Russ Heddleston on DocSend’s Journey from Seed to Acquisition

In this eye-opening episode, Russ Heddleston takes us behind the scenes of DocSend’s remarkable journey.

DocSend started off as a product that VCs weren’t exactly thrilled with at holiday parties, but it went on to become a $165M acquisition by Dropbox. In this interview, founder Russ Heddleston opens up about the ups and downs of building his company and shares the choices that led to its success. His story shows how even a simple idea, when executed with a focus on users and a self-serve model, can shake up an entire industry.

Let’s get into all the good stuff that was discussed during this episode.

Mark MacLeod:
In this episode, I sit down with Russ Heddleston. Russ is a multi-time founder. He sold companies to Facebook and he sold companies to Dropbox. He’s best known for being the founder of DocSend, a product that probably many of you have used for fundraising. We’ll unpack the whole DocSend journey and he offers really practical and actionable advice for somebody looking to sell their startup.

Russ, welcome to the Startup CEO Show. How are you doing today?

Russ Heddleston:
Great, Mark, thanks for having me on. Nice to see you.

Mark MacLeod:
Yeah, it’s good to see you. We were chatting a little bit before and the world’s changed since we saw each other last, that’s for sure. And you’ve done a bunch of things that I’d love to get into, but obviously, I think what you’re most recently known for is DocSend. And so I’d love to spend a bunch of time exploring that journey.

Most of the VCs that I know had a love-hate relationship with DocSend because there’s kind of an information and power asymmetry, especially in the early stages between founders and VCs. And that DocSend product which we used on all of our deals at SurePath, enabled us to see which VCs, which private equity investors were engaged versus not, and where they were spending time.

And I think the investors didn’t want us to know that because then we knew who to focus on so we reduced that asymmetry a little bit. But yeah, I don’t know if you ever got that feedback but that was definitely something I heard.

Russ Heddleston:
I’ll tell you an entertaining story about the start of DocSend which we released as a horizontal product from the beginning. But you gotta start somewhere, so I gave it to friends to use in their own fundraising because this is my second company, it raised money for the first.

It’s always been a great product for that use case. And immediately people did not like DocSend, especially the investors, because they would like to have all the power, as you pointed out.

The first year at the holiday Christmas parties for VCs in San Francisco, because I’ve always got a lot of friends in VC, people would often ask, what are you working on? Be like, oh, I just started this company called DocSend. And they’d be like, DocSend. I hate DocSend. And someone else would hear me, they’d come over saying they heard us talk about DocSend, then say they hated DocSend.

And then when people would ask me why I started the company, my cheeky response was that I just wanted to annoy as many venture capitalists in parallel as possible. And this was the best way. And then people would look at me and say, are you joking or not? Because I can’t tell.

Mark MacLeod:
That’s right, because you actually achieved that.

Russ Heddleston:
That’s true. But most VCs came around to it because it’s hard to raise money and there’s a power imbalance. And generally speaking, you’re just flipping through the deck. It’s a pretty short view. You’re giving a compliment to the person on the other side of this, which is nice. And so if you’re treating them as a person you would keep up with and have respect for, it’s fine for them to see you reading it.

And even if you don’t like it, it’s such a convenience for the founder in what’s otherwise such an annoying process that like, just let them have it. So most VCs are like, this is fine, I get it. And they also all use it for their own fundraising. But that journey took quite a while and it’s interesting that it’s ongoing still where still a fair number of people who don’t like the being tracked part.

And I think that comes with the territory. You can always turn on downloading, you can go back to PDF. But generally speaking, the DocSend model is one that has a lot of conveniences.

Mark MacLeod:
Yep, like I said, it was central to our workflow at SurePath. It was really good to know who was engaged and who wasn’t and which slides were the key slides.

You think about selling your business, it’s the ultimate enterprise sale, and knowing who to focus on and what questions to ask was invaluable.

I’m curious, I came across DocSend in that particular use case, but were you actually ultimately a horizontal product, or were you really focused on a few use cases like that?

