20VC Behind The Scenes of a $Bn IPO Process, What Startups Can Learn From Teddy Roosevelt's Five Minute Meetings and What John Lennon Teaches Founders About Storytelling with Howard Lerman, Founder & CEO @ Yext

In this episode of "20 minutes vc," host Harry Stebbings interviews Howard Lerman, the founder and CEO of Yext, a company revolutionizing brand experiences across the digital universe. Lerman discusses Yext's successful IPO, which opened at $11 a share and has since climbed to a $2.65 billion market cap, reflecting his leadership and the company's innovative platform. He shares insights on leadership techniques such as Teddy Roosevelt's five-minute meetings and John Lennon's storytelling strategy, emphasizing the importance of clear, memorable communication. Lerman also delves into the evolution of information from web-based documents to database-driven "brains," predicting that businesses will transition from websites to structured databases to power AI services. The conversation covers a range of topics, including the challenges of being a CEO, the future of voice and augmented reality, and the strategic cultivation of leadership within a company.

• Harry Stebbings expresses his excitement for the interview with Howard Lerman.
• Howard Lerman is the founder and CEO of Yext, a company that helps control brand experience across the digital universe.
• Yext went public in April 2018, with an opening price of $11 per share, and has been successful since.
• Before the IPO, Yext raised over $117 million in VC funding from various partners.
• Howard is also the co-founder and chairman of Confide, a messaging service.

"I'm so excited to welcome Howard Lerman, founder and CEO at Yext, the company that allows you to control your brand experience across the digital universe."

The quote highlights Harry Stebbings' anticipation for the interview with Howard Lerman, acknowledging his accomplishments and the success of Yext.

• Yext's stock price increased to $26.85 with a market cap of $2.65 billion, indicating a successful IPO.
• Insight Venture Partners, IVP, SV Angel, and Crunch Fund were among the VC firms that invested in Yext.

"Today, the stock price sits at about $26.85 and a market cap of 2.65 billion. So a pretty successful IPO there, Howard."

This quote emphasizes the financial success of Yext's IPO, with a significant increase in stock price and market capitalization.

• Howard Lerman discusses how there is no single pivotal moment in starting a company.
• He emphasizes the importance of selecting great co-founders, which he did with Brent Metz and Brian Distelberger.
• Lerman notes that the original idea for a company often evolves through iteration into the winning concept.
• He believes that great companies often grow organically from a small niche that turns out to be much larger than initially perceived.

"A company is really a group of people when you found it, and the most important thing you can do is pick great co-founders, which I happen to do."

This quote reflects Howard Lerman's perspective on the importance of team dynamics and the selection of co-founders in the success of a startup.

• Howard Lerman acknowledges that a company can be started with either a top-down or bottom-up approach.
• He mentions that historically, the most successful companies have grown organically from entrepreneurs executing on an idea rather than conducting market analysis.
• Examples include Microsoft, Apple, IBM, and Ford Motor Company, where founders started with an idea and expanded from there.

"I think they had an idea and they executed on that idea. They dominated a niche, and it turned out that that niche, which appeared to be small, was huge."

The quote explains Lerman's view on how many successful companies started with a core idea that founders believed in and executed, leading to significant growth.

• Howard Lerman shares a technique he learned from Teddy Roosevelt to keep a pulse on a growing company.
• Lerman applies Roosevelt's method of holding five-minute meetings to stay connected with his global team.
• This technique allows him to meet with a large number of employees in different locations efficiently.
• Lerman emphasizes the importance of quick decision-making and follow-up in these meetings.

"Teddy Roosevelt, in his presidency, developed a technique that we can all learn from this guy. His productivity was amazing... He would hold five minute meetings."

The quote describes how Howard Lerman was inspired by Teddy Roosevelt's method of holding brief, efficient meetings to manage a large and diverse team effectively.

• Teddy Roosevelt's five-minute meeting technique is an efficient way to gather critical insights from team members.
• The approach involves concise, back-to-back meetings with individuals, focusing on direct communication and time management.
• This method allows the CEO to collect numerous data points about the office's critical themes.
• Employees value the opportunity for direct, undivided attention from leadership, enhancing overall inspiration within the company.
• Such meetings are practical for companies with a size of 1,000 to 3,000 employees but not feasible for much larger organizations.

"You have to stay on time. You never, ever go over, and you'd be stunned how much you can accomplish in five minutes, how much you can learn from someone in five minutes."

This quote emphasizes the importance of discipline and the surprising effectiveness of brief, focused interactions.

"The output of the day is two things. One is that you now have 75 data points times three from the other two people around. What are the critical themes going on in that office?"

The quote highlights the primary outcome of the technique: gathering a significant amount of feedback to identify common issues or ideas within the company.

"So you inspire the whole office when you sit down with every person from the executive to the janitor, because you care what they have to say, you care what they have to think."

