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PODCAST 93: The Journey from 2x Founder to VC with Angus Davis

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This week on the Sales Hacker podcast, we speak with Angus Davis, VC and Partner at Foundation Capital.

Angus is an amazing person — who never went to college. After graduating from high school, he moved out to Mountain View to work at Netscape, the first massive modern internet success story, with Marc Andreessen. He founded Tellme Networks, sold it to Microsoft, founded Upserve, and sold it to Vista Equity Partners. Now he’s a partner making investments on the VC side at Foundation Capital with over 20 years of operational experience.

If you missed episode 92, check it out here: PODCAST 92: How to Be a More Influential Leader w/ Jay McGrath

What You’ll Learn

  • You don’t necessarily need college to have a fantastic career
  • An entrepreneur does need confidence, perseverance, and authenticity
  • Build what you’ve already sold, don’t sell what you’ve already built

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Show Agenda and Timestamps

Show Introduction [00:09]

Sam Jacobs: Welcome to the Sales Hacker Podcast. We’ve got another great show for you today. We’ve got an interview with Angus Davis. Angus is an amazing person — he never went to college. After graduating from high school in ’95 or ’96, he moved out to Mountain View to work at Netscape, the first massive modern internet success story with Marc Andreessen. He then founded Tellme Networks, sold that in 2007 for $900 million to Microsoft. He then founded Upserve and sold that business to Vista Equity Partners. Now he’s a partner making investments on the VC side at Foundation Capital, but has over 20 years of operational experience. Angus is an investor who brings real world operating experience to his job. It’s a great conversation, so I hope you enjoy it and we’re excited to bring it to you.

Now before we get there, we want to thank our sponsors. Today’s sponsor is Outreach, the leading sales engagement platform that enables sales reps to humanize their communications at scale, from automating the soul-sucking manual work that eats up selling time to providing action-oriented tips on what communications are working best. Outreach has your back.

Now, without further ado, let’s listen to this interview with Angus Davis.

About Angus Davis & Foundation Capital [1:45]

Sam Jacobs: Angus is currently a partner at Foundation Capital. He’s a venture capitalist but he’s been an active entrepreneur executive and investor in the internet industry since its commercialization. In 1995, while a high school student Rhode Island he was an early employee at Intelecom Data Systems, one of America’s first commercial internet service providers and website developers. Bypassing college, he joined Netscape and Mountain View becoming the company’s youngest employee at age 18.

Since he joined Netscape, he then co-founded Tellme Networks. He has been labeled one of America’s most promising CEOs. Most recently, he started and founded Upserve and grew it to become one of the largest cloud-based point-of-sale platforms for full-service restaurants in the US with over 10,000 restaurant customers and a payments platform processing over $12 billion in annual volume.

Angus Davis: Foundation Capital is a Silicon Valley-based venture capital firm. We invest in technology companies typically at the earliest stages. We’re actually investing out of our ninth fund as we’ve been around for 24 years and we’re probably on the third generation of people inside the firm. Although our firm is based in Silicon Valley, I’m based on the East Coast so I spend a lot of time working with founders in New York City, Boston, and London. Primarily I’m interested in companies that focus on SaaS, perhaps have some sort of AI angle to that. FinTech is also a big area of interest both for the firm and for me personally.

Success without College [2:46]

Sam Jacobs: Tell us a little bit about your background. You never went to college?

Angus Davis: I got into Emory University in Atlanta. I was accepted but never matriculated. I joined Netscape shortly after they went public and moved to California, a few thousand miles across coasts, and that was a crazy thing as an 18 or 19-year-old kid.

Sam Jacobs: How did you decide to do that? There’s so much pressure in a middle-class upbringing to go to college.

Angus Davis: At that time, it felt like a relatively low-risk move because I figured if it didn’t work out, I could just end up still going to college a year or two later than originally planned. That’s one advantage of being that age is if you have the ability to take some risks, there can be less downside. But the way I got that opportunity was there was an online forum. I would ask a lot of questions in these Netscape forums about how to build the websites because I was primarily self-taught, and over time I went from being someone that asked most of the questions to being someone that based on what I was learning could contribute the answers. That caught the eye of some folks at Netscape. They started off by asking me to write articles, and I got a chance to be there for one of the hottest summer internship opportunities around.

A couple weeks into my summer internship at Netscape, I met a guy named Mike McCue who really became my mentor at Netscape. He said, “Well, would you consider sticking around and joining Netscape full-time to work for me?” I figured the whole reason I was going to college was to get that opportunity. It was a great opportunity and he and I would later co-founded Tellme Networks together.

