Announcer: Hey there, product lovers. Welcome to the Product Love podcast, hosted by Eric Boduch, co- founder and chief evangelist of Pendo and super fan of all things product. Product Love is the place for real insights into the world of crafting products, as Eric interviews founders, product leaders, venture capitalists, authors, and more. So let's dive in now with today's Product Love podcast.

Eric Boduch: Welcome lovers to Product today. I'm here with Mike McDerment. He is one of the founders and also the executive chairperson of Freshbooks. Mike, why don't you kick this off by giving us a little overview of your background?

Mike McDerment: Sure, swell. Thanks for having me, Eric. Okay, my background, yes, I'm a founder. I was running a small design firm, I saved over an invoice one day billing my clients. I used to use Word and Excel, and I quickly realized the shortcomings, having lost an important document. So I said, " There's got to be a better way to do this." I built a very rudimentary online invoicing thing. This is in 2003. I mean, since then we moved into my parent's basement for three years and today that initial side project I had built for my agency has turned into Freshbooks. We're number two in America for small business accounting software, we have over 500 employees now and paying customers in over 100 countries around the world, with over 30 million people having used the software. As it pertains to this interview, that's probably most of the pertinent background.

Eric Boduch: Awesome. Talk to me about how you got into the tech space, how you pivoted away from your design firm. What was that whole experience like? I understand you had that aha moment. I had a similar one. I used to do invoices for some of the consulting I did in Word. I remember sending one client two invoices and the number was the same. I was like, " Whoops, that's just because I didn't increment it the next time." You can see a need, right? I definitely felt the pain that you felt. Talk to me about that transition, what it was like, that jump.

Mike McDerment: There was the pain that inspired the frustration. I had a series of problems like wondering who owed me money and how much they owed me. That was rattling around in the back of my mind and I had the agency. I had that moment where I just snapped and I started working in my" spare time." Evenings and I took some time out of my day because it was my own shop and I could do that. But I built that simple prototype and I had a gentleman who was working with me doing contract work for my agency. He was a doctor in computer science and he was like, " Oh, this is interesting." We just both saw it as a little side project. He was literally like, " Can I play with this?" I said, " Sure," so he started working the backend and I stayed with the front end. Anyways, fast forward 12 months, we created something we could take to market and we launched it. We really iterated from there. Rightly or wrongly, I think the heart of your question might be, how did you do both things at once? I did them parallel for a while. I kept the agency and that provided me with some income and actually enabled me to support some employees. I just gradually started moving my time and then my team's time over to Freshbooks. It was two or three years of transition from agency to startup, if you will. That's how we managed those early years.

Eric Boduch: It was a gradual process. It was not like one day you're like, " I'm making enough money that I should just shut down the design firm." But it was a process that took place over two, three years.

Mike McDerment: Yeah, that's right, through a combination of things. One of which was we just weren't earning that much revenue. Two years after saving that invoice, we were making$ 100 bucks a month. It was recurring revenue, which was great, but it was$ 100 dollars a month and there were three of us who were involved in the project. That wasn't enough to support anybody. So we needed the income from the agency and we just toughed it out until we had enough income to support pretty much six people.

Eric Boduch: Was there any hesitation in finally making that jump? Were you were like, " This is what I always wanted to do."

Mike McDerment: For me, I've always liked those jumping moments and then to go and just create. I think of it as like jumping off the cliff and figuring out how you land before you get down there. Some people are terrified of that. That for me, is the most special part of entrepreneurship and the process, is figuring all that stuff out. For me, it was gradual in a way, but under the hood, really quickly I was spending 80% of my time on this side project and it was just a matter of trying to get all the employees there too. Then get everybody to 100% time, so it was a job of optimizing for can we make enough revenue to keep everybody solvent while we transition? But my head and my heart switched pretty quickly. I liked a lot of the things with client service and there was a great need to continue to improve your craft and expertise. I sometimes refer to it as three layer chess. There's these three layer chess boards. I've never actually played. But playing one chess board's hard, playing three at once, three dimensional chess, that is next level. Relative to a service company, I find product companies to be that way.

Eric Boduch: Interesting. You're bootstrapping in the early days of Freshbooks. I mean, no easy feat, but nice that you have a design firm where you can keep that going and generating the revenue to keep everyone covered. Did you think about outside investors?