The quote underscores the motivational impact of leaders showing genuine interest in the thoughts of all employees, regardless of their position.

• John Lennon's storytelling technique involves not writing down new song ideas immediately to test their memorability.
• This method relies on the assumption that if an idea is not memorable to the creator, it will not resonate with the audience.
• Lennon's approach reflects the human brain's evolved capacity to remember rhythmic and poetic lines, a remnant of oral traditions.
• Effective communication in speeches or storytelling can utilize this cognitive bias by crafting memorable lines.
• Memorizing lines can improve their quality, making them shorter, crisper, and more natural.

"John Lennon... would intentionally not write it down... he realized that if he couldn't remember it, it probably wasn't very good."

This quote explains Lennon's rationale behind his method of testing the memorability of his song lyrics.

"The human brain is really good at remembering lines that have terrific rhythm, that have terrific poetry, that really sing to your heart."

The quote describes the cognitive bias that allows people to recall content that has an emotional and rhythmic impact, which can be leveraged in communication.

"When you memorize your lines, you create something that's memorable."

This quote conveys the idea that the process of memorization forces refinement and improvement, leading to more impactful communication.

• Howard Lerman discusses his leadership strategy of managing two distinct groups within the company: the executive group and the extended leadership team.
• The executive group consists of a manageable number of direct reports, which in Lerman's case is twelve.
• The extended leadership team, while not a decision-making body, plays a crucial role in disseminating the company culture and strategy across global offices.
• Lerman emphasizes the importance of frequent communication with both groups to maintain alignment and cultivate leadership.

"I carefully work with my direct reports... I also carefully work with and cultivate and frequently communicate with all my direct reports, of which there are 55."

This quote outlines Lerman's approach to leadership, which involves close collaboration with both his immediate team and a broader group of leaders within the company.

"I actually focus more on cultivating that group a bit more than the executive team because the execs are pros and the leaders need to be the ones that are carrying out the vision, the mission, the strategy, the culture in the field."

The quote indicates Lerman's strategic focus on nurturing the extended leadership team to ensure the effective execution of the company's objectives.

• Entrepreneurship is likened to playing an undefined game without established rules, contrasting with the structured environment of sports.
• The role of a CEO evolves from entrepreneur to manager as the company grows, with the CEO's responsibilities shifting toward overseeing a larger operation.
• Raising funding rounds is a milestone for entrepreneurs but should not be mistaken for the ultimate goal, which is building a sustainable company.
• Dealing with ambiguity is a critical skill for entrepreneurs, whereas CEOs of larger companies may find more structure in their roles.

"There's no clock, there's no championship at the end. There's no tournament."

This quote captures the open-ended nature of entrepreneurship, highlighting the lack of definitive markers of success compared to structured competitions.

"I think I'm getting more of a CEO now than an entrepreneur."

The quote reflects Lerman's personal transition from the role of an entrepreneur to that of a CEO as his company has grown and requires different leadership skills.

• An IPO is seen as a significant achievement in the business world.
• The IPO is not the end goal but a step along the journey of building a sustainable, profitable company.
• The process of an IPO involves selecting banks, going on a roadshow, and meeting investors.
• The roadshow is an intense period with multiple daily meetings across different cities.
• Feedback from investors is received quickly, which influences the pricing and selection of initial shareholders.

"The IPO is a step along the way. It is certainly an achievement. It's an achievement that no one can ever take away."

This quote emphasizes that while an IPO is a milestone, it is part of a longer journey, not the final destination.

• Banks like Morgan Stanley and JPMorgan are selected to lead the IPO process.
• The roadshow involves traveling to different cities, pitching to investors, and dealing with the possibility of investors betting against you.
• Entrepreneurs face a new challenge with investors who may short their stock.
• The roadshow provides immediate feedback from investors through an app showing their orders.
• The night before the IPO, the offering price is set in consultation with the bank's trading desk.

"You spend a couple weeks going on this crazy roadshow where you meet with at least eight meetings per day to investors that for the first time in your life, aren't just thinking about betting for you, but could also bet against you."

This quote describes the intense and novel experience of an IPO roadshow, where entrepreneurs are exposed to a broader range of investor attitudes and actions.

• The IPO day is an emotional event, symbolizing a permanent achievement.
• Seeing the company's name on the New York Stock Exchange is a memorable moment for all involved.
• The IPO is both a celebration of past efforts and a reminder that the journey is just beginning.
• The next day after the IPO, it's back to business with a continued focus on growth and innovation.

"It's an emotional moment when you see Yext hanging from the banner of the New York Stock Exchange and 250 people that helped you get there standing in front of it, that's the moment, you know, when you did something and you did something permanent, you did something that's going to change the world forever."

The quote captures the significance and emotional weight of the IPO day, marking a milestone in the company's history and the start of a new chapter.

