Why Most Startups Fail: Founders Don’t Know What They Don’t Know Yet

A large company has to be a small, successful company first, and then can it be a medium-sized successful company, and then eventually, hopefully, it can be a large successful company. So let's start, can we be a small, successful company? And it really comes down to, am I solving an important problem? It actually has to be not just important, it has to be kind of urgent. It has to be really painful for the customer. Hello everyone, and welcome to Built Not Born, the startup go-to-market podcast by Venture Guides. I'm Sage Nye, and around here we believe that great companies are built, Not Born, one smart decision at a time. Each week, we take you through real conversations with founders, investors, and go-to-market experts on what it really takes to land customers and scale your startup. Now, let's get to work. Hello, and welcome to Built Not Born, where we dive into the real stories behind startup execution, venture capital, and go-to-market strategy. I'm Sage and I partner at Venture Guides. Today's guest is very exciting. He has spent the better part of 3 decades at the intersection of venture capital, cybersecurity, and executive leadership. I'm very excited to announce that Dave Fascetti is a partner at Venture Guides, a seed stage firm focused on helping early stage founders navigate the path from idea to growth. He has also had recent experience as the Chief Strategy Officer at Bitsight, a leader in cyber risk intelligence, where he oversees corporate strategy, strategic partnership, and M&A. That dual role, operator and investor, is really the throughline of his entire career. Dave also spent 2 decades as managing director at Globespan Capital Partners, where he was part of the firm from its very inception, focusing on enterprise software and cybersecurity investments. During that time, he backed and served on the boards of companies that were acquired by some of the biggest names in technology: IBM, Google, Citrix, and Pegasystems, among others. But Dave's story really doesn't start in venture capital. He's an operator at heart. Early in his career, he was part of the executive team at Family Education Network, where he helped grow the company to over 4 million monthly visitors and a national network of more than 10,000 schools before the company was acquired by Pearson PLC for $175 million. Before that, he was building businesses internationally at Transnational Group, and he began his career at PricewaterhouseCoopers working with early-stage high-growth companies. If you want to hear from someone who has a long career of both investing and operating, this is for you. So Dave, welcome to the show. Thank you. Thank you, Sage. We are very excited to have you. To hear both on the show and also at Venture Guides. I'm very excited for both those opportunities as well. I would love to start with a little bit of your own background. Can you tell the audience about yourself? Yeah, sure. I mean, as you mentioned, I've sort of, I've had a very long career. I, I'd like to think that I'm not as old as I am, but, uh, that I have the benefit of that experience about, you know, 40 years now, almost evenly split between operating roles and investor roles. And I guess I, I just can't decide. I find them both fascinating for very different reasons. But early in my career at PricewaterhouseCoopers in the late '80s, we actually had an office in Cambridge called the Entrepreneurial Services Center. And I got the bug and I, and I've just been excited about just being around the excitement of that early stage of growing a business, starting to see, you know, that product market fit, getting those first customers. I find it, it's a passion of mine. And so, and, but I do find there are pluses and minuses to each side and we can talk about that. And I feel like on the margin, I am probably a better investor than I am operator. And if you look at my operating roles, I cheat a little bit 'cause I get in roles that aren't, operationally intense, like head of strategy is very similar in a lot of ways to what we do in venture capital. I actually do wanna start with the burning question, which is you have had such an incredible career and you have been an operator and an investor. You just joined us here at Venture Guides. Why did you join us? So great, great question. Look, I found that success has a couple of components to it. Obviously there's skillset, there's capabilities, there's a space you're in, and then there's the people you work with. And, you know, I've known the team for a very long time here, not just, you know, in a social aspect, but we worked together. I was a, I was an investor and involved in the board on Turbonomic and a lot of the team here. We all, we all share that history together. And, and like many companies, you have very successful outcome, couple billion dollars that IBM paid for that. And actually IBM's acquired 5 of my portfolio companies. So thank you IBM. But like a lot of opportunities, it was not linear. I mean, there's ups and downs. And I think when you deal with the complexity of the down, and the challenges and you navigate through that with people, then you really know these are people you can trust and you're gonna be working with well together. And that was sort of when I thought about coming back into venture capital and I looked at where would I do that, it was obvious to me that not just because of the people, but the space that Venture Guides in, in infrastructure software, I've spent the majority of my career there. And then also the stage. Again, you, you come back to this, you know, this is where you can have so much impact at the stage that Venture Guides is investing. And then I guess the last thing I would say is that Having spent time on both