Mike McDerment: For us, not often recognized or acknowledged in the story, we put some of our own money in and we raised some angel money to the tune of$ 40,000 or $50,000 here and there. Checks like that to keep us going in the basement days. Raised a little money there but that was really friends and family and people who cared more about us than ever expecting to get their money back. Love money, if you will. Over that time, as I learned about venture capital and that industry, if you think about the time frame I'm talking about, which is 2003 to 2006, it was a pretty different time for the VC industry. That industry was a cottage industry and had a pretty good reputation in a lot of cases of taking advantage of entrepreneurs just because the information arbitrage was so huge. So I was pretty leery, to be honest. What I was most concerned of, because I'm just so customer focused, was frankly, losing the ability to do the right thing for the customer. I thought that if we brought on venture capital in those early days, knowing that I didn't know how to manage venture capitalists or that whole process, I would find myself in a place where I could no longer do the right thing for the customer. Basically, I was highly paranoid and fearful and so we just put our heads down and kept building the business. But over the course of doing that, I learned more. I learned more about VC, also really the internet came along and made a lot of information available. I built some relationships with other entrepreneurs who helped me understand how this stuff worked. And a whole bunch of VCs, frankly, which was great. Became a student of it and then got to understand how things worked. Eventually, ultimately raised a bunch of capital and then raised some more after that. It was a process, about a decade of no institutional capital while we just figured out how to get this business going.

Eric Boduch: Now, that was 2003- ish, right? Now, 2021, if you were doing Freshbooks today, if the environment was like today as far as the venture capital market, especially I assume you were in the Toronto area back then too, would you have raised money earlier?

Mike McDerment: I might have. I think the question is, hey, if I had the access to information, if I could have joined an accelerator, an incubator to speed up the learning curve. For us, in 2003, I'm really glad we didn't speed it up because frankly, the market wasn't even ready. When we started out people were like, " Oh, can you send us the source code on a CD so we can host it?" People weren't committed to the cloud yet and one of the worst things that can happen is you're too early. You raise too much capital which predicates a whole bunch of expectations in a certain direction for your company. But the market hasn't evolved enough yet that the way you're going to market and the way you're serving your customers is going to be the right one. Long winded way of saying, I think the timing was good for us and so it's really hard to re- trade decisions like that. I am a founder of some other companies and in one case we're like, " We're going to build, I hope, tens of millions of dollars of software before we even have a dollar of revenue." But that's appropriate to that opportunity. This one was one where we could get started with less capital because it was a web application and that's just different. I think it's opportunity dependent and the rest of it. I hate to give a non- answer like that. But crosstalk.

Eric Boduch: Good answer. I mean, you might've raised money, but at the same time there's a need to learn about your market. There's a need to figure out that product market fit and there's also a need not to scale something before the market's ready to consume it. You start a clock, so to speak, when you raise money in most cases. Investors want to see that growth kicking in fast.

Mike McDerment: Yeah, 100%. Just by way of anecdote, we almost raised$ 300,000 for 30% of the company back in the basement and we wanted to do it. But I'm pretty confident that if we had succeeded in that fund raise, it was just some angels, but I think we'd be out of business today. Not that they were terrible people, but the expectations and all those kinds of things would have been mismatched with the timeline it was going to take to incubate our approach to the market and a variety of other things.

Eric Boduch: I mean, they're probably thinking, " Wow, I would've owned a lot of Freshbooks for a small amount," be millionaires.

Mike McDerment: That would be one of the things they might be thinking, yeah. I'll go ahead and tell you just as you're building a company you want the right people around you. The gentleman who was our lead point of contact for that was a wonderful man. When we started raising capital and before we did, I went back to him. I was like, " Listen, I think this thing's going okay. I'm not sure I need the money, but I'd really love to give you the opportunity to invest now if you want to," just because he was so helpful to us. It was a positive experience. Yes, we tried to raise money that probably would have really hurt us in the long run, but there's nothing wrong with that individual. He was just wonderful.

Eric Boduch: Yeah, I understand that, having been through that. Talk to me about the scaling process. Small startup to over, I think you said 25 million plus users. What advice do you have for people who want scale? Want to scale product, want to scale company?

Mike McDerment: Well, I've got lots of pithy, philosophical statements. I'll give you a few and we can talk them through.

Eric Boduch: That sounds great.

