Totally. That's a crazy story there. And key lesson there also, which I've also learned the hard way and I think you learned the hardest way possible because I run a business and I mostly do deals for my business which are not as high ticket as an M &A transaction obviously. But I've had that. I was getting happy at, you know, conversations getting further and, you know, getting to a stage where a deal is about to close, right? I was kind of happy about it, but now I've gotten to a stage where I know that a deal is not done until the money's in your bank, right? So I honestly now don't care at all how further a deal gets in the process and I celebrate it at all. I'm emotionless to it unless the money's in my bank, right? So I think you learned it the hardest way possible for an M &A transaction. But yeah. That's the lesson. Yeah, 100%. I mean, it's tough, right? Because that's the world

of being the founder, frankly. He's like the highest to highest, the lowest to lowest. partially, you get on that roller coaster and you ride it. And you're, as much as you want to be stoic about it, I think it's really hard to do that. And you're going to feel you're going to feel the highs, you're going to feel the lows, you've got to ground yourself. And I think with experience and age, that definitely helps. But at the end of the day, it's something very human to kind of have these feelings of anticipation. And, it's really hard to turn that off. Yeah,

totally. And you as a person have a lot of focus on product market fit. You run a podcast that's called the product market fit show. I encourage our listeners to go check that out. And also that's also a key focus at Mistral, right? So tell us how you are helping your portfolio companies and helping them find real product market fit and not fake growth numbers, right? Yeah, it's a great question. I mean, at the end of the day, the way we think about it is there's

before product market fit and there's after product market fit. And after product market fit, there's a lot of things that start to matter, right? Culture starts to matter in a big way. How much funding you have matters in a big way. Operational excellence and planning and finance, all these other functions that when you think about a classic enterprise, like a corporation, these are the sort of pieces of the puzzle, right? And great corporations are honestly great at all these things. And if you look at public companies and you hear quarterly calls, these are the sort of things that they're going to talk about, right? Long -term strategy, et cetera. But there is that kind of fine line before that divides product market fit and non -product market fit. And before product market fit, frankly, none of this stuff matters. I mean, it just doesn't matter. The only thing that matters is getting to product market fit. If you get to product market fit, you now get to a place where you're almost like you're an experiment until you get to product market fit. you're now in a stage where all the other things can actually add value. And so that's the way that we think about it. It's really the zero to one sort of event. And frankly, it is a bit more of a spectrum and product market fit is on every single feature. But there is this real concept of this before and this after. And we focus all of our time on the before, because we work, I mean, almost all of our time on the before, because we work with early stage companies and kind of help them in that path. Now I'll admit, and I'll be the first one to admit it, like feces, as much value as they can add are maybe 1% of the equation, right? The founders and the teams are 99% for the simple reason that they have way more depth, they're involved 80 hours a week, versus our two to five hours a week, right? So just, it's never gonna compare. I think what we can do, is what we add to the equation is that we have breadth, right, like we have seen way more examples of companies, of founders than any given founder has. And even a repeat founder, right? Like, or even a repeat founder has really experienced deeply, there are two or three experiences, maybe spoken to a few other founders, but we have seen hundreds. And so we can start to at least get a sense for, like pattern recognition of sort of things that are likely to help you find product market fit. And

the sort of things that are likely to kind of lead you straight. Totally agreed. VCs do see a lot of game film and that gives them that both side view of what works and what doesn't work in regards to product market fit, right? And when you say, you know, what works and what doesn't work, can you give us a brief insight into that, that what actually work, what's a good mindset to think about product market fit for early state founders?

