Sujay Jaswa was a principal at New Enterprise Associates before joining Dropbox. At Dropbox, Sujay created and led Dropbox’s global business and global finance organizations, including 20 acquisitions, and hired 500 employees in seven global offices. Now, Sujay is the managing partner at WndrCo, a holding company that invests in, acquires, develops, and operates consumer technology businesses. Here, he gives us insight into growing an early-stage business.
How did you get to Dropbox? [:53]
I had been at NEA for a couple of years, as a venture capitalist. The second company I ever invested in sold the company to Disney 9 months after we invested, for something around $650 million dollars. So they had a party, and their great, charismatic leader gets up in front of all these employees and delivers just a phenomenal speech and at the end of it he says, “I have to thank five people,” and he thanks the four founders and me.
It was interesting because that should have been like, a really wonderful moment and instead, I honestly felt like a total fraud because I actually hadn’t done anything. I had given money, but I didn’t feel like I had materially contributed to what the company became as compared to those 500 people who were working day and night to make this thing happen. And so that kind of put the bug in me to go try to do something.
What did the team look like, and what did those first couple of months look like? [4:36]
There was a lot of work to be done. The company was, call it 30 people. The first day I got to the office, I showed up at 10, nobody else showed up until noon. Everything was surprising back then. Anybody could walk into the office. We had a server closet that anyone could go into and just take it if they wanted. I mean, it was awesome. It was completely unstructured. I was the “adult supervision,” and I was 30-years-old.
What were some of your early projects? [6:21]
There were a bunch. In the first nine months, it was all about putting in place an infrastructure. I think most startups will have to deal with this at some point. So it’s everything from getting the books ready to be audited. That was a hot mess.
[Jessica] That’s why you need a bookkeeper early.
Absolutely, I wish we had you back then. Then a lot of legal stuff. I don’t think we had filed a patent back then. Nobody knew the difference in revenue and bookings back then. It was the most fun I’ve ever had in my whole life.
How did you build out the early organization of Dropbox? [7:29]
First, as we built out each new function, the person we brought in had to be someone that complimented and enhanced the existing culture, but didn’t clash with it. The second thing is, that we had a point of view that each person that started a function would be a seed crystal, which would then manifest itself in the rest of the function’s development or creation. So the first person in each function mattered a lot. The third thing is, I biased towards generalists because in part, we didn’t know what we needed as a company. So hiring people who were broad, would allow us to change things quickly, and allow them to adapt rapidly to whatever was needed.
What I would do personally is that, I had like 15 functions to create. The way I organized my time was, at any given moment I was hiring two roles at a time. One of the things I’ve seen a lot of founders do is they’ll try to hire all 15 at the same time and it just doesn’t work in my opinion. Instead, I would just focus on two and just serial it. And once one of them came off, I’d add another one on. Over the next nine months we hired a leader for virtually every function.
Tell us more about important hires. [10:14]
When you are in a management or a leadership role, especially as a founder, you want to be really honest about what you’re not good at. The reason you don’t have to think of that as a weakness is because you have the benefit of being able to hire people who are good at the things you’re bad at, and maybe even enjoy it.
What do you think most founders and early stage companies get wrong when they approach how to finance their company? [13:14]
The first and most important is, you have to start your goal and then work backwards. When you’re at a startup, one of the biggest challenges is how do you pull yourself out of the day-to-day grind and all the little problems? You have to figure out what’s the big idea, and then how do you work backwards to where you are today.
Another important thing is the other hires. Is the person who’s getting involved with you the right person for your stage of company? At some points in time, what you’re looking for are cheerleaders, people who will have your back no matter what. At other points in time, you need someone who’s really gonna give you the tough love that will help you scale. If you mix those up, you could end up with a person that tells you what you want to hear instead of helping solve problems, or too much tough love early on could break a founder.
