20VC Why and How The Best Companies Build Economies Around Themselves, When, Why and How To Build Effective PartnerChannel Networks & The Power of Compounding Growth in SaaS with Jay Simons, General Partner @ Bond

In this episode of 20vc, host Harry Stebbings interviews Jay Simons, General Partner at Bond Capital, who reflects on his journey from a 12-year tenure at Atlassian, including nine years as president, to his current role in venture capital. Jay shares insights on the importance of building economies around companies, drawing from his experiences at Atlassian, where they fostered a partner economy, a marketplace economy, and more, to facilitate sustainable, long-term growth. He emphasizes the significance of trust and alignment with third-party partners and the strategic timing of expanding product portfolios. Additionally, Jay discusses the challenges and surprises transitioning from an operational role to venture, highlighting the necessity of a long-term vision in investments and the role of founders' character in a company's success. The conversation also touches on wealth management solutions from Harness and art investment opportunities through Masterworks.

• Jay Simons is the general partner at Bond with their debut Growth Fund since 2019.
• Bond has invested in companies like Revolut, Canva, Nextdoor, Ironclad, and On Running.
• Jay spent twelve years at Atlassian, including nine as president, contributing to its hypergrowth.
• He serves as a board member for Zapier and HubSpot.
• The podcast host, Harry Stebbings, acknowledges question suggestions from Alex at Excel and Atlassian founder Scott Farquhar.

"I'm thrilled to welcome Jay Simons, general partner at Bond with their debut Growth Fund back in 2019."

The quote introduces Jay Simons as a significant figure in the venture capital industry and highlights his role at Bond and contributions to Atlassian.

• AngelList provides a fund admin platform for managing investments, simplifying back office needs.
• AngelList supports over 10,000 investments in 6,000 startups.
• Harness Wealth offers a next-generation wealth management solution for individuals involved in businesses.
• Harness Wealth provides tax planning sessions with experienced advisors.
• Users of Harness Wealth include founders and employees from Stripe, uipath, Affirm, and Coinbase.
• Masterworks allows investment in shares representing iconic artworks, with over $150 million in paintings purchased.

"The team at angel list takes care of all my back office needs so that I can focus on working with great founders."

The quote explains the convenience provided by AngelList to investors by managing back office operations, allowing them to concentrate on engaging with founders.

• Jay has 25 years of experience in building companies.
• He spent the last twelve years at Atlassian, focusing on Go-to-market strategies and business operations.
• Jay joined the board of HubSpot about four years ago.
• He began investing in younger companies and mentoring founders, finding energy in these activities.
• He chose to use his experiences to help multiple companies and founders by entering venture capital.

"After 25 years of building companies, I could choose between rebooting and single threading on another company that I could help build and grow, or taking the accumulated merit badges and experiences and scar tissue and trying to be useful across more dimensions and bunch of different companies in different markets and different founders and different stages of growth."

The quote captures Jay's decision to transition from building individual companies to leveraging his experience in a venture capital role to assist a broader range of companies and founders.

• Jay's early experiences as a musician in Asia, including Seoul, Korea, and Tokyo, were transformative.
• These experiences opened his perspective, taught him to appreciate differences, and improved his listening skills.
• He learned to connect with people on a different level due to language barriers.
• Jay also developed adaptability by learning to play Frank Sinatra's "My Way" in every key.

"Open my perspective a lot. Taught me, I think, to look for and appreciate differences. Helped me to listen more carefully."

The quote reflects on how Jay's early experiences in Asia broadened his horizons and influenced his interpersonal skills, which are valuable in his professional life.

• Alex at Atlassian gave Jay a brass owl as a parting gift, symbolizing their friendship and the power of observation and wisdom.
• Jay carried the owl during Atlassian's roadshow and IPO, symbolically including Alex in the journey.
• The owl represents the importance of incredible people in building successful businesses.

"Still, I keep that owl on my desk. As a reminder of the friendship that Alex and I formed in those early years. But to me, it's also a reminder that incredible people make incredible businesses."

The quote highlights the significance of the brass owl as a symbol of friendship, wisdom, and the human element essential to business success.

• Jay believes the best companies build economies around themselves, including partner, marketplace, job, and alumni economies.
• Atlassian intentionally built economies like a partner network of resellers and service providers, and a marketplace for developers.
• These economies have network effects and contribute to both growth and defensive strategies for the company.
• The components of these economies can vary but generally involve customers, partners, and developers.

"Each of those that I mentioned have their own unique built-in network effects and transitive properties back to the business around both growth and defensive modes."

The quote emphasizes the strategic importance of building economies around a company, as they provide network effects and contribute to the company's growth and resilience.

• Founders should consider building economies around their company from the earliest days, alongside product development.
• Investing in these economies can have transitive benefits for the company.
• Economies like partner networks can independently contribute to the company's growth and create mutual incentives for success.

"So whether it's a partner that's doing some value-added service that I mentioned, or developer building something on top of your platform, or a customer champion that believes that their next pay increase is going to come from the expertise that you've helped them develop, they're all hustling on your side of the field."