Mike McDerment: I have a couple of beliefs that I always go back to and when I'm lost try to remind myself of. One of them is to be successful in business, but also in life, I think you need two things. Which is shared values and alignment. If you bring on and start working with people who you don't really have those shared values with, when things get rocky that's going to show up and probably be decisive and contentious and all this kind of stuff. You want to think about, hey, what makes this person tick? Do I want to sit next to this person for 60 hours a week for 10 years? It's really important who you found with. Then also important when you start hiring. Do these people have this baseline of values? I'm not talking about political beliefs or anything like that. Just some core values. Do they have integrity? Are they going to tell you something's wrong if it's wrong? That kind of stuff. So shared values and alignment. Yeah, I guess alignment's the other part, which is like, " Hey, are we all clear on where we're going? And are we all bought into it?" Because if you don't know where we're going, then we're probably not going to get there. And if you know where we're going, but you're not bought in, then we're probably not going to get there. You inaudible those things all the time. Another thing that comes to mind, puts some of the earlier questions in context is, really for software companies it's all people. The biggest asset's people. You're just using capital to get more people so you can do more stuff with it. Whether it's build software, sell software, market software, whatever. It's people. I don't know who this was, can't think of the podcaster's name, but every problem's a people problem. Every solution's a people solution. As you go along when you're scaling, my pattern was solving for people who have good intention, who had capability, not solving for utmost technical expertise. I frankly, wouldn't have been able to recognize it if I saw it. I had done some design stuff, built some websites, but was not an engineer. So I solved for people of good intent who were loyal and into what we were doing. Then we progressively figured things out. Over time, your pattern recognition improves. Then it's just a job of they're scaling you. Which is hey, don't hold up the growth of the business. Keep learning, be open, don't get high on your own supply. You got to respect the people that are disagreeing with you. You got to understand why and leave room for them to do that. But then the harder part almost, there's yourself. Actually, it's brutally hard to grow yourself when you're trying to figure all this stuff out. Especially if you don't have experience in another company, been mentored and developed or something like that. I was a first time founder. Then the other part of it is the people and just outgrowing different people at different times. You have to make changes and you want to keep some of those people, but you're going to layer them. Put somebody on top and that's hard. It's all about people, yourself being one of those people that needs to grow and develop. And then the people you surround yourself with to really make it all happen.

Eric Boduch: I'd like to dig into all those things a little bit. But let's talk about the people one first. In particular, the layering. In a lot of cases, entrepreneurs might have their first VP of sales that's great for bringing them that first million dollars of ARR, but maybe isn't the right guy and often isn't the right guy to scale them to the next$ 20,000,000 or$30, 000,000. What advice do you have for them, especially when they have someone that's helped them a lot, that's done well for the company, but just isn't the right guy to get them to the next level? How do you help them through that process? Both A: identifying it and maybe figuring out how to have those conversations.

Mike McDerment: The first thing to know is it's super delicate and super hard. I think the first thing is just to come at the whole process from a place of respect. I think sometimes you can get into a place where you might lose sight of that. I always try to come at it from like, " Hey, this person's been great." The analogy, maybe a helpful analogy here is I had an advisor I crossed paths with. He talked about re- potting plants. It's like, " Hey, is this a plant we can re- pot?" Maybe that VP of sales on some level deep inside of them, maybe even knows that they can't do what needs to be done next. And maybe they'd be happy to learn from somebody who can go out inaudible. Now, you can't assume that, you don't know. But stranger things have happened, that in the back of peoples' minds they know they're at their breaking point. Actually being able to have a conversation that's really not about the person. What I mean by that is, these are not conversations to make personal in any way about what that person can or can't do. It's entirely around like, " Hey, what we've done together is amazing so far, that's personal. We're always going to have that. What I see us doing is in three years we're going to be here. The gap between here and there," and by the way as a founder you can probably get away this is say, " I don't know how to do it. We haven't done this before, but I know it's different. I think for that thing, I'm going to bring somebody in. But here's the deal, I want you to be here, subject to your wanting to be here as well. And let's bring somebody in." For me, I would involve people in the recruit process. Like, " Let's have you have a hand in vetting them. Let's make sure they're somebody you can learn from. You have so much knowledge about this business that we don't want you to go anywhere. This has always been my orientation, I want you to stay. A lot you can contribute, but we need somebody else to lead this thing and take us to the next place." I think that creates an element of safety because I think sometimes people feel like I'm getting fired, I have to leave. And in a lot of cases, you don't even want that outcome, so you got to take that off the table and make it their choice. Like, " Hey, I'm going to do this because I think it's the right thing for the business. But you have a choice. We would like you to stay. Maybe its not working for that person. Maybe you can go and run something else now. You've done a great job in sales, maybe you can go and take that to service or something like this, I don't know." This is where again, it comes back to so much of it's going to be predicated on who is that person you're talking to, what is their makeup, what are their values? Maybe it's all about them and this is just a complete hit to their ego that they're never going to be able to handle. And they're just going to be like, " Forget you, I'm out of here." You learn something that day and that's" fine." But I think if you come at it with respect and for me at least, if you can retain that person after the new person comes in and make them part of the process, that's what I did in the early days, for sure.

