20VC Why Startup Founders Have One Core Job, How To Reduce Risk & Increase Probability In Your Startup & Why You Should Not Send A Pitch Deck PreInvestor Meeting with David Rogier, Founder & CEO @ Masterclass

In this episode of "20 minutes VC," Harry Stebbings interviews David Rogier, founder and CEO of Masterclass, an online education platform featuring courses from renowned figures such as Steve Martin and Gordon Ramsay. Rogier discusses his transition from investor at Harrison Metal to entrepreneur, inspired by his grandmother's emphasis on the enduring value of education. He shares insights into the early challenges of securing top-tier instructors and the importance of validating business hypotheses before fundraising. Rogier advises founders to choose board members with care, prioritize long-term relationships over short-term cash, and ensure they never run out of money—the "one job" of a founder. He also highlights the significance of understanding investor dynamics and aligning with those who offer more than just capital. Looking ahead, Rogier envisions Masterclass in every American home, expanding internationally, and leveraging the universal desire for self-improvement through education.

• Harry Stebbings introduces David Rogier, the founder and CEO of Masterclass.
• Masterclass offers online classes taught by prominent figures such as Steve Martin, Natalie Portman, and Gordon Ramsay.
• David Rogier has raised significant funding for Masterclass from various investors.
• David's background includes working with Harrison Metal and Ideo.
• Harry thanks Roseanne Winchuk for introducing him to David.

We are back for another founders Friday here on the 20 minutes VC with me, Harry Stebings. [...] David Regier, founder and CEO at Masterclass, the startup that brings you online classes taught by the world's greatest minds, including Steve Martin, Natalie Portman, Margaret Atwood, Gordon Ramsay and more.

This quote introduces the episode's guest, David Rogier, and his company, Masterclass, which provides online classes from renowned instructors.

• Brex is a corporate card designed for startups.
• Founders Enrique and Pedro created Brex after facing difficulties obtaining a corporate card in the U.S.
• Brex offers instant online sign-up, no founder liability, and higher credit limits than typical cards.
• Harry promotes the service and provides a signup code for listeners.

Brex founders Enrique and Pedro built a payments business in Brazil, but found themselves rejected for a corporate card when they were in Y Combinator.

This quote explains the origin of Brex and its value proposition for startups, highlighting the challenges the founders faced and how they addressed them.

• Stripe provides guides and resources for technology companies on various topics.
• Terminal assists in hiring skilled remote engineering teams by managing logistics, benefits, and legal aspects.
• Harry endorses Terminal and shares the experiences of other companies that have used their service.

Stripe has built those resources for you. [...] that's where my friends at Terminal come in.

Harry discusses the services provided by Stripe and Terminal, emphasizing their usefulness for technology companies, particularly in scaling engineering teams.

• David Rogier shares his transition from investing to building, with Michael Dearing as a significant influence.
• He received initial funding from Michael Dearing to develop an idea, which led to the creation of Masterclass.
• David reflects on the pressure of having a unique opportunity to build something impactful.

So I went to grad school and I met a guy by the name of Michael Deering [...] And all of a sudden, I had funds, and I now had tons of pressure to go try to think of a great idea.

David recounts his path from grad school to receiving funding for his startup idea, emphasizing the pressure to succeed given the unique opportunity.

• David was inspired to focus on education because of its transformative impact on his and his family's life.
• He shares a personal story about his grandmother's experience with education and perseverance.
• The story of his grandmother's struggles and eventual success as a doctor influenced David's decision to create something enduring and valuable like Masterclass.

And I realized, harry, that if I had this one shot to try to build something, I wanted to build something that other people could not take away from others. And that was kind of the start of masterclass.

David explains the profound effect his grandmother's story had on him, leading to his determination to create an educational platform that provides lasting value.## Founder's Primary Responsibility

• The core job of a founder is to ensure the startup never runs out of money.
• Running out of cash is the only thing that can kill a startup.
• Founders face daily challenges and successes, but maintaining financial solvency is paramount.

"I have one job, and that job is to make sure that we never run out of money. The only thing that can kill a startup is running out of cash."

This quote emphasizes the critical importance of financial management for a startup's survival, highlighting the founder's role in preventing bankruptcy.