Russ Heddleston:
There were three phases to DocSend. The first one that we launched in 2014 at TechCrunch Disrupt was document analytics. That’s just what our website said, document analytics. Our view was that if we can add enough value to the sender and make it as easy for the recipient to click on a link as it is to click on an attachment, we can just get people to send links and not attachments.

Because attachments clog up your inbox, you can’t change them after you send them. There’s just all these problems. People would send a keynote file and the recipient couldn’t open the keynote file. Or PowerPoint doesn’t let you embed fonts, for example. People don’t realize that you’re sending a PowerPoint file to their side, so they open it and it just looks totally different.

Anyway, attachments are not great in my opinion. We were very general with document analytics and that was okay, but it was not growing that fast. And then we sold like 50k deals. So the second phase was us pivoting from selling up market into sales enablement. And then our website just said, sales enablement.

But even though we were only selling to sales, people would still use DocSend for all sorts of stuff. So they would ask our support team, are you the services “Blah, blah, blah?” And then support would be like, yeah. And they’d be like, cool. And they just put in the credit card.

So selling to sales was expensive. I also didn’t realize that we had been building for the end user, not the economic buyer. And so our upmarket competitors were building for the economic buyer. And so I learned a lot. It was a great crash course on how to do sales, and what it’s like to do mid-market versus enterprise. Then, we decided to focus on what was working fine and just decided to optimize it for better self-serve stuff.

But interviewing hundreds of our users, what I realized was that DocSend is a pretty horizontal product, but you get way more bang for your buck if you describe the value of DocSend in terms that a specific user can understand. So the third version was a horizontal product that we marketed vertically. And so with that in mind, yeah, we lean more into the fundraising use case because it’s not like we weren’t a fundraising company tool.

That wasn’t the company, but 1000+ seats on DocSend at big companies and so there were a lot of bigger companies that used it, people would use it and all sorts of cool things, and I didn’t want to discourage that. And so we are pretty early in doing that, which a lot of other companies have since done that product-led growth companies where you’ll have a template library or Airtable and you’ve got to tell people how to use the thing.

So that third phase worked the best for us specifically because we could lean into the founders using it and it was less than 30%, even when you consider VCs raising money and all the different flavors of fundraising. But yeah, it’s always been a pretty interesting spread of situations where DocSend was useful.

Mark MacLeod:
So, did you ultimately end up coming back down market? Like the business at exit was more of a self-serve business than a sales-led business?

Russ Heddleston:
Yes, but I’d say even during the period when we were desperately trying to do outbound sales, it was expensive, we hired up a dozen plus salespeople, VP of sales, and we were closing 50K deals. But then those are expensive. You got to do a cold outbound. And so when we pivoted back to the self-serve stuff, we didn’t fire our upmarket customers. We had Oauth Saml, we had teams of teams. We had a lot of enterprise features by that point, so those customers were fine.

We just decided to lean into the thing that was working better. So, we changed our pricing, packaging, and positioning for DocSend added the advanced plan with security-oriented, and then that started to take off and convert better. And then we had this pretty easy-to-follow cadence where we would go build more features for the users that were paying us the most. And those users were not dissimilar from fundraising.

And so, we were able to just monetize better, but after we pivoted to that third phase, we didn’t bother doing outbound anymore. It was 100% inbound, it was 95% self-serve. And then most of it was just people converting to the product. We just made it easier to buy. We also made the value prop easier to understand. And so when you go through the product, you’re like, cool, I get what it does for me.

Somewhere between 22%-25% of signups would convert to one of our paid plans, which is a really high conversion rate. Also, word of mouth was always our number one channel for acquisition.

Mark MacLeod:
Did you have a K-Factor? Did you track that?

Russ Heddleston:
It’s hard to track K-Factor unless you have a company and product that’s specifically viral, like a Hotmail-style thing. The recipients convert to being the users themselves. And what happened with DocSend, what’s generally hard with word of mouth is that people just type in docsend.com and then pay us. But you’re like, where did you come from? You just typed this in. There’s no click on an ad that didn’t convert from a content piece.

