Season 3, Episode 6 Behance (with Scott Belsky)

In this episode of "Acquired," hosts Ben Gilbert and David Rosenthal, along with guest Scott Belsky, founder and CEO of Behance and Adobe's Chief Product Officer, delve into Adobe's strategic 2012 acquisition of Behance. Adobe's market cap soared fivefold to $130 billion post-acquisition, marking a successful transition from boxed software to a subscription model and expanding their creative suite. Belsky shares insights into Behance's growth from one to fifteen million users, the challenges of bootstrapping, and the importance of building a network effect. Additionally, he discusses his journey from founding Behance to its acquisition, his role as a prolific angel investor, and his experience as a venture partner at Benchmark. The episode also highlights Behance's integration into Adobe's ecosystem, the significance of maintaining a startup's culture post-acquisition, and the release of Belsky's book "The Messy Middle," which offers lessons on navigating the complexities of building and leading ventures.

• Hosts Ben Gilbert and David Rosenthal introduce the topic of Adobe's acquisition of Behance in 2012.
• Adobe's market cap increased fivefold since the acquisition.
• Adobe transitioned from selling box software to a subscription service and expanded its business.
• Scott Belsky, founder and CEO of Behance and Adobe's Chief Product Officer, is the guest.

"Today we are covering Adobe Systems 2012 acquisition of Behance. Since acquiring Behance five years ago, Adobe's market cap has five x to $130,000,000,000."

The quote highlights the significant growth of Adobe's market value following the acquisition of Behance, emphasizing the successful transition to a subscription-based model.

• Scott Belsky is not only Adobe's Chief Product Officer but also a prolific angel investor, co-founder of three companies, and author.
• His career path was not linear, and he had a stint at Benchmark as a general partner and venture partner.
• Belsky's latest book, "The Messy Middle," resonates with the non-linear journey to his current position.

"He's currently obviously chief product officer at Adobe, which acquired Behance. However, unlike what you might imagine, his path from founding Behance to the acquisition by Adobe was not a straight line."

The quote introduces Scott Belsky's unconventional career trajectory, which did not follow a direct path from founding Behance to becoming Adobe's Chief Product Officer.

• The Acquired podcast has a Slack community where hosts and listeners engage in discussions about episodes and tech news.
• The community consists of over 1600 members who share insights and connect with each other.

"You can check out the slack at acquired FM. It's the place where David, myself, and 1600 of our favorite listeners discuss episodes right after we release them."

The quote encourages new listeners to join the Acquired podcast's Slack community to participate in ongoing conversations and connect with fellow tech enthusiasts.

• Pilot is a company that offers comprehensive accounting, tax, and bookkeeping services for startups and growth companies.
• It is backed by prominent investors and has grown into a billion-dollar company.
• Pilot's services are designed to allow startups to focus on their core product and customer experience by outsourcing non-core but necessary financial operations.

"Pilot is the one team for all of your company's accounting, tax and bookkeeping needs, and in fact, now is the largest startup focused accounting firm in the US."

The quote describes Pilot's role as an all-in-one financial team for startups, emphasizing its status as the largest startup-focused accounting firm in the US.

• Scott Belsky discusses Adobe's transformation after acquiring Behance, including the shift to a subscription model and the focus on monthly active users.
• Adobe had to adapt to having a direct relationship with customers, a significant change from selling boxed software.

"When we came into Adobe through the behance acquisition, this was late 2012. The company was just going through that transition."

The quote provides context for the timing of Behance's acquisition by Adobe and the company's ongoing transition to a subscription-based model.

• Belsky's interest in design started at a young age with Photoshop.
• He pursued a diverse education, dabbling in earth systems, economics, and design at Cornell.
• Belsky's work experience includes Goldman Sachs, where he utilized design skills in leadership development.

"I've always been kind of entrepreneurial. I've always been into design. I was one of those kids who had Photoshop at 13."

The quote reflects Belsky's early passion for design and entrepreneurship, setting the stage for his future endeavors.