the operational side and the investor side, a lot of investors, everyone says the same thing. You reach out to me, I'll help you here, I'll help you there. I used to find that actually in the majority of my companies, I was the first call. And there's a lot of reasons we can talk about why that is, but I think that's important. And then, you know, Venture Guides takes it a step further and actually puts some structure on what does that mean to support with VG Sales and the things that we do. And so I thought in this market where you need to be very differentiated when you go out and you compete for business, I mean, it's, it's unusual that you're actually competing to write a check to somebody, but that's the business we're in. And you need to be able to differentiate yourself and why they should take your money. I'm curious, you say that you were the first call. Do you feel like your experience as an operator and the fact that you can really empathize with founders has led to that first call? Or, or no, that two things. One, and this goes back to the operational. One of the reasons that I think venture capital works well for me is I wrestle with decisions. And the reason I wrestle with decisions is cuz I, I, I like the optionality and I like to think through what the multiple sides of what happens if you do it, if you don't do it. And venture capital, the nice thing about that is you only have to make a small number of really important decisions. So you, you know, they're pretty important. They're really important. But that actually works to my advantage cuz I will overanalyze. Okay. And that's really good when you're making a really hard decision. It's not good for every decision you have. I mean, I, and I learned this early in my operating career, I was running half of that startup at Family Education Network. I reported that I actually had two co-founders, the CEO I reported, the other co-founder reported to me. And we went from maybe 20 people to 220 people. Wow. At a point, you know, this is back in the, right in the middle of the internet bubble. I had about 80 people reporting to me, and for whatever reason, I was on the opposite side of the, of the office as was the CEO. And literally between me walking to his office and back to mine, I would make like 8 decisions. People saw me, Dave, Dave, can we do this? Can we? And I would make all these decisions. I get back to my office and say, why, why did I agree to that? And then I walk back and say, hey, you know, I might, and they're, Dave, Dave, Dave, you can't back it. I've already started to put that into motion. So that weighs on the CEO. But when the CEO calls me and says, Dave, I just really need a little bit of advice here. And starts to describe the challenge that, you know, he or she is dealing with. And what I would say is, okay, well look, I, I think of, I understand what you're asking. So first you mentioned empathy. Empathy's critical here. So I understand where you are. I feel your pain. Let me describe to you what you just described to me. You gotta basically, you gotta turn, you gotta make, do you go left? Do you go right? Yeah. Well, let me tell you what I think left might look like, and then let me tell you what right might look like. And then I leave that with like, that's your decision to make. I actually don't care which way you go. And if you're right, I'm happy for you. If you're wrong, I'm disappointed. That's too bad for both of us. But I don't judge you differently cuz oh, you didn't You didn't take my advice and you were wrong. It doesn't matter what decision, it's really your decision and you have to be super clear about that. That's, it's a really hard role to be in to be CEO and that's important for them. And I think that's why they feel like, okay, I trust Dave, he's not gonna judge me, he's gonna help me. And that's important. And I think that brings up such an important point that we talk about at Venture Guides, which is that ultimately we don't run the company. The CEO runs the company. Right. So we can give you all the data that we have, all the advice that we have, but it is your decision at the end of the day. It is. It is. Oh, and I'll give you one cuz it comes up cuz we do, I mean, we are helping these companies quite a bit. And so the question becomes, you know, when you think about that, you have this governance role, you have a support role, and sometimes companies like to keep that distance. Like, I don't know how much I want to get the board involved. And I think that the way you do that, and keep in mind, for me at BitSight, just to be very clear, when I came in to run, you know, strategy for the company, I was the largest investor in the company. So the CEO had a, CEO had to get comfort. And I'll tell you how the way you have to think about this, because the CEO and I talked about, should I come on board and can I help the company do, we had a market strategy issue. The market was coming to say, hey, everybody wanted to do, we came outta the gates really fast. Yeah. When I met the company, there were 3 people. People. When I invested, there were 15. By the time I joined, there were about 150 people and the company was growing at like 400% per year. And everybody kept coming and saying, we wanna do something with you. And in other words, we should be working together. Well, yeah. What, how, what, what should we be doing together? And we couldn't find the right person. We found that people were either corporate development or business development, and we really wanted someone in strategic partnership ecosystem development, and we just couldn't find the right person. And I was interviewing people. And so I said to the CEO, I would do it. And when I first said it to him, I felt like he ignored me. Anyways, he came back to me the next day. He said, were