Even in the early days, for example, an investor, for every investor that didn’t like DocSend, there were way more investors who were like, oh, this is really smart. I should get my other founders to use this tool so that they have an advantage in their fundraising. So investors were actually big advocates for DocSend, even though the people who didn’t like it were just always more boisterous than the happy, quiet people.

But, yeah, it skipped a step. So it was viral, but not in the recipients became senders themselves model because people who receive documents don’t necessarily send them, but people who receive documents generally receive documents from other people too so they ended up being this channel for us.

Mark MacLeod:
Yeah, it makes sense. I mean, that’s how I heard about it. The startup sent me a deck in DocSend. I was like, this is a really great tool, I want to use this for all of my deals. Just being exposed to it through someone else, I’m sure that was just a giant channel for you.

Russ Heddleston:
Yeah, it was. And to give you a sense of some of the scale, Dropbox shared our ARR when they bought the company in 2021, we were at like $15 million ARR. And so they bought it for 11x ARR, and we were profitable. And when we did that third kind of pivot back to the self-serve stuff, like horizontal product market vertically, we had about $5 million ARR.

We made the decision when we were like around $4 million in ARR and made like $2 million in what I called outbound or enterprise revenue and then $2 million in self-serve.

But when we got to 15, that $2 million in enterprise went to three, and then that two of self-serve went to twelve. So you just saw an explosion in the conversion. We also didn’t realize how much money we were leaving on the table by charging $10 a month. A lot of people didn’t convert because it wasn’t expensive enough.

So we got into data rooms and when people are applying for data room software, they’re like, it has to be really expensive because otherwise I just don’t think it’s what I’m looking for. So conversion went up when we increased our pricing, which was fascinating, but that twelve to three versus two and two, was the right call on our part.

Mark MacLeod:
Yeah, you’re 6x that other segment. Over what timeframe?

Russ Heddleston:
Basically two years.

Mark MacLeod:
That’s amazing. And you were pretty capital-efficient on that business as well, right?

Russ Heddleston:
Not on purpose, but yes, we were. What happened was we raised a $2 million seed in 2013, which at the time was normal in 2013. We then launched it in 2014. It’s kind of taken off. We got an $8 million series A from August Capital, which is now Lobby Capital. And it was a preemptive series A. We didn’t really have the stats to raise a series A, but our main partner there just believed in me and our team. And so I’m really happy we raised that $8 million.

We then spent three years in that selling up market phase to mid-market sales teams. And I don’t think that was the best time spent. So then once we got to that point, we thought maybe it wasn’t a good market model. We actually couldn’t raise a lot because it was formulating ARR, it was half self-service, half mid-market.

And so I did actually get a term sheet for $20 million, which is great. But I instead took a term sheet for $5 million from a friend of mine, Kyle Louie, who was at DCM at the time, and that was great.

One of the problems with product-led growth is it’s hard to promise how much you’re going to grow, because when you have a sales team, you can just dump money in and get more money out, versus with DocSend, talking to our investors, they’d ask how much we’re going to grow next year, and I’d say, I don’t know, but we grew a lot last year, so probably we’ll continue.

And they reply, well, how do you know that if you build these features they’re going to be worth it? To which I’d say, I don’t know, I just think that good things will happen because everyone’s asking for this. So, it’s very hard to predict. And so we raised a little less than $15 million total for DocSend, which was very capital efficient.

But, it was kind of interesting how that played out between those basically three rounds of funding, that taking that five was really just to have a little more balance sheet. But what we did was just really focus on what we’d figured out was working. And then we ended up being accidentally profitable. It’s a little bit more in vogue now to be profitable, but at the time, especially as a product-led growth company, just my view, my co-founder’s view, is that if you grow your engineering team too fast, it becomes chaotic and you don’t know who’s working on what.

And it’s hard to onboard people. So we didn’t really want to grow our headcount by more than 50% a year and our revenue is growing faster than that. We were still growing the team at the rate we thought was as fast as we could to be at an optimal level to get people trained and onboarded so that we’re still making progress in the product as well as hiring more people.

