20VC Why Startup Valuations Are Not As Overpriced As You Think, How To Determine Whether An Investor Is Truly Aligned To Your Mission and What 2 Traits Make The Truly Special Board Members with Jason Brown, Founder & CEO @ Tally

In this episode of "20 Minutes VC," host Harry Stebbings welcomes back Jason Brown, CEO of Tally, to discuss the company's growth and recent $50 million Series C funding led by Andreessen Horowitz. Tally, a financial automation company aimed at reducing financial stress and improving financial health, has raised over $92 million with investors including Kleiner Perkins and Cowboy Ventures. Brown emphasizes the importance of creating an inclusive work environment to foster diversity, the need for founders to focus on delivering customer value rather than fundraising celebrations, and the critical role of venture capitalists in providing more than just capital. He also shares insights on maintaining high customer retention through complete automation and the significance of empathy in company culture. The episode also features promotional segments for products and services like the temperature-regulating "pod" mattress by Eight Sleep, the rewards-based mobile bank Point, and Intercom's customer communication platform.

• Harry Stebbings releases a new episode of the 20 Minute VC podcast from Helsinki, featuring mojitos and travel adventures on Instagram.
• Harry welcomes back Jason Brown, CEO of Tally, to discuss the company's growth and a $50 million Series C funding led by Andreessen Horowitz.
• Jason Brown's background includes founding Gen110 and Basque before Tally.
• Acknowledgment of contributors to the episode's questions: Nikhila Shasta, Mamoon at Kleiner, and Angela at Andreessen Horowitz.

We are back for founders Friday here on the 20 minutes vc and releasing this one from Helsinki. And so with that, I'm thrilled to welcome back Jason Brown, founder and CEO at Tally, the startup that allows you to pay off your credit card debt faster and save money. To date, Jason has raised over $92 million for tally from the likes of Mamoon at Kleiner, Angela Dandreessen, Nicola Shasta and Eileen at Cowboy, just to name a few.

The quote highlights the episode's focus on the return of Jason Brown to discuss Tally's progress, the significant Series C funding, and the previous contributions to Tally's funding.

• The Pod by Eight Sleep: A bed that uses technology and temperature to improve sleep quality, with customers experiencing faster sleep onset and increased deep sleep.
• Point: An invite-only mobile bank offering a debit card with reward points and high-end credit card benefits, including high interest rates and no hidden fees.
• Intercom: A customer communication platform that helps businesses engage with customers through conversational bots, guided tours, and proactive messaging, with Unity's success story as an example.

The pod by eight sleep the first bed to combine dynamic temperature regulation and sleep tracking to ensure you're getting the best sleep possible. Point is an aspirational mobile bank that features the only debit card that enables card members to earn points when shopping at popular brands they already love. Intercom extends your team with conversational bots and guided tours inside your product.

Each quote describes the unique selling points of the respective products and services advertised in the podcast, emphasizing their innovative features and customer benefits.

• Jason Brown's personal experience with financial anxiety in his family influenced his view on financial services.
• The founding of Tally was driven by the desire to alleviate financial stress through automation, similar to services provided by family offices for the wealthy.
• Jason aspires to offer comprehensive financial automation to the general public with Tally.

So when I was thinking about the next 20 years, when they write the history books, what are going to be the big themes? And I believe one of the biggest is going to be the role that automation plays in really shaping the human experience and in our modern lives.

The quote explains Jason's vision for Tally, which is rooted in his belief that automation will be a significant theme in shaping the future of human experiences, particularly in finance.

• Jason Brown strongly disagrees with the notion that serial entrepreneurship is overrated, citing the 10,000-hour rule as evidence of the benefits of experience.
• He emphasizes that success as a founder is determined by capitalizing on brief, high-leverage moments that occur infrequently but are critical.
• The experience of founding multiple companies helps entrepreneurs develop the intuition to recognize these moments and act effectively.

And what I mean by that is that there's about a half a million minutes a year. And most of those minutes are either the monotony of going to work or you're sleeping. But in a given year, there's a couple brief moments that really, really matter.

