20VC Scaling Zapier To $140M ARR and a $5Bn Valuation on $1.4M of Funding, What Founders Misunderstand About Fundraising & How Founders Should Think About Secondaries Today with Wade Foster, Founder & CEO @ Zapier

Harry Debbings interviews Wade Foster, co-founder and CEO of Zapier, a company that automates web app workflows. Foster shares his journey from a humble beginning during the financial crisis to scaling Zapier to $140 million in ARR and a $5 billion valuation, with minimal funding. He discusses the benefits of remote work, the importance of management in fostering autonomy, mastery, and purpose, and the significance of maintaining a lean team to focus on growth. Foster also touches on the strategic approach to fundraising and the advantages of preserving equity and freedom by avoiding unnecessary capital. The conversation includes insights into decision-making, fostering company culture, and the future of democratizing automation with Zapier.

• Zapier is a unicorn company that automates information movement between web apps.
• Wade Foster, the co-founder and CEO, scaled Zapier from $1.4 million in funding to $140 million in ARR and a $5 billion valuation.
• Zapier's growth was achieved without traditional venture rounds until a buyout by Sequoia and Steadfast.

"He scaled his company with just $1.4 million in funding to over $140,000,000 in ARR and a $5 billion valuation."

This quote highlights the significant financial growth and success of Zapier under Wade Foster's leadership, indicating a highly effective scaling strategy.

• Carter is a platform that simplifies equity issuance for companies and acceptance for employees.
• Cooley is a global law firm that specializes in assisting startups and venture capital firms, with a history of forming the first venture fund in Silicon Valley.

"More than 16,000 companies issue equity to their employees through Carter."

The quote emphasizes the widespread adoption of Carter's platform among companies for equity issuance, suggesting its importance in the startup ecosystem.

"Cooley's form more vc funds than any other law firm in the world."

This quote highlights Cooley's leading position in forming venture capital funds, indicating their expertise and significant role in the venture capital industry.

• Wade Foster graduated during the financial crisis, which led to an unexpected career path.
• His early career in a small software company sparked his interest in building software and SaaS companies.
• Despite initial challenges, Foster's learning agility and networking led to the founding of Zapier.

"I graduated college during the financial crisis in eight... I wasn't very career minded... It was a bit of a wake-up call."

This quote provides insight into Foster's initial career outlook and the impact of the financial crisis on his job prospects, leading to a pivotal moment in his career trajectory.

"I fell in love with building software... I didn't know how I'd get it done. I didn't know how to code."

Foster's passion for software development is evident, and despite lacking certain skills initially, his determination to learn and grow in the field is clear from this quote.

• Wade Foster recommends joining smaller companies for a comprehensive learning experience in running a business.
• Exposure to all aspects of a business in a small company setting can significantly widen one's worldview and skill set.
• Larger, post-product-market-fit companies tend to slot individuals into specific roles, potentially limiting exposure to the broader business operations.

"If you want to learn how to run a company, I think the smaller company you can be a part of the better because you're just going to get exposed to the whole of the thing."

This quote advises graduates interested in entrepreneurship to seek experiences in smaller companies where they can learn about all aspects of a business.

• Wade Foster believes the principles of autonomy, mastery, and purpose are crucial for remote work, similar to in-office work.
• Effective remote work requires great management and leadership to establish successful systems and structures.
• Remote work necessitates a shift towards asynchronous communication and a greater focus on building camaraderie and community.

"Working remotely is not so different than working in an office... people want to feel like they have autonomy, mastery, purpose."

The quote underscores the fundamental human needs for a satisfying work environment, regardless of whether it is remote or in-office, and the importance of fulfilling these needs in remote work settings.

• Building companies remotely presents unique challenges and advantages.
• Intentionality is required to address difficulties that arise in a remote setting.
• Some areas may offer an advantage due to the nature of remote work.
• The fundamental aspects of building companies remain consistent regardless of the environment.

"So I think it just really boils down to identifying, like, okay, these are the things that are going to be a little harder, and we're just going to have to be a little more intentional about those things versus actually, we have a bit of an advantage now in some of these other areas, so maybe we get some of the benefit there. But at the core, I feel like building companies is still building companies. A lot of the things you do are still the same."

This quote emphasizes the need for adaptability and intentionality when building companies remotely, while also suggesting that the core principles of company-building do not change significantly.

• Zapier's executive team holds weekly staff meetings.
• Before meetings, topics are teed up to allow for preparation.
• Participants pre-fill documents and use the first ten minutes for a pre-read and comments on a shared Google Doc.
• Small issues are resolved through comments, eliminating the need for discussion.
• The majority of the meeting focuses on two or three major topics.
• Less critical topics are discussed asynchronously on Slack after the meeting.

"Folks join a zoom for the meeting. We do ten minutes of pre read. We're in a Google Doc, so everyone's, like, commenting out to the right, and a lot of small stuff sort of just gets cleaned up in that first ten minutes where it's like someone from engineering had this thing with someone in marketing, and they're like, okay, we should do XYZ."