• The idea for Behance stemmed from Belsky's desire to address the disorganization and lack of attribution in the creative industry.
• Behance was founded with a mission to organize the creative world and began with physical products like the Action Pad.

"Behance was really inspired by me wanting to bring my interest in business and design and the creative community all together."

The quote explains the motivation behind founding Behance, which was to unite Belsky's interests and address problems faced by creative professionals.

• Belsky attended Harvard Business School (HBS) while working on Behance, which he considered an insurance policy.
• Despite the challenges, he graduated from HBS and managed to advance Behance through an independent study.

"I did end up graduating. I think the pr value of not graduating would have been far better."

The quote humorously suggests that dropping out of HBS might have had a greater public relations impact, but Belsky still sees value in his education.

• Behance used various means to bootstrap, including selling paper products, hosting conferences, and publishing a book.
• These efforts provided non-dilutive capital and helped establish the Behance brand.

"We actually bootstrapped our company for the first five years with very little of the capital that I saved at Goldman to get this company off the ground."

The quote highlights Behance's initial bootstrapping phase and the creative strategies employed to fund the company without significant outside investment.

• Behance evolved as a global network for creatives to showcase their work, focusing on portfolio rather than text-based resumes.
• The platform was designed to address creatives' specific needs, such as keeping portfolios updated and gaining proper attribution.

"We knew that we wanted to help organize the creative world at work."

The quote emphasizes Behance's core mission to provide a platform that caters to the organizational needs of creative professionals.

• Behance differentiated itself from LinkedIn by being a visually oriented platform rather than text-based.
• The focus on showcasing creative work rather than employment history set Behance apart in serving the creative community.

"It doesn't matter where I worked, it matters what I did. And I want to have the content speak for itself rather than you look at my profile image."

The quote captures the essence of Behance's philosophy, prioritizing the visual representation of creative work over traditional employment narratives.

• Belsky sees opportunities for platforms that provide proper attribution to individuals for their contributions across various industries.
• He suggests that the internet could facilitate the recognition of individual talents and their work.

"I do think that there's a void of attribution, generally speaking, in the world."

The quote identifies a gap in recognizing individual contributions, hinting at the potential for platforms that could address this issue in different fields.

• Authenticity in creative work is linked to the tools used by creators.
• The "source of truth" for creative contributions can be traced back to the creative tools.
• Understanding who did what in creative projects is best achieved by examining the tools involved.

"And that's what we sort of saw in the creative industry and continue to work on to this day. I mean, if you really want to figure out who did what, the best way to do it is to root that back to the actual creative tools that they use, because that's the source of truth for who's doing what."

The quote emphasizes the importance of the creative tools used in the process as the definitive evidence of individual contributions within the creative industry.

• The business model for Behance was not immediately clear.
• Growth was initially fueled by showcasing global creative work and user discovery.
• Advertising and sponsored campaigns were key early revenue streams.

"How did you start to find the business model for the core behance product? It's not super obvious from the get go, right?"

The quote reflects the initial uncertainty in identifying a sustainable business model for Behance.

• Behance experienced growth through showcasing work and the spread of professional quality.
• Key growth moments included bootstrapping with paper products and a successful conference.
• The website's growth was bolstered by advertising campaigns and premium products like Prosite.
• The job posting board emerged as a scalable and growing business.

"And then with the website, we started getting tons and tons of page views. And this is back in 2008, 2009 when there were a lot of advertising opportunities."

The quote indicates that the website's growth in page views opened up opportunities for advertising revenue, which was a significant milestone for Behance.

• Early on, Behance operated as a lifestyle business without discussions of an exit strategy.
• The decision to avoid venture capital was driven by a desire for autonomy and control.
• Equity was distributed generously among the team to foster a sense of ownership.

"I swear, in the first five years, my co-founder, Matias, I never talked about an exit."

The quote illustrates the founders' focus on building the business without considering an exit, which is often a focus when raising venture capital.

• Many ventures fail during the final mile due to a lack of preparation for exit scenarios.
• The importance of understanding the impact of dilution and capital raising on founder and team ownership.
• The decision to exit or continue growing involves weighing potential dilution against future valuation.