And it'll be at a high level because the only way to get specific is on case by case, right? But what I can tell you is, you know, I'll give you one concrete, let's say, tip or whatever, which is probably the number one piece of advice that I would give to early stage founders is keep your team small. necessarily for as long as possible, but for until you find true, undeniable product market fit. Until you have clear market pull, don't grow your team because it's much easier to find product market fit with five to 10 people than it is with 20 or 30. When you start getting into the 20 or 30 range, you now have to spend time aligning your team, communicating with your team, managing your having sprints and planning phases. Every single time you want to make a change, you have to explain it to 20 or 30 people. You have to get by and from 20 or 30 people. And that's not helpful when you don't actually know what the thing is. By definition, if you don't have PMF, you haven't found the thing. So all the stuff that you're building is experimental, right? And until it becomes proven because of that market pull, you can't really add more bodies to solve the problem. What you have to optimize for is experimentation. It's velocity. It's the ability to change quickly on a dime, right? So when you have five or ten people, let's think about five, right? And I have so many examples. Like you look at Clio, this is how it was. You look at Shopify, this is how it was. Spellbook, another one that was in the headlines lately because of AI. That's how it was. was experimentation really quickly, trying things really quickly and moving and shifting and being extremely close to the customer. That's another thing is that when you have more bodies, you actually get further and further away from the customer, right? As a founder, which is the last thing you want, especially in those early days. So that would be my number one piece of advice is like when you're searching for product market fit. It's not just a runway thing, by the way. It's not like, well, I've raised $5 million, so I have all this runway, so I can add more people. I'm saying that adding more people beyond 5 and 10 before product market fit will, in almost all cases, there's exceptions to everything, but in almost all cases, make it harder for you to hit true PMF. Yeah,

that's a very solid insight there and also an advice for founders based on true events and true startups that you mentioned, right? You have talked to a lot of successful founders who are now post -PMF, who have achieved product market fit on your podcast. What has been a common thread there? Is it similar to what you said? That's one aspect of it, of course, keeping it lean initially. But any other aspects that you can share that you've

learned from other founders on your podcast? on value delivery, value creation, right? Less so on what happens a lot now because like the entrepreneurship culture is, you know, it's kind of like entrepreneurship has really permeated the culture I should say. And so many people are, you know, wanting to be founders, wanting to be entrepreneurs. There's so much information out there that one of the downsides actually is almost like overthinking, over strategizing, over polishing a deck and story and a narrative. Because the reality is that like, the more that time you spend on a narrative, at some point, you know, the beginning, you help yourself understand the world. And at some point, you go from helping yourself understand the world to just convincing yourself of a worldview, that may or may not be real. And that actually not helpful. And so that's actually a core difference I see between the, you know, I talked to a lot of founders obviously who, who pitch me or conversations that I have that are not, let's say, yet successful. So that's kind of your baseline, right? And then I interview founders that have gone into like late stage, well beyond part of my fit in many cases, had exit events or became unicorns. And that's kind of your success, let's say, your successful bucket of founders, right? And one difference I find is like, if you look at the early days of a lot of these companies, there was no strategic vision in most cases, right? Like about the release of an episode on Snapchat, there was no thesis about mobile or the app store in the creation of Snapchat. There was no huge vision around e -commerce in the creation of Shopify. In most of these cases, what it was was just somebody figuring out how to deliver true value to a specific customer set today and sort of that was really kind of a top number one or number two priority problem for that ICP for that ideal customer profile. That's one of the things and the maniacal focus on doing it. Some people got it right, right away, right? So I spoke with like full script. they're doing $900 million in revenue. When they put out what was basically Shopify from Natural Paths, it took off right away. It just hit right away. They got 50% of the Canadian market in a year. In other cases, with Spellbook, they just raised a $27 million Series A, but it took a long time. It took actually years of experimentation, hundreds of landing pages until they found the right kind of problem solution set, right? The right, not just phrasing, but the right problem to go after, the right way to tackle the problem, right? They always wanted to streamline legal firms, but they attacked it in so many different ways until one really hit, which is kind of this chat GPT for lawyers that they're doing today. So many different ways to get there. But at the end of the day, the core focus on just finding a way to deliver true undeniable value as kind of the key North star, I think for all these companies in the pre -product market fit phase. Right.