you serious? And I said, yeah, do it. And so what we had to decide was, and he and I had worked together very well, but we had a president to go, this was a go-to-market function. And we had a president who I knew very well, cuz both of these people were at a, at a company that I had been on the board of. And the question was, where was my ego? Because it was a go-to-market function. And for me to report to the CEO in a go-to-market function would be dysfunctional. And dysfunction kills companies. I reported to the president. Could imagine the president now of the company. So the president reports to the CEO, the CEO reports to the board. I'm the largest investor on the board. You cannot accomplish that without tremendous trust. You know, which hat am I wearing today? And when I was on the board, it was a governance hat. And when I was in the, in the operation, it was operational. Not only did we achieve that with the CEO that I first did it, you know, 'cause I was, we promoted that president of the CEO. I worked for him. We're at over $200 million in revenue now with 3,500 customers. We brought a new CEO. But just to give you a sense, that's the trust that you need to build when you are working with an entrepreneur. And it's really important. And if you build that trust, it pays dividends for both sides. That's amazing. I think it speaks massively to your own lack of ego and the ability to build trust. I also think it speaks very well to the CEO to recognize I have an opportunity to bring on someone who's really talented. Yes, there's some hair on it. Yes, it's complicated, but I'm willing to take the leap to do the best thing for the business and for the company and the customers, right? To try it. It does make me wonder when we think about management teams, I would say across Globespan, BitSight, Venture Guides, all of the different roles you've played, you've met with very young management teams and companies. Right. Two questions actually. First, how do you think about what makes a good company? Right. And then tied to that, 'cause people make companies, how do you think about what makes a good management team? So let's start with the company. So to me, I mean, you really have, you know, product market fit is everything. Like there's only a few things you have to really get right, and then the rest of it's just yield. Yeah. So I would say there's efficacy and there's efficiency. I'm not, not convinced efficiency, you know, you know, we're not that every startup is a snowflake, but there's a lot of trial and error, as you know. And so I focus first on efficacy. Can we be successful? And then I'd love to figure out how successful it can be and we can define, you know, what is success. So I, and that's why I go back to my early point about incrementing. A large company has to be a small successful company first, and then can it be a medium-sized successful company? Then eventually, hopefully it can be a large successful company. So it starts, can we be a small successful company? And it really comes down to, am I solving an important problem? It actually has to be not just important, it has to be kind of urgent. It has to be actually a little, it has to be really painful for the customer cuz, and I'm talking about business-to-business solutions. Mm-hmm. So the reason it has to be painful is cuz the last thing they wanna do is deal with startup. It has to be an important and hard problem. Mm-hmm. So that you have to start there. Now, it'd be nice if that can expand into, you know, we, we talk about can you be a very targeted solution, a point solution that can expand into a platform. And what I wanna do is solve the hardest problem first. And if you solve that hard problem first, you can earn your right into the other problems. And then you can expand with, and that's beautiful because everybody loves, you know, that, you know, you get everybody focused on net retention, which is really just, you know, gross retention is, is the customer satisfied? Net retention is, do you have a portfolio of things you can sell at a satisfied customer? Yep. And so that's sort of at that company level. So that's the company. And then the people, you know, there's a, when you look at a team and again, you know, we're investing very early and, you know, the team might be 2 people. I look at an entrepreneur and I ask myself, does this entrepreneur know what they don't know? Because there's a lot of stuff we all, and, and that actually is a test of a couple things. You're testing someone's confidence in their own ability. You're testing their curiosity, you're testing their collaborative nature, and it's a very easy test. And so when I, when I'm talking to an entrepreneur and I'm listening, and what I'm really listening for is do they know what they know and what they don't know? And what happens is if they don't know what they don't know, you'll usually find that in two ways. One is they will make a big deal about what they know, and then they will be very dismissive for a variety of reasons of what they don't know. Like you ask, what do you think about, oh, you know, that's not, we don't have to deal with that. Or, you know, that's not gonna be, you know, it's not gonna be an issue with us. Because, or no, because we do this. Like, okay, but what if this comes up? Yeah. No, it's not gonna come up. Well, how do you know it's not gonna come up? I mean, so I find that what I love when I'm talking to entrepreneur, they're very excited about, they're very proud. They know what they know. And the other thing is, by the way, and it's okay to say this too, which is, I don't know that, but here's what I'm comfortable with, that I don't think we'll have to deal with that for a little bit of time. So I can tell you that I'm not worried about it right now. And I feel