Very True by Verissimo

Alex (00:00)
What happens when you take the mindset of a high stakes investor and bring it inside a growing company? Welcome back to the podcast. Today, I'm joined by my friend, Elliot Comite. Elliot has made the transition from investor to operator. And today we are breaking down what it actually takes to be a great startup finance leader. Because he has sat on both sides of the table, we also get into the trenches of deal making and old school negotiation. We discuss how to read the room when you're raising capital and the psychology of people writing the checks. Whether you're pitching a

win at all costs partner or a strict numbers person, we cover how to build third party validation and maximize your leverage. Let's dive in.

Alex (01:27)
Welcome everybody to another episode of Very True by Verisimo. I'm excited to have my friend Elliot on today. I think it will become abundantly clear why we're friends, how we're friends, how much we have in common, how much we share experiences and philosophies around everything from investing to financial operations and Israel and an entire gamut of things. We met for the first time about

Elliot Comite (01:35)
you

Alex (01:52)
10 years ago, In Israel, we've been friends since we've both made different moves in our careers. And I'm excited to have this conversation today to cover a lot of what we've accumulated over the course of our careers. So I will hand it over to Elliot to share his background and we'll jump right in.

Elliot Comite (02:11)
Thanks, Alex. Thanks for having me on today. We've been friends for a long time, but I've always loved reading a lot of the pieces that you put out into the world. feel like you often are saying the things that other people may think or observe.

as for me, I built my career, both investing and operating across software, moving mostly between New York and the Bay area. started my career investing back in the 2010s. I got lucky. I was part of the first crop of kind of junior level hires at a New York based growth stage firm. it's called Stripes Group. at the time they had started to build a junior investment program along the lines of what Summit and Insight had probably done.

So I didn't really know anything about the venture ecosystem. I got very lucky starting there. And what was interesting about Stripes is that it was a growth stage firm, but it was also at the beginning of its own growth journey. So when I started there, it was in the middle of Fun2, the fun story ended up changing rapidly over a number of years there. And so we ended up living some pretty interesting like scaling and market segmentation, how we think about winning, understanding businesses, analyzing them, and then winning deals as the types of profiles of those companies.

changed over time in the sectors. I spent nearly five years there through several funds, great people, super smart, very business model focused. I ultimately loved investing, but couldn't see myself building a career where that was my only experience lens. And through...

Alex (03:35)
I remember those conversations.

We had those conversations when you were deciding to leave and it was so clear that it was the right thing for you to do. You were so like, but I want to know like what actually matters and how it actually works and where like how the sausage is made and like all this stuff is just a game. And I'm like, yeah, I hear that.

Elliot Comite (03:52)
You know that and I remember us talking about that. ⁓ I both from you and I got a lot of really good advice to that. You know, moving over into the building side of the world was a like venture and investing is like an art plus science. But the thing you don't really get on the company side is there's also teamwork. So you get art plus science plus teamwork when you really get into like the right places at the right company.

I ultimately, through my time at Stripes, ended up spending a lot of time spending with entrepreneurs and people in SF. And I kept going back because of the strength of that software ecosystem. And I just kind of felt to myself, if I'm going to go make a move, you should just go to a place where people are exceptional at what they do and are talented and are the best of the world. So I ended up moving from Stripes over to Ironclad. Ironclad was the time a Series B company had just been funded by Sequoia.

again, got very lucky with my time there. I led finance over many years, stood up our team internally across strategic finance, corp dev, all the assistant, all the systems put in the accounting function. We had a great early team. Ironclad's kind of business was it was software for contracts. So helping to work on this business process, the contract that was 5000 years old, we sold it into enterprises. So classic B2B software entry through the

The legal team became a system of records of selling across finance, marketing, procurement. Very, very talent-dense on the early side across the people there. We ended up scaling really well over a couple of years. Headcount scaled up through 550 because of kind of background through Stripes and where I sat in the org of raising a lot of capital. So raised 300 million of equity funding through the C, the D and the E rounds, kind of did some private M &A, operated the business through COVID.

⁓ great time, learned a lot, made a ton of mistakes, but was really a formative, interesting experience and seeing how people in the Bay area built and thought about like the progression of scaling software companies from the stage of you're figuring out the business model to just investing in that, to nailing that and to kind of attract in the right level of talent and matching the people and the talent to the business alongside. So that was incredibly fun. And then, I came back to New York. I'm,

from New York City originally, I'd say my third generation New Yorker, my mom and dad grew up in the five boroughs, my grandparents were either born New York or immigrated here. And so I knew I was going to come back and ended up linking up and joining up Perchwell. Perchwell, really interesting business. We are building this technology infrastructure layer for real estate. So for deeply vertical kind of data at its core, layering and bringing AI into that vertical.

of this legacy industry, very foundational to the country. The software and the data that we power ends up powering the backend of the home buying transaction, which nearly many Americans will go through across the entire of their lives. Very interesting kind of business to dive into that I'm to talk more about as well.

Alex (06:42)
Very cool. And so how long has it been since you left investing and switched over to the operating side?

Elliot Comite (06:48)
I so officially, I would say I left till I joined, um, I joined Iron clad 2019, but I think it's more of a vantage point thing because on one earlier when you're in the venture side, you're obviously, looking at businesses and business models and evaluating and figure out investor tastes and what kind of maps to the fund and what you think you can do. in many ways I moved from that into actually raising the capital myself. So you use, you, end up.

being on the other side of that process, that transaction and kind of seeing the way that you need to manage different parts of stakeholders. even though, when we both met, we were both on investor side, you've kind of made a couple moves back and forth and you meet a lot of people, your friends who are doing the jobs at different areas, kind of navigating the psychology and the mindset from a builder and operator side becomes very different, but kind of the same. And then,

I know you benefit from this as well when you kind of grow up or have a lot of early formative experiences in investing. Your network tends to be that for many periods of time. So, you know, I often find myself talking with friends who have now kind of grown their current investing side, maybe instead of working at funds, they're running their funds or many of them have started their own funds. And, these are people who are very close in your lives. You end up kind of hearing, still continuing to stay and kind of hear a lot of the things that are happening, not only at the company that you're running, but in others.