Eric Boduch: Yeah, it's the same. I know I brought up sales as an example, even though I have a product podcast here. inaudible entrepreneur, I think that's one of the easy ones to think about. But it's the same process on the product side. The role of a head of product changes as the company grows.

Mike McDerment: The role does, but you know what? The thing about product that's particularly interesting, is that knowledge of the customer. People who are at a company early on, they understand both your product and a customer in a way that the new professionals often don't. That customer intimacy, I'll go ahead and call it, is really important to helping those new professionals survive. Because a lot of times they're bringing in the oh, well, I'll bring in the process and maybe some leadership and some coordination. But it's going to be years for that new product leader to catch up and understand what the team already knows. Then maybe that informs what kind of a leader you're looking for. One of the questions I always ask when I think about a product leader, it's like, " Are you looking for revolution or evolution?" If you're hiring a head of product, I think that's one of the most important questions. Because depending on how the organization's set up, the other people that are there, you as a founder, I think you want a different product leader based on hey, do we have a strong vision and we need somebody to help us go and get at it? Or are we basically running a turnaround, we don't know where to go because the product market's not working and we need the revolution. We need somebody to come in and create a vision for us and take us to it. There's an example; one role, two very different animals and very different outcomes. Ideally, you want somebody who can flex between both, but mostly people have a leaning one way or another.

Eric Boduch: Yeah, yeah. I would even ask that as an interview question, pick one. crosstalk wants to say, " I have experience doing both," but when you force them to pick one, they get one choice.

Mike McDerment: Then I would say like, " What do you believe?" To me, it's not a question they can actually answer. You got to probe and you got to understand where are somebody's biases? Do they work on leading indicators or lagging? That gets into the art of interviewing, which is super hard as a founder because you probably don't have that much pattern recognition.

Eric Boduch: Yeah, no, absolutely. I mean, I think not getting into the art of interviewing, but asking questions that have multiple right answers, where they know they need to pick one helps you determine where their leanings are. One of the things you mentioned was yourself, working on yourself. Talk to me about that process and what you did and how you did that.

Mike McDerment: Well, I think there are again, phases and periods of all of this. When you're starting out like we did and we knew nothing, you're just running from thing to thing for such a long time. I hadn't really worked anywhere else, I didn't know how a software company worked. The number of things that were necessary to learn while you're leading is just astronomical in that context. It's not like I spent five years in Microsoft and I understood these functions and how they fit together and the roles complement. When you have the experience, you have a mental model for so many things that you don't even know you're going to need a mental model for. I think the core thing I tried to do is just surround me with great people who if I didn't know, I would ask them. This is going to sound funny to a lot of them in hindsight, but it's true. I would just ask and be curious if I knew I didn't know how to solve a problem or I didn't have an opinion that I thought it was going to be good for the business. That was my approach because I couldn't go out and get the experience because I was doing something and fully employed. I would A: collect advisors, but I probably learned more from the executives I brought in, in trying to be curious around how they did and having a discussion around whether it's usually a terrible idea to just re- implement the same thing. Let's talk about it, let's see what the situation's different. How would you take some of those things and apply it, but learn that way, is part of my approach over the years. That's growing in the functional roles. Then I think just pushing yourself to be better. Walking the dog around the block at night and for me, it's just attacking myself for all the things I did wrong that day and trying to be better. Then you get to a place, and sorry for the ramble here, then you get to a place where you can't keep it all straight. You basically just need to find mindfulness. There is no going through this wall, so just accept it all, try to quiet yourself down. And that's a bunch of years. Now, we're at place where, was it this month? Three weeks ago, after almost 20 years, I tossed the keys to a gentleman. If you've ever heard war time CEO and peace time CEO, I think we're going into a peace time where it's an expansion stage. He's an operator who I think is better suited to do what the company needs. I think maybe the final thing would be have enough self- awareness to say, " Can somebody do what needs to be done for the next leg of the race better?" I think that's that case in this situation.