Sam Jacobs: That’s amazing. What’s your perspective on college given your experience?

Angus Davis: I’m not sure that college is as relevant in the same ways as it once was. I think that programs like Lambda School and others are actually better than college in terms of teaching skills for particular industries. That said, I can speak from firsthand experience having not gone to college that there were some really big things I missed that had nothing to do with skills or knowledge but more about social things like dating or being independent. There’s a shift in how college is paid for, primarily with the loans and being financed, that’s contributed significantly to the runaway pace of inflation in post-secondary education costs.

Tell Me about Tellme & Upserve [10:30]

Sam Jacobs: Let’s talk about Tellme Networks and Upserve.

Angus Davis: Mike was the VP of Technology, and my job was to build prototypes of next generation products that our group was dreaming up. We were part of the office of the CTO. At that time, Marc Andreessen, the founder was the CTO of the company and there were only three of us in the group. It was pretty easy being an SDR for Marc Andreessen because he’d been on the cover of Time magazine.

Mike McCue, my co-founder at Tellme and my first boss at Netscape, he and I had talked for a few months about trying to start a company and we’ve been exploring a few different ideas. We left Netscape shortly after Netscape was acquired by AOL in early 1999, and we founded Netscape to make it easy to use the internet just through the power of your voice. So today many listeners of this podcasts can take for granted things like Siri or Alexa.

Being able to use your voice to ask a question, whether it be the stock quote, sports score, that was really the original idea behind Tellme. Just say what you want and get it with your voice. We initially went to market as a consumer business. We were going to offer a free toll-free number where you could call up like Yahoo but for the phone. And that was not a success. So we ended up doing what nowadays we refer to as a pivot. We started working with airlines, banks, Fortune 500 type companies that get a huge number of telephone calls, to help them replace their traditional and pretty annoying touch-tone systems with ones that used speech recognition instead.

Sam Jacobs: Wow. Is it true that was Tellme later acquired by Microsoft? That sounds like an incredibly successful pivot.

Angus Davis: Yeah. It worked out. We basically restarted the company in 2001 to focus on the enterprise sales model, and then we also then opened a second front in the business which was mobile search powered by voice. And we signed up customers even today that still use the platform. The company was acquired by Microsoft after we had grown revenue to over a hundred million in recurring profitable. It was acquired by Microsoft in 2007 for about 900 million. After spending a couple years at Microsoft, I left in ’09 and that’s when I founded Upserve.

Sam Jacobs: Upserve has been an incredible success story, so give us just the quick highlights there.

Angus Davis: At the time I left, we were working with about 10,000 restaurants and the ACV there is in the neighborhood of about $5,000 per restaurant per year. So that is a large number of small customers, much shorter sales cycle, maybe around 20, 25 days and just a very different animal altogether. It was a lot of fun to take what I’ve learned building an enterprise type business and applying it to SMB. The company was acquired by Vista Equity Partners, which is a very large private equity firm focused exclusively on SaaS companies in 2017. I stayed on for a little over a year and left in 2018, took a year to do stuff with the family and not have a lot of commitments which was a nice breather, and then I joined Foundation Capital at the end of last summer.

SMB Sales & SDRs at (Smaller) Scale [18:20]

Sam Jacobs: Congratulations on what’s been an incredible run over the last 25 years. What were the key principles that you kept in mind as you grew that business?

Angus Davis: One of the exciting things about an SMB sale is that it typically is a much faster cycle and you typically have more shots on goal. You can be quicker in what you learn and you can try different things out and react more quickly.

Another thing I’ve noticed about many SMB sales though is that oftentimes some of the winners can be actually characterized by the strength of the sales organization. You could have a phenomenally talented sales team pushing a product that maybe doesn’t provide enough value to the customer, so you can end up having great new customer rates but from a retention standpoint your sales efforts are going into filling a leaky bucket. So applying some of what I learned from the enterprise around customer success and taking a more consultative approach — that might not always be the first thing that comes to mind in an SMB sales process, I think that helped us differentiate from some of our peers.

Sam Jacobs: Did you all use SDRs at Upserve? I would imagine that you might not have been able to afford them but maybe if the turn was really low, you could have.

Angus Davis: The nice thing about our product is that over the years especially as we added strong point-of-sale capabilities, we got to net negative turn or greater than 100% dollar based revenue retention, we were able to afford SDRs. I’d say that we had greater success with our inbound SDR team. Outbound SDR for this audience is challenging because it’s primarily phone-based as opposed to email based. Some of the techniques that work for a larger enterprise sale didn’t scale down, but some did, and we had a lot of fun trying different things and learning from that.