And often while VCs are all kind of soft competing with each other a lot of the time, they're not often competing with me. So like I'll get a little bit of a download from fun places at kind of download from friends. And then, you know, also across the years I've had, friends and people call me who are going out and raising grounds and, wanting to talk my ear off about how venture works or how you should be thinking about positioning and we're connecting to the strategy piece. So I've officially in a

Alex (08:17)
Fun place to sit.

Elliot Comite (08:33)
I've been investing for a period of time, but it's all a very similar kind of psychological profile on the process of company building.

Alex (08:39)
I would say that you're beyond the tourist stage of like, let me go get some operating experience. There's obviously a lot of talk in the venture tech ecosystem. They're like, how can you be a VC without operating experience and blah, blah, blah, blah, blah. And you need that to elevate your career. Now the data shows that that's just patently false, but I think there's still for each individual person, an element of like, motivation early. Like I gotta just get on the other side and see how the sausage is made instead of just.

Elliot Comite (09:07)
Okay.

Alex (09:08)
And, you know, being on the inputs rather than just seeing the outputs. And I think that's one of the things that makes you unique you're kind of in it to win it at this point. And so maybe let's start with as you think about the next 10 years of your career, do you see yourself becoming a CFO? Do you see yourself becoming a CEO? Do you see yourself going back into investing? Does that involve doing it on the side as an angel or starting your own fund or joining a platform?

Elliot Comite (09:12)
.

Alex (09:34)
Yeah, I just to put you on the spot, like.

Elliot Comite (09:36)
I love the sauce. So I think that when you want to be the deepest in the sauce, you want to kind of helping building and scaling companies. And the way that I think about myself and my career is I love the process of building companies. It's fun. It's energizing. It's people and psychology and strategy and economics and numbers. And that's what I get a lot of energy. You wake up every morning like fired up.

I tell the team here in New York that every single day, no matter what the weather is, no matter what's going on, it's always a beautiful day because we get the opportunity to come in and build a startup today. And that means that we get a chance to build and create something new. And that's an incredible feeling that I absolutely love doing and I've done it for a period of time and plan on doing it for long time. Yeah.

Alex (10:15)
Nice. always good to hear. You know, I grew up, I don't know if you knew this, but I grew up as the son of a CFO. So my dad was in finance functions. He became a CFO for the first time in 1998 and then retired in 2019.

Elliot Comite (10:30)
.

Alex (10:32)
And so that's what I grew up with. I grew up with like Sarbanes-Oxley implementations, like as the conversation of the day.

Elliot Comite (10:38)
Thank you.

Alex (10:41)
It's interesting because I've started my own business. It's a fund. There are some similarities to starting something. It's very different because it doesn't need to scale like a company does.

And that changes a lot, but there are some, key similarities there.

How do you think about that contrast between same function, multiple companies or one company, many functions?

Elliot Comite (11:04)
Interesting question.

Maybe let's like bring it back to what to what the job is. What was the job?

Alex (11:09)
Yeah, what to quote the Bobs?

What is it that you'd say you do here? What is your job? You're a VP of Finance. Like I just wrote a post on LinkedIn about jargon, Like we, you know, people, need a VP of Finance. I need to say, felt like, okay, so let's hear. What is that? What is it that you do?

Elliot Comite (11:14)
Yeah.

Ultimately, everyone's job at a company, including mine is to grow the enterprise value of the company. So how do we become a big, huge company and not only big and huge, but be profitable because right now in this life cycle, the company, you know, iron cloud scaled up to a series E here were a couple letters below. But one of the things that you you ultimately want to be doing is getting off the venture, the venture investing ecosystem. Because if you're

raising venture capital means you are not funded through the company's operations. It means you're not profitable. Ultimately, like you want to be large, you know, high growth and profitable. So to bring that back to what I do here.

Alex (12:03)
I'll just, I gotta pause

you right there though, because you know you're preaching to the choir. All of our listeners know that you're preaching to the choir with me. You say everyone's job is to grow the enterprise value. What percentage of people inside any company know what enterprise value actually is? Do they know that's what their job is? Is it your job to explain that to them?

Elliot Comite (12:22)
It is 100 % one of my jobs to explain that to them. And we actually do that. So 100 % of people who are at Perch well have actually gone through a new employee training here That is the business model of Perch Well. And that is actually functionally explaining what the company does and how we make money. Everybody needs to have a baseline understanding. And if you've gone through a new employee onboarding this company, you know that Perch Well's business model is a data and workflow software company.

Like that is what we are. Like what we do is we ingest data, we build software around it. Iron clad was more of a workflow software company. Built great workflow software around this business process. Everybody default needs to know that because ultimately, if you're an engineer, if you're a designer, you know, if you're a customer success, like you need to know how either shipping high quality software, like building great software, servicing the customer, whatever you do, needs to ultimately contribute towards that. Now, to put that in a box, that is one of the things, because ultimately what the person in my job's

actually does is connect the strategy of the business, how the market thinks about what we should do towards kind of the rest of the team, whether that's the executive team, the team that you're on, hey, how do we all get aligned toward those overall goals towards like the baseline level is how do we actually go out and execute for it? I think about it a little bit as like a bridge. Now to go the other side of your

argument, my job is to be super curious. I need to be curious about what's happening in the company, at all layers of the company. I need to be curious about what's happening outside of the market. And when there's the right kind of concepts, the right ideas, we need to bring them in and needs to inform the company strategy. So I think about the job as, you know, an operator in the finance seat of, hey, how do we think about the best of the best experiences, the best ideas that are out there? And how do we serve as that translation bridge from what the market's saying from what the VC is saying, because we still need to be funded for a period of time?

towards how the exact team can execute on it, towards how everybody knows to go out and do their job.

Alex (14:11)
So now tactically, what does that mean? I used to say when I was doing my financial consulting stint and we started using this term strategic finance, I would basically say the CFO job is like four different things. And there's the administrative and accounting half of the house. And then there's the corp dev and FP &A half of the house. And I would say to people, I do the latter half.

When I said that to my dad, he was like, no, you're wrong. I have a different definition of what that is, which I can't argue with. he's the authority, but I'm interested in how you think about the breakdown of those functions. And I would also be interested to hear about how you kind of audit your time between.

