20VC: Notion's Founder on "Founder Mode": When it Works & When it Doesn't | Why The Way Startups Fundraise & Construct Boards is Broken | Raising at a $10BN Valuation in Peak Bubble Times and How Notion Has More Money Than Ever Before with Akshay Kothari
Sep 18, 2024
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Akshay Kothari, Co-Founder of Notion and former LinkedIn VP, shares insights on navigating startup challenges. He discusses the concept of 'Founder Mode' and its impact on decision-making, emphasizing the importance of a founder's 'veto power.' Akshay reveals the thought process behind raising significant funds, including a $270M round at a $10BN valuation, and the lessons learned from investor dynamics. He also reflects on the need for diverse board members and the role of first principles in scaling a successful startup.
Founder mode can be beneficial, but it becomes risky if a leader's decisions are consistently misguided, threatening the company's viability.
Notion's success is attributed to maintaining a lean team that fosters agility, allowing for quick decision-making and better resource allocation.
Linking customer feedback directly to product development has enhanced Notion's efficiency, ensuring that product enhancements align with actual user needs.
Deep dives
The Impact of Founder Leadership
Founder mode is effective when the leader consistently makes sound decisions; otherwise, it poses risks to the company. A strong leadership approach is needed to ensure that cash flow remains healthy and strategic choices are maintained. The discussion highlights the benefits of having a founder who prioritizes company culture and strategic growth, especially in companies that have significant funding, such as Notion. If a founder's decisions are misguided, it can jeopardize the company's future and viability.
The Importance of a Lean Team
Keeping a lean team has proven to be advantageous for Notion, allowing for faster decision-making and adaptability. The speaker emphasizes how maintaining a smaller workforce enables agility and encourages better resource management. Rather than expanding the team drastically, they focused on hiring selectively, which cultivated a culture of shared responsibility and creativity. This strategy has allowed Notion to utilize its resources effectively, keeping their operational costs in check while still achieving growth.
Innovative Customer Support Systems
An innovative approach to customer support was implemented by linking customer feedback directly to product development, significantly enhancing efficiency. Instead of merely increasing support staff in response to higher ticket volumes, systems were designed to streamline communication between support and engineering teams. A database of customer requests was created, allowing engineers to access real-time insights on user needs and trends. This proactive measure not only reduced the need for extensive hiring but also ensured that product enhancements were aligned with actual user feedback.
Navigating Growth and Agility
The discussions reveal the tension between aggressive growth tactics and maintaining operational discipline as Notion scales. The company raised significant funding to be competitive while adopting a cautious approach to hiring and project selection. This contrasted perspective suggests that while seizing market opportunities is essential, remaining disciplined not to overextend resources is critical for long-term sustainability. Adapting to market behavior and being prepared to dial back on aggressive growth strategies when necessary is an important lesson shared.
Valuation and Cash Flow Perspective
Being cash flow positive early on allowed Notion greater control over its strategic direction, significantly influencing investment decisions. The discussion contrasts the challenges faced by companies reliant on external funding with those that are self-sustainable. Knowing they were cash flow positive gave Notion the leverage to make decisions without the looming pressure of impending funding rounds. This financial stability enabled strategic investments in product development and a focus on long-term growth without losing sight of operational effectiveness.
Akshay Kothari is Co-Founder at Notion, one of the fastest-growing companies of the last decade. Akshay has run every function in the company from sales, to marketing to finance and even led their fundraising efforts raising $340M+ from Sequoia, Index and Coatue with the latest round pricing them at $10BN. Before Notion, Akshay was VP Product at Linkedin for 5+ years, leading all of their content efforts. He joined LinkedIn when his previous company, Pulse, was acquired by LinkedIn in 2013.
In Today's Episode with Akshay Kothari We Discuss:
1. Founder Mode, Veto Powers and Focus:
Does Akshay agree with "founder mode"? What are the biggest downsides to founder mode that not enough people are discussing?
Why does Akshay believe that the single greatest power of a founder is their "veto power"?
What is the biggest opportunity that Notion jumped on that they should not have done?
What is the biggest opportunity that Notion did not jump on that they should have jumped on?
2. Raising $50M @ $2BN Valuation:
Why did Ivan and Akshay decide to do this raise when they did not even need the money?
How did the fundraising process for this round go? Why did they choose Coatue and Index?
Why did Sequoia say no to this round?
With the benefit of hindsight, what does Akshay wish that they had done differently?
3. Raising $270M @ $10BN Valuation:
How did Sequoia come back into the frame with this round? Why did they say yes here when they did not before?
Why does Akshay believe that of all the investor brands, Sequoia is the most powerful? In what way does having Sequoia as an investor change the trajectory of the company?
Is Akshay concerned about how he will be able to scale into the $10BN valuation?
How does Akshay address the challenge of bringing new team members in with stock options priced at $10BN? How much of a blocker is that?
4. Boards and Social Media are F*******:
How is the way in which boards are constructed broken?
How does Akshay believe that boards should be constructed?
What roles should founders hire for in their board members?
Why is Akshay most concerned about the "Tiktokification of everything"?
Why does Akshay believe that social media has never been more concerning?
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