Otherwise, you’re just fully in hiring mode and it can be kind of a mess. Or if you’re not hiring at all, only in building mode, then you’re reducing your future ability to have more output. So anyway, and it’s been accidentally profitable, so then we didn’t need more capital.

Mark MacLeod:
That’s perfect. We’ve already talked a bunch about trying to move up market and then the decision to make it more self-serve, identifying this use case around fundraising. What were the other big milestones, key moments, or big decisions for you? If you were to do a retro on the success of DocSend, what would be in that?

Russ Heddleston:
It’s a great question because I have often gotten from people saying DocSend is such a great product and my thought has always been like, what exactly does that mean? I think in the case of DocSend, what it means is that it’s really good at something specific, but then it’s flexible enough to be useful for other things too.

And that’s generally viewed now as product-led growth company equates to a need to be good at self-serve onboarding, where you’re more like a consumer business than a B2B business. But what we did at the beginning of the company was to be laser-focused on doing something specific very well, which is just sending a document as a link and seeing what happens to it.

We had to spend a lot more time than anyone assumed being really good at document processing and being really accurate at tracking stats, which isn’t horribly difficult. But it does mean that we supported further back in IE than Microsoft did at the time, because banks are still using really old versions of IE, and then every browser version has different notifications they give you if you flip tabs or you’re in focus or out of focus.

So just being really good at those details and then there’s just PDF/JS is a lot better now, but at the time it wasn’t. There are all sorts of edge cases to understanding the PDF spec, but then taking Word documents, PowerPoints, and keynotes, and turning those things into the exact same thing in a browser as you’d have in the document and that was actually hard. It’s not giant, but it’s way bigger than people thought. I think if we hadn’t been great at that, we would have lost trust.

Also, if DocSend ever went down, you’d just stop using it and you’d go back to an attachment. We always had to be up. We could never have any downtime. We had to be flawless with converting documents, and it had to be incredibly simple and clear what the utility of the product was. I think even from the beginning when people would try to use DocSend, and even if they didn’t care about that value prop we had, it was still pretty easy to understand what it was and how I would use it.

As we added more complexity to the product with e-signature or data rooms, the idea we had was that it’s easy to get started, but there’s room for mastery and there’s complexity that’s hidden and is there when you want it but doesn’t get in the way of like, a new user getting onboard with the product.

Other key moments, I’d say were the pricing and packaging discussion we had where we launched our advanced plan and sales teams didn’t usually care about security, but we found all these users who would be paying us $10 a month and they would care so much about it and they wanted more security. So, we figured out what sub-segments of our users had the highest urgency with our product and then launched a plan that was $150 to be paid annually a month or $250 month to month. I still don’t know if that’s the right or best pricing, but it was close enough that it was great.

And when you compare $10 a month to $150 a month, that’s a big difference, especially in the minds of the target user that still wasn’t that much money to them. If you’re an investment banker who’s representing a business and selling it for hundreds of millions of dollars, you really don’t care about that expense. If you’re any professional, you’re raising your venture fund, it’s not that much money.

Getting the pricing and packaging correct was another really big moment for us. There are some other ones, but it is fun to look back in retrospect and wonder, what mattered most among all the things we spent time on.

Mark MacLeod:
You definitely masked a lot of complexity. I’m not a developer, but I totally appreciate that. I’ve tried to import PowerPoints into Google Slides and they’d always mess something up. So even just that, and it has to look good.

Again, we were using it for multimillion-dollar transactions. We have to put our best foot forward, the presentation has to be bang on and yeah, it always was.

You talked about product-led growth. I don’t remember when that became sort of a category and everyone started writing about it, but I feel like you were early. So, how did you know that that’s what you were doing and how did you educate yourself other than just putting the reps in? Were there resources you could turn to back then or were you just figuring it out yourself?

Russ Heddleston:
There weren’t any resources available in 2013 when we started the company. My co-founders, Dave and Tony, we all went to Stanford and did computer science together. We were influenced by the design school thinking there. And just, I did my masters in human-computer interaction, which is the fluffy CS degree at the time at Stanford. And my view has always been that most things can be built. It’s just a question of whether they should be built.