Totally. And you mentioned earlier in the conversation how when founders raise money, raise a round, they think, okay, I'm going to spend it and I'm going to hire a bigger team. I'm going to get more people in the team and then attack it, then attack the PMF problem. You're saying that that's not the right approach. You should keep it lean initially. Then what do you suggest that money should

be spent on? that's kind of the interesting piece. I mean, and again, there's going to be exceptions, right? So I did an episode with Glean. They're like a $2 billion company today. They started off with like $20 million round right away, but the founder had been through it before. He knew what he was doing. It was a different problem set. So we're going to call that like the 1% of the 1% that are successful startups, right? The 99% of successful startups, that stuff, more money, more bodies leads to more activity, more production, more features, but not to more success because it actually doesn't get you any closer to PMF. So I think for most founders, like, you know, at the end of the day, money's on the table. Like let's say somebody, you know, we're in 2021, 2022, and they're like, hey, here's $5 million and $50 million value. Should you not take it? I mean, you'd be crazy not to take it. If I was a founder, I would take it. The difference is what do you do with it? And I have seen founders – Rob, for example, runs a company called Float in Toronto. He raised a round, a pretty big round in kind of those hey days, and he just didn't spend it. like you just kept it, right? So if you have the discipline to do that, then by all means you should do it. If somebody gives you money on stupid terms and you're the recipient of that, you know, you'd be a fool not to act on it. The difference is, do all of a sudden start to grow that team, start to grow your expenses just because you have the money. That's your mistake, right? And that's the part that I'm really talking about. But I think for most founders, you rarely get stupid terms. I think what it really means is you just don't need that much money to find product market fit. What you need to build are a team of five to 10 people that either are founders or founder -like. They're builders, right? They need zero management. And they're what you need, depending on your use case, depending on what you're building, to just iterate on different concepts and try out different messaging as fast as humanly possible, right? Until you start to feel that market pool. And then when you do, that's when you can kind of start to lean in.

Right, totally. And up until what stage startups expected to achieve product market fit? Sorry, what do you mean? So I mean, the fundraising stage. So there is a pre -seed stage, there's a series A stage. At what stage are startups expected to have achieved product market fit?

I see. Yeah. So classically, that would be like series A. I mean, the way we think about it is Pre -Seed is kind of team market fit, team going after some ideas, some market. Seed is proven value prop. So like the team has actually delivered, you know, a product to a subset of customers who's actually getting some value from it. And then series A is clear product market fit, which is the value, the value creation is so clear and resonates so well with the ICP, the ideal customer profile, that there's this clear kind of market pull as a result of that, which shows up in, you know, high NPS scores, high retention, maybe high growth. There's a bunch of, you know, depending on the product, there's a bunch of different metrics you can look at. But it's also a feeling, frankly, it's also an emotional feeling that when you talk to customers, they're like, I could not live without this product. And you mentioned on the fundraising front,

if you are able to get amazing terms, you can potentially take it and keep it and not spend it. Because I think what most founders get wrong is they think that since they have the money, they need to spend it, right? But actually, the number of people in your team is not a KPI or a metric that you're chasing. It's actually growth numbers, right? So if it's optimizing those growth numbers, and you're achieving a real product market fit, not just burning money to acquire users, right? Then you should probably spend it, otherwise you should just keep it, if you're getting it on loop -credit terms, right? Awesome. And there's one thing that you prepared, maybe a presentation or something that you've been presenting at different conferences, which is called the five steps to product -market fit, right? Can you allow our listeners an

