20VC Why The CEO Should Make As Few Decisions As Possible, The TradeOff Between Freedom and Raising Big From VCs & Why Our Jobs Are Not As Hard As We Think and How To Assess Talent and Potential As a Result with Tristan Handy, Founder & CEO @ dbt Labs

Summary Notes


In a candid discussion on 20 VC, host Harry Stebbings interviews Tristan Handy, the founder and CEO of DBT Labs. Handy shares his journey from a "lost soul" in consulting to a successful startup founder, emphasizing the importance of seizing opportunities and leveraging skills—in his case, data expertise—to find one's niche. He discusses DBT Labs' growth, community-driven product development, and strategic fundraising decisions that traded off modest success for potential unicorn status while expanding their community reach. Handy also touches on the challenges of remote work, advocating for a distributed, asynchronous model that fosters community and combats isolation. Throughout the conversation, he underscores the significance of transparency, team performance over individual achievements, and the delicate balance of stakeholder interests as key to building a high-performance business.

Summary Notes

Introduction to DBT Labs and Tristan Handy

  • Tristan Handy is the founder and CEO of DBT Labs.
  • DBT Labs has achieved a $4.2 billion valuation over five years.
  • The company offers a data transformation tool that helps data analysts and engineers work in the cloud data warehouse.
  • Tristan Handy raised over $400 million from investors including Sequoia, Altimeter, CO2, iconic, and GV.
  • Before founding DBT Labs, Tristan was VP of marketing at RJ Metrics and worked at Squarespace.

"I'm thrilled to welcome Tristan Han Andy, founder and CEO at DBT Labs, a data transformation tool that enables data analysts and engineers to transform, test and document data in the cloud data warehouse."

The quote introduces Tristan Handy and his company, DBT Labs, highlighting its significance in the data analytics industry and Tristan's previous experience.

Tristan Handy's Background and Career Path

  • Tristan Handy started his career at Deloitte Consulting and pursued an MBA.
  • He had a "lucky break" when he joined Squarespace, helping with its Series A funding.
  • Tristan was drawn to the startup culture, particularly the casual work environment and hands-on approach.
  • As a consultant, he had to make his data skills useful, leading him to focus on performance marketing in startups.

"One of my good friends from high school and college is Anthony Castellina, and Anthony had founded Squarespace five or so years before. [...] It was an environment that I had never seen before, just the whole concept that I could wear jeans and a t shirt to work."

Tristan Handy discusses his transition into the startup world through a connection with Anthony Castellina and how the culture at Squarespace influenced his career decisions.

The Role of Luck and Skill in Success

  • Tristan Handy acknowledges the importance of luck in getting opportunities.
  • He believes that once you have the minimum bar of luck, success is determined by skill.
  • Handy reflects on his own fortunate connection with Anthony Castellina, which set him on his current path.

"I think that you need some amount of luck to be in the game. You need some minimum bar of luck. Then above that, it's probably skill."

The quote addresses the balance of luck and skill in achieving success, emphasizing that while luck is necessary to start, skill is what propels individuals further.

Talent Detection and Team Building

  • Tristan Handy values clear communication and shared understanding when spotting talent.
  • He shares an anecdote about Erin, DBT Labs' first employee, who impressed him with her clarity and assertiveness.
  • Handy believes that the focus on prior experience (e.g., leading a team at scale) is often the wrong approach to talent acquisition.

"That is the feeling that I get when I get really excited about somebody. [...] But the talent search algorithm is fundamentally not that hard. People just get focused on the wrong stuff."

This quote reflects Tristan Handy's philosophy on talent detection, emphasizing the importance of communication and potential over specific experience.

Experience vs. Fresh Perspective in Hiring

  • Tristan Handy discusses the value of experience and how it can be leveraged as a strategic weapon.
  • He argues for the benefits of taking time to grow a business, which can lead to uncopyable market strengths.
  • Handy shares the early days of DBT Labs, where they bootstrapped and focused on creating a beloved user experience.

"One of the strategic levers that I've tried to use throughout is to use time as a weapon."

Tristan Handy explains his strategy of using time to build a strong foundation and defensible position in the market.

Building Defensibility and Moats

  • DBT Labs took time to monetize their software, focusing on refining the user experience.
  • The company initially supported its open source software through consulting services.
  • This approach allowed DBT Labs to become a standard in the modern data stack.