Eric Boduch: Interesting, that's pretty awesome. I wanted to talk about building the product. Obviously, the product needs, just like the needs on you change as the company grows. At one point you rebuilt the Freshbooks platform. Talk to me about what made you guys decide to do that, when you decided it was the right time? How you went about that process.

Mike McDerment: Why did we do it? We had built the first version in 2003. My co- founder was somebody who could get a lot of stuff done and was a computer scientist, but was not a software craftsperson at all. The punch line of all that, is we just had heaping amounts of technical debt by the time a real engineer started showing up. We worked with that technical debt and some of that technical debt was front end and back end together in one monolithic front end piece of software. A lot of the magic in our platform was actually front end. Anyhow, long story short, we saw hey, there's a need to modernize not only our UX, but the look and feel to keep up with the times. Plus, you've got all these new devices coming in. Frankly, we started out, mobile phones were not a thing. Today they are the thing. In our category, they're less the hero than some other categories. But you really have to have a good mobile experience certainly in our category and certainly in most others. For these reasons and more, really the simplicity of the UX, the new expectations, the standard we want to hold ourselves to, we basically looked at our front end meets back end monolithic piece of code and said, " I don't think we can get here from there. I don't know that we're setting the company up to have a great 30 year future if we don't take this problem on." We could have gone ahead and refactored and we explored that. But I think when you refactor front end design, it doesn't really work that way. You need a new user experience. Because it was all jumbled together; back end and front end, basically refactoring was going to be less of a viable path for us. So we went and recreated a new offering and while we did it, we incubated it as a standalone company that no one knew it was us. We did that so that we could have this safety, I guess, to go ahead and take big risks. Do something like lose data because we were moving so fast and taking so many risks. Now, we didn't lose any data, but if you build a new platform with your existing brand and there's a problem, like you lose data, you're existing brand gets a hit as well. We really wanted people to be able to take risks and to not have to suffer the consequences on the core brand while we did that. That's why we built off in the corner and then we combined the two and after about 18 months, everyone who signed up for our service got the new thing and then we continued to build and iterate on that.

Eric Boduch: This is your secret competitor to yourself.

Mike McDerment: Yeah. There's a long winded way of telling this story. We're covering lots of stuff, but that's right. We actually created a secret company that you could not associate with our own. That's where we built and tested the new Freshbooks. It's a company called Bill Spring. It was incorporated, it had its own documents, domain, logo, everything. We used that as a testing playground until we had enough empirical data to say, " Hey, this is a superior way forward and let's make that the new thing."

Eric Boduch: Do you recommend that for other companies? Take that approach?

Mike McDerment: I mean, perhaps. You got to choose your own circumstances. For us, we wanted to not be copied and to have as much time as we could. We've got a competitor whose internal mantra is copy to compete. It's like, " Okay, I'll take another 18 months just out of eye shot to go ahead and work on something so they have less time to adjust when I actually bring it to market." Yeah, that's a thing. But also a big part of it was having the safety to really take big risks.

Eric Boduch: Now, how is the integration process when you brought that in?

Mike McDerment: Well, what we had despite the monolithic front end and back end code, we had done some work to start teasing apart the architecture of our application way back when. So we basically had a path to the database that was separate. We really had the same database on the new and the old platform. It was more sidestepping a bunch of front end entanglements, if that makes sense. Really, we just put a new front end on the same back end for a lot of people, which cut down on the problems, if you will. We did make some mistakes in there. We created a service that moved away from the existing back end patterns and started a whole new thing. I think I regret that decision to this day and should have fought it harder. But mostly it's still even taking advantage of that older code, which we will now refactor that in a sensible way. But the front end was a different story.

Eric Boduch: Now, beyond the opportunity to build something away from the watchful eyes of certain competitors, what else did your product team learn from the experience? What were some of the other big, maybe unanticipated learnings?

