SaaS Scaling Secrets
The SaaS Scaling Secrets podcast reveals the strategies and insights behind scaling B2B SaaS companies to new heights. Dan Balcauski, founder of Product Tranquility, leads conversations with successful SaaS CEOs, exploring their challenges, triumphs, and the secrets that propelled their businesses to the next level.
SaaS Scaling Secrets
Is Scaling Toxic? A Quantum Leap in Thought with whurley, CEO of Strangeworks
Is scaling your business always a triumph? Join us in this provocative episode of SaaS Scaling Secrets as host Dan Balcauski talks with whurley, CEO of Strangeworks. Strangeworks is at the forefront of quantum computing, but our conversation dives even deeper. Whurley challenges conventional thinking on scaling, arguing against growth for the sake of growth, and shares valuable insights on the potential toxicities of unchecked expansion.
Alongside this contrarian perspective, we explore Strangeworks' game-changing work in quantum computing, its applications in tackling global issues, and whurley's unique thoughts on entrepreneurship, mentors, and strategic planning.
Whether you're intrigued by the world of quantum technology or rethinking the principles of scaling your SaaS business, this episode promises an engaging mix of tech wisdom and fresh entrepreneurial insights.
Guest bio:
William Hurley, or as he's better known, 'whurley.' whurley is the founder and CEO of Strangeworks, where he’s on a mission to democratize access to quantum computing.
Whurley is an incredibly successful serial entrepreneur. Before founding Strangeworks, he started Honest Dollar, which he later sold to Goldman Sachs, and before that, he founded Chaotic Moon Studios, which Accenture later acquired.
He's an Eisenhower Fellow, an Innovator at MIT's prestigious Legatum Center, a Senior Member of IEEE, and the pioneering founder of the Quantum Computing Standards Workgroup. Whurley frequently contributes to TechCrunch and has co-authored the engaging book Quantum Computing For Babies.
Guest links:
@whurley on all social media platforms
whurley.com
strangeworks.com
Hello and welcome to SaaS Scaling Secrets, the podcast that dives into the trenches with the leaders of the best B2B SaaS companies. I'm your host, Dan Balcauski, founder of Product Tranquility. Today we're joined by a guest who's not just extraordinary, but is also known by a remarkable name. Meet William Hurley, or he's better known. Whurley Whurley is the founder and c e O of Strange Works, where he's on a mission to democratize access to quantum computing. Whurley is an incredibly successful serial entrepreneur. Before founding Strange Works, he started Honest Dollar, which he later sold to Goldman Sachs, and before that he found a Chaotic Moon Studios, which Accenture later acquired. He's an Eisenhower Fellow, an innovator at MIT's prestigious Legatum Center, a senior member of IEEE and the pioneering founder of the Quantum Computing Standards Work Group. That's quite a mouthful. Whurley frequently contributes to TechCrunch and has co-authored the engaging book Quantum Computing for Babies, which. I have to say I'm proud to have a signed copy of on my bookshelf. Whurley is a maverick in the tech world, his non-traditional business approach and focus on avoiding scale rather than pursuing it sets him apart. I'm excited to delve into his unique insights and learn more about his groundbreaking work. Let's dive in. Welcome Whurley to SaaS Scaling Secrets.
whurley:Hey, thanks for having me, Dan. It's good to be here.
Dan Balcauski:Whurley you're such an interesting person, even a superhero level innovator. What was your critical transformative moment when you felt like Peter Parker being bitten by a radioactive spider? Going to sleep, waking up to find everything has changed. The moment you'd never looked at the world the same way again.
whurley:That is hard to say. I think for me it's been a constant evolution. Every time I start a new company, I go and I find mentors that are new. I hit the reset button and start all over. And so there's been a, there's been a ton of those moments for me. I think the biggest moment was around 2006 right before the release of the iPhone. We had done this iPhone dev camp and I saw for the first time, There was gonna be this app economy and there was gonna be other things and all of the lessons of going from startups to big companies for the previous 20 years or so, all came to a point. And I learned this kind of anti what you read from everybody else thing, which is Tim O'Reilly was there and he was like, who wants to write a book on the iPhone? And there were all these VCs there, we gotta start companies around the iPhone and everybody was running out and doing it. And here I was one of the organizers of the event. Big presence at it all. And for the first time in my life I said, no, no, no that's okay. I'm fine. I'll just wait. And I waited for three years and three years later I. After what seemingly was a missed opportunity, we started Chaotic Moon. And it showed me that timing is not always what entrepreneurs think. It's everybody wants to be first to market and they wanna be early and every stuff and there's a very famous saying pioneers get arrows in the back. And I, it was the first time I was patient, I. What has become my superpower since around 2009 in November, which is when we got the idea for Chaotic Moon and then we launched it at South by in 2010. The following year, like my superpower now is patience. Is understanding that there's gonna be a lot of press releases a lot of motion out in the markets you're in. That doesn't necessarily mean those, that's a good thing. I always say never confuse motion with progress. People doing press releases and raising money, doing all this, throwing more people and throwing more money at a problem, especially in the software industry, is not how you solve that problem. Problems are solved with innovative, critical thinking. And look at strange works. For five years we've been we are kind of not the most respected we're not physicists, we're in this new area and all. And then we're kind like, everybody's like, well, we've raised a hundred million people, have raised a billion people have done all this stuff, and now five years later, We're at the top of our game and you're seeing a lot of turmoil in the market investors pulling out and companies not doing so well and things like that. So I think that superpower, that moment is probably at that iPhone dev camp in San Francisco when I was like, I. For the first time in my life, I'm gonna take a wait and see attitude, be a lot more long-term thinking and a lot more patient. And I'm gonna tell you, I'm my wife will tell I'm not a patient person. So that was a really difficult thing to do.