The quote underscores the mutual benefits of economies built around a company, where various stakeholders are incentivized to contribute to the company's success.## Importance of Building Economies Around Core Businesses

• Investors like Jay Simons look for early signs of economies forming around a company's platform.
• Founders must recognize the opportunity for other businesses to build around their platform.
• Microsoft is cited as a textbook example of building economies around its business.
• Trust in third parties and partners is crucial to extend the company's reach and capabilities.
• Challenges include maintaining focus and avoiding dilution of the partner's dedication to the core business.
• The timing of building a partner network is critical; it should not be too early and must align with market needs.

"I do. I look for either the early formation of them or the ability to form, you know, just I think the belief kind of in a founder or a company that there is an opportunity for businesses to build around your platform or your company."

This quote emphasizes the importance of identifying the potential for economies to develop around a business and the founder's belief in this possibility.

• Trusting third parties to handle aspects of the business as well as, or differently from, the company can be challenging.
• Atlassian chose to invest in a partner network for enterprise sales rather than building a direct sales team.
• The decision to invest in a partner network requires faith, patience, and alignment with long-term company benefits.
• Companies sometimes push their channel partners down the value stack, which can lead to the channel diversifying and becoming less focused and valuable over time.

"And that requires a lot of faith. When you're a young company, you could say, well, I know what I need to do, I know how to do this. And probably it's a more surefooted path for me just to do that directly. And it takes both faith, investment, patience to invest in an alternative."

Jay Simons discusses the leap of faith required for a young company to invest in third-party partnerships instead of taking a more direct approach to tasks such as sales and support.

• Market presence is needed for partners to grow their businesses.
• Alignment between what the partners do and what the core company does is essential.
• Atlassian's partner network was catalyzed by geographic and enterprise needs.
• Focusing on dedicated boutique partners rather than large service integrators can yield a better return on investment.
• Ensuring partners have a significant opportunity to grow without needing to diversify can align their success with the company's success.

"Well, you need market there. I mean, you need market for the partners to be able to grow their businesses."

This quote highlights the necessity of having a sufficient market for partners to thrive, which is a critical factor in determining when to build a partner network.

• Clear architecture of the partner program is needed, with a defined purpose and mission.
• Atlassian referred to partners as experts to emphasize their deep product knowledge.
• Expert managers were focused on recruiting, enabling, and managing the network of partners.
• The company must also look inward to improve the program and products to facilitate partner growth.

"We didn't have salespeople in the field, but we had at the time, what we called experts. We referred to our partners as experts because we wanted to signal to the market and to our customers that there are companies alongside us that have deep expertise in our products."

Jay Simons explains Atlassian's strategy of branding their partners as experts to communicate their high level of product knowledge and service capability to customers.

• Partner networks may be trickier in scenarios where the product is simple and requires little to no configuration or training.
• Partnerships could focus on reselling or training if the product itself does not require much service.
• Extensibility in products allows partners to create add-ons and customizations, increasing the product's value and stickiness.
• A well-structured partner network can enhance customer retention by providing additional value through extensions and add-ons.

"I think it can be a little trickier if there isn't something for the partner to be able to do with your product."

This quote addresses the complexity of integrating partner networks with products that are designed to be simple and self-sufficient, indicating that the nature of the product influences the role and timing of building a partner network.## Product Growth and Value Addition

• Independent software vendors and individual developers can add significant value to a core product through extensions and additional features.
• This creates a more meaningful and sticky product for the customer.

"You could potentially have the same opportunity for independent software vendors or individual developers to build a whole bunch of extension value on top of your core product."

The quote highlights the potential for creating a more engaging and integral product by allowing third-party contributions that enhance the core offering.

• Jay Simons reflects on Atlassian's unconventional strategic choices and their outcomes.
• Atlassian added a second product early in its lifecycle, which was risky but pivotal for the company's evolution.
• The company deferred focusing on the enterprise segment for about ten years, which was a strategic move that differentiated Atlassian from more expensive competitors.

"We added a second product really early in the company's lifecycle. That was a very unconventional and risky choice."

This quote underscores the significance of early product diversification in Atlassian's history, which was a key factor in shaping the company's future.

"We deferred focus on the enterprise segment for about ten years... but we grew more durably."

Jay Simons explains that by delaying their enterprise focus, Atlassian was able to grow more sustainably and become more competitive in the long run.

• Jay Simons wishes Atlassian had moved faster on certain initiatives.
• Over time, Atlassian improved in prioritization and became more decisive, focusing on critical projects for future success.
• The ability to concentrate resources on key initiatives is something Jay would have developed earlier if possible.

"I think the thing that we did was right. We just should have done it in half the time."

The quote reveals a retrospective desire to have executed strategies more quickly, highlighting the value of speed in business decision-making.

• Companies often wait too long to develop a secondary product, which can lead to missed opportunities.
• Jay Simons advises always having some focus on innovation and new problem-solving for customers.
• Atlassian's second product, Confluence, was created in the company's second year, which was risky but foundational to its success.

"A more common mistake is companies probably wait too long versus doing it too early."

Jay Simons suggests that businesses frequently delay the introduction of new products to their detriment.

