business out of it. You know, by the time we got to series B metrics, we didn't need a whole lot of money and so we only raised five million from DCM. And that round was also one where Kyle Louie joined the board and he and I knew each other from business school. So again that's something a benefit from business school. And he just was really intrigued with what we were doing and really like the product led growth and thought it could 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. I said, well, I don't think we need a ton of money right now. The like money is not our bottle neck, but a little bit more would help. So we only raised five million and it just helped us like have confidence in two thousand and eighteen, two thousand and nineteen really to go through and like redoor marketing messaging. So we revamped a lot of like our pricing, our...

...packaging or positioning for docs and which then actually really started to fuel the fly wheel. And then by the time we could raised a much larger round, we realize that, well, money is not our bottle neck anymore because we're profitable and it's actually growing quickly. Access to more users is the bottle deck, and so that's ultinately why we've decided to sell to drop box, because they just have all the users that, you know, we would want to go actually acquire. So yeah, yeah, and I'll see. Want to talk about that in a second. I can really see the like a beachhead market you guys had with the pitch decks, and that naturally gets you in front of, well, obviously the users being the companies raising, but then there and user was the investor. The investor'sies are using docks and what's this company? And then it kind of enforces for raising funds. I don't know if that was deliberate, but that certainly sounds like an advantage. You might just tell me a little about you said like the repositioning in the pricing start to, you know, add a bit of fuel to the fire. Like what was the change there? Yeah, so what had happened was, remember, we started with document analytics. That's what it said on the website, and then we said Hey, we're able to sell this thing to like big sales teams. Let's just do that. So we change the messaging on the website to be sales enablement and all we talked about was just the sales use case for it. But people kept signing up for all sorts of things. Like our support team would get these questions like are you the service that does blah, Blah Blah, and then we be like yeah, and then they just go off and pay us. And then we like tried to gate things behind this like enterprise wall, like talk to the sales and a lot of people were like no, I get it, your product makes sense, I don't need to talk to sales. As word about from my credit card in right. So gain twenty teen. I just you know, as I mentioned earlier, was just chatting with lots of users and like looking to interesting use cases and be like what are they doing with our product? And after having enough conversations, you know, we decided like I don't think that sales enablement is the right messaging on our website, like yeah, sales team should use docsend or something like Docs, and that makes a ton of sense. But what we're doing is much broader than that and we were also were not charging enough. I didn't realize, like we were here talking to one investment banker and the managing director and he's like I love your service. I send documents to my secretary, I send the links, then she sends me screenshots of people reading my documents, like Oh cool. He's like it's crazy, we just don't pay you for your service. As like well, your secretary pays is ten dollars a month, and he's like, like, I said, we just don't pay you for your service. So when we redid our pricing, the increased pricing by a lot. So we took everything out from behind, like the enterprise pay wall. We made everything self serve and we came out with what is now the advanced plan, which costs a hundred fifty bucks month and three seats are included. That's a lot more expensive than ten dollars a month, right. But conversion went up because what people started using docs and for as we expanded the product, was as a data room. So if we're competing with Inter links, which is charging fifteen, Twentyzero for it, and you're looking to buy a data room provider, if Docsin is only charging ten dollars a month like that cannot be the same category of software. That's just insane. That doesn't make any sense. It becomes much more important that you buy the right software than you say a little bit of money here there. So by increasing pricing up two hundred fifty dollars a month so it's eighteen hundred dollars per year, that's at least in the right Ballpark, you know. And then in order to do that we had to change up all the messaging on our websites. And so if you the little four pys thing, you know we left the product the same, but we change pricing packaging and positioning and getting into data rooms. Data rooms like two and a half billion dollars a year and revenue is a huge market for us. Like we're able to be quite successful there. We also gotten into e signatures, and so as we've continued to add more and more functionality docks and it increases the LTV and increases engagement and increasing virality, all that sorts of stuff. But it was so interesting for me a few years ago, like going through, and that's why I said message market fit is so important. So for Docs, I'm kind of figuring out that right. Messaging on the website allowed us to take advantage of the product spreading awareness for itself and reduced a ton of user confusion. Like really smart, creative users be able to figure out how to use docs in four different things. But for everyone else, like we had to make it obvious for them, right, like if you go to a products website and it doesn't speak to you and your use case for it, you're not going to go buy it and figure out if you can shoehorned into your use case. Generally speaking, like the product has to say like Hey, I know who you are and here's exactly how you're going to use our products. And so by doing that, that just increased conversion of ton and it was that mostly driven by your research into your current customer base. Ride like you weren't guessing. You knew by seeing segments within your customers. Okay, there using it at this we haven't really presented our positioning and our marketing materials around that. Let's do that. Is that right? It's like the intrepred few we'd find, you know, there's like the people who are using it for something and we're just like, isn't that interesting? A few of them would chat with us and answer our questions and be like why are you using advance? Yeah, so they were already in our user base. But by having a relatively cheap product, that meant that it was pretty accessible. It wasn't like, you know, Fiftyzero Mienum manual spend, which is just a different way to go about things. So by having docs and as a product be something that you have a free trial with it, we used have freemium for it as well. We're just able to like observe how it's...