"But in fact, it's a completely different playbook, and we went through that."

The quote acknowledges that the approach to successfully navigating an exit is distinct from the strategies used to build a venture.

• Entrepreneurs should focus on dilution rather than valuation during fundraising.
• Raising capital at high valuations can lead to difficult situations like down rounds.
• Founders should consider the long-term implications of their fundraising strategy.

"But what you really need to think about is dilution, because whatever your valuation is along the way doesn't really matter."

The quote advises entrepreneurs to prioritize the long-term ownership implications of fundraising over short-term valuation successes.

• Behance used compensatory units in an LLC to distribute profits to shareholders, including employees.
• The approach to equity was aligned with the company's stage and philosophy, not focused on an exit.
• Communicating the value of equity in a bootstrapped business can be challenging but was managed effectively.

"So because we weren't thinking about an exit, and these were compensatory units in an LLC."

The quote explains that Behance's structure as an LLC influenced its approach to equity distribution, reflecting a focus on the current business rather than an exit.

• Behance faced several competitors over the years, including Dribbble.
• The challenge was to adhere to Behance's principles while responding to competitive dynamics.
• Behance experimented with a feature similar to Dribbble's but ultimately removed it to stay true to its core mission.

"And that was the tough lesson we learned with this sort of snapshot sharing tool on behance that we ended up killing."

The quote recounts the difficult decision to eliminate a feature that deviated from Behance's core values, despite competitive pressures.

• Competitive pressure can lead to insights that align with a company's principles or contradict them.
• Sticking to core principles is crucial when navigating competitive threats.
• The decision to persist with or abandon a venture should be based on conviction and market understanding.

"But when you see competitors doing things that are not in line with your principles but seem to be working, you have to really determine whether you should change your principles or stick with it."

The quote highlights the dilemma of responding to competitors whose strategies conflict with one's own business principles.

• Rec Room Vanta has hundreds of customers.
• Statsig helps roll out and test AI product features.
• Notion's generative AI features evolved quickly using Statsig.
• Statsig ingests data from data warehouses, compatible with various data storage solutions.
• No need to migrate from current feature flagging solutions to use Statsig.

"Rec Room Vanta. They literally have hundreds of customers now." "Also, Statsig is a great platform for rolling out and testing AI product features."

These quotes highlight the customer base of Rec Room Vanta and the utility of Statsig in testing and deploying AI features, as exemplified by Notion's use of the platform.

• Adobe had a longstanding relationship with Scott Belsky's company.
• Initial conversations with Adobe spanned four years, involving potential partnerships.
• Adobe's shift to a subscription model made Behance central to Adobe's Creative Cloud.
• Scott Belsky valued Adobe's culture and alignment with his company's mission.
• Economic considerations included the comparison of acquisition versus further fundraising rounds.

"We were never interested in selling our business in the first few conversations we had over a four year period with Adobe."

Scott Belsky discusses the gradual development of a relationship with Adobe, which was not initially aimed at selling the business but evolved over time.

• Dilution and market risks were key considerations in the decision to sell to Adobe.
• The potential acquisition value was compared to future fundraising rounds.
• The decision focused on what was best for customers, the team, and the desire to work together.

"You realize that $150,000,000 valuation or acquisition is maybe the same as a 600 million dollar acquisition, or even more."

Scott Belsky explains that when considering dilution from future fundraising, a smaller acquisition can be economically equivalent to a much larger one.

• Union Square Ventures (USV) and other investors were supportive of the acquisition.
• USV was recognized for being founder-friendly and understanding the team's logic.
• Investors received a significant return on investment within a short period.

"They were very supportive because USV is just one of the greatest firms in terms of how founder friendly they are."

The quote reflects the positive reaction of investors, particularly USV, to the acquisition due to their founder-friendly approach.

• Adobe's subscription model allowed for regular feature updates and a better customer experience.
• The subscription model provided a more predictable business for investors.
• Behance's integration into Adobe's ecosystem was seen as central to the company's strategy.

"First of all, at the center of that is being able to ship updates and features and value to customers every month as opposed to once every 18 months."

