Navigating Choppy Waters: A Year in Retrospect

Matt Blumberg: Hi, nice to see everyone. I see a bunch of familiar names and faces here. I am Matt Blumberg. I'm the founder and CEO of Bolster. And welcome to the, I think, fourth installment of our Navigating Choppy Waters webinar series. We are very excited to have two veteran CEOs with us today, Ari and Anna, and I will let them introduce themselves in just a second. Our format for today, and what we're really talking about is end of year, beginning of year topics, our format for today is mostly going to be Q and A discussion with the panel. If you have questions, I would encourage you to put them in the chat. I will try to keep an eye on it. And if there are questions that are related to the topic at hand, we'll try to weave them in on the spot. If we have a few minutes at the end, maybe we can pick up a couple of them then, but we only have 30 minutes. We do these deliberately as quick hits. So with that, I think we should dive right in. Anna, and then Ari, would you do super quick introductions of yourselves so that everyone here gets to know where you're coming from as you're answering questions today? Anna, I'll start with you?

Anna: Sure. Yeah. He picks me because he knows I can speak really fast, so there you go. So I am Anna. I am a startup advisor. I'm CEO of a company called Loadstar. And what we do is we help early stage founders navigate the business lifecycle, and we also support them through the funding stages that happen in between. That's essentially what we do.

Matt Blumberg: Okay, great. And Ari?

Ari Paparo: Hi. I'm Ari Paparo. I have a long experience in ad tech and martech, having worked at companies like DoubleClick and Google, AppNexus and Nielsen. And patent holder on several interesting things in ad tech. Most recently I created a company called Beeswax that was in the ad tech space that we sold after several years to Comcast. And now I'm independent and I am CEO of two companies. One is called Marketecture TV, which I would encourage you to Google and check out. And the other one is in stealth. That is in the martech/ SaaS space, and is well funded with about seven employees.

Matt Blumberg: All right, so what's the most interesting patent you have?

Ari Paparo: So there's this thing called DAR, or Digital Audience Ratings, that is a way that Nielsen created, or I created for Nielsen, to measure audiences in the digital space by combining well- known data from places like Facebook with anonymous data from surfing the web in a privacy- protected way.

Matt Blumberg: All right. Great. Well, let's dive in. I think what we want to start with is a couple questions of the looking backwards variety, and then we'll move to some questions about looking forwards. This has been such an odd year, and a challenging year for a lot of people. From where we sit at Bolster, and we're serving hundreds, thousands of clients in the startup space, I feel like the best way to define this year is that it's a little bit like an old sink in an old European hotel, where instead of having one faucet that you can change between hot and cold, there are actually two. There's a hot water faucet and a cold water faucet. And I feel like at the moment, they're both on full blast, and depending on who you talk to and what day you catch them, you're going to hear a very, very different answer of how things are going. So I'm curious for the two of you, and we'll start with Ari on this one, as we wind down a potentially challenging year, what are the indicators in your business, or both of your businesses, which are both early stage, that are important to focus on for you to even figure out, are things going well? Or are things not going well? Or are both things true at the same time?

Ari Paparo: Yeah. It's an incredibly confusing time. It reminds me a little bit of the two weeks after the COVID lockdown, where, when I was at Beeswax, we were saying, " Is our business going to hit the numbers, or do we have to fire half our staff?" And we had no idea which way to go. And right now, it feels similarly, where for my stealth company that I'm working on, we plan on launching sometime in late Q1, early Q2 of next year. And I'm having a lot of conversations with people where they're saying, well, they don't think they're going to have budget, because they're cutting back, there's a recession coming. But right now, there is no recession happening. People are doing pretty well. So should I prognosticate that the recession is coming, and I have to be super cautious about launching my product? Or should I chance it and think that this might just be a self- fulfilling prophecy without actual problems in the real economy? Very hard to tell.

Matt Blumberg: Yeah, it is incredibly hard to tell. And how about you, Anna? Whether it's for your own business or as you're advising CEOs, how do you think about separating signal from noise right now?