Elliot Comite (14:52)
Ultimately, like this changes as a company scales and changes like what you're going to do at a, you know,

40 person business versus 100 or 250 become very different. But ultimately, I think about kind of of growth stage operator, like running the finance, he has three different jobs. And you can think of what you're hiring in those jobs, because not a single person in the entire world is going to do all three of them. Amazingly, like sorry, your dad, maybe your dad does. But I think of those.

Alex (15:16)
I mean, my dad

always had a team of several people, right?

Elliot Comite (15:19)
The way I think about those three jobs, what I tell whenever I connected to an earlier stage founder who wants to think about this is you're kind of either hiring the past, the present or the future. So like you can hire the past and that is a excellent someone who grew up in accounting, like knows that with, all who like knows how to close the books, who is has amazing process and perspective on controls. There's a lot of companies, especially those maybe that are more in the

the fintech, some of them are more security or compliance that you might actually want that type of person to be inside your company and leading the finance function. knows the past, knows the present. Those profiles generally tend to look like people who have grown up in operating finance. So they tend to either have owned the model, they tend to do go to market finance, maybe they've done product finance, they have a really good lens on what's happening right now and for the next couple of months.

And then lastly, you have a third bucket, which is people who really tell help you like tell the future a little more. And that is can go from six months out to a year out to two years out. And those tend to be individuals who maybe have an orientation around them where they came from an investing standpoint, venture capital, banking, private equity. Now, none of these are tried and true. You can have incredibly strategic forward thinking folks who can group in the accounting world. You my background is obviously grew up in the investing side of the world, but I've done part of the other two jobs at every place that I've been.

So I understand how it works, but I'm never going to go in and kind of, you know, close the books and kind of write the journal entries when big, it wouldn't be a good use of my time. No.

Alex (16:41)
Chief accounting officer is not your next title.

Well, you I have this line that I always say, which is that, and this is something we've run into in Israel where people don't really know what finance is. when I stepped into monday.com and I had a little bromance with Eran Zinman and he was just eating up what I was telling him. He's like, I've never met anyone who talks like you talk and does what you do. And all the data and the numbers and the projections and the math and everything.

He's like, what is this called? I was like, this is called finance. He's like, we have a finance guy. I'm like, let me guess ex EY? He was like, yeah. I was like, that's accounting. And he had never heard of the distinction between these. And then over the years, I came up with this line is basically the ethos around accounting versus finance is very, different, which is that if you are a creative finance person, you become a billionaire.

Whereas if you are a creative accountant, you go to jail and that just completely changes the, the motivations and the thought processes and the risk tolerance and everything associated with it. so bridging those things is not simple, right? And in some ways I think about it as like, you got to nail the arithmetic before you start learning calculus.

Elliot Comite (17:52)
100 %

Finance is really the intersection of storytelling, psychology, numbers, teamwork and markets. Like you have to have like a part of you that's interested in any of those pieces. If you want to help build and grow companies and you want to help do it from the arithmetic type lens. You need all of those because ultimately, The numbers really matter. They matter in the fact they need to be right.

but what really matters is the story and the trend line of those numbers of what it actually means, what it means for the business, how you invest into it and how you ultimately attract other people to the team, how you attract capital, that storytelling and that psychology. And that is even when you're influencing on the exec team, you need to be thinking about other things you've learned in the past or other companies and you as a person in the seat.

often is tasked with like help understanding and like make sense of that crazy world out there. Like you always have these four wall problems that startups that are just like in this, but the whole world of problems out there. You how do you think about, what your company needs to go from current stage you are to the next stage, what different perspectives and that's a combination of storytelling, psychology and influence. And so you need pieces of those, but to your point, there is a crawl, run component where the numbers and the controls and the baseline

has to be right. And so you have to like the details. A lot of people, not all of them who come from the investing into the building, they still want to stay at the strategy layer, they want to like think in opine about God knows what, you cannot be a good operator unless you like the details and you want to own a detail. If you just want to like be an opinion person, that's fine. Company building is probably not the right thing.

But you have to like a detail and like a system. You learn a lot when you implement a system. So both those things.

Alex (19:35)
For sure. Yeah, I couldn't agree more. but I've been saying this for a while that finance people were the original data analysts. The only data that companies used to have was the financial data. And that's what it is, right? I started using this term quantitative resource allocation.

instead of finance, but getting back to this idea of enterprise value optimization, Everything is ultimately sources and uses and like resources and return on investment and all the layers and the personalities and everything that happens in between. But that is where the rubber meets the road.

That's why we've decided as a society that there's these things called dollars and it's how we benchmark literally everything that everyone does in terms of economic value. And finance is what companies do. Like if you don't understand your business model, it's so refreshing to hear you do this onboarding with your new employees, but like, if you don't understand your business model and like who your customers are and what you sell and what you build.

Like, what are we even doing here? We're just pushing paper for no reason. the finance is where the rubber meets the road.

how do you bridge all this? Where the rubber meets the road. I opine on this stuff, but you actually have to do it.

Elliot Comite (20:42)
⁓

You end up keeping a lot of context in your head. So you always you have a form of the ADHD that you that we're talking about then investors do have. I think about operating finance as living at the knowledge point. You're you're the single most person at the company with that single pane of glass and any great operating finance specialist should know the business better than anyone else at the company, even including the CEO who's often more external.

⁓ in different points in the time of the company life cycle. The other thing I like to say is all ARR or all revenue tastes like chicken. And the reason that I say that is like, everybody can be doing a bazillion different things in the day. But when you look at a P &L, you like really understand the guts of the business, which means like you have the central focal point of truth, no matter what anybody says, no matter what anyone thinks. Now, what you do about that is what kind of separates if you're good or great at helping build companies, but

you get to start with a central truth point of this is what's actually happening. Like, I can tell you that my sales team on this business is like massive is making their OTE to quota is way out of whack because I can look at the truth. Now, like what you do with that is very, different. But you are afforded to have a single pane of glass from that glass is kind of I would think where the source of authority or the source of power ultimately comes from and allows you to help like

weigh and kind of drive the business in a direction. But that is something that you as an operating finance professional have that very few people in the business have. And everybody has their version of the truth, but no matter anyone's version of the truth, like that is the truth. It is the canonical text. It is what happened. Here's the numbers. We closed it. We're moving on to the next month, but here's what happened last month. And it's a good starting point when you think about

Alex (22:14)
Here's the numbers.