...being used and then unblock people there, which is actually a super valuable lesson from facebook. Early on, to remember Chris Cocks talking about how they would just observe facebook users running into walls and then unlock those things for them. Like when face book came out with the news feed. It's because people were just running around all their friends profiles to see if any was a new which is insane. Doesn't put that in a new speed, you know, and for for Docs, and it was like, okay, wow, people are really wanting to send one link to multiple documents. We should probably build that feature. Oh now we're a data room provider. Okay, cool. What does that mean? And it kind of like following the thread incrementally along and it must be fun too as a founder and almost getting goes to last. So ten minutes here Rus. I love to know. Obviously the decision to exit. So a bit of a loop here. You were in turning at dropbocks. So you clearly know it was early days at dropboxs to it and you said only five employees at the time. Was that when you return your funny fiften? Okay, so you clearly we're in touch with everyone on staff then. So you would have known the founding team very well. How much of that plane to the decision to ultimately partner and sell Docs and the dropbocks? I don't think very much of my personal relationship mattered. Like I mean it's a drews founder and the CEO dropbox and it certainly didn't hurt that I worked with him in the past, so I think that there's some amount of trust there that was useful. But we just created a great business and so certainly dropbox was inspirational to us as we created docs and, you know, product that of growth. Just make the product really intuitive, like just make it work. So there's a lot of overlap there in terms of like approach to building products that dropbox certainly liked. But, you know, the end of the day it was one where we didn't really shop it around. There's one other interested buyer and then it ended up being more of like a personal decision that, you know, we were excited to work with dropbox like this kind of fit into their vision of the future and for us it was exciting to think about having access to their really, really large user base. So it is kind of a rare and interesting full journey to come new back to drop box years later. It's funny because they turned on my dropbox account like I still had all my old book stuff in there, you know, from ten years ago, like how it's still still here. But it just happened to be the case that what we built with docs and fit in really well to what dropbox was moving towards in the future. And you know, big companies evolved to so you know I'd kept in touch with dropbox and some other evential strategics and we didn't need to sell docs end. It's just something that we did because it was exciting and interesting and a good fit. Yeah, I want to ask it sold for a current W from wrong it's tech crunch from Qoding for here hundred sixty five million. How do you determine a price whenever your countable sharing in terms to the numbers? I'd love to hear about it. Yeah, I mean it depends on like the situation in the scenario. Sometimes founders use like a term sheet to drive up the prize, sometimes just willingness to pay. But for Docs and we hadn't raised a whole lot of money so that that that everyone could make money and that they reported is at like x r. So it's like we could have been a lot more sure, could have been a lot less sure. In our situation there's just the big middle zone. So there's just some negotiating. But I'm sure it's different in every single scenario. But for us it seemed like a reasonable exit at the time. I think any deal that happens, probably both sides feel like it should have been more in their favor. But you know, for doc box, keeping our eye in the prize is like, yeah, this is an exciting combination between the two companies and it was great for our investors, it's great for our employees and it's great for docsins customers as we get to continue to build out and involve the the product and just can make it more and more useful for them. So everyone one, which is the situations. That doesn't happen a lot often. So for me, my cofounders, you know, they were excited about it and we're going to be working on docs and and help the drop box for the first evil future. Yeah, I think it's very clear that you're very much committed to the continuing journey of docs and you weren't like looking 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 your equity and in shares, whatever. I'm not sure what it was. Whatever the case maybeing, is a lot of money. Did it change you're thinking even around investing and what to do like to do something thin. Now I'm going to Angel Invest A lot. You more conservative. My podcast is called best at capital, so we're always interested in when you get a big capital infusion, what do you actually decide 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 am I bar. Typically for investing is like, do I like the founder enough that I would help them anyway? And if I'm going to health anyway and there's an opportunity, then I definitely will put money into so that's fun and I just like being a part of different software companies. So that's a lot of fun having access to more capital. Now it dure become an LP and a few different venture funds. You know, it hasn't really changed the day to day stuff and for me I always remember that. I think buildings offware's just really interesting and one and they're just so much value to add in the world, like creating great software. So I mean that's what I'll continue to do and be involved in, and there's lots to do left with with docs and but it didn't like fundamentally change like how, you know, my day to day or how I think about it, because it's like great, this is awesome financial win for everybody. Do I need to go invest a ton and other companies for some reason? Like no, I don't,...