Scott Belsky highlights the benefits of Adobe's subscription model in delivering continuous value to customers, which was a key factor in the company's growth.

• The transition to a subscription model was a major change for Adobe, a long-established company.
• The subscription model is more aligned with modern software expectations and collaboration needs.

"If you were starting a company today that was delivering any type of software experience... you of course would make it a service."

Scott Belsky rationalizes Adobe's shift to a subscription model as a necessary evolution to meet current software and collaboration standards.

• Creativity is seen as a uniquely human trait, increasingly important in a world of automation.
• Scott Belsky advocates for design as a fundamental skill, akin to literacy.
• The focus on creativity is both an opportunity and a responsibility for his team.

"Yet creativity is the most uniquely human trait there is."

The quote encapsulates Scott Belsky's belief in the importance of creativity in the modern workforce and its resistance to automation.

• Behance's user base grew from over a million to over 15 million post-acquisition.
• Product integrations and distribution strategies within Adobe's Creative Cloud contributed to growth.
• Behance's role in Adobe's go-to-market strategy and product development was significant.

"Now we're over 15 million and growing rapidly."

Scott Belsky confirms the significant growth of Behance's user base following its integration into Adobe's ecosystem.

• The power of distribution is often underappreciated in tech and startups.
• Integrating Behance into Adobe's tools provided a powerful form of distribution.
• Finding effective methods of integration post-acquisition was a learning experience.

"It's hard to integrate in the right way into tools that have been working in a certain way for 25 years in some instances."

Scott Belsky discusses the challenges and opportunities of integrating Behance into Adobe's longstanding software suite.

• Scott Belsky's angel investing began with advising and investing in Pinterest and Uber.
• His successful investments led to suggestions that he should become a full-time investor.
• Despite a strong track record, Belsky realized he preferred building products and working with teams over full-time investing.

"It sort of happened by accident in the sense that I was before the acquisition of behance and most of my stuff I did after."

The quote describes the serendipitous start to Scott Belsky's angel investing, which was not initially planned but became highly successful.

• Belsky joined Benchmark as a general partner but missed the hands-on product development.
• He became a venture partner to have more freedom while still engaging with select teams.
• Belsky returned to Adobe to continue building products for creatives.

"What I learned pretty quickly, maybe even three weeks in, was that I really missed building and jamming about product."

This quote reflects Scott Belsky's realization that his passion lies in product development rather than full-time venture capital.

• Venture capitalists aim to network with numerous teams to identify products gaining traction.
• Time spent with teams lacking progress is viewed as less valuable in a top VC firm.
• The competitive nature of the industry can detract from deep engagements with founders.

You think about it as a venture capitalist. You are trying to see and network with as many different teams as possible. And at a top firm, you're trying to make sure that anyone that's really getting traction, any product that's really working, that you're ahead of it, which basically means that any additional minute spent with a team that hasn't figured it out yet is in some ways a wasted minute.

The quote highlights the high-stakes, fast-paced environment of venture capital, particularly at prestigious firms, where the focus is on identifying and investing in teams with rapidly scaling products.

• Scott Belsky suggests that a full-time venture investor role at a seed firm might offer more engagement with early-stage companies.
• He finds a balance by working with Benchmark and focusing on his own seed investing.
• Personal investment strategies can be tailored to individual preferences without the pressure of managing LP capital.

Would that have been different at a seed fund? Potentially. What I kind of come back to now though, is I think I have my best of both worlds right now because I can continue to work with benchmark in this capacity, but I have a full time job building teams and building products that I care about.

Scott Belsky expresses contentment with his current situation, where he can work with Benchmark while also having the autonomy to build teams and invest in projects that align with his interests.

• Angel investing involves working directly with companies on problems, creating a business relationship.
• Venture capital involves actively seeking investment opportunities, which changes the nature of interactions with companies.

What really struck me when you were talking about your angel investing and meeting Ben at Pinterest and Garrett and Uber is those conversations came out of like a business relationship.

David Rosenthal contrasts the personal, problem-solving approach of angel investing with the more transactional nature of venture capital.