"It was foundational to the company Atlassian became."

The early introduction of Confluence is cited as a critical move that helped define Atlassian's trajectory.

• Jay Simons talks about his transition to venture capital and the surprises he encountered.
• A significant part of venture capital involves evaluating many opportunities and saying no to most of them.
• The challenge for operators moving into investing is to not solely rely on their operational perspective when evaluating potential.

"Biggest surprise is probably 98% of the job spending times on things you'll say no to."

The quote sheds light on the reality of venture capital, where most time is spent assessing and rejecting potential investments.

"I think maybe the hard part about investing in general is it's easy to imagine what a company is going to look like two years into the future."

Jay Simons discusses the difficulty of predicting a company's long-term future and the complex considerations involved in making investment decisions.

• When investing, the quality of the founders is often a crucial factor.
• Jay Simons reflects on Atlassian's growth and the strategic decisions that led to its long-term success.

"Incredible people make incredible businesses."

This quote emphasizes the belief that the capabilities and qualities of the founders are fundamental to the success of a business.

"We were really intentional about how we were growing."

Jay Simons attributes Atlassian's success to deliberate growth strategies and the intentionality behind their business decisions.## Atlassian's Strategic Decisions

• Atlassian chose to focus on the enterprise segment with a higher-priced product.
• The company's trajectory could have been different if they had chosen to sell a less expensive product.

"Instead of selling a $10,000 product, chose to sell a $200,000 product."

The quote highlights Atlassian's strategic decision to target a higher-priced market segment, which may have influenced its growth and current status.

• Concerns about how current capital markets might overfund early-stage companies like Atlassian.
• Overfunding could lead companies away from their core simplicity and discipline.

"Atlassian, if it was today, in its two, three-year formation, say, the first years, it would have been so stuffed with capital from so many different multi-stage crossover funds, you name it, that actually it could have been so diverted from the beauty and simplicity of what it was."

This quote expresses a concern that excessive funding could have caused Atlassian to lose focus on its core principles during its formative years.

• Capital scarcity can impose discipline and a strong focus on ROI.
• Atlassian funded its growth from revenue, leading to careful expenditure and experimentation.

"We were forced to kind of fund the business from the cash register, and I think that created a discipline."

The quote explains how funding the business through generated revenue rather than outside capital created a disciplined approach to growth and spending.

• Jay Simons shares personal favorites and insights in a rapid question-and-answer format.

• "The River Why" by David James Duncan is Jay Simons' most reread novel, reflecting on self-discovery and nature.

"The River Why? By David James Duncan is probably the novel I've reread the most."

Jay Simons shares his favorite book, which resonates with him due to its themes and familiar setting.

• Advocates for a long-term orientation in venture capital.
• Believes that focusing solely on aggressive growth metrics can lead to missed opportunities.

"More long term orientation, especially in the early days."

Jay Simons suggests that a long-term perspective in venture capital could lead to more sustainable and thoughtful company growth.

• Lori Norrington is praised for her insightful and ego-free contributions on boards.

"Lori Norrington, an absolute treasure."

Jay Simons commends Lori Norrington for her valuable and humble approach to serving on company boards.

• Believes that learning to the point of enjoyment is not difficult and that the fear of not mastering a skill should not prevent starting.

"It's not hard to learn anything, like anything to the point of enjoyment."

This quote reflects Jay Simons' belief that acquiring a level of competency in new skills is attainable and enjoyable.

• Would promote kindness or environmental awareness on a billboard.

"Be kind."

Jay Simons would choose a simple yet powerful message encouraging kindness for a billboard.

• Impressed by musician Jacob Collier's ability to sing microtones and modulate pitch.

"Jacob can do this thing where he can also sing microtones, which are sort of the tones in between regular notes."

The quote describes Jay Simons' admiration for Jacob Collier's exceptional musical talent, which he finds astonishing.

• Invested in Sentry, a company that helps developers monitor and fix code performance and errors.

"Sentry is this company that helps developers monitor and fix performance and errors in their code."

Jay Simons explains his recent investment in Sentry, highlighting its broad appeal to development teams of all sizes.

• The conversation with Jay Simons was enjoyable and insightful, diverging from the planned schedule.
• Harry Stebbings appreciates the flexibility and depth of the discussion.

"This was such a joy to do."

Harry Stebbings expresses gratitude for the engaging and spontaneous conversation with Jay Simons.

• AngelList is praised for its fund administration platform.
• Harness Wealth is recommended for wealth management and tax planning.

"I just love using AngelList fund admin platform to manage my investments."

The quote shows appreciation for AngelList's platform, emphasizing its convenience for managing investments.

"Harness have helped founders and early employees at companies like Stripe, uipath, affirm and Coinbase capture more value with their finances."

This quote endorses Harness Wealth for its financial services tailored to founders and early employees of successful startups.

• Masterworks allows investment in shares of iconic artworks.
• The platform is recognized for its significant art market purchases.

"Masterworks is the first platform for buying and selling shares representing an investment in iconic artworks."

The quote introduces Masterworks as a unique platform enabling investments in the art market, allowing for a diversified investment portfolio.