• Fundraising should be based on the milestones a startup needs to achieve, not on a fixed time frame.
• Founders should consider the cost of proving their hypotheses and then double it to account for unexpected expenses and delays.
• It's important to identify what needs to be proven to both the startup team and potential investors for the next round of funding.

"I never think about it in terms of time. I think about it in terms of what I need to achieve."

This quote reflects the strategic approach to fundraising, focusing on what the startup needs to accomplish rather than how long the money should last.

• Venture funding enables startups to undertake projects that require significant upfront investment.
• Raising funds can accelerate growth but may also bring misaligned expectations and pressures.
• Founders need to consider not just the financial aspect but also the investor's involvement level and approach to business.

"It allows you to do things that you otherwise could not do... It also allows you to go much faster."

This quote highlights the benefits of venture funding in enabling startups to pursue ambitious projects and grow rapidly.

• It's crucial to research potential investors, particularly by speaking with entrepreneurs who have experienced failure with them.
• Understanding an investor's behavior during challenging times is a better indicator of compatibility than during success.
• Founders should assess investors' involvement in operational details and their reaction to hypothetical adverse scenarios.

"A test of somebody is not when things are great. A test is when things are bad."

This quote underscores the importance of evaluating potential investors based on how they handle difficult situations, indicating their true partnership qualities.

• Seeking professional therapy and having a trusted advisor can help manage the pressure of entrepreneurship.
• Having too many advisors can slow down decision-making; it's often more effective to have a single go-to advisor.
• Speed is essential in the early stages of a startup, and quick decisions are preferable to prolonged deliberation.

"I think the best thing to do is to get a great therapist... So I think it's really helpful to have one advisor who you just go to versus having five advisors."

This quote suggests practical strategies for coping with the stress of entrepreneurship, emphasizing the benefits of professional mental health support and focused advice.

• Before raising substantial funds, it's advisable to test the startup idea with minimal resources.
• The necessity of raising large amounts of money should be evaluated based on the startup's specific needs and the ability to test core concepts economically.

"I think you want to test as much..."

Unfortunately, the quote is incomplete, but it suggests that testing ideas and concepts thoroughly is important before committing to significant fundraising.## Validation of Business Idea

• David Rogier emphasizes the importance of validating a business idea before raising significant funds.
• He created a fake website with various classes to test market interest in non-tactical skill classes, such as acting.
• The site was built with the help of a firm and class descriptions were written by TaskRabbit hires.
• Ad traffic was purchased to see if people would attempt to buy these nonexistent classes.
• A phone number on the site allowed David to interact with potential customers and offer compensation for the error.
• The test results showed a high demand for the classes, which he then used in his pitches to investors.

"So what I decided to do was I created a fake website that had 100 different online classes that I did not have... But I could see the amount of people that could actually try or that would actually try."

The quote explains the methodology David used to validate the demand for his online classes without having the actual product, indicating his innovative approach to market research.

"And the results from that test were like, oh, my God, people really want these classes."

This quote reveals the positive outcome of the market test and the realization that there was a genuine demand for the classes he envisioned.

• Convincing high-profile instructors to join took 8-12 months and was possible due to initial funding.
• David used the initial funding to afford the time spent on business development and pitching to potential instructors.
• Cold calling and emailing were part of the strategies used to secure instructors like Dustin Hoffman, Serena Williams, and Gordon Ramsay.
• The first yes from an instructor was a significant emotional milestone for David.
• Securing a few top-tier instructors made it easier to attract others, creating a snowball effect.

"That was hard. That probably took like eight to twelve months. And it was only possible because of that first half million."

This quote highlights the challenges and the necessity of initial funding for securing top-tier instructors, which was a critical step in the business development process.

• David prefers not to send out pitch decks before meetings, as it's challenging to convey a compelling story through a deck alone.
• He believes in the effectiveness of presenting the pitch live and in person, particularly at the early stages of a startup.
• Avoiding sharing decks before meetings can also create a sense of exclusivity and interest among investors.

"I try everything I can to not do it. I can't think of one case where sent out a pitch deck before the pitch and the person then wanted to actually invest."

This quote conveys David's strategy of not sharing pitch decks before meetings to increase the chances of securing investment through a live pitch.