"We took a long time to monetize our software. DBT core is open source. [...] But really DBT is as close as you can get to a standard in the modern data stack."

The quote describes DBT Labs' strategic decision to delay monetization in favor of perfecting their product and user experience, leading to a strong market position.

Startups and the MVP Philosophy

  • Tristan Handy believes in releasing imperfect software and improving it over time.
  • He advises startups to release software that may not be perfect as part of the development process.

"I really believe in that? I still try to get us to. And certainly in the early days we released software that was not always perfect. That is fine,"

This quote encapsulates Tristan Handy's endorsement of the "move fast and break things" philosophy, encouraging startups to iterate quickly and learn from the market.## Early Stage Monetization and Growth

  • Early stage companies can benefit from fast iteration without extensive release processes.
  • The pressure to grow rapidly increases significantly after reaching $1 million in software ARR.
  • Companies have more flexibility and less pressure before reaching the $1 million ARR milestone.
  • It's suggested to take time before getting on the growth "treadmill" since it's challenging to slow down once on it.

"What we found out is that the minute that you have a million dollars in software ARR, you're on a clock."

This quote emphasizes the urgency and expectations for rapid growth that come with reaching a significant revenue milestone.

Fundraising Dynamics

  • Fundraising can be paradoxically more difficult post-revenue due to increased scrutiny and expectations.
  • Pre-revenue companies with strong adoption might find it easier to raise funds.
  • B2C companies have a more commonly understood playbook for fundraising compared to B2B enterprise software companies.
  • Metrics for evaluating a business for Series A investment can be varied and not always relevant.

"And it's actually almost harder to raise once you have revenue."

This quote highlights the counterintuitive nature of fundraising where having revenue can complicate the process due to investor expectations.

Strategic vs. Principle-Based Decision Making

  • Decisions on when to monetize can be based on principles rather than strategic timing.
  • The concept of the "pathless path" suggests adapting to the road as it unfolds.
  • Community needs can dictate the timing of monetization.
  • In 2019, the need for commercial relationships with open-source software users prompted monetization.

"I have a principles based answer, and the principles based answer is that we navigate as much of our strategy as we can by asking what the community needs from us at any given point in time."

This quote explains the principle-based approach to decision-making, focusing on community needs to guide strategic moves.

Transitioning to Enterprise Adoption

  • Transitioning from community adoption to enterprise adoption requires meeting complex security and control needs.
  • Building scalable solutions to meet enterprise requirements is a challenging but necessary step.
  • Early unscalable solutions can be acceptable if there is a plan to develop scalable versions over time.

"We built role based access control. If you have an extremely mature, multitenant environment, then you can answer all the security questionnaires in a certain way."

This quote describes one of the key features required to transition to enterprise adoption, highlighting the importance of role-based access control.

Hiring and Team Dynamics

  • High retention rates may indicate successful hiring or the presence of non-A team players.
  • The performance of the team is often more important than individual performance.
  • Team issues, rather than individual performance, can lead to departures from the company.

"Oftentimes our ability to work together, to communicate, to have a consistent approach and consistent set of values that really determines the performance of the team."

This quote emphasizes the importance of teamwork and shared values over individual performance in determining team success.

Performance Management

  • Even small teams can benefit from formal performance management.
  • Quarterly performance reviews can help maintain accountability and healthy working relationships.
  • Performance reviews should involve uncomfortable but necessary conversations for team health.
  • Feedback in performance reviews should be bidirectional.

"The goal that I always set for these meetings is that we don't leave the room without somebody saying something that feels uncomfortable."

This quote underscores the importance of candid discussions in performance reviews to address any underlying issues.

Remote Work vs. Distributed Companies

  • Remote work can be isolating and contrary to human nature.
  • Distributed companies can be structured to provide community and address the drawbacks of remote work.
  • Companies can offer stipends for employees to work outside their homes and facilitate distributed workspaces.

"Because it's lonely and dehumanizing. Because we're built to interact with other humans."

This quote reflects the challenges of remote work and the importance of human interaction, which distributed companies try to accommodate.

Facilitating Distributed Workspaces

  • Employees receive a stipend to work in spaces outside their homes.
  • Home office setups are also supported by company budgets.
  • Providing options for out-of-home workspaces helps prevent the isolation associated with remote work.

"So everybody gets, I think it's $250 a month for an out of home stipend."