Angus’ Approach to VC [23:59]

Sam Jacobs: What are your takeaways? What are some of the things that you’re implementing? How do you balance the tension of you can invest in every single company at the same time you want to be authentic?

Angus Davis: I’ve been on the other side. I’ve been turned down by so many VCs I’ve lost count. I still remember when I was down on my luck at Upserve. I had met with all the top venture capitalists in Sand Hill Road and everywhere else I could take a meeting with them, and pretty much every single one of them said no. I had gotten pretty far along with a firm called Shasta Ventures and the partner there working is a guy named Sean Flynn. He called me while I was still in the hotel room, so I’d only been out of their office for maybe an hour, to explain to me that they were going to pass on the investment.

I remember thinking to myself , “Oh, shit.” I really had thought that these guys were going to do it and they were like the last hope. I remember telling him on the phone, I was like, “Well, that’s that’s a cop-out.” He wasn’t really expecting me to tell him that. I was like, “If you actually mean what you just said, then give me the freaking term sheet with the price that you and your partners think is the right price. But don’t give me this like, ‘Well, we don’t want to offend you, blah, blah, blah.”

He was caught off guard and he said, “Huh, okay. Well, let me get back to you.” So he called me back and he’s like, “All right. Here’s the deal we’ll be willing to do.” It wasn’t as high evaluation as I’ve been hoping, but it wasn’t a disastrous situation either. So he gave me the term sheet, and if that hadn’t happened, the company might have gone under and instead we built it into a really successful business.

So I just try to empathize authenticity with the founders that I’m working with, and what they’ll instead hear from me is like maybe a month or two later, I’ll introduce them to a customer . I actually will be helpful instead of paying lip service. I’ll never forget what it’s like to be the founder and walk in those shoes. That’s something that’s top of mind for me every day.

Build Something You’ve Already Sold [33:11]

Sam Jacobs: You said it’s always easier to build something you’ve sold than to sell something you’ve built, and you’re relating it to the role of sales and marketing as it pertains to the product. Talk to us about what you mean there.

Angus Davis: One of the biggest things I’ve learned over the two big startups that I’ve been part of for 20 years is the fact that the sales and marketing component is significantly undervalued too often by the technical or product type founders. Oftentimes sales teams, sales leaders, marketing leaders are being brought in to sell something that has already been built and that’s not a for-sure thing that’s going to work. Conversely, if you have a talented sales and marketing team and they’ve worked with a customer, they’ve identified a problem, they proposed a solution and the customer said, “Yes. If you give me that solution, I will pay for it.” Then I would much rather then roll the dice with the product, an engineering team to deliver the thing that we’ve sold.

Generally speaking, I feel like we can build something that we’ve sold, but we can’t always sell everything that we’ve built. Oftentimes, I think that sales and marketing leaders are a little bit afraid of selling something that hasn’t been built yet. But I would much prefer as a salesperson to have the sale as a for sure and then can we build it. Nothing is better for an engineering team than a signed contract saying we’ve got to do it by now. That’s one of the challenges that the product leaders face is influencing and motivating engineering teams to deliver something. Well, what better way to do that than a customer demand?

Get in touch with Angus at LinkedIn, through Twitter, or by email at adavis@foundationcap.com.

Sam’s Corner [41:10]

Sam Jacobs: Hi, everybody. It’s Sam’s Corner. There’s a big debate right now happening around what is the function of higher education and is the return worth it relative to the cost. One of the points we made in the interview was, listen, there is a role for higher education because you have to learn how to socialize, develop networks, and build relationships with people. Until there are communities at the secondary schooling level where you can build a network and have access to other people without having to go to college, then we’re probably going to need college for that.

The main thing I took away from the conversation is his perseverance and his skill as an entrepreneur in work. His confidence worked really, really well and that’s just a function of perseverance and authenticity. The second thing that we talked about towards the end of the show was this idea that it’s easier to build something that’s been sold than to sell something that’s been built.

Reach out to me at LinkedIn — and if you’re thinking about joining the best executive community focused on you individually in your career development, then go to revenuecollective.com.

What We Learned

  • You don’t necessarily need college to have a fantastic career
  • An entrepreneur needs confidence, perseverance, and authenticity
  • Build what you’ve already sold, don’t sell what you’ve already built

Don’t miss episode 94!

I hope you enjoyed the show. Before we go, let’s thank our sponsor, Outreach, the leading sales engagement platform

If you want to reach out to me with feedback, you can reach me on LinkedIn. If you haven’t rated the show, please give us five stars on the iTunes rating system so that we can remain in business and continue to bring you this show.

As always, thanks so much for listening, I’ll talk to you next time.

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