And so when we started DocSend, we wanted to build a product that was really great for the end user because it’s fun for us to design the product that way. But, yeah, it wasn’t called product-led growth at the time, and we had to figure out a lot of things on our own.

We did a case study with Harvard Business School last year and hearing the first class discuss it, it was very hard for me to just sit there. And to your point, a lot of the people in class didn’t realize that when we started the company, that wasn’t the thing back then. So students would say things like, well, it’s very clearly a product-led growth company, so why didn’t they do these things? But we were figuring things out as we went, because it’s not quite the consumer playbook, and it’s certainly not the enterprise B2B playbook.

So a lot of trial and error, a lot of just kind of following the thread. But yeah, there were a lot of inefficient paths we went down. I always kind of felt like if we did it over again, we could have done it half the time type of thing. But that’s probably true for founders generally, with the benefit of hindsight.

Mark MacLeod:
Last question here, and then let’s move on and talk about the acquisition. But when I think about, again, that use case of raising capital, it’s almost like a campaign. I need it for a short time, and then I don’t. So did you experience that? Was it episodic use and people would churn out and then come back in 18 months or did you find they discovered through using it for that fundraiser that they could use it more broadly, and so they stuck around?

Russ Heddleston:
Yeah, that’s a great question. When I talk to founders now, I usually urge people to aim for something that’s high urgency, even if it’s small, even if it’s episodic, because it’s better to be useful for someone than to be generally useful for no one in a particular type of thing. And that was the episodic nature of fundraising, which is why we didn’t do that initially or focus on it.

And that’s also why we’ve focused on sales for a while because that’s an evergreen use case. But when we went back to being a horizontal technology but marketed vertically, the benefit of fundraising that we only saw after some period of time was that a founder would, even if they raised or didn’t raise, they’d go on and remember it, and they’d go use it in other things. They’d take it with them. And we had a lot of people who would use it, churn, then use it again, and then churn again. So our resurrected revenue was really high.

Part of the thought process we did was to think about what else we could get them to use this for. And part of that was just telling them what else they could use it for such as sales, or for investor reporting. But then part of it was like, what are the adjacent things we can build into the product to make it stickier? And that was a lot of why we added e-signature into the product.

And that’s also why we added what are either data rooms or deal spaces or send a folder in basic terms. But those are all things we added to the product to be able to acquire someone in one use case and then convert them to other use cases of DocSend.

So in the beginning, if you looked at our cohorts, there’d be a pretty steep drop-off. But it was fascinating that people would resurrect themselves over time. What we couldn’t track automatically anyway, was that people would come back to us with a different email address for their next company or as they switch jobs.

You wouldn’t see that in the cohort, but then you would see in the cohorts, they kind of bottom out after a couple of years, then come back again because the episodic users were gone. And then there’s founders who gave it to their sales team afterward, and then their sales team kept growing or they found some other use for the thing. And so the cohorts are actually like an enterprise you want to see it be like this huge expansion over the years.

So you can buy the stacked layer cake that the whole playbook and ours didn’t look like that. But what I always tell investors and companies is that, hey, our cohorts are free and this is amazing. So, as we got retention up and we got people to use DocSend in other use cases, then there was more of a stacking effect to the product.

But the episodic use case wasn’t a kiss of death I think is often believed. It’s certainly not ideal, but it was great that people got the value prop and then they recommended it to other people. It like solved a specific need very well and then gave us the opportunity to broaden out from there.

Mark MacLeod:
When I look at SaaS, I see sort of two broad value propositions. I see products that help me save time and products that help me make money. And I would put DocSend very firmly in the latter category. And I think that’s super helpful in terms of conversion and retention. If something’s the number one competitor for the apps that just save me time is status quo or like Google Sheets or Excel. And so those are very hard to retain, especially when times are tough. So I think it helped a lot that you were in the critical path of raising the money that would pay for everything. So very high-value use case.