confident that I can, you know, but I, I know it's out there. It's a known risk., but it's, it's not an immediate risk. And that, so that's a good conversation. And then the second thing I look for is how is the team together? How are they engaging with each other? Is, is one founder dominating the conversation? Are they respectful to each other? Are they playing off of each other? Which is, is great when they are. So I, so those are the couple things that I'm looking for in the team. So to the, you know, domain experience, intellectual curiosity. Unfortunately, the, the world is becoming increasingly complex in the, you know, you look at AI and all the things that are going on. Oh my gosh. Yeah. And so, you know, intellectual So horsepower is becoming more critical than ever. And so, so anyways, those are the kinds of things I'm looking for. That makes a lot of sense. Are there any red flags for you where you say, okay, if I see this in a meeting, even if everything else has gone well, there is absolutely no way I'm proceeding? Yeah. I mean, stubbornness is, I always, I actually used to say, you know, great entrepreneurs are resilient and tenacious, but not stubborn. It's not actually true. They are stubborn as well. I was gonna say, you know, I think the two of my favorite entrepreneurs, you know, Nirzuk from Palo Alto Networks. We were a very early investor, pre-revenue in Palo Alto Networks, and Anthony Wood at Roku. Both very successful founders, both a little stubborn, but they had reason to be. I mean, this goes back to the point about Mirazook. He understood the problem in firewalls and he understood it pretty broadly 'cause he had multiple companies. Mm-hmm. You know, he had been at Check Point, NetScreen. He really understood the problem. And I always say to people, you know, when we made that investment, he better be right 'cause he's not changing his mind. You know, he is very successful and he would listen to me. I, I had him on a panel in one of our limited partner meetings. He was more willing to listen than you would think, but he was very committed. He had a lot of conviction in what he's doing. And obviously you can see the outcome of that. And Anthony Wood, the same way. But they, in both cases, as experienced and as confident as they were, they were open to listening. And that's the key. And if I, if I'm with an entrepreneur and they just don't wanna listen, that's not gonna end well. And so I figure let's, that's an easy no right outta the gate. I think that makes a lot of sense. One thing that it's so hard to figure out is leadership styles and a strong, healthy leader can, get so much more out of their team. Yeah. Than I would say a weaker leader. Yeah. Do you have anything that you look for there in terms of how people are— you, you mentioned the team playing off each other. Yeah. But how a team is interacting or how the leader thinks about leading? Yeah. I mean, a leader, the mountain is steep and so you have to both cajole and you have to push and you have to lead from the front. And if you notice today, which I find interesting, is that the leader has to have, you have to embrace the technology. I mean, I think it's increasingly, if you look at it today, especially with all the social media and LinkedIn LinkedIn has become, you know, when I first joined LinkedIn, it was, you know, it was just a networking application. It's just like any other social media today. But you look at CEOs, they're leading from the front. I mean, they're talking about the specifics of the problem. Your team has to be confident that, you know, in that very competitive environment, that you guys are gonna show up and you're gonna win. And I think that starts with a leader. And so, so that is a very out in front. This is where a risk-taking and just aggressive of respectful but aggressive behavior. But I do think people wanna know we're gonna win. And that starts with, can they see that in the leader that they're in a, in a genuine way that they're following? That makes a lot of sense. Switching gears a little bit because you've not only looked at companies as an investor, but also in your role as Chief of Strategy, Chief Strategy Officer. Is there a difference when you're looking at a company from a sort of strategic perspective as opposed to as a potential investment? Yeah, there's, I mean, there's some things that are very common. Again, I'm looking, so we've been very, you know, we've, we've made 4 acquisitions at BitSight. We've been very successful in those acquisitions. I pride myself on the length of time the CEOs stay with us. In fact, in, in our most recent one, and, and I'm, he's a very good friend of mine now, the CEO. So the difference is I'm trying to figure out, I have a platform now, you know, Bitsight is, it's got 3,500 customers across. We have 5 solutions in our product portfolio that our customers buy. And so what I'm looking at is how do I enhance those? I'm not looking just to add a 6th product. The beauty of our business is it's a data business. Mm-hmm. And so what I'm really looking for is data assets that I can quickly integrate. And then the question becomes, what additional skill sets do I need beyond that? Like in, for example, when we bought this company Cyber Sixgill in the threat space, they also brought a tremendous AI capability, which we needed more broadly. The reality is you're buying something for what it can do for you, not what it's done to date. And so you, you know, and you need those people to do that. Interesting. But I'm looking at how do I augment a capability? So, so on the one hand, I need to know the technical prowess. I need to know that they've built, they understand product market fit, all the things we just talked about. But I also, I don't need necessarily to know the breath of what it can do, I