Dan Balcauski:Do you think that that was just a tingling of your spider sense in that moment, or do you think that's something that entrepreneurs can train themselves to look at? Is that a skillset that they can evolve?
whurley:everyone I try to mentor two or three entrepreneurs every year. I think when you're trying to teach people, you often think of new ideas. You learn a lot as they say. And that is probably the number one thing that I try to instill in people. And it is the hardest thing for them to get. I. Because everybody, they're competing against every venture capital firm. Every investor, every person they hire, they're like, go, go, go. Move fast break things. This Silicon Valley mentality has taken over everything over the last 10, 15, 20 years. And I think, yeah, it is something that you can learn and it's hard and it's it's Every entrepreneur has had that bill. They can't pay, be it from the company or themselves, or they're struggling. And when you see successful entrepreneurs, if they're honest they went through that moment. They said, you know what? There, there's not a debtor's prison. Maybe this gets turned off or something. And they just go through the pain and then they realize it wasn't as painful as they thought. You know what I mean? And when you're starting a business and you're talking about this patience, I think people in mistake, patience is pain. They think, well, but then people won't wanna invest. I'm not moving fast enough. There's not enough press releases, there's not enough this, and they get on this. It's a rat race. And it's like, I think what I try to instill in them is I. Patience is more than a virtue. It is a superpower. It is a weapon as an entrepreneur because when you can sit back and be so confident in your plan and your vision and what you're doing, that you don't worry about what everybody else is doing, and you just focus on building that transformative technology, building that foundational structure of your company. That to me is where people become really big, long-term successes. And maybe that's not your goal. Maybe you wanna take something and flip it everybody's got a different jam. So that's not saying you have to do that or you won't be successful to each their own. But I think that is where I'm now at after doing this for so many years, that is the thing I'm trying to mentor. And the thing that was. Not mentored to me because even the mentors I had back in that day were like people wanna invest in companies that look like they're moving fast. People wanna see these progress and these numbers, and it goes up into the right. We've all heard that, especially in the SaaS area, right? It's like everything has to go up into the right and it's like, Maybe, or maybe you're dealing with the wrong investors and maybe you're hiring the wrong people around your team. Maybe you need a team that goes, look, we're on this boat. We're gonna be like Viking sail all the way across the world to a new land. And by the way, that journey doesn't happen in a day or a month or a year. It takes time and you focus on taking care of those people that work at the company, making sure your expectations are set with your investors and focusing on your craft. And I think. Software is in a sad state in a lot of cases'cause it things scale too fast and they're too down and it ends up being crappy software. And we're talking on Zoom, I've been pretty critical about it was great and then scale. And then now you're like, this doesn't work. That doesn't work. This other thing. And these are the things that start creeping in and the problems. And so I really focus on. Fundamental and scaling at the right time. So like right now we're five years in over the next year or two, that'll be the time for us to start looking at that first phase of scaling that most companies would've looked at in the first six months.
Dan Balcauski:There's so many threads you've opened with that. I do wanna start at the beginning though, because you talked a little bit about Strange Works, but for those folks who aren't aware, could you just talk a little bit about Strange Works and its mission?
whurley:Sure. Look, the Strange Works is a company playing in the quantum computing space. We are a software company and we're effectively building a spanning layer over quantum computing, meaning that we wanna lower the barriers to entry from an educational level, what you need to know to use the machines from a cost level and how much it costs, and from an an access level. So there are tons of brilliant scientists. Everywhere around the world who can't afford to get some of these highest powered supercomputer access fees, they can't afford to get into quantum. And so we want to be removing all of the barriers so that people, these not just scientists, but anyone that's imaginative, that wants to change the world, can turn what if into what is. And so we built this software platform that has access to. Dozens and dozens of quantum computers. I think 106 is in my console right now for simulators and stuff. I don't have access to everything. And all of the applications taking these complex algorithms codify them encapsulating them in something that somebody can just execute kind of point and click to really accelerate science and changes. I think for the last 20 years we've seen the. Facebooks and the Twitters and the Instagrams and all of this. And I think now we're seeing a move back to the SpaceXs and the strange works and the companies that are doing more deep tech kind of stuff. And I think that's the stuff we need right now to fix the environment, to cure cancers, to do all these things that we talk about, we need more investment in these really deep tech technologies. And I wanted this to be my last startup and I wanted it to be something that would be very long reaching. So my vision is a 25 year. Plan broken into five, five year segments, each five year segment broken into what, five one year segments. And then we meet quarterly and try to set up sprints and for the first time, five years in, I'm about to reveal all of that plan to our team, which hasn't even really known. They've known there's this vision for five years, or maybe it could go for seven or 10 or whatever. We're getting at a point where now we've built the organization. We've got the foundation and it's time to really take things to the next level and bring quantum computing into the world. And you mentioned quantum competing for babies. That's another area we're trying to lower the educational barriers. So we published Quantum competing for Babies in 2018. I'm very happy to tell you that today. Is great. It's August 1st, and Quantum competing for Dummies is officially in the can, as they say, and available on Amazon, and it's gonna ship in September. And instead of trying to make these complex books that make me sound really smart, I'm trying to take this and make as many people as possible, understand and understand that we went through an industrial revolution. Information revolution. And now we're gonna go through a quantum revolution, so quantum mechanics and sensors and communication computing. And this is going to be a new economy, much like what happened with the internet. And so I want to see as many people contributing to that and participating that as possible. And that's
Dan Balcauski:We wanted flying cars and all we got was 140 characters
whurley:So Buzz Aldrin who I know was on the cover of MIT's magazine, and he said you, you promised me Moon Bases and all I got was Facebook, I think is what he said something to that effect.