Mike McDerment: There's a couple ways to cut this. I mean, I think there's reasons to go ahead and do that, of which there are a bunch. But I think empirically knowing your new offering is better than just hoping it will be because you inside the building believe it is, I think that was an important thing to learn. I think another thing we learned is when we launched it was great for new people, but our existing customers were not happy with it. There's a difference between when somebody's signing up new and your existing customers will experience and expect. I think that was important. But maybe more to the point, what I want to say are some of the unexpected benefits of this whole process, I think the organization achieved peak performance during this period because it was so uncertain that we would survive it. It was really hard. Three weeks from launching, it wasn't clear that we were going to be able to land the plane and pull it off and flip the switch. For all these years, hey, you're building a new thing, it's your new baby. It's really technically hard, it's not clear we're going to be able to merge it all back into one at the end, if you will. That brings out the best in people. By the way, I wonder how you'd do that in a remote world. It'd be very interesting, because I think a lot of it was the collaboration, stuff like that, in office. There was a real energy that was super exciting about that and I think a lot of people took a next level of growth in themselves and really pushed. If they all look back on it, a lot of people that'll be the peak of their career, for sure. And they probably worked harder than ever and look back and say, " I learned a ton and I loved it more than any time."

Eric Boduch: Yeah, not being sure if you're going to land the plane, that's definitely one way you can cause havoc in the company. One of the questions I had written down here, we were chatting about earlier, was the seven ways you almost killed Freshbooks. Talk to me about that.

Mike McDerment: Well, nothing I've mentioned to date was on the original seven ways list. So I think I'll just call that out and be like, " Clearly it's been more than seven." But having said that-

Eric Boduch: I assumed this was one of the seven, but I guess I was wrong.

Mike McDerment: No, no, no. I made this list, it's a blog post that's out there, seven ways I almost killed Freshbooks, if anyone wants to go look it up. inaudible There's some really good stuff in there. But one of the things on that list was a false sense of security from spending money. I think sometimes whether it's advertising dollars or we can grow if we only had the money. It's a really seductive line of thinking and it's just not true. That's one of the ways we almost killed it. Close to that is believing the spreadsheet. I'm a big fan of having a business model with a spreadsheet so you understand how it works. But depending on how new and novel your offering is, and UX or whatever, even if you end up hitting the numbers, I promise it won't happen the way you thought it was going to. One thing in your funnel will go better than another and vice versa so it's a huge journey. I think again, not only like money, spreadsheets can create a false sense of confidence. Then again, I'll give you a third one. I haven't read the post in a while but they're all coming back to me here. There's so many things I didn't know. You really just have this yearning a lot of times as a founder in the early days, to have somebody have the answer. You just want to believe in them. Sometimes you encounter these people who are really confident and opinionated and maybe they've got more knowledge and expertise than you. Invariably, those people are always wrong. It's a great input, but no one knows you or your business or your customer like you do. You just got to treat all that like an input and not follow those folks to the letter of the law. That can be from like, " Hey, your idea sucks and it's not going to work," it turns out they were wrong. To, " Oh, you absolutely need to have big partners for distribution because it's too hard to reach small business," which turns out they were wrong. Those are things I could have believed in that other people who had more knowledge and expertise told me were true and I nodded my head and was afraid. But carried on and followed my own intuition and by golly, here we are.

Eric Boduch: It's interesting, some of the bad advice, which sometimes is just bad advice. And sometimes it's bad advice because of the context that they have to give it. I mean, 2003, Toronto, similar to, I think, in 2003, I forget where I was. Maybe Pittsburgh, but similar cities in some ways. Nascent tech scene, not necessarily always the best advice. Do you think that had something to do with it? Do you think if you were getting advice from people that maybe had more recently done it or I hate to say were from the Valley. It's not about location, it's about experience. You think that affects that, or do you think it's largely driven by context?

Mike McDerment: It can be all of the above. I'll go ahead and say I think technology industries the world over have come a long way in the last couple decades. Things like cloud didn't exist, there's a lot of moving pieces. It's pretty hard to put down to stuff. I don't know. I don't want to cop out on it, but I will say one of the things I did along the way, was I got close with this guy who had a lot of basically San Francisco based experience. He became a close advisor. He started working with us closely, and then believe it or not, he up and just said, " Hey, you guys aren't moving fast enough for me. I'm going to go work with this other guy who is more modern, who is more up on this stuff and we're going to compete with you. I'm out." Just completely crosstalk a traitor. I was like, " Holy shit!" I spent a lot of time with this person. Pardon my French, I shouldn't swear.