This quote illustrates Jason's perspective on the value of experience in entrepreneurship, asserting that most of the time is routine, but the ability to seize the few critical moments is where experience pays off.

• Jason Brown reflects on how his past entrepreneurial experiences have influenced his approach with Tally.
• He suggests that the knowledge gained from previous ventures has informed strategies and operations at Tally.

What do you think you've done differently then with tally as a result of the prior experiences with the other companies?

The quote sets up a question about how Jason Brown's past experiences have shaped his current approach with Tally, implying that each entrepreneurial journey provides lessons that can lead to improved methods in future endeavors.## Mindset Shift in Career Goals

• Early career mindset focused on economic success and fame.
• Learned that this mental model leads to suboptimal decisions.
• Shifted focus to thriving in the journey and delivering everyday value for customers.
• This approach leads to more effective decision-making and liberation from superficial goals.

"Early on in my career, my mindset was all around, quote unquote success and success defined by economic outcome and being famous and getting quote unquote being successful from a superficial standpoint."

This quote explains the initial career mindset that prioritized traditional markers of success such as wealth and fame.

"And I've learned as I've gone through this more, that that kind of mental model leads you to make suboptimal decisions."

The speaker reflects on how a superficial success-oriented mindset can lead to poor decision-making.

"And that when I shifted my mindset to really focus on thriving in the journey and finding deep meaning in every single day and focusing on delivering value for customers regardless of what happens, that it really liberated me to be much more effective and make better decisions."

The speaker describes the positive impact of changing their mindset to one that values the process and customer value over superficial success markers.

• Importance of working with investors who are committed to the startup's mission and vision.
• The need to be judicious about investor relationships due to the opportunity cost of time spent away from the team and product.
• Evaluating investor alignment through the questions they ask about the business and its impact.

"Because when we chatted before, you said, be judicious in working only with investors who are committed to seeing your mission and vision through."

This quote highlights the importance of choosing investors who are genuinely interested in the startup's mission and long-term vision.

"I personally try to spend as little time fundraising as possible and as little time with investors as possible, because every moment that I'm doing that, I'm not spending it with my team or focusing on products and delivering value to our customers."

The speaker emphasizes the opportunity cost of fundraising and the priority of spending time on product development and customer value.

"It was the investors that also spent time trying to understand the benefit to consumers... that I think it showed the difference between kind of people that were excited about the numbers versus people that were excited about the numbers and the impact we're trying to have in the world."

The speaker identifies the key difference between investors who are solely focused on financial metrics versus those who also care about the company's mission and consumer benefits.

• Building investor relationships starts early and can be years in the making.
• Preference for walks to understand investor motivations and values.
• Seeking investors who are intrinsically motivated by impact rather than superficial success.

"So half of my investors, I've raised four rounds of funding in the leads. Two of them I knew beforehand, and those relationships were years old, and then two of them were new."

The speaker shares their experience of having long-standing relationships with some investors while building new ones with others.

"And it's the folks that are more intrinsically motivated by those things outside of superficiality, that I'm drawn to, because I believe that when you're in, let's just say, a spot of bother in the company, at some point, those that are worried about their reputation or how much money they're going to make are going to potentially be drawn to suboptimal decisions as it relates to the company and the mission."

The speaker discusses the importance of partnering with investors who have motivations beyond superficial gains, as this aligns with the company's values, especially during challenging times.

• Concerns about the compression of fundraising timelines and getting to know investors.
• Venture valuations are influenced by the structural distribution of wealth and the scarcity of yielding investments.
• Founders with great markets and execution are scarce, which affects demand and pricing.

"I mean, I think maybe one of the implications there is around valuation. So even with short timelines, you can still get walks."

The speaker suggests that despite compressed timelines, there is still an opportunity to build relationships with potential investors, such as through walks.

"So I would actually argue that given those constraints, venture funded companies aren't as overpriced as you might think."