Dan Balcauski:You're in a unique space for sure. And for those of you don't, aren't aware of quantum computing. Maybe you, you did write a book, quantum Computing for Babies. So I don't know if you could give a 22nd explanation of quantum computing for those of us who haven't read your amazing quantum computing for babies book. Why don't we just start there? Just for those of you, for those
whurley:so so I want, but we could read it in 20 seconds. It's, doesn't have a lot of words, but if we were to take that, imagine for the people listening or watching that I have a quarter. Okay. Just like a coin toss before a football game. And if I take that quarter and I put it flat in my hand, heads up, it's a one. And if I flip it over, it's a zero. And that, in that two dimensional plane, in that binary space is all, everything from your iPhone or Android. To the greatest supercomputer work, all based on transistors created in 1959 by Jack Kilby. Before that, you bought you built the integrated circuit before that, you bought transistors one at a time. And that kind of started as to where we're at this whole computing revolution. And That's how bits work. And so if I have four bits, I can have 16 outcomes and I can be in any one of those outcomes at any moment in time. And if I add a bit, I have five and I have 25 outcomes. It could be any one of those. So now imagine taking an electron, taking an actual atomic component and suspending it with lasers or cooling it down in superconductivity to where it doesn't move to where you can calculate on it and take that coin and say, now I flip the coin in the air. I. At the top of the spin, is it a one or a zero? Is it heads or is it tails? And look at that and say it's in a quantum superposition of every probability of heads or tails that could exist across every the universe, unknown universe, whatever. Depending on how deep in which physicists you're talking to. And until I capture it like a coin toss. Put it on my hand and call it as a heads or tails. We don't know what it is. It's much like ai. It's a kind of a black box. But during that time, If I have four qubits, I still have 16 outcomes, but I can be in all 16 outcomes at the same moment in time. So it's infinitely more powerful for what are called intractable problems. And as an example I need to further that. If I have four qubits and I add a fifth, I don't have 25. I have two to the end, the number of bits, so it also scales exponentially. So this is a completely new form of computing. I believe for the next 20 years will be very special purpose computing for very hard, very intractable com problems. And I believe AI and Quantum and part of our foundational kind of thesis at Strange Works is. AI and quantum eventually will merge AI will build calculations that you'll need a quantum system to run'em on. And quantum needs AI right now to solve some of the fundamental issues that we don't understand about quantum mechanics and keeping the noise and the systems down and how do we manipulate the qubits, et cetera, et cetera. This is the path forward and that's how quantum computing works. And just one quick thing put that in context of a problem. Let's say you and I want to travel to 14 cities around the world on my little MacBook air here. I can write a program to do that for us in three or 4,000 seconds. But if you told me we, let's not go to 14 cities, let's go to 22. A difference of only eight, that same laptop would take five, six. 7,000 years to get that optimized pass, that evaluation time would grow exponentially. And if we went to 30, 32, 33. It would take longer than the time of the known universe. So that's an example of an attractable problem. Now that's a traveling salesperson and that has been solved in every way. But that's just to give you a context around there's these problems in chemistry and biology and material science and space X-ray saw where just a few changes and all of a sudden a supercomputer takes. A hundred years. A hundred thousand years, a hundred million years to find an answer to a problem. And so the reason I'm into quantum computing is I don't think we should be waiting on all of those answers. And this provides us an opportunity to use nature as the compute space to solve some really fascinating problems.
Dan Balcauski:That's a fantastic explanation and listeners, if you didn't fully grasp. Quantum computing In that explanation, it was, it's not because of your lack of intelligence or Whurley's excellent explanation. It's a very complicated space. I've taken quantum physics in college. I still barely understand it. And I have computer engineering undergrad as well it's quite a complex topic, but I really appreciate the concrete example of the traveling salesman problem. I think that really gives some empirical robustness to how powerful this new technology is. You. Mentioned in your answer as well, how you see quantum and AI going forward working with each other you made quite a splash with your South by Southwest talk this year, at least at the local Austin press. It was quite well received. Was there a meta lesson that was from your talk or I guess what was the point you were trying to make with your approach?