Eric Boduch: No, no, it's all good.

Mike McDerment: But anyways, suffice it to say, that company went well for 18 months or whatever and is not around anymore. And we kept going. I learned a lot from that guy. Where do you net out on your question? Yeah, I do think there's some parts of the world that are a lot further along in their thinking, but I don't think anything's the whole and no, there's one person crosstalk.

Eric Boduch: I don't mean to say parts of the world either. Some of it's just experience. I think like you, I've been around for a little while and moving to the cloud was a whole another step. Even say, 2010, if you're getting advice from people that are used to building a software companies that were all gold disc driven versus cloud driven, there's a big paradigm shift there in how you build a company. That's what I mean more of the example, is you'd run into, at least I did in the Pittsburgh and Toronto type places back then, a lot of the people that are like, " Oh, back in the day when it was like this." Which wasn't the day of cloud based, salesforce. com kind of companies. I found a lot of that and some of that's location based. But location is immaterial in that decision. I mean it's immaterial I guess in my point, I was thinking about this from a perspective of lots people that might have done it then aren't in the same done it recently enough in the same kind of technology stack and how does that affect opinions or advice.

Mike McDerment: Yeah, I think of it increasingly around pattern recognition. Like, " Hey, I've seen a couple platforms come now and not perfectly certain what the next big important one's going to be." But I feel a little more prepared to A: recognize it and B: contend with it and make good decisions just because I've seen desktop to cloud, I've seen the emergence of mobile, I've seen the move to distributed hosting and all this kind of stuff. Yeah, I think that's right and you can get people who learned it one time in one place. Often too, the people we were going to for advice, who'd been in the industry for five years or whatever, I think a lot of it is hey, can you diagnose who you're talking with and what is the good you can take from them? Because a lot of times that person who yeah, I've been there, done that, well, they might have been one part of a team. Now, if you speak with that team's leader, that team's leader may have a very different perspective on all the advice that was just given. It's hard to diagnose when you're early getting started unless you've been in industry, which animal's which. That is a huge part of it all too.

Eric Boduch: A friend and I used to describe it of who's the cog versus the wheel? Especially at some of the bigger companies like Google. Were they the wheel or were they the cog? Are we getting advice from the right person there? I think one of the challenges as an entrepreneur and as a product person, is really being able to separate the good advice from the bad. Because even from the people that have done it recently and understand at least part of your situation, it's still difficult because they're not in it day in and day out.

Mike McDerment: One hundred percent.

Eric Boduch: Talk to me about hiring. Talk to me about what makes a good, strong chief product officer? What you look for in building a product team?

Mike McDerment: I mean, first of all you've got to diagnose your context again. Are you building enterprise software, are you building consumer software, are you building for something in the middle, like we are at Freshbooks and you need some of both? I really think a great product person's very different at a consumer company versus an enterprise company. Not everybody's going to agree with that, but that is my take on things. There's product leaders who've done both, but I think just one is very limiting and probably not as likely to succeed in the other context. That is a first thing. Then what do you look for? For me, the most successful folks that I've had the opportunity to work with, the ones who I would say the judgment comes back and it's like, " Yes." Is someone who knows the customer for 20 years, I do know it when I see it. They're very interested in the customer, they spend time close to the customer, they do a lot of with customer time to get a really solid foundation. Then that informs their decisions and they communicate in ways that the customer inaudible discuss the problems in the way they would. I think that's foundational because if you don't have that, I think you can start to make a lot of decisions that are ham fisted. If you think about entropy, I'm not even sure that's the best application of it, but every step you get away from a customer, you're getting less and less clear signal. Less and less closer to the truth and you're less and less likely to build something people really love. Then it's like, " Okay, many people are going to be getting direction from your product leader. Do they understand the customer?" That's a core thing and no matter what size and scale. Then it really does depend on the job you're doing. We've had parts where hey, we've got nothing built and you've got to go from zero to something. Then there's other parts where it's like now, it's like, " Hey, we got to marshal a whole bunch of people and projects," and that's a very different problem set. You need a different product leader for it. I think to the extent you can go ahead and diagnose your situation, like anything, spend more time defining the problem and then the right product leader's going to fit that situation. Versus necessarily just being a great product leader.

