Unlocking Startup Potential Through Conscious Leadership and Customer Success

[00:00:01] Welcome to the Startup Builders and Backers Show, a podcast which is part of the Tech Talks Network. I'm Neil C. Hughes and you may know me from the Tech Talks Daily Podcast, which covers a completely different topic every day around how technology is ultimately impacting our life, our work and even world.

[00:00:22] But the Tech Talks Network is a series of unique podcasts that drill down on unique subjects and showcase the voices right at the heart of tech startups. And in this series, I want to shine a spotlight on the energetic world of startups where bold entrepreneurs and visionary investors come together and create the world-beating solutions of tomorrow.

[00:00:47] So the conversations you can expect to hear on this show will dive right into the journeys of those building innovative companies and also the strategic insights of those who support them. Balancing the excitement of breakthrough ideas with the more pragmatic challenges of scaling a business. So if you're a startup founder, you get to learn from other founders some of the mistakes they learned and also some of the opportunities that they unlocked along the way.

[00:01:14] So I invite you to join us as we unpack the risks, the rewards and the realities of turning those groundbreaking concepts into successful enterprises. So we'll talk about the intricacies of gaining funding for startups, the importance of conscious leadership and how to enhance customer retention. And yes, we will also talk about emerging tech trends and AI.

[00:01:40] And whether you're a startup founder, a tech enthusiast or someone looking to better understand the dynamics of modern leadership in the industry, this conversation promises to be both enlightening and inspiring. So get ready to explore the mind of a visionary leader who is passionate about making a difference in the world of venture capital and beyond. So buckle up and hold on tight as I beam your ears all the way to the US where Luke's waiting to share his story.

[00:02:08] So a massive warm welcome to the show, Luke. Can you tell everyone listening a little about who you are and what you do? As a functional leader, I lead in the customer success teams. So I love to build customer success teams in the startup world. And then I also, in 2015, I started an advisory and investment angel fund called DBT Ventures, which we could talk about more. But my background is investing and leading and building startup software teams.

[00:02:37] So DBT Ventures stands for Do Big Things. That's one of the things that put you on my radar. I love hearing about stuff like this. But I've got a feeling there's going to be an origin story of sorts here. So can you tell me a little bit about the journey to funding DBT Ventures and what maybe inspired you to focus on angel and venture investing for underrepresented startup founders? It's phenomenal what you're doing here, but there's got to be a story behind it, right?

[00:03:03] Yeah, I guess you could say I noticed a gap in the traditional venture capital space. When I say underrepresented founders, it's mostly females and people with non-white backgrounds, basically. Even if females were funded 10 times as much as they currently are, they'd still be underfunded from like a proportionate standpoint.

[00:03:31] Because females start 20% of companies and they receive like 2% of venture capital. That's just one example of like, wow, there seems to be an opportunity here. So I started looking at those gaps because a lot of the venture capital goes to certain types of founders. And so I looked for opportunities in that realm where they might have been passed over.

[00:03:57] And that was the main origin story of like, I wanted to find opportunities that were being passed over. And it's such important work what you're doing here. Before you came on the podcast today, ironically, I published an article about women who code. And they recently announced this closure due to lack of funding, which is just phenomenal and almost heartbreaking to see such a crucial platform close. And some of the challenges that the WWC, I think, just highlight the ongoing struggles for women in tech.

[00:04:26] How can we better ensure sustainable support moving forward? Because obviously it's a topic very close to your heart too, right? It is. Coding is one way for females to access like the startup landscape. Starting a company is obviously another. We have seen a remarkable increase in STEM, in the STEM female representation.

[00:04:52] So I'm happy to see that on the educational and academic front, which one would think would result in more jobs to that nature. As more and more tools come online, whether it's GitHub Copilot or amazing tools like Khan Academy, I am really enthusiastic about how the information is being democratized. You can now use like a chat GPT to teach you so many different things.

[00:05:20] So I hope that'll just like knock down more walls to get more females into the space and contributing to building these global software brands that really change the world. Completely agree with you. And there will be a lot of underrepresented startup founders that are listening to this episode. Now, hanging on your every word almost, I've got to ask to give them a heads up. How do you quantify startups for angel investing?

[00:05:47] And what are some of the key factors that you consider when evaluating their value potential? What are you looking for? Well, first, I caution them to hang on every word I say because I'm frequently wrong. And I'd like to think that I've picked up a few tricks along the way. But to my background, what I mean by angel is I write checks between $50,000 and $250,000.