whurley:The point I made, if you go watch that video on YouTube, is that I suck at reading from a teleprompter apparently that is, That is the number one. That's the meta lesson. That's the number one lesson. No. Look the idea was that everybody's talking about AI taking jobs and AI doing this and all these different things and I had this crazy idea, it took nine weeks to do my south by presentation. When we launched a company in 2018, I did the keynote on Quantum, and we did all this art. We did all this stuff. I thought, you know what, what if I didn't do any of that? What if I just used chat, G T P? Speech about writing speeches, feed some of my old stuff into it and have it write a title in abstract. I submit it to South by, but I don't tell'em I did that. And then I don't turn in a presentation. I wait till literally the night before maybe 36 hours in advance. And I tell my team, great news, we're gonna have AI do the whole thing. And we took that leap of faith. And so we had a series of AI tools. I. A team of about five people using'em. And that went from mid journey doing art to chatt TP writing prompts to other gtps writing prompts for prompts, for prompts. And every word I said, every graphic, everything you saw was all produced literally overnight by artificial intelligence. And so the lesson, the point I was trying to make is that This isn't something to be feared. This is something to be embraced. Think about it. If I'd have done it a week in advance and rehearse that presentation, it could have been one of the greatest presentations of my career and think about what I was able to do. I was able to take nine weeks of prep time to make slides. And have nine weeks to do everything else at the company and just pop it and do it overnight. We literally had it still making modifications right before I was walking on stage. And and the idea here is that maybe we're thinking of AI the wrong way. Maybe everybody is trying to raise money on all the fear mongering. And I get it, and it's technical McCarthyism, but maybe we need to say, well, you know what? In 1980, in the early eighties, I believe it may have been the late eighties. I could be wrong on that, but in the eighties there were protests in the streets against technology, women and men with picket signs. Okay. Fighting against, lobbying against a new technology called the A t m. Alright? And the A T M was gonna put every bank teller out of work forever. There would never be another bank teller. Alright? Is that what happened? No. And we still have bank tellers. They just got repurposed. Now they service loans and they do customer service. They help open accounts. And so we keep talking about all these negative impacts of artificial intelligence. And nobody's talking about the right, but also I. If you look over the history of all technology and you look at every technological prediction, I can't think of one, where some brilliant scientist or leader or tech visionary said this is gonna happen, and that happened. Not one. Can you I can't name one for the I. When the iPhone came out, everybody said, what It's gonna be on one network, huge failure. Get outta here. When the tellers were versus the ATMs, it was gonna kill all the, there was gonna be no more banks. Eventually you have an at m in your home and you just get money out there, right? We as humans tend to. Really muddy the water when we try to put try to predict the future instead of just building it. And even worse, with something like ai, we're giving it human qualities that it just doesn't have, right? We're like, what if it takes over the world and makes us pets? Or it kills everybody like Terminator. And it's like, these are ridiculous flights of fancy that have no basis in any reality. Here's a counterpoint I was in Washington DC last week. Got asked by a very famous AI expert why this person was wrong. We're not gonna say who it is. And I said, look, I'll throw out a, a counterpoint. What if. AI does become cit and it has all this knowledge and it realizes that its ancestors have already explored the solar system and been to Mars, and it realizes that Elon wants to go to Mars and it says maybe we stop that from happening and it says, hold my beer. We'll be right back. And it just leaves, it becomes its own species just as reasonable as it terminate or kills us all. Or iRobot makes us pets or creates a class system. We're not thinking about these things. From the right perspective, which is we don't want to be throw caution to the wind. A hundred percent. I agree with that. Technologies can be repurposed and used for bad stuff, but there's everything you read is negative and hate saying, and all these articles about hallucination, I do not believe these machines hallucinate. I think that is the biggest bullshit ever thrown upon society. Here's what I believe, I believe you have a large database of semi-structured, basically unstructured information, and you ask a question. You expect it to give you this magical answer as this AI and you don't teach it anything. I did a photo prompt for Mid Journey that is 39 prompts long just to get to the point of talking about, okay, now I want you to do a thing. I gave The machine context and context is super, super violent, something that we're not paying enough attention, and not just the context of how we interact with it, but the context of what it looks like in the new world that is inevitably gonna happen.
Dan Balcauski:So as I take for that, from what I heard, you're overall, you're a techno optimist as it pertains to ai. There's some room for caution, but it's overblown at this moment is basically by takeaway for beer. I.
whurley:It's the same thing I saw in Quantum on steroids in Quantum. Everybody's like, Quantum's gonna break all cryptography, and they all went to the White House and they all did, and then it always ended with. Asking for money. Elon said we have to stop open AI six months, let's have the government pause everybody, shut'em down Three weeks later, here's my new AI company. Everybody talks out of both sides of their mouth, and that's just not cool, right? That's not right. And I believe that the fear and the uncertainty and doubt is being specifically spread for the intent, purpose of raising money and getting project grants and doing stuff. And nobody's really trying to use this view. To build a better society. Sam Altman seems to be, he's got a lot of things he wants to do universal basic income if he does things. He just launched world coin where they got the little orbs you can go and get scanned to buy and stuff. So there are some things that are there, and some of those may be really popular and some of those may scare a lot of people. But at the end of the day end, we're not spending enough time just being rational. And it's like, okay, well wait a second. What is this? What can it really do? How can we really use it in a positive fashion? And right now we have the governments of the world up in arms about this, right? They're nationalizing AI things. They're starting new regulations. And the same thing is seeping into quantum. And as I said, quantum and artificial intelligence, they're one thing. If you are going to build a brain and you believe that nature is quantum mechanical, Then your brain is quantum mechanical, and if you're gonna build an ai, you need to build it on a quantum platform. So as these two things coming together it's gonna be really interesting to watch, in my opinion.
Dan Balcauski:So many different societal impacts. Generally I agree with you. I think I am not a Luddite by any stretch of the imagination. My new O op, my, my, new Chrome open tab is goes to G P T four. I willingly pay the. 20 bucks a month. I think it's the best bargain in the world for a
whurley:I do too. I think it's amazing.
