Akshay Kothari: How Notion Has More Money Than Ever & Why Startup Fundraising is Broken | E1203

Intro (0s)

• Founder mode is only effective if the founder is frequently correct. (2s)
• Notion currently has more cash on hand than it has spent in its entire history. (9s)
• Sequoia Capital has high standards for its portfolio companies, similar to Notion's high standards for its employees. (18s)

Adapting to Multiple Roles & Learning Fast (47s)

• The speaker's primary job was to help scale the business and the company, allowing their co-founders to focus on the product. (1m22s)
• The speaker's background is in product development, and they applied their knowledge of first principles thinking and systems design to other areas of the business. (1m40s)
• The speaker and their co-founder created a system for tagging customer support requests, which allowed engineers to see in real-time what issues customers were facing and prioritize their work accordingly. (3m0s)

Founder Mode & the Transformation of Traditional Org Structures (4m34s)

• Traditional organizational structures are being questioned as leaders like Jensen demonstrate alternative approaches, such as managing 40 direct reports without one-on-one meetings. (5m0s)
• The prioritization of a small, nimble team at Notion, largely influenced by Ivan, was not solely for profitability but for enhanced agility and responsiveness. (5m34s)
• Maintaining a small team size allows for greater agility and the ability to adapt quickly. (5m52s)

Managing Growth Without Losing Focus Amid Increased Funding (6m0s)

• The best way for a founder to manage growth is to use their veto power. (6m22s)
• Up to 500 employees, either Ivan or the speaker interviewed every job candidate. (6m49s)
• The company was willing to endure the pain of waiting for the best candidate for a position. (7m3s)

The Importance of Speed (7m16s)

• A small team can move faster in the long term, even if it feels slower in the short term. (7m46s)
• Instead of hiring more people and saying yes to more projects, it is more effective to do fewer things better. (9m4s)
• Values are very important, and one of the values is to be kind and direct, which means that people are invited to debate internally. (10m20s)

Lessons on Hiring (10m58s)

• Many of the roles at Notion were initially filled by hiring individual contributors first, and the speaker often started by doing the job themselves to shape the role. (11m22s)
• Hiring experienced executives from large tech companies proved to be a challenge because Notion's smaller size and leaner structure didn't align with their established ways of working. (12m2s)
• The speaker acknowledges that attempting to reinvent the sales function was a mistake and that adopting established sales practices would have been more effective. (13m11s)

Unmade Decisions Weighing on Notion's Future (16m12s)

• Notion faces a challenge in clearly defining itself as a product for consumers or large enterprises, despite its potential to serve both. (16m31s)
• Notion recognizes the importance of its consumer user base, as it contributes to the product's distribution and adoption in business settings. (18m6s)
• Achieving cash flow positive status early on has allowed Notion to prioritize product development and customer acquisition over fundraising, giving them greater control over their direction. (19m33s)

Are We Building Companies the Wrong Way Today? (19m37s)

• Companies should understand long-term valuation metrics, such as revenue multiples and PE multiples, which are typically in the range of 5 to 10x revenue for SaaS companies. (20m14s)
• Three ways to increase a company's valuation multiple are: achieving a faster growth rate, improving cash flow margin, and operating in an industry with high terminal growth potential. (20m49s)
• Raising capital too early can lead to companies prematurely scaling operations and hiring, potentially hindering their ability to stay close to customers and build a successful business. (21m49s)

Raising $50M at $2BN Valuation (22m26s)

• Notion raised $50 million at a $2 billion valuation in early 2020. (22m38s)
• The company pursued this funding round, despite not needing the capital, to signal stability to potential hires during the onset of the COVID-19 pandemic. (23m47s)
• Notion allocates a portion of its budget to testing different business strategies and channels, such as performance marketing and sales, to identify opportunities with strong unit economics. (26m0s)

Raising $270M at $10BN Valuation (27m25s)

• Notion raised approximately $270 million at a $10 billion valuation in the second half of 2021. (27m32s)
• The company planned to use the funds to compete more aggressively in the market, particularly in marketing and sales. (28m17s)
• Notion acknowledges the importance of valuation, especially for employees who need to see the value of their stock options grow. (31m28s)

What Would You Change About Fundraising? How Did Sequoia Join? (32m12s)

• In March 2020, during a Series B funding round, a pitch was made to Sequoia Capital (Sequoia) for investment, but the firm initially declined. (32m46s)
• Sequoia and Coatue, who had participated in the previous funding round, became investors in a later funding round. (33m28s)
• Sequoia Capital is viewed as having the best brand recognition among venture capital firms, which helps with talent acquisition, customer acquisition, and brand recognition. (33m37s)

What Was Unique About How Akshay Structured His Board (36m15s)

• Notion was able to secure funding while maintaining low dilution of ownership, approximately 2-3%, which provided the flexibility to delay the appointment of board members. (36m23s)
• The ideal board would comprise a CEO coach, a finance and audit expert, a go-to-market specialist, a governance and compensation specialist, and an investor with a macro perspective. (37m30s)
• This board composition is structured to provide one-on-one support and mentorship to the executive team, aligning with their growth and development. (38m9s)

Quick-Fire Round (39m50s)

• AI will create more jobs than it will eliminate. (39m57s)
• The principles discussed in the Bhagavad Gita, a part of the Mahabharata, are timeless and worth rereading. (40m21s)
• The speaker believes that boredom is beneficial for children's growth, as opposed to filling their schedules with constant activities. (43m17s)