• Scott Belsky advises finding career paths that feel natural, even if they do not fit conventional job descriptions.
• Pursuing interests and working in ways that feel authentic can lead to satisfaction and success.

And what I advise everyone in their career is to find the motions that feel natural to them and then do them.

Scott Belsky emphasizes the importance of aligning one's career with personal inclinations and strengths, rather than conforming to standard expectations.

• Adobe's transition to cloud-based services marks a significant shift in product strategy.
• The opportunity to influence this transition and work on innovative products is a driving factor for Scott Belsky's return to Adobe.

I was very excited about kind of this next generation of creative products.

Scott Belsky expresses enthusiasm for Adobe's new direction, highlighting his eagerness to contribute to the company's evolution.

• Living on both coasts allows for engagement with different tech and creative communities.
• Adobe's location strategy aligns with its customer base and the company's evolution.

Right now I spend my time on both coasts. So we have a place in San Francisco and in New York, which is really cool to be able to say, hey, I can make the most of both of these interesting cities.

Scott Belsky discusses the benefits of residing in both San Francisco and New York, leveraging the unique opportunities each city offers.

• Adobe's renaissance involves embracing new ideas and transitioning products to services.
• The acquisition of Behance is seen as a small but impactful part of Adobe's broader transformation.

There's a bit of a renaissance in the company right now where a lot of new ideas are coming.

Scott Belsky describes the innovative changes occurring within Adobe, indicating a period of significant growth and development.

• The acquisition of Behance brought new talent and ideas to Adobe.
• The transition to subscription-based services is a fundamental change for Adobe, mirroring industry trends.

I think that behance is a small little part of this whole picture. I think it's all about the people.

Scott Belsky acknowledges the role of Behance and its team in contributing to Adobe's ongoing success and transformation.

• It is uncertain whether Behance would have achieved similar success independently.
• The partnership with Adobe is viewed positively, with benefits for the team, customers, and Adobe itself.

Of course I think that behance would have been as big, if not greater.

Scott Belsky expresses confidence in Behance's potential for growth, while also appreciating the outcomes of the Adobe acquisition.

• Network effects are powerful in marketplace and network businesses, increasing value with each new participant.
• Building such businesses requires patience for the flywheel effects to manifest.

These marketplace businesses and sort of network businesses are so crazy powerful because every additional person that joins the network makes it that much more valuable for everyone already on the network and everyone new that joins the network.

David Rosenthal highlights the exponential value created by network effects in marketplace businesses, emphasizing the need for patience in their development.

• Startups experience volatility, ambiguity, and self-doubt.
• Embracing challenges and learning from adversity can build resilience and lead to success.

Gosh, talk about the fact that ups and downs, fits and starts and endless amounts of ambiguity, uncertainty and self doubt along the way.

Scott Belsky discusses the challenges inherent in the startup journey, suggesting that navigating these difficulties is crucial for growth and achievement.

• Assessing an acquisition's success involves considering its impact on the company's market cap and strategic direction.
• The Behance acquisition is graded highly for its contribution to Adobe's transformation and market cap growth.

Since the behance acquisition, there has been over $100 billion in market cap created here.

David Rosenthal provides a positive assessment of Adobe's acquisition of Behance, linking it to significant increases in the company's market value.

• Leaders should prioritize fairness and exceed expectations during acquisitions.
• Building a positive reputation with employees, acquirers, and investors is critical for future opportunities.

All I can say is that doing the right thing by the team and also for the acquirer, nothing is more valuable than every reference check you'll ever get in the future from people that either worked for you or worked with you or acquired you to say that you exceeded their expectations.

Scott Belsky emphasizes the importance of ethical leadership and the long-term benefits of exceeding stakeholder expectations during acquisitions.

• Scott Belsky invites listeners to follow his work and check out his book, "The Messy Middle."
• The book aims to provide insights and guidance for those embarking on ambitious projects.

The messy middle hits shelves October 2, so probably by the time you're listening to this, it will be in its first week.

Scott Belsky promotes his book, which addresses the complexities of navigating the startup journey and offers advice based on his experiences.