This quote details the financial support given to employees to facilitate a healthy and productive distributed work environment.## Many Satellites Strategy

  • The company has a strategy to open satellite offices in areas with a high concentration of employees.
  • Employees within commutable distance to these satellites are expected to use them as their out-of-home work experience, forfeiting a $250 stipend.

"In places where we have high concentration of employees, open up satellite offices. We're calling this our many satellites strategy."

This quote explains the company's approach to establishing smaller, local offices to support employees who are based in areas with a high employee density.

Aligning Success Between Founders and Investors

  • The CEO's key role is to balance the long-term interests of various stakeholders, including founders and investors.
  • Success metrics differ significantly once institutional capital is involved, shifting from modest success goals to the pursuit of becoming a unicorn.
  • There are funding opportunities aimed at helping founders achieve exits within the range of $5-50 million, but such paths may not align with every company's objectives or community needs.

"The most important job of the CEO is to keep all of the different stakeholders in mind at all times and try to balance their long term interests against one another."

The CEO must consider and balance the interests of all stakeholders, which includes navigating the different definitions of success for founders and investors.

Trade-off Between Freedom and Scale

  • Accepting institutional capital often means trading the freedom of a small-scale operation for the potential of significant growth.
  • The decision to scale is not just about money, but also about expanding the community and the company's reach.
  • Certain business models may not be feasible for scaling without institutional funding, especially when targeting larger clients like Fortune 50 companies.

"I think you sold freedom for scale of money, and I think when you're small, you have freedom, you have flexibility."

This quote reflects the perceived trade-off that companies make when they decide to scale up with the help of institutional funding, often at the cost of operational freedom.

The Impact of Market Environment on Fundraising

  • Fundraising during favorable market conditions, such as during COVID, can lead to attractive valuations and less dilution for founders and employees.
  • The company's fundraising experience was positive, with a $222 million raise at a $4.2 billion valuation, resulting in a dilution of about 5%.

"We raised four rounds of funding all during COVID the valuations during that period started off attractive and only got more attractive."

This quote highlights how the company took advantage of the market environment during COVID to secure funding with attractive valuations.

Living Into Valuations

  • High valuations can pressure companies to grow rapidly, often at the expense of efficiency.
  • The focus on growth over efficiency can be problematic, but the company has maintained a balance due to its financially conservative approach and efficient growth driven by organic community adoption.

"I think that there's a lot of companies, including public software companies, that are doing a lot of living into a lot of things."

The speaker acknowledges that many companies are challenged by the need to grow into their valuations, implying that it is a widespread issue in the industry.

Cost of Book Metric

  • Cost of book is a key metric that differs from customer acquisition cost (CAC) by being calculated on a margin basis rather than revenue.
  • This metric helps to assess the true efficiency of a business by accounting for the cost of margins.

"We're very focused on a metric called cost of book, which is not that different from customer acquisition cost, but it's like the math worked just slightly differently."

The speaker explains the importance of the cost of book metric and how it provides a more accurate picture of the company's efficiency in acquiring customers.

High Performance Leadership

  • High performance in leadership is associated with clear communication and the ability to involve the entire organization in both positive and challenging times.
  • Transparency is a core value, but it must be balanced with respect for individual privacy.
  • Collaborative decision-making and sharing of both good news and difficult truths are key to getting the most out of a team.

"I think that we found that the best leaders communicate very clearly. They bring their entire organizations along for the ride, whether it's the good parts or the bad parts."

This quote emphasizes that clear communication and transparency are essential qualities of high-performance leaders, which contribute to the success of the business.

Limits to Transparency

  • Transparency has its limits, especially when it conflicts with individual privacy or could negatively impact employee morale and behavior.
  • Sharing too much information about sensitive topics like exits or fundraising can have unintended consequences, such as employees checking out or becoming overly excited about potential outcomes.

"The main limit to transparency is when it conflicts with an individual's privacy."

The speaker notes that while transparency is important, it should not infringe on personal privacy, illustrating the need to find a balance in what is shared within a company.

Painful Lessons and Operationalizing Transparency

  • Learning how to operationalize transparency was a painful but valuable lesson.
  • Employees prefer to be informed about potential fundraising to make informed decisions, such as when to exercise stock options.
  • The speaker learned from other companies like GitLab about how to approach transparency differently during fundraising.

"The companies that I had always worked at, the expectation was that you as an employee were going to learn about a fundraise once everything had been signed and the money was in the bank."