[00:06:13] So these are what classically would be considered smaller check sizes before a formal A round that's typically called a priced round. This is where you have an idea and you want to test it out or maybe you've tested it out and you have some early data. I love meeting founders at that stage. And I typically give them the first check, maybe the second check to hire someone in sales or maybe hire a co-founder or maybe spend some money on marketing.

[00:06:43] But it's a smaller check between $50,000 and $250,000 in that classic early seed round. And from what you're seeing here, I'm curious, what are some of the fundraising techniques that you found to be most effective in garnering interest and awareness for new business ventures? Is there anything that stands out or that you're seeing work out there too for any founders listening? You know, that's a great question.

[00:07:10] So I see about 20 pitches a week and I would kind of break it down into two camps. The first camp is you have a product and you've tested it. And so you actually have some data. You have like the goods, so to speak. You have some early insights to share. And that's a different camp than the other camp number two, which is like I have an idea and a philosophy and an approach, but I have not yet tested it.

[00:07:37] Camp number one has an advantage because they can let some of the data speak for itself. My friend Darwish raised $4 million by sending an email out with 10 bullet points in a spreadsheet. He's like, this is what we're doing. If you want to invest minimum check size is this, the round's closing end of month. So he was able to do that by letting the goods speak for themselves.

[00:08:03] If you're really early on and you're a founder without a track record of exits, it's much more competitive. One thing I would call sometimes success is like knowing what not to do. Cold emailing and cold calling almost never work. It's often an exercise in futility. And so I caution founders.

[00:08:26] I'm like, hey, if you're cold emailing decks and cold calling investors, perhaps you haven't learned like one of the first rules of entrepreneurship, which is networking. Like it's all about the warm intro. You could find someone who knows someone to get to the person you want to. And that is the art. And it takes more work. But that warm intro is so much more valuable than cold emails or cold outreach.

[00:08:51] So that would be one don't do just for my personal preference, because I feel like that is it's kind of a self-fulfilling behavior, if you will. Yeah. And we've all been hit by those connections on LinkedIn where within the second that that connection comes through or that request, it's straight into sales pitch straight away. Oh, man. Yeah. I'm curious. Are there any other big no camps or things that people shouldn't do or anything we can lay to rest today?

[00:09:20] Maybe make your life a little bit easier if people stop doing those certain things. Is there anything else? Even with some of the investments that we have made, I look back at the original pitch decks and the projections are just so wildly optimistic. Like, I like to joke that founders, their favorite function in Excel is like fill to the right. Like, you just project. And the real world's not like that.

[00:09:48] So I would love to see a projection that is a little bit more intellectually honest and be like, maybe we're not going to grow at 40% every year for the next five years. Like, let's account for some headwinds, some false starts, because I'm not even investing on the forecast, but it would show higher intellectual honesty if it was not just a linear equation.

[00:10:13] So I would caution founders against overly optimistic forecasting just because most VCs or angel investors don't put much stake in them. So like, don't engineer the fake spreadsheet, because like, there's so many unknowns that let's just start from square one together. Another thing that's changed in recent years is this move to a more conscious leadership. It's a term we're hearing more and more often. Are there any strategies that entrepreneurs can use to practice conscious leadership in their startups?

[00:10:42] Is it something that you're seeing and hearing more and more of too? It is. There was a founder I had the pleasure of working with. His name was Alex McCaw, and he founded a company called Clearbit, which was recently acquired for nine figures. And it was an amazing outcome for the company and for him and the co-founders. He was the one that really opened my eyes to this several years ago.

[00:11:07] He heard about it from Matt Mushari, who's one of the foremost leading advisors in Silicon Valley. But to your question about conscious leadership, if there's anything like tactical I would share, it's a little bit of a hand wavy term. Like, what does this actually mean? I would have the leadership team or the founders, if you're talking about two guys or gals in a garage.

[00:11:32] I think it would be a good investment of time if they read what I consider the best book on the subject, which is The 15 Commitments of Conscious Leadership by Deathmer, Chapman, and Clem. The 15 Commitments of Conscious Leadership is the best book, and I've read about five of them. This is the best book that I've found that really distills the book into concrete best practices. And the reason I think the founding team should do that is because it starts at the top.

[00:12:01] It's a way of operating and a way of – it's a mindset of operating and building a company that must start with the leadership team. And then they live it, they breathe it, they exemplify the behaviors, and then it shifts the culture as you grow. And I saw this remarkably done at Clearbit and a few other companies.

[00:12:23] So that's the high level – that would be like the high level suggestion of like the leadership team needs a shared vocabulary on like what does this mean and how can we put it into practice.