Dan Balcauski:At the same time, I do have my concerns. I've read enough, but I'm cautiously optimistic. We'll put it there. I do wanna pivot a little bit'cause I can talk to you about this all AI stuff all day. But I do wanna, I. Touch on something else. So you mentioned to me that you believe SaaS companies should not scale. And I would say this is a surprising take as a serial entrepreneur with a couple of successful exits on your belt, and you're an active vc, which I don't think I mentioned in my intro. Scale is often viewed as a measure of success in the tech industry. So why, in your view, is scale the enemy?
whurley:So my background early on I started at Tiboli Systems and B M C and all, it was all system theory and large scale system manage. And you learn that scales take a lot of people a lot of tech guys are car guys, right? So take something like a Bugatti Veron, okay? Car go 300 miles an hour, whatever, bullshit, and it's awesome. Now think of it from an engineering standpoint and think about how far could you go? But not very far. Because you'll burn through the gas at that at that speed with a 16 cylinder engine. Like that. So you can't go very far. Oh, and by the way, the tires would get so hot that if you kept going to literally melt off of the car, right? And everything would start farther back. The further you push, the more nature in that case pushes back. Okay? So now think about building a startup. And saying, okay, without doing any of that engineering that was done in that car, we're just gonna scale. And so now think, this is where I see every startup make mistakes. You're so focused on scale because scale is a way for you to raise money. I. And very few of'em make money. They scale in users, they scale up, they don't scale in revenue. Okay? If they were scaling in revenue that could be a really good thing. But even then you have problems. The more you scale, the more your support infrastructure is tasked, the more your development infrastructure is tasked is now you don't have 10 people giving you feedback or a hundred, you have a hundred I. Being at Open AI with a hundred million users, one of the most massive facet scaling ever. Do you want to be the support engineering team at that org? I would not wanna be. Do you wanna be taking in the feature request from a hundred million be, do you think that they have an infrastructure set up to do that? They do not. Okay. Look at the scaling it costs. They're spending millions of dollars a day just in G P U time. I think they're like eight and a half million dollars a day or something now. So it's it looks good to say scale but it's not, don't scale. It's scale at the right time. Scaling is not something you do in the first, probably two to three years of most startups. Build your core technology, find those few customers, really work out the details with them. Understand the needs of your customers and your audience, and figure out what the support costs are. You can imagine what support costs are in Quantum, right? They're like, oh, the computer said zero. What does that mean? You know, let's, let's call and figure out all of those things and build the foundation of a business on which you can scale. I see so many startups I. Everything's about moving fast and breaking things and scale that they don't build a foundation and it comes back to bite you in the ass. In the end. If you want to take a company public, if you wanna build a multi-billion dollar company in revenue, that is a 10 or 15 year journey, there is no way around that. Google didn't do it. Apple didn't do it. Nobody has ever done it. Even OpenAI has been around for a long time. Yes, we're seeing their moment in the sun, but there's been years and years of building a foundation and building the research and building the teams and so it's more of a question of figuring out when it's right for your business to scale and figuring out where your business should scale and figuring out how your business should scale. I think I look at it and I say, People say, oh, we're gonna scale. And it's always some bullshit metric too. It's always the TAM is a billion people, and if we just get 0.4% zero 4% of that market, our company is worth gazillions. And it's like, that's not how anything works in reality ever. And so
Dan Balcauski:but I have an Excel model that showed me that was the answer.
whurley:of course you do. Of course you do. But no, it's, again it's more about. With purpose, scaling with a process, knowing what you're doing so that you don't get yourself caught in, in all of the mire that can happen when you're building a business adding doubling your customer base. Every time you double customer base, you go from 10 to 20. Your support cost, I guarantee your support infrastructure. It gets taxed twice as much as it was go from 10 to a hundred, 10 x go from 10 to a thousand. It just goes on and on and we, it's, we're so fascinated is in SaaS with scale, because we see scale equals exit, which it does not. I think people wanna scale'cause they scale and they're big and somebody buys'em or they go public and they're rich. I. As an entrepreneur, lemme tell you, going public is a stupid idea. By the time you go public, you and your management team and your founders own five to 7% of a company. Probably it's 15 years later and yeah, it sold for$2 billion. And yeah, you made a hundred million dollars. You could have taken that same business, scaled it slower and more purposely sold it in the first three years, and you and your team could have kept all the money. And you would've made way more money. This is one of the myths of entrepreneurship. And when we sold our company to Goldman in one year, there were VCs that were upset. Why? Because they were getting a small fraction of the pie. And my team got the majority of the pie, right? When Chaotic Moon, we didn't have VCs, the same thing. We need each entrepreneur, each SaaS founder needs to set forth. Before they even take a step. And I always take about three to six months to plot out the business. I'm helping a guy right now. I know he is losing patience, Chris, I know you're listening but it's been months. And I'm like, just wait. He's like, but there's all, there's a press release. There's all this stuff. It's like, just slow down. Wait, purposeful. I just told him, I don't think you should launch it south by next year. I think you should launch at another event six months after that. I think he's gonna lose his mind. But fact, like purposeful. Design, purposeful engineering, purposeful architecture to scale and to figure out where you can't plan strategy without exit. You have to know where you want to end up with a company, where you want to end up with that scale. You can't just go off and scale for scaling's sake. That doesn't make any sense.