need to know what it can do for us and I will value it. And that's always the negotiation is I'll value it for what it can do for us. And, you know, the thing I often, I often enjoy when someone says to me afterwards and they, you know, wink, wink, I would've taken less. I say, well, good news. I would've paid more. So I guess we got a good deal. Because the, you know, it's a long-term thing because again, you, if you can't get that in, a lot of acquisitions fail for this reason. If you can't get that in and get it productive and get it integrated, then you failed. And that's about people, that's about relationships. So you have to balance both the the transaction itself with what do you intend to do long term? So there's, so there are, there's similarities. There are a fair amount of differences between the two. That's fascinating. If you were talking to a founder who's trying to think about acquisition offer, what advice would you give them with that in mind? So I give them the same advice if they take our money, which is when you're dealing with other people and you're dealing in a relationship business, you've gotta know that these are people you wanna be with. Mm-hmm. Like, it's the same thing in acquisition. It's not, again, you're gonna be asked to stay some for 2 years. The thing about all of this is time is the most scarce resource we all You do not get that back. And so you really, if you're gonna spend 2 years there, somebody says, you know, if it's enough money, it's worth it. 2 years of your life. And by the way, you should have choice. If you've done a great job and you've built a really good business, you're gonna have a lot of options. So the key there is you don't build a company to be acquired, but the reality is that is one of the 2 great outcomes. And so if you take other people's money, then, you know, particularly venture money, you are on one of those 2 paths. Yeah. It's not, it's not a lifestyle business. And so you're gonna build so that you fit within ecosystems. You should have partnerships. I think partnerships are a great way to find eventual acquirers. And I mean, like a number of the companies that we, Cyber Sixty-O, we were a customer of a third-party trust who we acquired. We had 30 joint customers when we acquired the company. Wow. Anubis Networks we acquired, we actually, that was our best data source. We knew that there was, you know, value there. And so I think that the best outcome is when you're ready to walk. The majority of negotiations I'm in, at some point in that conversation, we're not gonna get this done. And that's okay. You know, 'cause I played a long game. We'll see each other at some other point. And I, when I say that, I'm not bluffing. Perfect. Like, I'm ready to go. And you need to be able to do that, which means you need to be comfortable with your alt, you know, the BATNA, the best alternative. You need to be comfortable with that. And so I think for the founders, you know, and for the entrepreneurs that are navigating, if it's a really good deal with someone you wanna spend time with, you should take it. I mean, if the company is, is struggling and failing, you know, that's a different conversation. Yeah. If you've built something of, of interest, you have options. That sounds great. And, and the alternative to your point is, so you should take it or just keep building. Just keep building. Because you wanna be in a position where you can just keep building. That is your best alternative. Like when you're negotiating and someone's saying, well, you know, there's no one in the other room. There doesn't have to be somebody in the other room. Like the alternative to you is that we keep going and we're pretty excited about that. When we think about the investing world today and the market that we're facing, it feels like it's moving so fast and everything is changing so quickly. Now that you're in this role at Venture Guides, are there any nuances that you're looking for or anything new that you're looking for in management teams? You're right. I mean, this, and people compare this a little bit to the internet. I mean, I, I, I went through that, that experience as well. This is very different. This is an entire technology shift. And anytime you change the base of a technology, I think of this as, you know, the LLM is the equivalent of a new operating system and everything. That means everything that's on it or around it has to change. And it's just changing so fast. Where is the safe ground? And it's not, yeah, it's not really clear. And so, so number one, AI native, everything has to start with that. And then I think beyond that, I do think that, you know, what I'd I like to think there's a first order problems that come from any change. And I think there's sort of, there's a strategy that's in the market today that I don't agree with. I mean, I, there's nothing wrong with it. I, I have some friends that are, that in other firms that are executing very well. And the strategy is this, which is it's a first order problem. It's got a big flashlight on it. I'm going to take a very, very talented team and I'm going to pour a whole bunch of money into the company and we're going to run really fast. Our competitive differentiation, we're just going to get there faster than anybody else. I actually prefer an alternative strategy to that, which is to say, okay, When those first order problems are solved, what's the second order problem? What problem does that create? Can we at least think a little bit about what the world might look like in 3 years? And can we get entrepreneurs that are focused on that? And so, you know, what might be a little bit of an edge case today, but we think that'll move more mainstream, that becomes very interesting 'cause it gives you running time. Like you can actually think