The speaker provides a perspective on venture valuations, considering the economic factors and scarcity of high-performing companies.

• Raising money is likened to refueling on a road trip, necessary but not the main event to celebrate.
• Emphasizes the importance of shipping product and delivering customer value over celebrating fundraising.
• Celebrations should be grounded, recognizing the responsibilities that come with raised funds.

"But in and of itself, putting gas in the car is not this big thing to celebrate. It's something to be appreciative of."

The speaker compares raising funds to a necessary step in a journey, suggesting it's not the primary achievement.

"So I just prefer to have all my team grounded and understanding that with that fundraising comes a big mountain to climb and quite honestly, a duty to deliver on the promises that were made when fundraising happened."

The speaker stresses the importance of the team understanding the responsibilities associated with fundraising, rather than focusing on celebration.

"So it's more you need to put it all in perspective."

This quote summarizes the speaker's view on maintaining a balanced perspective on the significance of fundraising in the broader context of the company's journey.## Company Celebrations and Focus on Value

• Tally does not celebrate fundraising events, instead focusing celebrations on product development and delivering consumer value.
• Emphasizing the importance of training the team on what truly matters, which is delivering value rather than celebrating financial milestones.
• Encouraging team connection to the progress and direction of the company, not just financial achievements.

"And we at tally never have or never will explicitly have a celebration around the fundraise. It's always going to be around product and delivering value to consumers."

This quote explains Tally's philosophy of not celebrating fundraising as a milestone, but rather focusing on product development and delivering value to consumers as a more significant achievement. It highlights the company's priorities and its approach to team motivation and focus.

• Skepticism towards the value addition by venture capitalists (VCs) is expressed, with the starting expectation set at zero to avoid disappointment.
• The primary concern is ensuring that VCs do not provide negative value through distractions or poor advice.
• The CEO should assign specific tasks and expectations to investors, treating them like employees with clear responsibilities to potentially move from neutral to positive value addition.
• The importance of having a directly responsible individual (DRI) for each task to ensure accountability and focus among investors.

"My starting point is you have to have the mindset that VCs are going to provide no value."

This quote captures the speaker's cautious approach towards the value VCs claim to provide. It sets a realistic expectation for entrepreneurs, suggesting that they should not assume VCs will add value and should instead focus on preventing potential negative impacts.

• The challenge for VCs is differentiating their commodity (money) through claimed value-add to attract entrepreneurs.
• The true differentiator often lies in the individual partner's expertise and personal qualities rather than the overall firm.
• A perception exists that VCs add significant value, which may be a marketing strategy rather than a reality.

"Money is a complete commodity. And so the drive is to try to differentiate an undifferentiable commodity through the quote-unquote value add."

This quote emphasizes the idea that money provided by VCs is not unique, and the supposed value-add is often a marketing tactic to differentiate themselves in a competitive market.

• Preparation for board meetings starts well before the actual meeting with a structured onboarding for new members.
• Intensity and intention are brought to board meetings by ensuring no distractions, such as devices, and providing breaks for emails.
• The importance of formally ending board meetings to avoid any unwanted scenarios and allowing investors to discuss and provide feedback separately.
• Constructive feedback from these sessions can contribute to personal growth for the CEO.

"So I do an orientation for new board members, and this is a structured onboarding where I make sure that they understand the talent, strategy, and our values and the norms that are expected in a board meeting."

This quote describes the proactive approach taken to orient new board members, ensuring they are well-versed in the company's strategy, values, and expected meeting conduct, which fosters a focused and effective board dynamic.

• Establishing norms and expectations through orientation or reorientation can help address individual board member behavior without singling anyone out.
• Creating a mutual contract on meeting conduct allows for a platform to address issues like device usage during meetings respectfully.

"I'm trying to make the board meeting overall more productive and I'd love to institute some norms and I'd like to get your feedback on them."

This quote suggests a collaborative and non-confrontational approach to improving board meeting productivity by establishing norms and seeking board members' feedback on them.