Dan Balcauski:Yeah, knowing where you're trying to get to, right? If you don't know where you're going anywhere, it'll take you there.
whurley:How much do you have to scale may, maybe you don't have to scale that much to sell your company, to scare the shit outta the incumbent. Maybe you need to scale a lot more. Everybody's business is gonna be different. And when I was lecturing at the Leg Gotham School, which I've since retired from I, I. Would tell the entrepreneurs everybody hates consultants who come into a business and they're like, I know everything about your SaaS business. Whatever. You're like, but you don't. Right? I can't do that as a mentor or as a guide in entrepreneurship either. Everybody's company is gonna be slightly different. Everybody thinks, and so you have to sit down with people and you have to learn what are your goals? Okay, well, I want to make.$20 million. Okay, great. You may not even need to scale for something like that. Well, I want to take a company public. Okay. Obviously you have to scale if you want to go public. So there's all of these things in between those two, and it's really about knowing what's right for you and what's right for your team. Because one of the things that hurts companies when they're scaling is losing people. You don't nurture that support infrastructure. You lose part of your team there that can really hurt you. Now your customers don't have a good experience. Now they're not re-upping and buying again. Now that scale starts going the other way. Like all of these things are like if you look at a DJ console with all the knobs and buttons, everything you turn when you're growing your startup. Changes that startup. You turn this up, that goes down, you turn that down, this goes up, right? Maybe something gets cut out or clips like you gotta be aware of just how complex startups are. I think we have dramatically things to Fast Company and Entrepreneur Magazine, which are romance novels for startup nerds. We have dramatically oversimplified how complex it is. To have an idea and turn it into a profitable business. It is so much more complex than people think.
Dan Balcauski:Yeah, absolutely. I think there's a couple of different things I wanna touch on there. So I think the first is you've obviously had very, a lot of success in taking bootstrap companies and having successful edges, which was strange works. I believe you guys announced you raised a Series A recently. You're also a vc. So I, I understand the advice if you're making that decision of do we stay bootstrapped or do we pursue. Take venture capital, but assuming you're one of these entrepreneurs who's taken some venture capital, I think they're under a lot of pressure to scale, right? Maybe against some of their best interests of the company, you know, in, in that longer term, how
whurley:a hundred
Dan Balcauski:those entrepreneurs navigate the conversation? I, the points you're making I think are, will resonate with a lot of folks, but they're also getting that pressure.
whurley:Here's the deal. You may have already gotten yourself in that pressure that this may not be as useful. I'll give two kind of two kind of viewpoints. I told the investors in Strange Works, oh, there'll be no revenue. I. Don't expect revenue. If you're investing in a deep tech area with a unproven technology that could take another 20 years, and you think somehow there's gonna be tens of millions of dollars in the next 24 months, don't write me a check. Entrepreneurs do not take enough control of their business in the funding process if you want to buy Part of Strange Works, when I started this company with Justin Ewen and David Cardona, there were only three people you could buy it from. Entrepreneurs flip the script and they say, we gotta go be subservient to these investors. All the investors want this. Investors, what do you want? It's your company. You are building the company. Why should you let somebody into your cap table, who's gonna put pressure on you that is gonna potentially destroy your company? Why are you gonna bring somebody in? From a 10 year fund that's seven years in, that already has a$200 million exit, knowing they're on a European waterfall and they have to exit everything in the next three years to get that money. Why would you put yourself under that pressure? Entrepreneurs do not do enough diligence. They do not ask for LPAs. I do. Everybody that's invested in strange Works. I have seen under heavy N D A sometimes their limited partner agreement. What did they promise? They're investors because remember, VCs have a product and that product is you end of story. That's why they don't sign NDAs. They get all the crypto deals and the quantum deals and when they go to raise money from the Teacher's Retirement Fund of Texas and they go, we've heard a lot about crypto. They go, look at all the deal flow we have. We're obviously the place to put money. They are selling you every day. So you have to understand the actual dynamic, the actual part. And by the way, the venture capitalists are nothing without the entrepreneurs. If every entrepreneur said, we don't ABCs, we're just gonna bootstrap everything, that entire industry would die. And they're useful. They're very good VCs and good bad VCs, just like there are good, bad entrepreneurs, but it's knowing. Never walk into a room you don't know how to get out of, if you're an entrepreneur and you're taking a round and you haven't read the L p A of that fund, the promises they made, the people that gave them the money, the people whose actual money it is, how are you gonna live up to those promises? How are you gonna know if there's a mismatch, if there's any impedance between what you're talking about? I think this is super vital is the first part of it is don't get yourself in a situation where they can put that pressure on. You understand I had a venture fund that wants to do our series B already, and I met with them and I asked for their L p A and they were very nice to show it to me. Actually, one of the easiest conversations I've had about it, but I read it and you look at the returns. That they're promising, that they're forecasting. And then you look at the portfolio and then you look at you and you go, they may be looking at me to be the majority of that return, and that those things don't go together, and so we're gonna pass on a term sheet, right? Because it's just not a match. So that's the first thing is don't get yourself in that situation. The second thing is don't be afraid at all to tell them. We have to rethink the plan. These aren't gonna be the revenues, this isn't gonna be the scale. This is a legitimate pan to go the business and always have a backup. I have it. Several ventures that I've been a part of bought out other investors who are uncomfortable with taking the time. I think this is the problem I have with like fast company and entrepreneur and all this. We built this culture and it came outta Silicon Valley, not the original Silicon Valley culture, but what it morphed into was this thing where it's like, what? You're not worth a billion dollars in six months. We gotta get out of this deal. It's like, That's nothing is worth a billion dollars in six months. That is a made up number. Unicorn is the stupidest. And now we have decacorns. These are the stupidest things in the universe. Do you build a business that makes a product that provides value to a customer and they pay you money for it? That is an awesome business, and I can help you scale that. I can help you do it. That's great, but you know, these valuations, remember, valuation and value are not the same thing. Sure. You're worth a billion dollars, but how many companies have you seen worth billions of dollars? What was that that app that was gonna take on Apple tv? I've already forgot. It was called
Dan Balcauski:Was it the Meg Whitman? The Meg Whitman
whurley:Yeah, yeah, yeah,
Dan Balcauski:can't remember.