it through, you can test it, you can put an appropriate amount of capital deployed against it. I think that that is a way better place for us and the way we're set up to spend time. And I, again, and I, I think I think there's some firms that will be very successful in that first strategy and I, and I all credit to them. Yeah. But I just think there's so many spaces that that's not true. And so I don't think there's any dearth of opportunity for funds if they're focused. I just think there's a lot of lemoning. I have a question to that on that line as well, which is, you know, there's a lot of firms now that are going to find students that have just dropped outta college and they're trying to give them crazy amounts of money at crazy valuations, right? For a young, unproven founding team who has a lot of learning to do between now and then. Right. If you were advising some of these teams, how would you advise them to think about, do I take the $50 million check, $20 million check? Yeah. Or do I think about the, you know, $5 million check with a firm that maybe is gonna have more focus on me or more of a partner or something like that? I do think experience matters. You have to be careful. I always think there's, there's correlation and causation, right? Mm-hmm. And let's not confuse the two. Yes, there's correlation. A lot of people that drop outta school, I think the experience matters. And I think you, you know, you can gain that experience very quickly. It's not like you have to go, you have to go, I always say like when I was in the internet company, my average person that was working for me was 26 years old and all their friends were vice presidents. So they all come to me and say, I should be a vice president. I said, why? By the way, I was 34 and they were telling me I was age discriminating. And so I said to them, I said, look, it's very simple to me. There's a set of gates you gotta go through. I don't care if you get through every, you can get through one a day, but there's a set of experience gates that will help you be more successful in the, in the role that you want to get into and you need to get through those. And so what I would say, there's two choices for an entrepreneur. One is that you work with someone that can really help you and you go after something in stages. Let's, like I said, let's get something, you know, let's get the first problem solved, you know, and then we can get the second problem solved. The second is you align yourself with someone that's navigated before. So when I met the team at BitSight, the reason I met them is they were interviewing the CEO of one of my old other portfolio companies. The guy was 68 years old and he, and this is in a published article, so I can, I'm not telling you anything that's not in the market. He was worth over $100 million.. He had been a CEO very successfully 3 times. And they called me and they said, and these guys were in their, they were over at MIT Sloan and they were in their, I think, I think mid to late 30s. And they called me and said, hey, we're thinking about hiring, uh, this person. What do you think? And I said, well, listen, I have to tell you 2 things about him. One is he is incredibly successful and, you know, he's got houses all over the world. You know, you're not gonna get all of his time in the office, but you will get his mental time. And that's invaluable. And the second thing I have to tell you is he's fired at least one of the co-founders at every one of his prior companies. And they hired I decided that the courage they had to make the right choice, not putting themselves in front of what they were trying to accomplish. I said, these, these are two courageous entrepreneurs and I'm gonna back them. So what they did was they hired someone. This is actually a study at Harvard. I think you want to have people around you helping you now, whether it's someone on your team that you're the number 2 the first time out and you have a huge success, you'd be number 1 the second time, or whether you have someone like us, because the, the benefit you have if you're a younger entrepreneur and you want to be in a lead position is you need time. Time. You will most likely make a great decision, but you're gonna need more time to make that decision 'cause you don't have the benefit of all the prior experience. And so you ask yourself, where can I put myself in a situation where I get a little bit more time that I can make that decision in? Yeah. And I think to that point, as you think about building a team and helping have leverage as you're making decisions and stuff like that, it can be really hard, but also really scary to build your first team as a founder because it's the first time you're starting to let go of Right. And it's critical. You need to have some scale, but you also wanna make sure that you know what's going on in the business. Right. So how do you advise CEOs, or how do you think about empowering a team but also staying on top of what's going on without micromanaging? Yeah. Well, I, I think you have to look at it. So you need a team, right? And so this is a team, this is a team sport. Yep. And the way I think about it, it's actually the same way I evaluate teams depending on it. So I have each of the, Here's the roles that you would need. And then across the top, so that, that's the Y-axis. And on the X-axis, I have domain, I have function, I have scale, I have lifecycle experience. So have you gone through this before? Because there's, there are patterns. It's not random. And then soft skills. Are these good people? Are they collaborative? Are they, you know, ego in check? But if I go through that, and then what I say to, and I would say this to a CEO starting out, this is what you gotta fill out. And what you wanna do is you wanna check to see sort