...but I do like getting involved in helping where I can, and having money does help with that in terms of like the size of impact I can have. So I'm sure that's something I'll continue to do. Anything else, cryptocurrency EFT's, obviously, you know, you have to park money somewhere. Just not. Was Curious to hear we you know, did you play a nice car? You know, everyone loves hearing those stories. Maybe it was back with facebook when that was your your first sort of experience one exit like that. Well, why that are usually for not. Are Not very showy people, you know. So we've been pretty conservative on those fronts. And then in terms of like where to park money for like the best return, it's always such a crap shoot, you know, in terms of what the future will hold. It's the old business school addedge, like past performance asn't in to keep future success type of things. So for me, I tend to stick to being pretty 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 to me. So you know, there's plenty going on in the Crypto andft worlds that that, you know, I kind of scratch my head and I'm like that would have been a great investment a few years ago, but it's not entirely clear to me exactly what it's useful for or how I would use it. So I tend to stay away from things that apparently makes sense to other people but like don't connect with me as well. I'm happy to miss out on like some big wins just to stick with stuff that I'm interested in and for sure understand. So like be tob software, B TO BE SUS software. That's a great category, man. There are a lot of boring profital companies to be created and scaled in just bb sous software. And having been through this a couple times now, I really enjoy talking to first time founders or companier earlier because we've just learned so many lessons over the years working on this stuff and I love to pass that knowledge on. But those are the areas where I'm like yeah, that makes sense, someone should have built this years ago, and you're doing it. You're going to market and people are paying you for your software and I'm sure this will work out great. So, you know, those are the ones where I get those excited about the the boring, obvious ones. Fair enough. So, software guy through and through, Russ any other sort of last words of wisdom you want to pass on to people? I mean, I'm kind of curious now what you kind of vision is for the future, because you are working not just in your own company, but now it's a bigger you know, you're in in a larger company with multiple missions, not just your own. But is your focus just on getting as many uses to drop bocks? I mean it's both, right, like when you join a larger organization, it's you want to make the one plus one equals three or five or ten, and so for now, yeah, we're just focused on docs and change to improve it, but then doing that in the context of dropbox. So there's just so much integrating that has to happen, whether it's support or sales or go to market or the product, just getting all these systems to work together. And then, you know, it's row box of all its own like strategy, you know, just being a part of that influencing it. So you know, those are those are really fun things to be part of. That's my pain surces like time these days as work of 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 on Linkedin or on twitter, or even just russa docks and or Russa dropboxcom. All those things work awesome rust. Thank you taking the time to share the story. I love hearing the origin as well, as you know, the nuts and bolts of growing docs and and a few really insightful, almost psychological things more than just pure software development or marketing issues, that you shared it here, so I do appreciate that. Yeah, thank you are its great talking to you. I hope you enjoyed that episode with Docksens Cofounder, Russ Heddelston. I really appreciated him sharing the details behind the growth and eventual acquisition of docs and and I was just a fun interview, so I hope you felt the same. You heard me mentioned several times during this interview my own company, Inbox Donecom, and in fact how we're looking at rolling out docs and as part of our service. So what we do is we provide virtual executive assistants who specialize in superior communication and they take over applying to your email, they take over managing your calendar, they take over your social media direct messages, they can reply to those and they're basically fantastic with the written word and having that attention to detail to know how to manage something as personal and as private as those in boxes. And we're looking to use docs and as a tool to help secure the information that is shared by our clients. So basically, are assistants that we assigned to clients will be using Docs and to provide that extra layer of security, and it's definitely something we see as a valuable addition to the service we offer and that's why I'm talking about it. It's the sponsor of today's episode of the vested capital podcast. That's my company, inbox DONECOM. So you want to simplify your life, if you want to break free from living in your inbox, and you looking for an executive assistant service that really specializes in replying and managing to email, as well as all the other tasks that are associated with email, calendar scheduling, forwarding invoices, entering data into other software tools, doing basic research, but mostly just getting into that inbox replying to your messages. So you can not spend all... in there and gain back one, two, three, maybe even four hours a day and a lot of mental freedom as well. We are currently taking on new clients as we wrap up two thousand and twenty one, so we do have some space to on board you in the months ahead. You can always get in touch with us by going to INBOX DONECOM and booking a discovery call where you can tell us what things you need to delegate to us. We'd love to hear from you. That's inbox donecom. Okay, that's it for me. I'm going to get this interview out to you now. So I hope you enjoyed it and I look forward to talking to you on the very next episode. By by.

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