[00:13:02] Yes. Just get it straight away. Adoption picked up, and we've seen the madness since. So customer success is such a critical component for any tech or SaaS company. So how can startups better accelerate that product adoption that's needed and ultimately drive quantifiable business impact for their customers? I appreciate there could be an entire episode dedicated to that question. I don't know.

[00:13:26] Well, I'll first say that my background is in B2B customer success. So we sell software. The companies that I've worked with and built customer success teams for sell software to other businesses. In the case of OpenAI, you have both, which is an interesting jump off point because you have the consumer app, 100 million downloads, fastest growing app technology of all time.

[00:13:52] The customer success playbook is much different for consumer than it is for enterprise because the enterprise, which is also adopting chat GPT in their enterprise offering, requires a different motion. What I like to point to – I like to invert a lot of questions and problem statements.

[00:14:14] Like if you're trying to drive adoption, you'd be keen to look at what is the kryptonite to adoption or growth. And if you're looking at churn, for example, 40% of SaaS churn or in the software paradigm, 40% of churn can actually be tied back to a failed onboarding. So what I often talk to founders about is like, hey, how do you structure your onboarding program?

[00:14:44] Is it objective? Do you have exit criteria? Do you have phases to – because this new organism is trying to adopt and change. Have you created an on-ramp for them to slowly tweak and change their approaches? You're trying to get like 10, 20, sometimes thousands of people to like do something different in their day-to-day. And you have to be really thoughtful about how you walk people through those phases so that they actually successfully adopt.

[00:15:10] A lot of B2B SaaS software just sadly goes unused and eventually churns because they didn't get adoption from the get-go. Yeah, and I think improving gross and net retention rates can significantly impact a startup's success. We did see a few years ago a big push to reoccurring revenue subscription models. That was before subscription fatigue setting.

[00:15:34] But what are some of the best practices that you've implemented or advised to maybe achieve some of these goals? You know, churn is a painful topic, right? Like you lose a customer. Let's say your typical SaaS product is, I don't know, call it 50 to 100K. Like you lost like a decent chunk of change. There's a tendency for the organization to not want to talk about it that much because it's hard. It's like a breakup.

[00:16:04] Like let's go revisit the breakup that was painful and, you know, hurt our heart. The exact opposite is actually incredibly helpful. So one of the things when I was building the customer success management team at Optimizely is if when a customer churned, which thankfully was not too frequently, I would have an email go out to the entire company and it said, hey, this customer left us. Here's the revenue impact.

[00:16:33] Here's the reason why. And here's a longer explanation of why. And this ensured that the entire company was on the same page when it came to churn. And so like kind of inverting, like how do you get to world-class gross GRR, which is typically considered 90 to 95 percent. You have to talk about churn and you have to look at that. You have to drag it on stage, interrogate it, figure out why each customer left you.

[00:17:04] And figure out which promise you broke if it was in fact your doing. So that's one best practice that I find almost no company does, but I highly encourage them to so that everyone has eyes wide open on when you fall short. And if we look back, what, just five or six years, I think there were so many startups and indeed established businesses that were sticking blockchain in their title just to increase investability or increase value on share price.

[00:17:33] Well, we're kind of seeing the same thing with AI now. But I'm curious, if you're looking at the current landscape of technology and software, what trends are you seeing? Where do you see the industry heading? And what should startups focus on to be staying ahead? Because there are so many distractions right now and the speed of technological change is moving at such a speed. But what are you seeing here?

[00:17:53] Well, to address the current hype cycle, which is everything AI, I view AI through an evolutionary lens. For the first time in history, we have more information in our pockets than the president did a few years ago, like 10 years ago.

[00:18:11] So I view LLMs as an evolutionary tool that humans made to make sense of information or quantities of information that the human brain just can't make sense of anymore. Like we're well past being able to synthesize how much data we actually have at our fingertips right now. So I view LLMs as like an evolutionary tool to make sense of things.

[00:18:38] In terms of like where I see that from a business perspective is I work for an AI-enabled company right now and it still comes back to dollars and cents. So our whole pitch is we're going to save you labor. Like you're going to have fewer full-time employees by making you this much more effective. So I start to get really uncomfortable when I hear about talks of AI, but I can't connect it to a P&L.

[00:19:07] And that's where I'm like, this is getting a little hand wavy, a little fluffy. Like let's bring us back down to earth and talk about that. And another big change or big challenge that we've all got to face at the moment is this pressure to be in a state of almost constant continuous learning. Or because there's just the pace of technological change again. And there's someone right in the heart of this space. You've got to be up to speed with so many different trends and everything that's happening. I've got to ask, how or where do you self-educate? Anything you could share around there?