Anna: Yeah. So I think my answers here are going to be always based on the perspective I have of many clients I work with. I think that would be more valuable for whoever's listening. So I do believe that odd and challenging at this point is coming from external circumstances. Sometimes external circumstances can be great, or perceived as great; economy, recession, whatever. But the situation can be really difficult internally. I think it all depends on where the company is and what the stage of the company. So for us and what I am seeing with our companies, it varies depending on the stage. And like Ari said, people are predicting based on what they hear and see, but I feel that you have to plan based on what's happening internally and what we're trying to achieve. Now of course, external circumstances are going to affect what can or cannot happen, but that's going to happen no matter what it is. If it's recession, or not recession, if the economy is great, if it's not great, you have to adapt depending on where your company is. So I am a proponent of understanding the circumstances, planning for it, but not letting the noise affect your trajectory, if that makes any sense. You have to be really, really strong on what you're doing and where you're going, and understand you always have to prepare for what's going to be there. Things can change. As we all know, in 2020, they really did. So how do we adapt and stay nimble? That's where I work with them.

Matt Blumberg: Yeah. I do think it's interesting. We're not in a recession, or maybe a recession has just started, but we've now been hearing for 12 months that the recession is coming, which is I think a longer lead time than you usually get for something like that. And it feels to me like things have been tenuous and almost semi- frozen, even though the economy is still in expansion mode. So it's kind of an interesting time.

Anna: Exactly. Mm- hmm.

Matt Blumberg: So I want to talk a little bit about the retrospective. So how do you run an annual retrospective? Do you run it with your leadership team, your board, the two of them together? A co- founder yourself in a quiet room or on a hike? And as you think about pulling up and doing a retrospective, what's the biggest thing you're trying to accomplish? And as you do an exercise like that, how do you balance data and instinct? So I guess I'm asking a broad question. What's your end of year routine for doing a retrospective in the business?

Ari Paparo: So I'll jump in. I use one fun trick, which is whenever I do strategic planning with my executive team, I always start by showing the exact same slides I showed the previous year, or the previous quarter. And the only thing I do is I put a little red banner on them that shows the date. And then we go through them one at a time and talk through. Like it says, " Hey, launch in Japan," and we didn't do that. " Okay, why? What happened? What's the story there? Was that a good decision or a bad decision? Why did that happen?" That's in addition, obviously, to the more metrics- driven things, which are a little easier to measure.

Matt Blumberg: Yeah, that's interesting. I do something similar. I think it's always helpful to show what you said you were going to do at some point. So how about you, Anna? How do you think about doing a pull- up at the end of the year? What's your routine around that?

Anna: The routine, for me, I think Q4 is where it all starts. First what we do is it's our last chance to wrap up the financials, making sure that we're going to end the year strong, make sure that we can optimize and finish as close to what we projected as possible. But the real routine is looking back at the goals and how we set them in the beginning of the year, and making sure that what we did made sense with the strategy that we had in mind. So it all comes down to what were the intentions when we started, and did we do a good job with the goal setting? Because you can set goals that are not reached, but then the goals that were set to begin with are not the goals that were supposed to be. So that I think is the biggest opportunity that we have at the end of the year. It's to rethink the way we set the goals and then make sure we set the goals for the next year in a way that makes more sense by comparing, " Why didn't we hit that?" Well, maybe it was because it was not even achievable to begin with. So that's the exercise I try to take the team, if that makes any sense.

Matt Blumberg: And this is a question for both of you. Do you do a structured retrospective with your team or with your board? Or is it more you on your own, or with a co- founder?

Ari Paparo: I would generally do it as part of my annual planning. So think about an annual planning process that maybe kicks off in September or October. At that point, we have a pretty decent idea of how we're doing on strategic themes, even though the financials aren't done. And so that'll effectively serve as the retrospective. Then obviously do quarterly more meat and potatoes; OKR review, financial review, et cetera.

Anna: Same. I think that by the end of the year, we have a pretty good idea if we hit the goals or not. If it comes as a surprise in December that you didn't hit your goals, then you're not doing the correct thing of trying to check those along the way. I feel like it's more of an introspective way of looking at the strategy and how we set the goals to get to that. And then are we on the right track from that perspective? Not so much the metrics. And the metrics should not come as a surprise at the end of the year. If we're not hitting it, we should know ahead of time that we're not hitting them. But it's more of what was the intention when we set those goals last year? Did we make it, and why not? And now it's time to rethink how we set goals again and how we implement the plan of action. I think it's more of a leadership thing, and that way we can articulate to the team when we roll out the plan for the next year.