• David disagrees with the notion that founders should always be actively raising funds, as it can consume all their time.
• Instead, he suggests dedicating a small percentage of time to building relationships, which can be beneficial for future fundraising.
• Maintaining relationships with investors who previously passed can lead to successful funding rounds later, as seen with Rick Yang, who led the B round after initially passing on the A round.

"I think if you're always raising, it can consume all of your life... I think it is always smart to be spending 5% of your time on the relationship side."

This quote advises against constant fundraising and instead recommends a balanced approach, where a small portion of time is dedicated to nurturing investor relationships.

• David advises founders to carefully select investors, emphasizing the long-term relationship over immediate cash benefits.
• The key consideration in choosing an investor is their potential to provide help and support, rather than just funding.
• The selection process should consider the next ten years of working closely with the investor.

"Yeah, I mean, you have to hand pick this person, and it actually is about the cash."

This quote underlines the importance of choosing investors who can offer more than just financial support, focusing on the long-term partnership and assistance they can provide.## Importance of Board Selection

• Choosing board members based on alignment and quality over financial offerings.
• Willingness to trade equity for a great board.
• The impact of a bad board is likened to "death," whereas a great board makes everything easier.

And so we often chose not the best price in exchange for the best person.

This quote emphasizes the strategic choice to prioritize the value a board member brings to the table over the potential financial benefits of their investment.

• David Rogier's favorite book is "Creativity, Inc.," which he finds remarkable for its insights on leading a tech and creative organization.
• The book has significantly influenced his leadership approach.

I just read creativity, Inc. It's the Pixar story. It is fantastic.

David Rogier expresses his admiration for the book "Creativity, Inc." and its valuable lessons on combining technology with creativity in leadership.

• Desire to level the playing field in tech and Silicon Valley.
• Current success is too dependent on educational background and personal connections.

Your success here is often increased by what school you went to and who your friends are.

David Rogier criticizes the existing system in Silicon Valley, where success is heavily influenced by one's educational and social network rather than pure merit.

• Acknowledgment of Michael's genius.
• The importance of a great board and long-term thinking over immediate battles.
• The significance of focusing on the right path and not sweating the small stuff.

One, is that he is a genius. Two, I think what I learned from him was how important a great board is.

David Rogier reflects on the valuable lessons learned from his time at Harrison Metal, particularly the importance of having a strategic and supportive board.

• Aaron Sorkin's quote about discerning facts from noise influences David Rogier's decision-making.
• The importance of focusing on the facts and not getting distracted by opinions or assumptions.

There is tons of info that we get that's tied to facts, and then there's tons that are tied to opinions, and you have to become very good to pull those apart.

David Rogier shares a quote from Aaron Sorkin that highlights the necessity of distinguishing between factual information and mere opinions, a skill valuable both in medicine and entrepreneurship.

• Surprised by the hard work and insecurities of top industry figures.
• Realization that even the most successful individuals have doubts, which normalizes his own insecurities.

I am consistently blown away at a, how hard these people work, and two, that a lot of them are still doubtful of their own skills and are insecure.

David Rogier discusses his realization that even the most accomplished individuals work hard and harbor insecurities, which he finds both inspiring and comforting.

• Ambition for Masterclass to be present in every American home and then expand internationally.
• Belief in the fundamental truth that people want to improve their lives through education.

It will be in every home in America. And then after that, we will go more internationally broad.

David Rogier outlines the ambitious growth plans for Masterclass, rooted in the belief that education is a key driver for people seeking to improve their lives.

• Appreciation for the opportunity to share insights on the podcast.
• Mutual respect and thanks between Harry Stebbings and David Rogier.

Yeah, of course. This has been my pleasure.

David Rogier expresses his enjoyment of participating in the podcast, indicating a positive experience.

• Shoutouts to Brex, Stripe, and Terminal for their services to startups and scaling businesses.
• Encouragement to engage with the hosts and guests on social media platforms.

Brex founders Enrique and Pedro built a payments business in Brazil, but found themselves rejected for a corporate card when they were in Y combinator.

Harry Stebbings provides a background story on Brex to illustrate the challenges startups face and how Brex offers a tailored solution, promoting the service to his listeners.