Elliot Comite (22:22)
the different layers of people you end up conversing with on a weekly basis from, you know, externally on the, on the VC side towards other people on the executive team towards, the people on different teams or the people overall in the, finance, accounting, G&A function. So I think about that as well.

Alex (22:37)
Yeah, I had an experience just last night, actually, a friend of mine who he's a deal guy, Like he's done deals in a bunch of different industries. I wouldn't even call him an investor. He's a deal guy. And he sent me this company. there's this SPV, all the hype, like we've secured this allocation prior to their series B. It's going to be at 100 million cap with a 20 % discount. And I'm like, what are the numbers?

Elliot Comite (22:51)
.

Alex (23:01)
He's like, yeah, 1.5 million allocation. I'm like, no, no, no. What's the company actually doing? And he's like, oh, here's the data room. I'm like, you can't hack me a deal if you don't know. Just give me the revenue. Give me the ARR. I look at the ARR, it's like 850,000. And I'm like, dude. He's like, yeah, but they've got all these contracts. if you know anything about this business, you know that converting bookings,

to revenue and or billings is where the rubber meets the road. It's the hardest part. It's where these companies fail because they can't make that jump. And I don't know. feel like for me, my pushback on that is probably more the son of the CFO kind of been in the weeds in a lot of companies than it is like the investor. Again, especially in this day and age where the venture environment is almost entirely driven by

deal people, frankly.

Elliot Comite (23:54)
Maybe let's use this to go talk about the psychology because you just said like, you had some great insights there. You psychologically profile the deal guy, which is 100 % a person that exists in the ecosystem. They are they are deal driven, they are deal incentivized, they are FOMO based people, like they kind of exist right here. But there's a bunch of different profiles of these people that exist that you as a leader, especially in the finance that need interact with you.

Alex (23:56)
Thank

Elliot Comite (24:20)
You have the deal guys, you have VCs, you have different types of VCs. You've actually talked about this because you've worked at NEA and then started your own fund. So you actually now are a very different profile as you've kind of made that jump.

⁓ Like how has your perspective changed in those two different roles which are very different?

Alex (24:41)
I'll give you a couple of points there that I've thought about over the last 13 years. First is that when I was at NEA, there was a understood thing inside the firm that it takes 10 years to become a GP. Not to like earn the promotion, but to build the requisite skills to earn that and have that title in a meaningful way.

I was there for three years. didn't get there. But my job was actually, there were three parts of the function, which were the deal execution piece, the working with portfolio piece, and then the deal flow sourcing piece. And what's happened over the last 13 years in venture is that those pieces got unbundled. can quickly, my hypothesis there or theory or whatever you want to call it is that

Elliot Comite (25:22)
Okay.

Alex (25:29)
Just the asset class grew so quickly and because it's naturally a cottage industry it's hard to find people who are Really good at all them because it does take all those years to build that synergy But there's tons

of synergy in doing them all well, my job at NEA started as they hire bankers Why do they hire bankers because they want you executing deals. They want you running diligence. They want you basically helping get those deals done inside a large partnership the

That then flows into being a board member and working with a portfolio. And then that very organically turns into the deal flow piece on relationship driven. And so I consider myself like an old school VC, which frankly, you heard it here first. Like, I feel like I'm just getting squeezed out even of this like early stage game where everything's become very deal driven. I mean, a couple other like thoughts on that. There are two other functions inside the being the GP sort of thing that I've learned.

Elliot Comite (26:09)
and it's been awesome being able to the to talk with you and meet you and to hear you do the work. I mean, it's been a great And I'm grateful for the opportunity to meet you and to talk with you about journey that you're going through. And

I'm to be I'm excited to here you. I'm excited to be here you. I'm excited to be here I'm I'm excited here here I'm be with you. I'm

Alex (26:23)
running my own fund for the last six years, which are the LP side of it. So we'll call it sales, marketing, customer success, and then the administrative side of it, which is that CFO function where you've got to deal with fund admin

and audits and stuff like that. that you never have to think about

Elliot Comite (26:43)
in the time that I was doing the job, I actually think the firm I was at did a really good job of ⁓ being boutique and kind of full stack. And this actually informed a lot of the ways that I think about raising capital and building companies, which is, you know, back in the time, before the institutionalization of that asset class.

Alex (26:43)
there.

Elliot Comite (27:03)
We had like maybe 10 to 12 to 15 investors and we were full stack. What that meant is first touch relationship analysis, modeling, term sheet support. And that allowed you to like see up and down. I think these days there are a lot of funds that actually kind of break those pieces apart where you're only doing deal analysis or only doing relationships. People who only do relationships, there's a word for those. It's called BDRs. People who only do deal analysis, there's a word for them. Like they're,

effectively investment banking associates. And so I think there's that dynamic, but I think the psychology of it, even more than the evolution of that asset class, which has changed a lot. think psychology of it is very interesting because when you come back to like how to think about venture capital if you're at a company or you're raising.

capital and how to like get inside of their brain. think you kind of need to remember two things at the same time. So first is this goes back to your concept earlier, VCs are default ADHD. You have to be to be reasonably good at your job, you have to be looking at a bunch of different markets, you have to be thinking about different concepts, you have to keep your portfolio companies in the back of your head at all times and try to hopefully be relating to those companies. And this is hopefully some of the ones who are on the better side. And then your

a bit for like a animal kingdom analogy, you're a little like a hawk, you are trying to stay above the atmosphere above a certain trend line. And then when you see something that is super interesting, you dive and you go very, very deep, very, very fast. That is definitionally different than what I do every single day, which I am thinking about the problem of the business of this company. I'm thinking about the customers had made them successful and think that it would attract talent. I am thinking generally about one

overall problem and how to make that better, which is a very different juxtaposition. And this actually has really big impacts in financing impacts in managing the board. And how you communicate, because you have to assume that you spend three months and there's one board meeting, but you have to assume the person on your board has 15 other board meetings or 10 other board meetings or no matter what they've gone to the first

Alex (29:07)
I worked for this wonderful guy named Harry Weller and he was on 17 boards. can't be on 17 boards and care at all if you're not ADHD. It's a core confidence. But I had a really interesting story when I was consulting and advising companies years ago. And I sat with this company and they were like,

Elliot Comite (29:07)
All right.