Matt Blumberg: So I'm going to throw in a question here a little bit out of the order we talked about before, which is around investors or advisors when we turn our attention to next year and thinking about how to build the plan for next year. So investors, and VCs in particular, tend to start their statements in this kind of environment by saying, " Look, every company is different, but..." And then they'll give you the same advice that they're giving everyone else. " Every company is different, but you should have enough runway to get through wherever." " Every company is different, but you should be cutting right now, and not expanding." Whatever it is. And you're both veteran CEOs, right? You've done this multiple times. When you hear something like that, and I think a lot of the people who are on this call who are maybe first- time CEOs don't quite know what to do with that kind of advice, what do you do with that kind of advice? How much of it do you tune in? How much of it do you tune out? Do you challenge it ever and say, " Well, I know that's your generic advice, but let's talk about how we might be different or might not be different." How do you process something like that coming from a VC or an advisor?

Ari Paparo: I'll say that VCs are very aware of the funding market. That's their jobs. And so if you're in a planning process where the natural end goal of the process is around... so let's say this happened to me, where we were doing our planning in let's say 2019, and we said, " Well, we want to raise a B round this year." The advice they would give me leading up to that B round would be very good and very on target, because they actually know a lot about that subject. And they could say, " Well, your gross margin is trending in a direction that's going to make it hard for you to do a good B round." And it'd be very astute feedback. And when it's on something more operational, like I remember a time when they told me that I should invest more in a certain kind of professional services, because they had seen it. Sort of pattern recognition in some other businesses they had invested in. I discounted that advice, because they didn't really understand their service model very much at all. They just were making a suggestion based on how a company like MongoDB does their services. It'll just not be the same thing as my business. So I think it's very important to understand the context that the VCs are giving you the advice in and judge it accordingly.

Anna: 100% I second what Ari said. I think it depends on the context of that advice. If it's something leading to a round, yes. And then same thing with the operations. Sometimes they have companies and even though they invest in a particular sector, it doesn't mean that the operations of the company is always going to be the same. The only thing else I'll add to that is that some things are sort of universal, right? Managing your cash flow should be something that we should do in either camp. Could be in the fundraising, or it could be in the operations. So if some of the advice are maybe sometimes just reminders, they're just reminding, " You've got to manage your cash. You don't know what's going to happen." Or they're going to help you figure out how to do that. Then yeah, I'm like, "Oh, wow. Yeah, you're right. I should be a little bit more aware of this." I take it in that aspect. But I agree with Ari; it depends on what context it's coming from. I know they mean well, but obviously they're coming from their perspective. They don't have details of how the operations run and why we're doing the way we're doing. And yes, I do push back. If I feel like my decision is going to have a longterm impact on their return, I try to demonstrate that to them, and why I'm doing what I'm doing and why I'm discounting their advice. So yes.

Matt Blumberg: Yeah. And of course, the conventional wisdom at the moment is, " Whatever you do, don't raise money in 2023." And so a question for both of you, do you agree with that? Clearly, rounds are going to get done in 2023. It's not like everyone's just going to put the checkbook away.

Ari Paparo: Yeah. I think if you've got a really good story, you can raise. I think the bar's higher, the valuations are lower, and there's certainly people who are sitting on the sidelines. But if you're a top 25% company of your stage, you shouldn't have a problem.

Anna: This is going to take more than two minutes to explain, but I'm a fan of only raise if you really need it. I feel like sometimes people raise it because they can. And so part of my work with my clients is, " Do we really need to raise? And if we do, then let's go for it. Absolutely. Let's get the timeframe right. Let's figure out when. But if we don't, and if we can do this without raising, I am a proponent of that." But a lot of companies, I feel like people get validated by raising money. It feels like, " Oh, if someone invests in me, now I'm validated." I don't subscribe to that necessarily. I think the raise needs to come when it makes sense to do it, and if there is a reason for it, and then we go for it. But not because, " Oh, now that's the thing to do. Now I'm going to go for a series A. That's the thing to do." No. So yes, if it's a tough year, then if we can go through this year without needing the raise, but still hit the goals and maintain the strategy, then why not? Why am I going to go through that trouble if I don't have to? That's how I go. Yeah.

Matt Blumberg: Yeah.