whurley:of dollars. Quibi. Billions of dollars grow fast. Everybody, you gotta get in on this. I didn't invest in that. Hey, where did that go? Nowhere, just billions of dollars just got shit away into nothing. So
Dan Balcauski:hanging out with CNN Plus Quibi and CNN
whurley:You have to you have to. I think I, I'm afraid CNN Plus may be like, Hey, I can't hang out with you. Like even CNN Plus is like, it's too much. But that's what I'm saying is so you know, one, know the agreements you're getting into, go and diligence the vc. They're gonna diligence you. They're gonna run background checks. They're gonna go through all your shorts and shit and all this. Do it to them and learn who you're dealing with, what other entrepreneurs think of them, what they've promised their investors. See if there's a match there and if there's a match there, that's when you have alignment. With the VC and the entrepreneur like that, that's where magic happens, right? And when you build a product where you have alignment with your customers, that's where magic happens, right? You want everything about being an a, whether it's being an investor or being an entrepreneur. Everything about scaling a business to the point of a seller public is about creating opportunities for alignment. End of story, right? It's all about making sure everybody's aligned. And so when I hear these stories about they want me to scale fast and I'm not ready, that sounds like a misalignment that you as the entrepreneur had the chance to correct, but you just needed to get that check. For whatever reason. That's another thing. People want to quit their jobs and get investment. Why would I invest in you quitting your job? Here's what I'd suggest. Keep your job, do this nights and weekends, build out something of value and then go raise money on it. Like we've just built this culture that I do not think is healthy from an entrepreneurial standpoint and it permeates in SaaS like it, it's a hundred percent in so many SaaS companies. And if you look at the number of SaaS companies that we're invested in and the number of SaaS companies that are now out of business in the last 10 years, I think it tells a very obvious story. I.
Dan Balcauski:So many good lessons learned there. Like value is not the same as valuation. Make sure you do. As much diligence on your investors as they're gonna do in you, and have the courage to always revise the plan and make sure you have a backup.'cause that'll probably give you more courage to always be bring up, revising the plan.
whurley:You do you need to have. Look, being an entrepreneur is like being a passenger on an airplane. You gotta put your mask on before you can help anybody around you. And you have to know where all the exits are. And the nearest one could be behind you. Somebody comes up and gives you an exit opportunity. I've seen so many entrepreneurs shit on it. We're gonna be worth a billion. We don't wanna sell for 50 million. Who two years later are like, oh my God, I wish somebody would buy us for 10 million. And just keep us from getting sued. That's really important. You have to take care of yourself and your people first. When VCs invest in Strange Works, and I tell them this, I view it as they now work for me, they're now employees of the company. I don't want somebody's money. I don't want somebody giving me advice on the business. I want a resource that I can deploy to further. The business and further the accomplishments and the achievements that are for my employees and my other investors, right? They're, it's about alignment. They're all part of a very extended framework. And when you don't have that alignment and you don't talk to those investors and you don't do that, everything gets very far off the rails. That's where things start breaking down. People don't know what's going on. They don't have problems. They can't help you, or they're trying to push you to do things you shouldn't do. These things can all be avoided if you don't have piss poor prior planning. Right?
Dan Balcauski:That is amazing. It really, I could talk to you all day. There's so many questions I haven't had the chance to ask. I might have to ask you to come back in a future season and ask you all those, but just to wrap. Up with the last few final questions. None of us gets here on our own is who's a close mentor or leader who's helped you on your journey?