Alex (29:28)
What metrics should we use? how should we benchmark this? This was like,

eight years ago. And they really cared about this one metric. And I was like, let me guess, this board member suggested that you use that metric? And they were like, are you like a prophet? Like, how did you know that? Like, you weren't in that board meeting. You weren't in that conversation. Like, how did you know that, that board member suggested this? Like, what are you? Like, their heads exploded. And I was like,

Elliot Comite (29:37)
Okay.

Alex (29:52)
Well, yeah, I know that person's also

on the board of this other company and that's that company's North Star metric. But let me explain to you why that company is very different from your company. And therefore that shouldn't be a North Star metric. Now I wouldn't even call that other VC board member lazy. They weren't not doing their job. They were trying to do their job. They're trying to make connections between companies and that's them trying to do their job. just wasn't the right thing. So again, it gets back to like, as a founder.

Elliot Comite (29:59)
Okay. you

Alex (30:20)
You gotta own it. You have to understand. You

have to take the steps forward to learn those different things.

Elliot Comite (30:25)
that tracks to me and you know, the, the irony of what you just said is usually what the VC will do is take like the best company in their portfolio and say all companies in my portfolio should act like this, which is general, which is almost usually not the case. And let is, unless it is like a carbon copy and you're the guy who led the investment in both Uber and lime, which are like generally similar types of businesses, but not exactly the same.

Alex (30:38)
Okay.

Elliot Comite (30:50)
⁓ we, talked a lot today about what operating finance means and like, how do you help kind of drive influence across like all the different levels? I think you could simplify it into. define the strategy define the business model, defend both of those and help the organization see it and execute against it. Ultimately, either at different levels at the board level, at the executive team level, at the individual contributor level.

It is your job to make sure that everybody knows the company strategy and how they can all contribute in different ways to making that strategy. And it should be as simple as possible. So you need to both translate and be a massive simplification engine because ultimately businesses are super complex. That's what you're paid to do to understand how all the inputs come together and make make the outputs. Most people are not going to live in your level of complexity and that is totally OK. But serving that translation layer, that bridge to say, hey, here's where we're going. Here's how we get there. Five years.

What do do today to get to that five years? That's kind of the job of somebody in the operating finance seat.

Alex (31:44)
This is.

Elliot Comite (31:44)
step.

And the second thing, which is I think a little harder unless you've been on the inside, is venture capitalists have followed the herd mentality on steroids because of the production line of the way our society works. Many of these people went through the same academic pipelines. They went from the same boarding or prep school or summer camp to the next college. If you look at a VC's website, you'll probably see maybe five or six colleges represented I would argue that's ⁓ kind of by design.

They go to the same conferences and what is generally less understood to anybody who's building a company is every VC knows each other. They are all friends and they're all friends and they all constantly talk all the time. And so you have to think about all these things where you're not talking to like a single person, a single firm, you're talking to a type of mentality. And it's generally a type of mentality that usually hasn't always built companies. Some have, some haven't, but there's a lot of great professional investors or some great

folks who've ran companies that became investors, etc. But they all kind of hang out in the same place in the same things. So the question becomes if you're building a company, if you're going to, raise around like, how do you how do you use that? How do you like take that knowledge, put it inside of yourself, and then make it better. And the last piece that you also talked about is incentivization. So how do you actually get paid? Because the Munger quote, you show me I think it's the Munger quote, you show me incentives, I'll show you the outcome. There's two ways you can make money in venture.

You can make money by being amazing at producing returns, which is not the way most people decide to make money. Or you can be amazing by raising larger and larger funds. It's way easier and you actually see the money faster when you decide to raise larger and larger funds because that's kind of the two and 20 model works 2 % of your 2 % of the fund every year 20 % of the profits.

Alex (33:26)
A little secret, it's not two and 20, it's 20 and 20. Ten year fund life, 2 % a year. Two and 20 sounds nice, but when you actually do the math, it's like, wow, that's like a really expensive thing. And I would say that that's one of the hacks of venture is that you can accumulate assets that figured out how to scale up this business. And yet the operation stays really thin. Like if you're a huge PE fund and you're owning companies, you need to hire armies of consultants.

Elliot Comite (33:33)
Rare.

Alex (33:52)
And that's the cost of being a majority investor. When you're a minority investor and you're like, oh yeah, the founders, they'll figure it all out. You don't really need to staff up that much. And that's really the hack to getting rich on fees.

Elliot Comite (34:03)
Though Alex, I would say to your point, this all revolves around raising the next fund. So every VC's life, yours and everyone else's includes raising the next fund. So what do you have to do to raise the next fund? You need to generally make good investments, generally be seen as knowledgeable and making good deals. But you also need to be on trend. You need to be on trend with the things that are happening. You need to be on trend with how the world is moving. And so

You see these follow the herd dynamics, you see the hype cycles that come and go crypto kind of, you know, metaverse. saw that SaaS hype cycle of like probably 20 to 22. You're seeing what's happening now. And obviously there's always underlying business dynamics that makes sense, or you see what's happening in like defense and nuclear and the stuff right now, your job is to be on trend and all of

that.

Alex (34:47)
there's this

thing out there that says that good VCs need to have been operators, right? And there's this other thing out there that says like, don't listen to your VCs. They shouldn't boss you around and tell you how to run your company. My general view is that if you are a VC that never ran a company, you have to be such a schmuck to tell someone how to run their company. Like, like that's high level schmuckery.

Elliot Comite (35:10)
Thank you.

Alex (35:11)
Right? Whereas

if you ran a company or multiple and you did so successfully and now you're a VC slash board member, I don't think you have to be that big of a schmuck to be like, you should do it like this. And so I think the wires get crossed and actually the biggest offenders on boards tend to actually be the former operators. Whereas the modern VC, especially who tends to have more of a

deal oriented background is more likely to just sit back and be like, there's no upside to me saying anything. You guys just do your thing. So anyway, I'd love to hear your reaction and thoughts on just that hypothesis or idea.