• Yext is described as a special company, not merely a feature of a larger SaaS platform.
• Yext aims to build the 'brain' to power company information in an AI-powered future.
• The company operates in a new market category with significant growth potential.
• Despite being in a market that is not yet well-defined, the company sees this as an opportunity to build something substantial.

"Yext is a platform in itself. We're building the brain to power every company's information in the AI-powered future."

This quote defines Yext's business model and ambition, distinguishing it from other SaaS companies and highlighting its innovative approach to information management.

• Information is transitioning from web documents to database-based brains.
• Websites are seen as static documents, while the future is about dynamic, structured information.
• This shift enables intelligent services to provide direct answers to user queries, rather than directing them to documents.
• Companies will move towards having a database-like brain to present their information, allowing for more complex queries and interactions with intelligent agents.

"The information is moving from web based documents to what we call database based brains."

This quote outlines the conceptual shift in how information is presented and accessed, moving from traditional web documents to more intelligent, database-driven systems.

• Voice search is considered only part of the future of natural computing input.
• Augmented reality is predicted to play a significant role alongside voice search.
• Despite changes in how consumers interact with technology, brand power is not expected to diminish.
• The combination of voice and augmented reality will create a new user interface beyond smartphones.

"I don't believe that brand is over because I think that voice search is only half the puzzle. While exciting, augmented reality is going to be the other part of that puzzle that completes the evolution away from the smartphone into a next generation user interface."

The quote suggests that the rise of voice search will not negate the importance of brand, as augmented reality will complement voice search to form a complete and transformative user interface.

• Howard Lerman is asked for a book recommendation during a quick fire round.
• He suggests "Five Stars" by Carmine Gallo, which focuses on the art of storytelling and the oral tradition.

"One I'd recommend reading right now is five stars by Carmine Gallo. It's all about storytelling, the oral tradition."

The quote provides a personal recommendation from Howard Lerman, highlighting the importance of storytelling in communication and business.

• Howard Lerman discussed the importance of storytelling in enterprise software.
• He highlighted how Marc Benioff of Salesforce excels in entertaining customers through executive dinners with a mix of celebrities and customers.
• Benioff encourages guests to share what's on their mind, fostering conversation and engagement.

"Benioff does a great job putting on dinners... he has everyone go around the table and answer the question of what's on their mind."

This quote explains Benioff's approach to engaging a diverse group of dinner attendees, prompting them to share their thoughts to stimulate dialogue.

• Howard Lerman expressed a strong preference for companies being public over private.
• He outlined the advantages of being public, such as access to more capital, the ability to offer RSUs to employees, attracting senior talent, and providing transparency to customers.
• Lerman views being private as a transitional phase in a company's growth.

"Being public from a competitive perspective, you're bigger, you're badder, you have more cash... Being public is the only way to be big."

This quote summarizes Lerman's view that public companies have significant competitive advantages, including size, financial resources, and brand recognition.

• Howard Lerman recounted his positive experiences with venture capitalists (VCs).
• He acknowledged the support he received from his VCs, especially during challenging times.
• He refrained from generalizing about the VC community due to his positive and limited experiences.

"We were lucky. We had great vcs... I never had any problems with vcs."

Lerman's quote reflects his personal, positive interactions with VCs, which he attributes to his company's success and the support he received.

• Howard Lerman shared his personal strategies for coping with stress, including taking Chinese lessons.
• He finds learning new languages and reading about historical leaders to be meditative and intellectually stimulating.
• These activities contribute to a growth mindset culture at Yext.

"It requires you totally to focus... Similarly, if you don't have complete and utter concentration on speaking Chinese, you won't succeed as a westerner."

The quote emphasizes the concentration required to learn Chinese, which Lerman uses as a stress-relief technique and a way to foster a learning culture within his company.

• Howard Lerman relayed a personal anecdote about an encounter with a Chinese engineer on a train.
• The engineer's statement about China's mission to surpass America left a strong impression on Lerman.
• This story was used to illustrate China's ambition and focus on global dominance.

"It is the mission of my generation to study America and to crush you."

Lerman recounts the direct and impactful statement made by the Chinese engineer, which encapsulates his views on China's strategic intentions.

• Howard Lerman compared overcoming business challenges to running a marathon.
• He believes that persistence and continued effort can lead to finding additional energy and resources to succeed.

"I think it's like a marathon where when you're tired halfway or even a half an hour into it, if you just keep going, somehow you find more energy without slowing down."

This quote draws a parallel between the endurance required in a marathon and the resilience needed to overcome business challenges.

• Howard Lerman outlined Yext's future focus on creating a "brain" for businesses.
• He described this brain as a structured database of public facts that will power AI for businesses.
• The vision includes enabling businesses of all kinds to have their own AI-driven databases to think for themselves.

"Every business in the world that today has a website will very soon have a brain... Without structured information, a brand can't think for itself."

Lerman's quote details Yext's ambition to revolutionize how businesses use structured information to power AI and enhance their operations.