Eric Boduch: When we're talking about that CPO, it raises another thought or question I have. Do you have advice for a first time CPO moving into a company where they're joining in working for a founder CEO? Maybe someone who is strongly oriented to product? How do they develop that right working relationship? What should they do to make it work?

Mike McDerment: First of all, I want to recognize I don't think that's easy. If there's that strong founder still there, and they're going to have strong opinions about what should be done. I would say a couple things in that situation. First of all, is know whether you're revolution or evolution and if you're revolution, you may not want to go there if that founder still wants to be involved in the product. Good chance it's going to be painful because that founder may not be looking for revolution. Unless the board is like, " Hey, we need revolution. We need something totally different, you can just ignore them." I think situational awareness with that is key. But then I think the other thing to go ahead and do, is to take the attitude of ultra low ego and say, " How do I get as much as I can out of this individual? They know the customer, they know the market. I may have had a whole bunch of experience or whatever, but those things are going to help me win." If you see by and large what venture capitalists are doing these days, they're trying to keep the founders around as long as possible. The number of CEO founders now has gone up relative to the 2000s or certainly the'99s. Back when the days was yeah, the founder can start the company, that's nice. We'll put a professional in. Now it's through Andreessen Horowitz and all the folks like them are realizing listen, these founders are the wellspring of longterm value. We need to figure out how to assemble teams around them so they're still here and helping to guide us. Assuming they have the requisite self- awareness and they have enough of a vision and all that kind of stuff. But then it's like, " How do we build around them to keep them engaged and retained because the company will ultimately be more valuable if we do that." I think as a product leader stepping in, I think diagnose the situation. Is it a turnaround and I want to ignore the founder, or is it like, " Hey, the company's being successful and I want to channel the founder. How do I help them get done what they believe needs to be done," and you're playing the role of an implementer. A partner for sure, and you're going to add to it. But I think it's a different orientation. And the founder might be like, " I want nothing left to do with product anymore. I had to do it, it wasn't interesting to me." Again, these are conversations to have up front. But I think that's a bit of the way to think about things.

Eric Boduch: As we're wrapping towards the end here, let's talk a little bit about the future. What trends do you see coming in tech in general this year, the next few years?

Mike McDerment: Well, I think, I mean, depending on the category you're in, in a lot of cases I just think we're super early days with applied analytics and machine learning and all that kind of stuff. In a lot of ways that's going to manifest our really rudimentary experiences. Just making errors not happen and stuff like this that are just going to make software better and better and better. I think it's really early days with that, though it's being used a lot in a lot of places. But I think again, early, early days. Yeah, I don't know. I'm personally curious around, I think it's early and still too early, but hey, the Bitcoin kind of world we live in. In payments and what does internet money really look like and how does it relate to the first generation internet? How does that all go?

Eric Boduch: crosstalk bought a lot of Bitcoin today.

Mike McDerment: Tesla did?

Eric Boduch: Yeah.

Mike McDerment: Okay. Well, I don't know. I don't know what to make of the recent run up in Bitcoin and whether to think it's a good thing and I'm just whatever, holding off or whatever. But listen, longterm I believe there is a thing there. I think the question is how early are we? I think it is still super, super early. But I'm curious to see how that starts to affect things. You can see certain industries and applications of that technology that get very interesting pretty quickly. Looking for those things to come along. I'm involved with a company in the commercial insurance space and that is an industry that is fascinating because it's the classic. They're not from technology and they're moving slowly and they're inherently risk averse because getting it wrong can cost you a lot with the underwriting. I see a lot of just software itself starting to get into more industries still. That is exciting. Not sure anything revolutionary or earth shattering in any of those forecasts, but those are all places of big change and sources of change I see coming.

Eric Boduch: What's your favorite product?

Mike McDerment: My favorite product. Well, my common answer to that is the ballpoint pen so I can keep notes and write stuff down on a moleskin. Not a software product, but pretty useful.

Eric Boduch: Absolutely. Three words to describe yourself.

Mike McDerment: Okay, inaudible speed round. These things are in contrast. Vision, late adopter, challenging.

Eric Boduch: Absolutely. Well, thanks Mike. This is awesome.

Mike McDerment: Cool. Thanks for having me, Eric.