insight into that? So yeah, I'm happy to give you, you know, the presentation itself is like 20 minutes or so. So I won't go through like all the details. And really, I think the richness comes from a lot of the examples, but I'll walk you through kind of five steps, at least at a high level. Right. So step one is really about finding real problems. And in the kind of catch line there is before startup mode, there's research mode. So before you even have a startup and can do like lean startup things, right, like Eric Ries and all that kind of good stuff. You actually have to do serious research. And I've seen this done in a bunch of different ways. One of the one of the clearest examples I like to use is it's company called Ada, which is a chatbot company from like the 2010s. But the way that they built the product is they actually became customer service themselves, the founders, customer service agents themselves for over a year doing the actual job and figuring out all the subtleties, all the different workflows, all the different pieces of puzzle. And then they automated themselves out of a job and that became Ada, which is now a unicorn. And so that's step one is like before startup mode, there's research mode. The second one is that, you know, there's this book by Andy Grove, the CEO of Intel called Only the Paranoid Survive. And I think that what translates over when you think about pre -product market fit is that only the insanely focused survive. It's pretty crazy when I talked to some of these successful founders, this sort of weird things that they were doing on that only someone with maniacal focus would do. As an example, a company called Wealth Simple Canada is a $5 billion company, has millions of users. It's kind of like a, not Robinhood, but it's a finance app. And Mike Katchen told me when he started, he would call every user. These are not paying subscribers. These are not businesses, but every single time he'd get a sign up, he would personally call them within 30 seconds of signing up just to ask them, you know, how the experience was and just to introduce himself. So that's like, you know, when you're so focused on satisfying customers that, you know, that was his focus. Those are the crazy things you do. And so that's like, that's step two is like only the insanely focused survive. Um, step three is, you know, you have to be in the market to win the market. And what that means is you kind of have to start somewhere like we have all these lately. There's so much focus on market size, tam analysis from the outside looking in. But the reality is, you know, these things get found from the inside, right? You have to actually be in the market to win the market. And you don't really know where things are going to lead you once you're there. Like once you've identified a high level problem and you get insanely focused, you actually have to get in. And there's just so many examples of this, right? Like Wattpad is one, right? They have a hundred million users now on their marketplace, but it started off like in the pre iPhone age, like in the flip phone age, and it was literally an app. Today is like an app where authors can write books and readers can read them, right? And it's one of these, one of the biggest marketplaces in the world for that use case. But it started off, it was literally an app to help people read mobile, read stories on their phones, like classic stories on the go. Like that's what it was. There was no market. Like there was nothing really there. There was no TAM analysis, but he was in the market, right? And he had found a problem that was a real problem for him and some subset of people. And that led to something which led to something else, which grew the marketplace, which drew users and so on and so forth. So you have to be in the market to win the market. That's more your classic kind of lean startup thing. Step four is forget growth, find value, right? So I think post product market fit, you want to growth. Like you want to spend on sales, you want to spend on marketing, you want to spend on product all as a function of what's going to grow top line, what's going to grow customers, right? Whereas before product market fit, you're really not looking for growth, you're just looking for value. And that can mean weird things like in Cleo, which is a legal tech startup out of Vancouver, a billion dollar company. His example was when he started, he actually made it hard for people to join his beta program. He added friction. He said, if you want to be in my beta, you have to go through this webinar, 30 minute webinar. That's adding friction. Like that's the opposite of what you'd want to do post -party market fit, where all you want to do is remove friction, make it as frictionless as possible. But his goal wasn't to grow, it wasn't to get as many beta customers as possible, it was to get the right beta customers so that he could have the right conversations and find value. So that's step four. And then the final step, step five is pivot harder, faster, right? Like the reality is, even if you go through all these steps, even if you found problems, you get focused, you get in the market and you search strictly for value, you have to be willing to look at everything that you've done up till now as a sunk cost. This is maybe one of the hardest things for founders to do because founders are builders and when you build something, you get enamored with it. And there's this kind of sunk cost fallacy or this endowment effect that comes into play, all these biases that make you overvalue, which we've already built. But the best founders are willing to understand the simple truth, which is if you're a pre -product market fit, by definition, you haven't found the thing. And if you want to go to the extremes, what you've built so far is like worthless. It's not actually worthless, but that's probably a better construct anything else, which is I haven't found product market fit. So all the stuff I've built so far isn't the thing. So it's not worth that much, which means that if tomorrow there's a new thing, still probably within your market, within the world you understand, right? Within your ICP, that's the thing we should go out and we should be willing to kind of forgo everything else. In fact, what one founder told me, founder of Spellbook Scott, who'd done like hundreds of landing pages, he said, if anything, I would have been more aggressive. And anytime I put out a new feature, I would have presented it as an entirely new product with a new name, new brand, a new landing page to not confuse potential customers with everything else that I'd build, not try to think about how does this fit in and how does this position, but to kind of start with a blank slate and give that new messaging the best chances of actually resonating. So that's step five is pivot harder, faster. So those are all the steps that kind of, and these have been pulled frankly from all the conversations that I've had mainly through the product market show, on all these companies that have achieved Product Market Fit. Right.