This quote describes the process of the pre-read phase of staff meetings at Zapier, indicating an efficient approach to resolving minor issues before the main discussion.

• Accountability for tasks deemed less critical is not a primary concern.
• Executive team members are responsible for driving accountability for these tasks.
• The approach to accountability is based on prioritization, with the most important issues being addressed during meetings.

"I don't worry about them all that much. I kind of take the mindset of like, well, if it was really important, it would have been like the number one thing we were spending our time on."

Wade Foster explains that less important tasks, which do not get addressed during meetings, are not his focus for accountability, suggesting a prioritization-based approach to task management.

• Transparency in remote teams is crucial for effective operation.
• Zapier uses an internal tool named 'async' for main company communications, which functions like a long-form Reddit.
• The tool allows for categorized posts, comments, and a personalized homepage feed.
• Day-to-day tactical work is handled through Slack, with a vast number of channels following a naming convention.

"We've built this tool, async internally. That is like the best way to describe it is kind of like a Reddit style but long form Reddit, I guess, where you can post blog posts and assign them into a category or maybe subreddit if you want to."

Wade Foster describes the internal communication tool 'async', which facilitates transparency and engagement within the company in a structured, Reddit-like format.

• Zapier's team has grown to over 400 people.
• Breakpoints in scaling occurred around 20-25 employees, 125-150, and are approaching another at 400.
• Each breakpoint required adjustments to management structures and practices.
• The company has had to adapt its operational cadence and management as it grows.

"I think we have had breakpoints at a few spots. I remember the first one was probably around 20 or 25. That was where it was like, oh my God, there's no management structure in this company."

This quote reflects on the challenges faced at different stages of scaling the team at Zapier and the realization that management structures needed to be established and adapted.

• Scaling as a leader is a continuous learning process.
• Hiring and leading great executives is one of the most challenging aspects.
• The number of direct reports for a leader can fluctuate based on company needs.

"An area that has been a constant learning for me is just around my own sort of ability to lead larger and larger groups of people."

Wade Foster shares his personal experience with the challenges of scaling as a leader, emphasizing the difficulty in hiring and managing executives effectively.

• Zapier has roots in the Midwest and has operated in Silicon Valley.
• The company culture borrows from the self-reliance and humility of the Midwest.
• Ambition and other positive traits are borrowed from Silicon Valley.
• The company follows a Bruce Lee-inspired philosophy of adopting what works and discarding the rest.

"We knew that to be successful, we were going to have to do that work ourselves and get it done. And then we sort of instilled that into the culture."

Wade Foster discusses how Zapier's Midwest roots have influenced its culture, instilling a sense of self-reliance and humility which contrasts with typical Silicon Valley culture.

• Harry Debbings expresses admiration for Amazon and Basecamp's organizational structures and behaviors.
• Wade Foster shares his respect for companies like Amazon, Stripe, Atlassian, Basecamp, and Disney, highlighting their ability to reinvent and endure.

Yeah, I mean, there's a few. Amazon is certainly a company that I admire a lot from afar. Stripe, I think is one of the best sort of modern companies. Atlassian is one that I've sort of respected a lot from afar. Base camp as well. Outside of sort of maybe traditional tech like Disney is a company. I think that its durability and its ability to reinvent itself over and over again is amazing to watch.

This quote emphasizes Foster's respect for the innovative and enduring qualities of certain companies, which he believes are worth learning from.

• Wade Foster discusses the importance of vulnerability and honesty in leadership.
• He criticizes the old school mentality of leaders needing to be perfect and suggests that transparency can align and motivate teams.

Well, I tend to think that it is pretty useful to just be honest about the situations you're in. [...] I actually think that that prevents a lot of good things from happening inside of your company.

Foster believes honesty about challenges is more beneficial than pretending to be perfect, as it fosters a better internal company environment.

• Wade Foster shares his approach to decision making, differentiating between head decisions (logical) and heart decisions (moral, ethical, personal).
• He values following gut instincts when the answer is not clear and emphasizes staying true to oneself.

The times where I find myself using my heart the most are times when you sort of come to this crossroads where you're at a decision where you're like, I just don't know what the answer is. But I have this gut instinct or belief that this is right.

This quote explains Foster's reliance on his heart or gut feeling when faced with uncertain decisions, suggesting that it often leads to fewer regrets.

• Wade Foster discusses the mindset of founders towards raising capital and the importance of understanding the implications of selling company equity.
• He advises founders to critically assess the need for capital and its alignment with their mission.

You are not raising money. You are selling a part of your company.

The quote is a reminder to founders that raising capital equates to giving up ownership and they should be mindful of the trade-offs.

• Wade Foster reflects on the low cost of capital for founders in the current market, but still emphasizes the need for a clear purpose for raising funds.
• He argues that if a company's balance sheet is already sufficient, taking on additional capital without a clear purpose is not advisable.

Still comes back to, what are you going to do with that capital? What do you need it for? How are you going to spend it?