Elliot Comite (35:48)
Human beings are all special snowflakes. so there's like rules and exception to every single part of this. There's good VCs and bad VCs. I've seen bad VCs who don't know your business and tell you what to do. If you've your business on first call. There was a LinkedIn post I saw the other day from this guy who left, Andreessen, his name's Robin. Haven't met, but had this amazing LinkedIn post of him being like astonished at the behavior and the venture capital system, given that he just left and now starting a company.

The LinkedIn post was something like, you know, about VCs that goes to show up 10 minutes late, don't read your memo, 30 minutes before the meeting, ask the dumbest question you repeat 100 times a week, are sheep and only follow leads, waste your time, only buy, never sell. Like all of these people exist. Actually, you probably don't feel it that much because you're thoughtful and like, you know, do your work and, you know, show up to meetings. But there's every flavor of person and ecosystem.

⁓ including every flavor of operator VC and every flavor of investor VC to bring, to bring it back though. The one thing that I think is really important that anybody, if you're building a company, if you're a founder, you know, should know is like, what is, what is the business question? Like it's comes back to like, how do you make money? How do you accelerate that growth, which directly leads to making money? And if you do like, what's the main thing of the business model right now that needs to be worked on.

most of the pain comes from different people thinking they're extremely right. So most people think they're going through the world, making actions and doing things to like improve their fortunes. Like generally, let's assume most people aren't nefarious, but like that's a different conversation. If that's the thing, let me bring back something earlier. The job as someone in the finance seat is defining the business problem. And so you don't enable that conversation.

Like your job in the finance seat is thinking about the strategy, the main problem and reframing the meeting, the context. So if this does happen in the context of the board meeting and someone tries to go off the rails and wants to talk to me about AI product strategy and how I'm moving fast enough, we can say, Hey, the problem we're trying to solve with the company right now is X. So like, I hear you like that's great, but we're going to talk about X right now. And so you kind of need to start setting the guard rails because remember these VCs are default ADHD.

They have 20 different things that's on their plate every single day. They might have gotten a text from their rich buddy who they go skiing with, which is great. And now they want to talk about this and drain all the time. Your job, and when you're helping to the business, especially thinking about people who are externally, is keeping the problem in front of you and making sure you're actually working on the company strategy. Full stop.

Alex (38:17)
I will, I'll plug my own piece that I just wrote about controlling the narrative. I think that the biggest mistake that founders make, especially early stage founders is they don't grab their own narrative by the horns. They, they want feedback from investors and the market on what they're doing. Like, yo, if early stage investors had the ideas of what the company should be doing, they would, would be, and should be starting the companies themselves. you got to your narrative. You got to drive it forward. If you're hearing a bunch of questions

Elliot Comite (38:21)
Okay. Yes, I want to talk about this.

Alex (38:44)
you have to come back and synthesize those and count them up and figure out which questions are actually the same. Like we all now have note takers recording every meeting and we have an AI that we can just dump all that into and be like, what are people asking? And then see through the question of being like, what am I not getting on top of? What am I not explaining on the front end? It's something that founders miss all the time that they just, they expect people did more work than they actually did, or they cared or.

Elliot Comite (39:09)
you

Alex (39:09)
people

will say like ABC and then they'll expect the VC to say D and they'll be like, no AI. It's like, man, no. Like, right. It's like that, you know, that there's like a product meme out there where it's like a kid's toy, where there's like a square, a circle and like a star. And they're like, they give them this, they give the user the star and they put it through the star one. And then they give them the circle and they turn it sideways and put it through the square one. And it's like, my gosh, it's like.

Elliot Comite (39:23)
Yeah.

Alex (39:35)
That's human nature. that's what people will do. don't make people work harder than they need to. It's just not fair. So I guess, what I'm hearing is that's a lot of the job of the modern finance function is to help. the CEO and really help the board stay on task. And, you know, that's not to say you're shutting down people's questions. It's just like, you know, your business better than anyone else. And as a, as a finance leader, like

Elliot Comite (39:54)
We know the point that he was in the office. We know in the office.

Alex (39:59)
you know it quantitatively better than probably even the CEO,

Elliot Comite (40:00)
We know one thing is that he was not really in the office.

Alex (40:03)
you got to use that objective data to keep things on task and throw some positive subjectivity into that.

Elliot Comite (40:10)
Let's,

yeah, let's make this tangible instead of post investment, which I think is a different level of kind of relationship with stakeholder management. Let's do a pre-investment. Because I loved your piece on the art of narrative control. One of the things that we'll talk about or I'll tell other early stage founders, someone to get connected with, thinking about running a financing process. And let's exclude.

seed and like hype A's. I know it's where you live. like, I actually think like seed deals are the FOMO deal jockeying ones. Like those are all emotion. So let's say we're out of that world. The way you should think about is every process, you basically get somewhere between four to six meetings to land the plane on an investor. Maybe sometimes if you're doing there's a lot of work, it's eight but

Alex (40:40)
All emotion, pure emotion.

Elliot Comite (40:56)
You have a first meeting intro, you have a product demo, you do model overview. Maybe you do unit economics follow through. Maybe you do a customer file. Maybe you're negotiating a term sheet. So let's call that around four to six because some of those meetings come together. Every line, everything you say matters. There's a there is like a shot clock that is out there. And so anytime you need to help people who you're talking to understand the business and peel back the layers of the onion. What that means

is you do not want to get sucked into rabbit holes. if a venture and ever talking to a venture investor and they're like, Hey, like why is your gross margin 73 % instead of 71 % which is a question that it's a pretty unintellectual question because the answer can mean like anything from like, Oh, AWS changed their cogs allocation or like, Hey, there's something in the model that shows that, you know, we're going to spend less money on like elastic as a core infrastructure, whatever.