sort of every time you can't check something, then you've got a risk. It doesn't mean you shouldn't take that risk, but you wanna look and say in a function, you know, some, I have a head of engineering, how confident did I have someone that can scale? You know, they're good enough to do the job today. And by the way, it's probably an okay answer if they're good enough for the next year or two. Look, not everybody scales. And as a CEO, you've gotta make that decision. And so my point to you is the team construction is an evolutionary, it's a living And so you start off and I like to look and say, what roles do I need? When do I need them? You know, you don't need 'em all right at day one. Yeah. But as a CEO, it's a beautiful thing to delegate. You know, it's like, wow. And, and by the way, I mean, you delegate to the team and you get credit for it anyways. Like the, I always say like that great leadership is, there's a couple rules I live by. Number one is never criticize in public. If you have something to say, close the door and have that conversation. Always compliment in public and always compliment your team. Anytime you're in a situation where you're with a board and you say, well, the team did this and, and give them that visibility. 'Cause the reality is if your team did it, you did it. They did it. So you don't need to take credit for it and let the team take credit for it. And so I do think that that's important. And, and again, I, I think that building that kind of motion, it's just a flywheel if you get it right. Amazing. So that's the getting it right side. If you were to say across your whole career, is there one mistake that's really stood out that you would recommend other people watch out for? So, I mean, some of this, I'm an experiential learner and the positive of that is if you do things that you get to repeat yourself, venture capital is a good example of that. 'Cause you, you know, you get to actually make another investment. The negative of that is it's very painful when you make those mistakes and there's no safe investment. And I made a safe investment early in my career. I thought I was making a safe— I had two choices and one of them is a company that went public here in the Boston market. I didn't choose that one and I was getting a lot of pushback from my partners and there's a question on the strategy and I respect that. I mean, that's the way these, all these deals are. The other one was a very focused investment and there were two flags that I got in due diligence that I I ignored. I just chose to minimize them. One was on the CEO. There was some clear signs. This came up later where he would be, you know, the, you know, so we would talk about customer fit and he would say, well, they don't understand. Well, the customer usually does. Yeah, that's concerning. You know, does understand. And the other was I got some feedback. It was a database company and I got some feedback that technical founder was very strong, but only on certain kinds of databases. And it was meant to be a capability that was across a broad set of database technologies. And I got some feedback that it, you know, there were some things that would be limited on. And I,. And, and I thought, oh, you know, that's not gonna be a big deal. And so I made the investment. So the two mistakes I made is I made the investment, which I shouldn't have, and I was doing both at the same time. And I, and part of it was just a, I had too many things going on with the other one that I just, you know, and I, so I said, I'm gonna focus on this one, do it. So I made the investment. The second and bigger mistake I made was at some point I had to fire the CEO. So I did, and I went and I ran the company and it was a $3 million investment. And the reality is that the writing was on the wall and I would've saved everybody a lot of time, including myself. And time is the most precious asset. Time is the precious asset. And so, so two mistakes in Fascinating, Dave. I wish we could keep going all day, but at some point we need to get back to our actual jobs here at Venture Guides. So thank you so much for joining. Before we wrap up, I have a couple reflective questions for you just to give some founders and our listeners something to take back. The first one's probably gonna be the hardest question of the day, but if I had to ask, what is one of your favorite memories across all of the companies that you've worked with in your career? Oh, favorite memories. Told you it'd be hard. Wow. I'll tell you one of my favorite memories and I'll tell you why it's my favorite memory. So when I invested, and I, you know, this is a story that's probably been out there in the market. So I invested in a company called Q1 Labs and, uh, we had a pivot and there was a point in time where most of the investors sold that company for cash back. And the CEO who was very dedicated, super experienced, and he and I talked a lot about it and we had a couple other people there and we made a pivot in the company. He actually led, to his credit, 'cause he, he was worried about the amount of cash. And I said, oh, there's enough cash. I know where the cash is. He said, but it's not on my balance sheet. And so I said, well, you know, we're not gonna do it right now. He, he calls me the next day and says, we have a lead for a new round. And it was him. So I said, look, if he's gonna put his money in, well, I can't deny that. We're gonna, we, so we put some money in the company and then the company started to grow and I was spending a lot of time with it and some of the other investors weren't. And I actually led another round and actually increased my ownership in the company. We sold that company, one of the ones to IBM very successfully. So when he called me to tell me that, you know, We're at the point