Foster questions the rationale behind raising capital, emphasizing that the decision should be based on the intended use of the funds rather than just the availability of cheap capital.

• Wade Foster shares the benefits of not engaging in continuous fundraising, such as having more freedom and flexibility.
• He highlights the time and mental investment that fundraising requires, suggesting that it's more beneficial to invest that energy directly into the business.

We gained so much more freedom and flexibility.

This quote captures the essence of how limited fundraising has allowed Foster's company to focus more on customer service and business growth.

• Despite not raising funds frequently, Wade Foster maintains that building relationships with venture capitalists is important for keeping options open.
• He describes his approach to relationship building with VCs as a way to have the option to raise funds if ever needed.

I did say like, hey, I do want an option. I do want to be in this situation where if I do

The quote is incomplete, but it suggests Foster's strategic approach to maintaining relationships with VCs, keeping future opportunities available.

• Wade Foster, from Zapier, set up a simple calendar strategy for potential fundraising.
• He would meet with smart, talented individuals who could be potential partners.
• The goal was to have established relationships before needing to raise money.

"I'm going to jump on a Zoom call with somebody and build a relationship with five or six people that I think are smart, talented, maybe potential partners and such, that if that day comes, I don't have to go through this shotgun wedding to raise money."

The quote explains the proactive approach Wade took to build relationships with potential investors or partners, thus avoiding a rushed fundraising process.

• Selection based on individual qualities rather than brand or prestige.
• Importance of personal assessment and compatibility for long-term help to the business.
• Continued interaction was a sign of a good potential relationship.

"Mostly it was individuals, just like people I happened to meet and get introductions to and build some of that personal assessment of like, it's like hiring a person."

Wade compares selecting potential partners to hiring, emphasizing the importance of individual qualities and mutual compatibility.

• Wade Foster supports secondary sales for founders.
• Secondary sales are beneficial for personal finance health and allow founders to take bigger risks in business.
• Even those typically against venture capital (VC) find secondary sales to be a smart move.

"Taking a little bit of money off the table in a secondary is, I generally think, the risk reward equation there is probably pretty reasonably smart."

This quote reflects Wade's belief in the practicality of secondary sales for founders, allowing them to secure personal finances and focus on business growth.

• Wade Foster does not face the challenge of determining the right amount due to his modest lifestyle.
• The right amount for secondary sales depends on personal lifestyle goals and financial needs.

"The amount that I would take off the table is something that most people would just be like, are you sure you don't want more weight?"

Wade's personal preference for a modest lifestyle informs his approach to secondary sales, suggesting that the 'right amount' is subjective.

• Wade and his wife are high school sweethearts.
• Personal relationships and family are discussed, indicating their importance to Wade.

"We're high school sweethearts."

This brief quote reveals the long-standing relationship between Wade and his wife, highlighting the significance of personal history in his life.

• Wade hopes his children will be caring, hardworking, and honest.
• He emphasizes the importance of caring for people and the Earth.

"I hope they care about people. I hope they care about the fellow humans or the earth we live on."

Wade expresses his desire for his children to adopt values that prioritize compassion, work ethic, and integrity.

• Keeping up with growth is the hardest part of Wade's role at Zapier.
• Leadership involves making tough decisions that are not always popular.

"I think it's just like keeping up with the growth, just making sure that we're on top of everything, always."

Wade identifies the challenge of managing rapid growth and the constant need to stay ahead in his leadership role.

• Zapier's first pricing model was based on the Fibonacci sequence.
• The pricing plan names were themed around electricity to match the company's name.

"We're going to do our first pricing model based on the Fibonacci sequence."

The quote explains the unconventional and creative approach to Zapier's initial pricing strategy, which was both thematic and unique.

• Acquisition of Makerpad, a company that impressed Wade with its innovative use of no-code tools.
• The ability to build clones of major tech apps using no-code tools was mind-blowing.

"He would just post these tutorials on how to build clones of these pretty major tech apps, like he built, like an Airbnb clone and some of these other things using no code tools."

Wade's amazement with Makerpad's innovative tutorials demonstrates the potential and power of no-code tools in creating complex tech solutions.

• Wade admits to an insecurity around the need to be liked, which can affect decision-making.
• Leadership often involves making unpopular decisions.

"I like to be liked, I think a little too much."

This candid admission by Wade highlights a personal challenge in leadership, where the desire for approval can conflict with necessary business decisions.

• Zapier aims to democratize automation and make it accessible for everyone.
• The focus is on empowering people to use automation as a tool to simplify their lives.

"Our goal is to democratize automation. We want to make this stuff a lot easier for folks."

Wade outlines Zapier's mission to make automation user-friendly and widely accessible, changing the perception of automation from something daunting to something beneficial.

• Zapier's impressive growth from $1.4 million to $140 million ARR (Annual Recurring Revenue).
• The discussion of equity and legal representation in the startup ecosystem.

"1.4 million to 140,000,000 in error. Incredible to see."

This statement highlights Zapier's significant financial growth, showcasing the success and scalability of the company's business model.