What are important factors to successful fundraising? [15:06]
Presenting to venture capitalists is about convincing them of two things. One is that you have the potential to build something really spectacular, and second, that you or your set of founders and executive team are the right people to achieve that potential. What you have to do is say, this is what we’re trying to do, and make sure that’s compelling. But it’s about painting a clear picture about why you’re gonna go from A to B.
Which do you like to invest in, raise on the vision, or raise on the numbers? [16:16]
The dream scenario is you can present a vision that the numbers support. Then it’s early numbers but you say, look at what we’ve done so far and if we continue to do this, we’re gonna achieve this crazy vision and now let me show you five reasons why we think we’re gonna keep achieving these things.
For example, we had four things going for us at Dropbox. We were just on the verge of launching our business product and the early kind of feedback from the market was very positive. We had significant partnerships that would help accelerate our growth rates. We had hired an outrageous set of engineers. And the way the owner, Drew, could talk about what he wanted to do with the products, people fell in love with that.
What do you think is most important for companies to get right from day one? [18:22]
So my bias is towards delaying bureaucracy as much as possible, so you can stay focused on your customers and building your culture. You want to make sure you pay people on time. Related to that then is that you actually know how much money you have. I’ve noticed a lot of startups don’t really understand their burn rate. They don’t really understand their cash position.
They don’t understand that, for example, you have a vacation policy and so your employees are accruing vacation. If you run out of money, you still owe them for that vacation time. People think of their cash balance as I have this much cash. I have this much money going out the door. They don’t think about the liabilities they’re accruing they have to get paid.
When is the right time to make your first full-time finance hire? [20:34]
My bias is you delay these sorts of things full-time as much as possible. I would start looking when things are so big, or moving so fast, that you don’t know how much cash you have. Or that your expense burden or other such things were becoming a problem. Now, there are other types of companies that need to go get bank debt, they might need to be in position to go raise additional money and usually needs someone full-time in finance to go do those two things.
When is the right time to hire a full-time controller or CFO? [21:32]
I’ll just give you rough numbers. I think if you have, call it $10 million dollars or more in revenue or more than 40 employees or so, I’d look into hiring someone who’s either a senior accountant or a controller. CFO, it depends on you as a founder. If a founder has some financial sophistication, that’s a hire you can delay because usually the kind of CFO you’re able to hire in the earlier days may not be the one that can take you public. So then you’re putting yourself in a tough position where you’ll have to replace that person.
When making these hires, what are the key criteria that show they’ll be successful in an early stage startup? [22:31]
For accounting, this is one where experience matters. I would look for somebody who has a strong foundation from a big four accounting firm, but then ideally has gone to a dynamic, relatively high-growth company. That person has both the quality of foundation but also has seen what a company that’s a couple ticks above your size, how that operates. So they can kind of bring both of those things to the table and they should be able to learn beyond what they don’t know.
On the non-accounting side, this is someone that was a catch-all for everything from corporate finance to treasury, including fundraising, and debt capital, and everything else. My very strong bias here is look for someone who has extremely high raw IQ in the finance world. And if I were to give you a couple of personality characteristics, does this person have resilience? Because every single day is a rollercoaster. The second thing is that you want someone who is a true evangelist, they’re a true missionary. I think the biggest reflection of that is when they’re hanging out with their family, or they’re at the gym, or when they’re in the shower, or whatever it is, are they thinking about the company? And if the answer is yes, then you’ve got someone who is a magical hire.
Are there any characteristics that are a risk in a startup environment? [27:20]
It can go one of two ways. They can join your company and immediately need 20 people around them to support them in whatever they’re trying to do, as opposed to being able to roll up their sleeves and do it themselves. But the flip side is management of others. When I saw people stumble in terms of individual contributors growing into leadership roles, the number one problem that’s hard to learn and hard to teach, was management of teams. In other words, you can’t get it without experience.
Sujay Jaswa has worked at successful startups from their beginnings, including Dropbox and now WndrCo. He gives advice on how to set up businesses for accelerated growth.