This quote reveals the traditional approach to transparency in fundraising and the speaker's realization that a different approach could benefit employees by providing them with timely information to make important decisions.## Employee Communication and Fundraising Transparency

  • Employees desire more information rather than less during fundraising periods.
  • Prior to fundraising, the company informs employees of market interest and potential fundraising without specific details.
  • A 30-day notice is given before signing any term sheets to allow employees time to prepare.
  • This practice has been challenging but is a commitment to employees based on their feedback.

"We said there's interest in the market we're probably going to raise in some reasonably near term time frame. We don't have any details, but we wanted to let you know that the wheels were happening and we're not going to sign any term sheets for the next 30 days."

This quote emphasizes the company's approach to keeping employees informed about potential fundraising activities, highlighting the value placed on transparency and giving employees time to understand the situation before any formal agreements are made.

Secondary Programs and Fairness in Financial Opportunities

  • The company has initiated a secondary program to provide annual opportunities for employees to achieve liquidity.
  • Allocation is based on tenure, with consistent rules for all employees to ensure fairness.
  • The goal is to allow employees to realize returns without waiting for an exit.

"We have general way that we think about how to allocate those employees of a certain tenure, always get to participate at a certain level, and we try to do it in a way that all the rules are consistent between everybody at the company."

This quote outlines the company's policy for its secondary program, which is designed to be fair and equitable across the organization, allowing employees who have invested time and effort into the company to participate in financial opportunities.

Equity and Financial Decisions Among Employees and Leadership

  • There is a growing dislike for the unequal rights between C-suite, tenured employees, and founders.
  • The company strives for fairness in financial decisions and opportunities.
  • Personal relationship to money is influenced by past experiences and current financial security.

"Fairness in doing this stuff is unbelievably important."

This quote highlights the importance the company places on fairness when it comes to financial opportunities, suggesting that they aim to create an equitable environment for all employees regardless of position.

Personal Finance and Quality of Life

  • Secondary sales have allowed for personal life improvements, such as home renovations and childcare support.
  • Financial security reduces stress and provides a more comfortable lifestyle.

"It's meant that we can renovate our home to actually have bedrooms for our kids. It's meant that we can have childcare support, that we need to actually be able to do our jobs and focus on them."

This quote illustrates the tangible benefits that financial security from secondary sales can bring to an individual's personal life, such as housing and childcare, which contribute to overall well-being and the ability to focus on work.

Parenting Challenges During COVID-19

  • COVID-19 made parenting extremely difficult due to the inability to hire help or send kids to camps.
  • Money helped solve certain childcare problems and prevented family stress.

"Being a parent during COVID was tremendously challenging... solving them with money, because otherwise we would actually suffer meltdowns."

The quote reflects on the struggles of parenting during the pandemic and how having financial resources helped alleviate some of the stress by addressing childcare challenges.

Asynchronous Work and Company Culture

  • The company emphasizes writing and has implemented cultural and technical systems to support asynchronous work.
  • Inconsistent adoption of asynchronous work can lead to inefficiencies and excessive meetings.
  • Encouraging employees to cancel unnecessary meetings and communicate through documentation is key.

"The problem with async and the time when it's really hard to adopt well is when it's adopted inconsistently."

This quote captures the importance of consistency in asynchronous work practices to prevent a reliance on meetings and to ensure efficient communication and productivity within the company.

CEO's Role and Decision-Making

  • The CEO's personal approach is to minimize their own decision-making.
  • Empowering others to make decisions is a key part of the CEO's philosophy.

"I try to make as few decisions as possible."

The CEO expresses a desire to delegate decision-making, suggesting a leadership style that empowers other team members and reduces the decision-making burden on the CEO.

Future of DBT and the Data Ecosystem

  • In five years, the data ecosystem will involve more people and produce higher quality, consistent data.
  • The goal is to make the process of working with data less chaotic for practitioners.

"In five years, there will be more people participating in creating data, analyzing data. There will be more quality around the data that is produced and consumed, more consistency."

This quote offers a vision for the future of DBT and the broader data ecosystem, forecasting growth in participation and improvements in data quality and consistency.

Personal Growth and Experiences

  • The CEO has a desire to experience different lifestyles, which led to a special trip to Italy.
  • This desire is balanced with the commitments of running a startup and being a parent.

"I have a grass is greener problem. I want to live every life."

The CEO reflects on their personal aspirations to experience various lifestyles and cultures, indicating a curiosity and eagerness for life experiences beyond the startup world.

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