where we have a term sheet that we're gonna sign. That was just like, wow. And to the credit, and this is, this is my little plug for IBM. IBM, 'cause I've done this 5 times now, they show up with a lot of people, but they do what they say they're gonna do. They're a very respectful buyer. Mm-hmm. And we sold this company in the time where the market cratered. We didn't crater, but in 2011, the market dropped during the due diligence period. So we had a signed term sheet, which was exactly what we want. We were with, I mean, just to be very clear, we, we had had a couple offers that were just not interesting to us. And IBM, to their credit, stepped picked up. You know, I think they were very happy in that because post-acquisition was very successful and they consolidated all their security around this, the team there. But they signed a term sheet, which was, I mean, I literally had a guy from corporate development call and said, we're using the word transformational here and we don't like that word. And then the market dropped, their stock dropped 15% during the period to close. They never blinked. They never came back and retraded. They closed that deal. They did everything they said they were going to do. And I have respect to that. But It's just having been at the low, and of course it can be much lower. We didn't close the company, but having been through that and to get that was just such a, to have him call me and say, we've got it, we're ready to sign. And I just thought, well, you know what? That's what this is about. Well, and to have an entrepreneur who's so bought in. Yeah. That he's literally bought in. Yeah. Yeah. He's, yes. Going with you. And then a win like that. Exactly. It's so great. Amazing. Okay. What is one piece of advice that you would give a first-time founder who just started their company? Company? Can I give two? Can I, can I? Yeah. Two. So two pieces of advice. The one thing that you have to appreciate, these are related. Cap table only adds up to 100%. That is a law of physics. And you need to manage that cap table as an entrepreneur. It seems so easy in the early days. Give this away, give that away. I'll raise some money. Go, your point about I'll raise a lot of money. Managing that cap table for you as a founder, for your employees, and for all of your investors that have different relationships with you along the journey. Is super important. Like what you mentioned, when I buy a company, I don't start at the top with a price. I actually start with the four constituencies. I start with the preferred investors. What do they need? With the founders, what do they need? What do the employee shareholders need? And what's the common? And I actually think about those four audiences and I build up from that. And that's how I get to a price. And it's the same thing, like if you're a founder and you're navigating, so that's number one is think about in your mind, what does this look like over time? What decision I make today? Because those decisions are, you're locked into those decisions. That's number one. And number two is when you take all these people's money, you take them with you. And people that can add value to you are critical to you early. As you get later, you probably don't need as much, you know, so I think about value-add money, neutral money, and negative money. There's a lot of negative money in the market. And what I can tell you is I've been on 20 boards and I've made 100 investments and cohesiveness between the team and the board doesn't guarantee success. If it's dysfunction, guarantees failure. So be careful about those two things. Dave, this has been really helpful and amazing for our listeners. There's so many insights that I'm excited to listen to multiple times over. I'm sure our listeners will as well. If people wanna learn more about you, where can they go to do that? Well, I mean, the internet is a pretty transparent place. You could search that. Um, there's a, a lot of history of me on there. I'd like to think it's all positive. You might find something negative. I haven't, haven't been able to find it, but I mean, there actually literally is a website. I can't remember the name right now, but in 2008 or '09, we're, we're had a thing on, uh, the most loved VCs. They had 50 listed. I was on it, so I feel pretty good about that. Nice. Congratulations. But look, I'm here. I mean, it's dave@ventureguides.com. Can't be any harder than that. And so Sage, I really appreciate you spending the time with me. I think this has been awesome and I'm so excited to be here. It's a great team. If you're raising a seed or Series A, you should come here. Well, we are so excited to have you on our team and so excited for all that you can teach and share with the founders that we have in our portfolio as well. So thank you and thank you listeners for joining us on Built Not Born, the podcast where we break down the real stories of startup execution. If you enjoyed this conversation with Dave Fascetti, first of all, reach out to him, but also be sure to subscribe and leave a review. And if you're a founder looking for guidance on scaling your startup, check out VentureGuides.com. Thank you so much. Now let's get to work. Built Not Born, the startup go-to-market podcast, is brought to you by Venture Guides. To find out more about Venture Guides and how our venture capital plus guiding model helps early-stage startups build scalable go-to-market strategies and grow faster, visit VentureGuides.com. And then make sure to search for Built Not Born Learn in Apple Podcasts, Spotify, YouTube Podcasts, or anywhere else that you listen. Hit subscribe so you don't miss any future episodes, and we look forward to building with you. On behalf of the team here at VentureGuides, thanks for listening. Until next time, keep building.