⁓ The answer to that is not it's 70 % because of X. The answer is what I really think you're talking about is like how this gross margin is going to scale over time. It's going to scale over time because we are using the same cost base over our overall customer infrastructure. You know, we are building this product that's going to make the product from that we do internally to being self-serve. You need to use all of those simple ways to always connecting it back to what I like to call in the nature of a venture investment. what are your three to five bullet points? So

if you start at the end and you remember that VCs are default ADHD, the end result of every single venture investment is a PowerPoint slide that has five bullet points on it. And that PowerPoint slide with five bullets on it are like, this is the thesis, this is what we're investing. Anybody can go read them online. I think Bessemer does a really great job of like open sourcing some of their memos. And there's a lot of all analysis in there, but there's usually only like three to five points on why anybody does a deal. And when you are communicating and communicating the value of

business model and the company and how you're going to be able to scale over time and how you're not just a feature, you're a platform. You know, need to always think about like, what are those three to five points? And anytime you can get sucked into a rabbit hole, the job is, hey, you got to bring it back because ultimately, like negotiating over the 71 to 73%, it doesn't matter. The models at this stage are good. They're informative. They're all wrong. What really does matter is like how the business is going to build an accrued value over time. And your job is like, and keeping things on the rails and on track because

If I spend 15 minutes out of a 45 minute model walkthrough talking about 71 to 73 % gross margin, I can 100 % tell you that investor's not investing, they've probably not done their homework and they've wasted your time and their time. So your job is keeping that on track, keeping that on track. If they're gonna pass, they're gonna pass. That's okay, it's state of the world. But make sure that they at least understand the way the business works and operates because otherwise, you're never getting closer to where you need to go.

Alex (43:35)
I think it's an interesting paradigm, which is that an investor's job is to be able to get smart on businesses. that's kind of a known thing that I mean, maybe it's not a known thing that your job is to be able to communicate to the capital markets and put it in the context that they understand. Now, maybe they don't know that's their job and that's literally what investment bankers get paid for, that the good ones get paid for. On the other side, a good...

operator needs to understand that they are the world leading expert in their business. This is frankly, one of my favorite parts about being a VC is that I get to talk to the people who are the world leading expert in whatever it is exactly that they do and helping them translate that is not trivial. a quick, a quick story, and this wasn't a hard exercise, but when I was working with monday.com, they had gone out on like a little road show, met a bunch of VCs and they came back with like,

20 emails of different diligence questions. And this was pre being able to just throw them all in AI and be like, what does this mean? And so they sent them to me and they're like, we have so much work to do. We have to reply to all these diligence questions. And I was like, let me see the questions, know, skim through all the emails. I was like, okay, this is what we need to prepare. And they're like, well, yeah, but what about this other one? I was like, guys, no, no, everyone has the same questions, right? Like we know the business, they don't know the business.

Here's what they actually want to understand. like, it's what they say in like relationships is like the issue is not the issue. Like the question is not the question. what they actually want to get at. You might not understand as an operator and what the way that they want to get there is probably not something you understand, like that they really understand as being the right line of questioning to get what they want. And that skill of translating, I feel like this is where

⁓ we're kindred spirits here, which is like, you're, you're right on one side of the fence. I'm right on the other side of the fence. Cause I often do this with my portfolio companies as they, you know, progress into series ABC and help them help them manage this exact process because people have different functions. They have different skillsets. They have different frameworks and being the translating layer between them as silly as it might seem like is actually one of the most valuable parts of

the economy, frankly.

Elliot Comite (45:37)
I so 100 % to what you said. Part of the job is like understanding the question beyond the question. So if I'm getting I'm getting this gross margin question, the middle of a diligence process from 71%. I know that's not a real gross margin question because the number while is important does not matter. That is really a question on scaling and how the business model and the technology platform is going to scale over time.

Alex (45:38)
Yeah.

Elliot Comite (46:01)
and you have to kind of zero in on what they're actually asking. The way I think about this from a different angle is I have this line I say sometimes, which is like, VCs aren't liars, but they also don't tell you the truth. And so what I mean by that is when you are talking in the middle of this translation process, the power dynamics are pretty simple. It's usually like, I am sitting here and like, if you were thinking about investing, putting capital into the business, you are asking me questions, which is a pretty good dynamic if you're the one asking questions.

But it's not a good dynamic if you actually want to build that mutual partnership. At of the day, it is like a marriage when you are taking capital from someone over a long period of time. You do not want that one way to door. And so like one of the things that I always, you know, we talked about internally and then coach other people on or talk to other people on is like, Hey, you're getting through an intro call, a model call, you've earned the right by giving up 30 minutes or 45 minutes or hour of your day. Like you have other important things to do, which is like run.

business itself, for someone on the investing side, like this is the main part of their day, you get a chance to ask them like, hey, out of the companies you've talked to in the last two months, how interesting is this? Like, hey, how many deals have you done in the last nine months? Like, how many deals have you personally done? How far deep is the fund invested all interesting data points where you get to go back and forth? Now, VCs

don't tell you the truth. So they're never gonna lead with this information. No one's gonna tell you, hey, we've done one deal in the last nine months because the managing partner of the firm doesn't really know our AI strategy. So like, hey, I'm here taking this call with you, but they're also not liars. So if you ask a direct question you will get a direct answer And you need to think about how you use that conversation that you're having of getting more complete information. Like you can ask if you see like out of a scale of 10,

how interesting do you think this is of every deal you've looked at in last six months? They'll tell you, and even if they don't tell you immediately, they'll either say, ⁓ it's kind of interesting, which means not, this is extremely interesting. So you get a chance to kind of force that binary into the open through direct ask, they get a direct answer in a way that helps you serve the transition layer because in other people's mind, they're thinking, ⁓ I'm...

65 % deployed out of this fund. So therefore, I'm almost at the time where I'm not doing primary investments, I'm saving 30 % for reserves. So even though we're talking, I'm not really going to invest like that's all context that you earn the right to win back through a series of kind of conversations and meetings and things of the sort.

definitely wanted to think about is a lesson that I've learned, which kind of connects back to pockets of your experiences is to deeply understand who you're talking to at the VC firms. And this is usually a thing that gets missed. Insight is not insight. It's you're talking to Jeff Horing, or maybe you're talking to one of the partners that were like, there's three other guys who are in the fun. I know he's one of them, et cetera.

But the reason I bring this up is you need to kind of understand and think about like who the person at the fund is that you're talking to. So back when I was at Stripes, this is a memory that always kind of sticks with me. We were all generalists back in the day. So looking at a lot of different companies, I called this consumer business that was abroad.