• Board members should contextualize their advice to the specific company, industry, and resources, rather than giving generic advice based on other companies' experiences.
• Encouraging diversity of thought by exploring the other side of suggestions, considering opportunity costs and risks, to provide more productive input.

"What I think really good board members do is they have this big mental bank of all this learning and pattern recognition, but they contextualize it for your company and understanding what is really relevant to you."

This quote advises board members to leverage their experience in a way that is tailored and directly applicable to the company they are advising, rather than offering generic or uncontextualized advice.

• The concept of leading with inclusion to naturally result in diversity within the team is discussed.
• The strategy applies not only to team building but also to board dynamics, ensuring diverse perspectives and inclusive decision-making processes.

"Well, in today's world, there's a lot of tal"

Unfortunately, the transcript cuts off at this point, so the complete thought on this theme is not provided. However, the quote suggests a discussion on the importance of inclusion in the modern workplace.## Diversity and Enterprise Value

• Diversity is not just about hitting metrics but also about diversity of thought and approach.
• A workplace must be intellectually and emotionally safe for underrepresented individuals to share and challenge ideas.
• Inclusivity can lead to natural improvements in diversity metrics.
• Tally, as a company, has focused on creating an inclusive environment, which has resulted in a majority minority workforce.
• Achieving diversity of thought is seen as a driver of company success.

"And where I think that a lot of folks are kind of misled is that they're so focused on these metrics and I've got to hit this number and this number, that they missed a point, that in order to get diversity of thought, you need a workplace where people feel intellectually and emotionally safe."

This quote highlights the misconception that achieving diversity is solely about meeting numerical targets, rather than fostering an environment that encourages diverse perspectives.

"But I am proud to say that the company is majority minority, and that hasn't been an accident."

This quote indicates that Tally's workforce composition is intentional and a result of their commitment to inclusivity, which has led to a diverse team.

• The concept of "change shoes often" is a core value at Tally, representing empathy and understanding others' perspectives.
• Empathy is encouraged by imagining oneself in another person's situation, both emotionally and intellectually.
• Curiosity towards others' perspectives without judgment fosters inclusion.
• These behaviors contribute to creating a safe and inclusive workplace.

"So the wording is change shoes often, and the underlying idea behind that is empathy."

This quote explains that Tally's core value of changing shoes often is about fostering empathy within the workplace to create a safe space for diverse ideas.

• Consumer finance typically struggles with customer retention.
• Tally maintains a 99% retention rate through complete automation.
• Automation shifts the interaction model from providing tools to taking on tasks and achieving goals for the customer.

"It means moving from a world where you're giving people tools and recommendations to one where you're really taking the burden and the task off of their plate."

This quote explains Tally's approach to improving customer retention by automating financial tasks and decision-making for the customer.

• Building completely automated financial services is extremely challenging.
• The difficulty of creating automated financial solutions was underestimated.

"I wish I knew how freaking hard it is to build completely automated financial services."

This quote reflects on the unexpected challenges faced in developing automated financial services at Tally.

• Customer Acquisition Cost (CAC) is not the sole important metric.
• The ratio of CAC to Lifetime Value (LTV) is crucial for assessing consumer fintechs.
• A good CAC to LTV ratio for fintechs is five to one, though most fintechs are below this due to higher CAC.

"It is the ratio of CAC to LTV."

This quote emphasizes the importance of evaluating both the cost of acquiring customers and the long-term value they bring to the company.

• When there is doubt in a hiring decision, it is better not to proceed.

"If there is doubt, there is no doubt when it comes to hiring."

This quote suggests a decisive approach to hiring, where any uncertainty should lead to not hiring the candidate.

• Tally aims to provide complete financial automation.
• The vision includes a service that can think and optimize for the user's financial goals on a global scale.

"Building a service that can globally think for you and optimize based on what you want out of life and do all of the thinking and the financial work to get you to your goals."

This quote outlines Tally's ambitious goal to automate personal finance entirely, tailoring financial strategies to individual life goals.