[00:19:36] That's a great question. It's changed a lot over the years. I used to allocate an hour and a half a day to deep work learning. Ever since having a four-year-old and a one-year-old, that time has shifted to weekends and evenings where I also do a lot of my advisory and investment work. I like to play around and get hands-on. So you can take a class at Stanford right now for free.

[00:20:07] Crazy, right? You never used to be able to do that. The organizations and universities are realizing that these massive online classes could subsume their whole existence. So they're offering classes for free. So I would encourage so many people to go to MIT, go to Stanford, learn some stuff for free. You can even put it on your LinkedIn. You get a diploma for taking CS101 at Stanford. It's insane. Totally free.

[00:20:34] And then I dedicate time to learning tools that I think would help me personally. So I got into the code and learned some elementary Python and have also been playing around with the applications of ChatGPT for my function, creating presentations automatically, synthesizing long documents, that sort of thing. So I try and allocate about five hours a week to learning, usually with tools and kind of a thesis in mind.

[00:21:03] Wow, that's just absolutely phenomenal. And also the fact that you do it with two young children as well. And in between watching Miss Rachel videos, I would imagine or something like that. You know Miss Rachel. Everybody knows Miss Rachel, right? You have kids yourself. My kids are all grown up. I'm talking grandkids now. And I feel those songs are ingrained in my head. You know, Can We Say Mama? And I'm So Happy Jump. I know them all. Yeah.

[00:21:33] I always like to finish our episode with a bit of fun with my guests. We're not going to ask you to leave a Miss Rachel song. But if there's one song that we could add to a Spotify playlist or a book we could add to our Amazon wishlist, what final gift would you like to leave everyone listening? For the business folks out there, I would recommend Seven Powers by Hamilton Helmer.

[00:21:54] It is the number one most recommended, most suggested book I've ever came across in my network and meeting and investing and building teams. The Seven Powers is basically the best book I've seen of applicable business principles and basically anyone could benefit from. So I would point them to that book. Fantastic. Are you sure you don't want to add I'm So Happy? By Miss Rachel as well.

[00:22:23] We could have a bonus track for Miss Rachel, who deserves so much credit for the time that she gives back to parents, too. Oh, well, I absolutely love chatting with you today. And for anyone listening, maybe they want to be on your radar. Maybe they just want to find out more about the kind of work that you're doing. What's the best starting point for everything? If they go to their browser, just type in dbtventures.com. You can see there's a bunch of book summaries for free.

[00:22:51] So there's like 200 books I've read and I've summarized the books in about five pages. They could do that at dbtventures.com and just go to the library or LinkedIn, lukeardias.com. So if there's anyone that wants a free book summary or just wants to stay in touch or talk about their business, dbtventures.com or LinkedIn, lukeardias would be the best resource. Well, I'll have links to that so people can find you nice and easy.

[00:23:20] And we did cover so much in a short amount of time today. We didn't focus too much on AI, which is always a bonus in a tech podcast. But just from learning more about how to quantify startups for angel investing, understanding value potential, fundraising techniques for garnering interest and awareness, the things not to do. But I think the big takeaway for me as well was this customer success. And it's all about accelerating product adoption, driving quantitable business impact for customers to achieve best in class growth and net retention.

[00:23:49] The real meat and potatoes of what's important. But more than anything, just a big thank you for shining a light on this crucial topic today. Thanks again. Thanks for your time, Neil. I'll hit you up next time I'm in the UK. And that wraps up our engaging conversation with Luke Diaz today. I think his insights into supporting underrepresented founders, conscious leadership and improving success have been as informative as they are inspiring.

[00:24:16] And Luke is not only a trailblazer in the startup world, but just a genuinely cool guy that I could chat with for ages. And as a fellow football fan, behind the scenes, I will be doing my best to convert Luke into a Toby County supporter. At the very least, I'll be making sure he checks those scores each week. That's how I'm going to lure him in. But I hope you enjoyed today's episode as much as I did. Don't forget to check out Luke's book recommendation, The Seven Powers by Hamilton Helmer.

[00:24:44] And visit dbventures.com for more resources. But as always, I want to hear from you. What's your biggest takeaway from today's episode? Share your thoughts. Join the conversation. Email me, techblogwriter at outlook.com. Hopefully, I will have the privilege and honor of speaking with you all again then. Bye for now.