Ari Paparo: Yeah, I'd build on what Anna said though, which is definitely don't raise for the sake of it, or for the press release, or for telling your friends. But one thing I'm noticing, though, is that some industries like SaaS are getting pretty mature, and a lot of SaaS companies are starting to bounce into each other. You start with documents and then suddenly you do legal signatures and suddenly you do messaging, and they're all kind of colliding. And that implies to me that you might need a lot of capital to survive people encroaching on everyone's territory. And so I think that capital raise is also an opportunity cost question. Like if you didn't raise, what else is going to happen in your sector over the next 12 months? AI being another example. Literally every single CEO in America right now is pivoting to AI, including me. I'm not ashamed to say it. And if I didn't have the dry powder to do that, I would probably be thinking about getting it.

Matt Blumberg: Yeah. So we just had an excellent question from the audience, from Brian, which I'm going to work in here before we do the last question we have, which is about budgeting and planning for next year. Because it's sort of a reflective question on 2022, which is either for yourself or for other CEOs that you see or that you work with or you're friends with. Are you seeing high levels of CEO burnout? Low levels of CEO burnout? There was a lot of talk about that during the pandemic. What are you seeing around that right now? And when you get to a moment where you're kind of fried, and all of us do, what's your strategy for getting yourself out of it? So Anna, let's start with you on this one.

Anna: Well, my nickname is CEO Whispers. So I work really, really close with CEOs, and what they go through and how they personally have to take care of themselves to be able to lead a company. And I'm a very, very big proponent that the wellbeing of the leaders is what determines the wellbeing of the organization. And they need to understand that. So having been there, having been burned out, I feel like as a company grows, it's hard to avoid that, unless a CEO is well prepared for what's coming along. So understanding what that process is going to be like is going to be a game- changer on how they manage growth. If they just react and if they just go with the flow, not knowing what's going to come, not preparing, there will be burnout. So I don't know that the burnout right now is anything different than it's always been. It's just a matter of how do you prepare ahead of time to avoid it to happen by understanding what you're getting yourself into? That's what usually I do.

Matt Blumberg: So Ari, let me build on that by channeling the question that Liza put in as followup, which is turning your attention to your team. So as you told us earlier, you have one business with no employees, but presumably that means the other business has employees. And if you're anticipating a year of tough sledding, maybe you're asking people to dig deeper, do a little bit more. How are you thinking about rallying the troops any differently in a difficult environment?

Ari Paparo: Yeah. I'm not sure that the troops are that affected by macro environments, at least at the stage of company we are, where we don't have much of a commercial operation. I think that the biggest change from Beeswax, which I did a full startup, from end to end, starting from 2014 to 2021, to NewCo, which is less than a year old, biggest change is default remote. Default remote is the way it is. And we have some of our employees in Atlanta, Georgia, some in Virginia, et cetera. And that's the biggest challenge. So far we've done one all- hands, where everyone came to New York. We'll probably do one every six months or so. It's a small team, but still, seeing people in person makes just a huge difference. So that's I think the number one thing that we have to overcome. And there definitely are pluses and minuses to it. I don't think anyone could say it's unmitigatedly a positive.

Matt Blumberg: Yeah. Okay. Let's turn our attention to the topic of planning and budgeting for 2023. So an uncertain environment. How are you thinking about building your budget? How are you balancing out optimism and pessimism? How are you balancing out your boards telling you, " God, you really should triple this year," but you don't really think you can triple this year. And how are you doing your budget for the year? Are you doing a full- year budget? Are you just doing a quarterly or a semi- annual? Are you doing a rolling forecast? How are you approaching the topic of budgeting and planning for next year?

Ari Paparo: Well, I'm at a very small startup, so we don't have a budget. We just have a burn rate. But I'll tell you how I did it for Beeswax, which is maybe a little more instructive. So with Beeswax, what we did was we would do the budget honest. Like, " Here's the number we think we could hit. Here's how many people we think we could hire." And they're both sort of optimistic. And we'd almost universally do the same thing, which was slightly underperform on the top line, and then hire slower than we expected. And so they evened each other out. And we would kind of wink, wink, nod, nod, on especially the headcount numbers, because anyone who's done an annual budget will know the pattern of the headcount ask, which is suddenly inaudible 90 people in January and then two people a month thereafter. Everyone wants everyone in January. So you don't get it. You don't get those 90 people. They actually come in April, May, June, July, whatever. And especially in the previous pre- recession era, you would never be able to hit your hiring targets, because it was so hard to find good people. And so you'd end up at 60, 70% of the people you wanted to hire. And that would, just by default, give you the wiggle room in your budget that would occur from an optimistic revenue projection.

Matt Blumberg: Got it. And Anna, how are you approaching budgeting planning?