Elliot Comite (49:07)
We hopped on a call. It was a very interesting company. They were raising their first round of institutional capital. So we like dove into due diligence. We sent TaskRabbits, do a bunch of consumer product sampling, looked at analysis, modeling, looked at the entire business. And I was working on this deal with a guy who was, a couple years senior than me at the firm. And then there was, the managing partner of the firm ⁓ was, looking at the deal as well.

And so the guy who was a couple years older than me and I had a price in mind that we wanted to pay and we spent a ton of time like pulling comps. And we were like, Hey, we're going to find the perfect comp set for this business that hasn't yet raised our first institutional round of capital that is coming to the United States. We could add a lot of value and we have this exact price in mind that is like, we're going to win the deal like at this exact thing. And we walked the person.

named Ken who ran the firm through all of this analysis of here are the comps that we're going to do. This is where it matches. We're going to give them a growth multiple, but don't worry here. So we defend it like many, many hours. And the management partner looks at the firm, looks at me and goes, guys, great analysis. This is stupid. Like we're going to pay $20 million more. Like this is a great business. We're going go win this one. And I call this the, like the just win baby principle, like after Al Davis, which is

If you know who you're talking to at the firm, they can make the decision to just go and pay more. And that is an important kind of psychological thing. Are they going to go just win or are they going to say, Hey, I got to go convince these three or four other stakeholders. And that's a personal dynamic of who they are as a person. That's kind of usually the people who built their firms tend to say, they tend to be competitive junkies and they can to want to go just win. But I think keeping that back in mind of like, who's the stakeholder you're talking to, what can they do?

How do you enable them versus can they make the decision are things you should always want to keep in mind and kind of decoding that level of psychology.

Elliot Comite (50:54)
the company was talking to ⁓ the managing partner of the firm, who are usually competitive junkies and often have like, let's just win mentality.

So when you're talking to people at the firm, is it the guy who's the let's just win guy? Is it the person who has the more analytical mindset, who's probably gonna be a little more timid to go up on price? Or is it gonna be the young hotshot who's trying to make a name for himself? All these things, incredibly important.

to make sure you understand where you are at the firm you're talking to with the people who you're talking with at that firm.

Alex (52:02)
Absolutely, I love that. Yeah, I always say at the end of the day, it's just an old school negotiation. Like, what's the benchmarks on this? And then I'm like, in the day, it's how much can I get you to pay for this? Whether you're selling a product or selling a company, whatever it is, it's just old school. How do we meet in the middle? know?

Elliot Comite (52:18)
Do you have a

competitive process? there other people telling the person who's making the decision in their ear who aren't you, how good you are? Because there's no validation like third party validation from someone else you trust. And how much do they believe that you're going to build something massive? It's all those three things.

Alex (52:34)
Yeah, I could go on about that and the three types of conversations you have with VCs. I always say there's only three different types. There's non-decision makers, decision makers, and then the people who started the firm.

What advice do you have for someone who is thinking about transitioning from investing to operating vice versa, is coming out of college or business school and thinking about, I go into investing or go into operating just from your lessons thus far in your career?

Elliot Comite (52:59)
Great question. I'll say a couple of things. I actually like I think contrary to popular opinion, I think working and investing perfectly suits people who want to go build companies. And the reason why or a superpower that I've got to benefit from is I've been rejected by like a million entrepreneurs when I'm reaching out to them and I'm trying to

get into their businesses. That's a pretty core competency that anybody learns. And what that means is I'm exceptionally willing, able to do on myself to do cold outreach that I need to. if I'm trying to recruit somebody to run the go to market function or product engineering, I am very willing to go out and deeply use my network and deeply go find answers. And that is a skill that working on an external services firm, whether it's private, whether that's investing or kind of

VC, PE, banking, I think teaches you where people were born inside of companies tend to not be so like, can you do that? And can you go sell because the end of the day, venture capital or investing is kind of half finance, half sales. At companies, lots of things default to sales, you end up selling people to come great people to join your team, you end up go selling, you know, people who are, you know, investors, that's totally that's a lot of it is sales. And so can do you have the muscle where you want to go like activate the network and sale?

I think is an amazing thing for a venture the second thing is you learn and venture to really young age that most people don't know anything Which I think is really important sometimes in your companies you're like look up you're like There's the CRO and the CFO and the chief people officer and you know They've been at this great brand and that great brand and then like venture You don't really have any of that because you realize that everyone's kind of figuring it out. So you go to the companies and you look look at someone you evaluate their strengths and weaknesses and try to think about what do they know really really great and usually

people understand what they came from really, really great. So you can get a sales leader that has nailed a transactional sales motion, and you shouldn't assume that they're gonna know how to sell a really complex enterprise deal structure, because they haven't done it before. And so you get a chance to of use that pattern matching muscle from investing into operating. It's really good.

Alex (55:59)
Awesome, anything else you wanna add before we wrap

Elliot Comite (56:04)
⁓ we, talked a lot today about what operating finance means and how do you help kind of drive influence across all the different levels? I think you could simplify it into. define the strategy define the business model, defend both of those and help the organization see it and execute against it. Ultimately, either at different levels at the, at the board level, at the executive team level, at like the individual level.

It is your job to make sure that everybody knows the company strategy and how they can all contribute in different ways to making that strategy. And it should be as simple as possible. So you need to both translate and be a massive simplification engine because ultimately businesses are super complex. That's what you're paid to do to understand how all the inputs come together and make make the outputs. Most people are not going to live in your level of complexity and that is totally OK. But serving that translation layer, that bridge to say, hey, here's where we're going. Here's how we get there. Five years. How do we?

What do do today to get to that five years? That's kind of the job of somebody in the operating finance seat.

Elliot Comite (56:58)
I love the perspective of what you're doing and building. I think wrapping it up, just to say, if you like strategy, execution numbers and teamwork, there is nothing

more fun and more terrible than helping to build startups, both at the same time. Highs are higher, lows are lower, but it's fun being able to connect the strategy, the execution, and help something work on a thing from a day in, a day out. And it's been awesome.

Alex (57:25)
Amazing.