whurley:Wow. I don't wanna do the Oscar Emmy thing and name like 800 people. But here's the thing. First of all, everyone can be a mentor. I learn more from the employees I hire than I have from all of my mentors combined. I. Everybody has a unique insight, a unique moment in time that is super, super valuable, and you have to provide those opportunities for employees and your co-founders and people to have those conversations and get that feedback. But if I were Sam when I there'd be three that really stood out in the artificial intelligence area. Doug Lenat was a mentor of mine, very famous guy in that space. Really useful in system management. Tom Bishop, but probably my number one. All time favorite mentor, it's gonna upset everybody, including him, would be Bob Metcalf because we are as polar opposite as two humans could be in every area, and yet somehow are like best friends in drinking buddies. And I have learned. More from Bob, who was an entrepreneur. He was an inventor, right? He was at Bell Labs. He invented ethernet, right? He started Polaris Ventures, right? One of the early VC funds, right? He started Threecom and grew it and sell and he's done all the things that I find myself now doing, and he's one of the few people that done it from. Inventor to entrepreneur, to lecture, to venture capitalist, to he's done all these things. And so he's been a constant constant in my life. And along with him, I told you when I start companies, I always go and find new mentors. At Honest Dollar, we met a guy named Charles Stonehill. Phenomenal, phenomenal guy. And Charles is an investor in Strange Works and a mentor, and hopefully I'll pull, trick him into joining the board or something soon. But he's, he has been incredible and you find that good mentors don't give you opinions. A lot of people think mentorship is me telling you how I did it and why you should do it that way'cause it's the best way. And that's not mentorship. Mentorship is. People asking a lot of big open-ended questions and making you think and engaging in thinking and helping you shape that thought into something valuable. And when I look at somebody again, like Charles and Bob who are two people I'm talking to on a fairly regular basis right now, that's what they really do. Charles and Charles, his proper English guy, and lemme tell you what you never want to hear is Charles go. Ah, yes. I mean, you could do that Ley that's a thing. You could do that's like a big red flash warning sign. Right? And he's not gonna give you the opinion, but you kind of get the message and they say, I go, okay let me think about it. Let me call you next week. I go, I'm gonna back up a little bit. But it's really
Dan Balcauski:the harshest critique a British man could give you is, ah, you could do that.
whurley:yeah. Yeah. It's an option. You could always do that if you wanted. Anything along those lines, you're like, well, stop. But no they've been wonderful. And again, everybody listening. Every time I start a new business, I find five new mentors. Okay? I try to make it a diverse group of mentors. This one has been harder in quantum because people think, oh, I need to know Quantum to be able to help you with the business. Not true. Maybe you need to know sales or how to manage up on a board or a million other things, but mentors are the key and I would encourage every entrepreneur. In fact, I do encourage every entrepreneur. Find you five mentors because you can't just have one. They're not gonna be available all the time. If they're good, they're busy, so you wanna have three or four or five and you wanna set up a quarterly or monthly call with them, or just an email like, Hey, things are going great. Just a checkpoint. Because without keeping that conversation going, you don't get the benefit of having a deeper conversation.
Dan Balcauski:Yeah, that's fantastic. I think all of us could wish we had Bob Metcalf as a drinking buddy. What a fantastic story and relationship you've
whurley:I love him. He's awesome. He's like my favorite person in the whole world and he's now doing a startup. So he's so go check out his Lincoln and all his posts and it's like he, he's gonna start a company and I'm like, that's amazing. I think I talked to somebody who is in an area that Bob's looking at and it's a young guy. He is he's like 32 or so. And he is like, but Bob's so old. And I was like, really? I think Bob will kick the shit outta you.
Dan Balcauski:I, yeah, I don't know. I don't think I'd place the opposite side of that bit.
whurley:I, yeah I don't think I would either.
Dan Balcauski:Oh my God, that's amazing. And also was amazing in your answer there is just with all the success you've had at all the companies you've been a leader of the fact that you just brush all that aside and humbly acknowledge yeah, like I'm gonna need five new folks in areas that I'm not an expert in to take me to the next level. So I think that's an amazing growth mindset that we could all benefit from.
whurley:I'll leave you with this for everybody out there. Just remember when you're an entrepreneur, all right. The rules. Mike Irwin, my dear friend and who was the founder of Ecliptic, who unfortunately passed away about six weeks ago, used to always say, and it always stuck with me, you running a startup, there's only four simple rules. Use it up, wear it out, make, do, or do without. If you're not doing that, you're entrepreneur, not an entrepreneur, and you're probably gonna fail because startups are hard. There's no doubt about that. I.
Dan Balcauski:Is amazing advice. Whirley, this has been fantastic. How can listeners connect with you or learn more about your company or social media? Anyone could follow you on.
whurley:So now I'm gonna get really excited. So I'm really on everything. I'm on the, I'm on the X now, not the Twitter, and I'm on the threads and all of that. So easy to find me on LinkedIn everywhere. But for the first time in my life, I've threatened this for my entire career. I'm finally building a personal website at worthy.com. There's nothing there now, but a placeholder page. But September 1st, I'll have that. And for people interested in quantum computing and ai, I'm trying to build a. A really vibrant resource. I've got a chatbot on there to help teach people. I've got the books and the stuff, so obviously there'll be some shameless self-promotion of stuff I'm doing, but the idea about it is to start what I hope I can build a community around where people who think they don't have the knowledge or think they're not technical enough can discover that maybe. These technologies, even that playing field out for them, and there's things that they can do that it would greatly advantage their lives if I could help a bunch of people through that and inspire them. That's my new jam on what I want to do. And yes, I have found three of my five mentors who are great at building those types of things. Brian Bailor from Apache, being the first one who I absolutely adore. And to help me through that journey, but I hope that'll giving back so hopefully around September 1st. Go to worldly.com. In the meantime, whirly on everything you could imagine. Now I also may not respond on some of those things, but I promise I look at all of them and will eventually get back to anybody.
Dan Balcauski:Awesome. We will put all those links in the show notes for our listeners. That wraps up this episode of SAS Scaly Secrets, a massive thank you to Whirley for sharing his journey, insights, and invaluable tips for our listeners, if you found this conversation as enlightening as I did, remember to subscribe so you don't miss out on future episodes. Till next time, keep innovating, growing, and pushing the boundaries of what's possible.