Anna: Yeah. So I just finished ... not just. About three weeks ago, I just finished yearly budgeting with two clients. And the way we do it is we get the baby between the projections and the forecast, and that's how we come up with the budget. So the budget's like the Venn diagram between both of them. So we looked at the projections and said, " Oh my gosh, it would be really great to get this revenue." And then we plug that in. And then we look at the forecast on how we went this year, and then we see the modulations on how things went, and we feel like, "Is it even doable?" So the way I do budgeting is I start with what I would love to do. And then I kind of back- cast, to borrow a term. And then we'll look at the back- casting, compare, overlay on what we did this year and see is this even possible? And if it's not, because there are sometimes not... like you can't even go from December and all of a sudden, in January, completely change the picture. So we use the previous year to be able to help forecast the next year, but we always find how that would be if I were to overlay on the projections. And that's how we do budgeting. But we will do full- year budgets, 100%. But we also check every quarter. So at midyear, we will do some readjustments if we have to. But most of the time, we'll do full- year budgets, yes. With very specific deliverables for each quarter.

Ari Paparo: Right. And one piece of advice I always give to my startups that I advise or invest in, which is they probably need a VP of finance before they think they do.

Anna: Yeah. That's right.

Matt Blumberg: Or a good fractional.

Ari Paparo: Fractional. Fractional I believe there's a place you can get a good fractional.

Anna: That is right. That is correct. And I have a CFO background, so I am the one who usually does that. So I act as that person when they don't have it. But I 100% agree that that is necessary. They think a bookkeeper can do it, and a bookkeeper cannot. So that is a huge piece of advice there. Thanks, Ari. Very important.

Matt Blumberg: Okay. In our last minute, we're going to do three speed round questions just to wrap things up. So question number one, and we will start with the Brazilian on the panelist, World Cup. Who do you like to win? How much do you care?

Anna: I care a lot. I live for it. Every four years, my life turns around. I just found out Spain lost, because you told me, and I'm celebrating it. So obviously I'm Brazil all the way. So let's just hope for that.

Matt Blumberg: Ari?

Ari Paparo: No opinion.

Matt Blumberg: No dog in the hunt?

Ari Paparo: No.

Matt Blumberg: Okay.

Anna: Brazil, then. He's by default-

Ari Paparo: Brazil, okay.

Anna: He's my friend. He's my BFF now, so that's how it goes. Yes. Yeah.

Matt Blumberg: Okay. Second speed round question. Favorite holiday food? Ari, we'll start with you.

Ari Paparo: Pecan pie. I'm thinking Thanksgiving, not Christmas, but still.

Matt Blumberg: It's all holiday. Anna? Favorite holiday food?

Anna: Ooh, I don't have one. My favorite holiday is New Year's Eve, so usually we have pomegranate seeds that we eat. And I love pomegranate, so I'd say that that's my favorite thing. But that's the tradition that's really not here, but that would be my favorite thing to do. Yeah.

Matt Blumberg: Okay. And then let's wrap on a speed round business question. One piece of advice for any founder who's listening about how to manage things right now?

Anna: Get that CFO, for sure. I think that's important. You need to know your numbers. I think that that's the biggest issue I see with founders. Sometimes they're specialists, the ones that come from their craft. They were engineers and they feel like, " Oh, the numbers will work out." Really know, you have to be able to translate your vision into numbers. There's no way around that. And if you don't know how to do that, if you don't have anyone in your team that knows how to translate your vision into numbers, then you've got to find somebody who can do that for you. And bookkeepers cannot. Yeah.

Ari Paparo: I'll give my generic hiring advice, which is there's only two types of employees; those who don't care at all about equity, and those who only care about equity. And you should figure out which type they are before you make them an offer, because otherwise, you're either going to waste a lot of your equity on people who don't care, or you're going to get into a negotiating war with some engineer who wants to own 10% of your company.

Anna: That's a great advice.

Matt Blumberg: That's a good one.

Anna: I love that.

Matt Blumberg: All right. Let's wrap. Ari, Anna, thank you so much for joining us today. Everybody who tuned in, thank you as well. I hope everyone has a happy and restful and peaceful holiday season. Keep Bolster in mind if you're looking for anything; mentor or coach, board member, full- time exec, or that fractional CFO or fractional head of finance. And thanks everyone. I appreciate you joining. Take care.

Ari Paparo: Thank-