Russ Heddleston:
Yeah, same with sales. You gotta keep selling products. If it’s critical of sales, great. But if it’s not, then you’re on the chopping block and that’s problematic. But yeah, it was definitely proven post-acquisition that even when the SaaS market declined, evaluations came down. And a lot of other companies that were selling to other SaaS companies had their revenue collapse. Meanwhile, DocSend grew right through it, which was pretty cool to see.

Mark MacLeod:
So tell us about the Dropbox acquisition. How did that come about? Dropbox is a tier-one company, and everybody uses it, so it’s kind of fascinating to learn more about it. I know you interned there back in the day, so walk us through that whole thing.

Russ Heddleston:
These stories are all so different. It was fun to go run around and ask other founders who have been through something similar for advice and to hear the other stories. And every startup is a little bit of its own snowflake, especially if it’s successful and acquisitions vary a lot.

But the backstory to selling Dropbox was that in 2018 when selling to sales wasn’t working as well as we were hoping. It was too expensive, it was too slow. That was not a great year for us because we needed to figure out something that was working a lot, and it was hard to raise money. I went around and wanted to see if anyone would buy the company and no one was really that interested. If you’re $4 million in ARR, that’s not enough to be that interesting.

But that lit a fire under me to make a great business out of this thing. And so then when we double down on self-serve, our investors were like, it’s just not going to work out for you, because it usually doesn’t. But our credit stuck through it and figured it out and just started to grow. And our investors a year later were like, wow, this is like working.

And so I hired a banker more as a coach, not because I was going to run a process to sell the company, but just to get some advice from when we passed $10 million in ARR, and then we had not that long after, at the end of 2020, we had one of the people I asked a couple of years before that if they would buy the company and they said, “Nah”, they came back and were interested because my board wants me to do something different and that they’d like to buy it now.

And I said, well, we will not be as cheap because we have figured out some stuff here, shared the numbers and he replied, yeah, you guys are doing pretty well.

Because I had a relationship with Dropbox from interning there way back in business school in 2010 when there were around 20 people. So I tracked down Drew and convinced him I wouldn’t be a burden for the summer. So the PM intern, which is a lot of fun, but I went back, and there’s an exec there at the time who I asked him, hey, very close with this other offer wasn’t quite enough, but are you guys interested? I looked internally and they’re like, yeah.

And they got a little bit higher and I asked our banker and investors, hey, what do I do? I wasn’t really running a process, but responding to these things.

And I always think it’s a wise thing to know the other players in your space and kind of be on good terms with them, just in case, plus it’s also just more fun that way. But for both of these companies that made offers, I’ve known them for a while and the investors’ view was they thought we weren’t doing well. So this is pretty good. You know, we’d like to take it. The banker’s view was, well, if you have like two offers here, and if we try to run a process, one of those might not convert.

And if we get a rushed yes from someone else, we might not be able to trust it. And that’s fair. I think in retrospect I probably would have run a process, but the other things that we were considering were that we’d been at it for eight years and it is hard to know how fast something will grow with product-led growth because you can’t dump money in and get more money out.

One of the fears we had was maybe Dropox would compete with us and maybe that’s the thing we should be worried about. In retrospect, I don’t really think that was a realistic concern. Another concern was like, oh, maybe it’ll kind of top out and we’re only $15 million in ARR, so getting to $100 million in ARR, that’s a long time in the future. If we’re going to IPO, then we have to have a couple of other things go really well for us.

And then it is true that as you are more successful as a business, there are fewer companies that are potential buyers for it. And what do you do with that thing? I have more nuanced use on this now, again, having learned from the experience, but this is what was going through our heads at the time.

So Dropbox got the minimum amount that we thought we would take. I had offers to raise money at 2x at valuation without really shopping around much because it was kind of like, obviously hockey sticking. This is working and, wow, this is pretty cool. It was one of those things where it’s a personal decision was something I heard a lot and I think it was a reasonable decision for us to say, like, sure, we only raised $15 million.

Our last post-money valuation was $50 million, raising $5 million, basically 10x ARR at the time in 2018.

And so this was 11x ARR, and so we said, sure, but I do feel good that we didn’t have to say yes to this offer. And it was right on the border for what we would have considered. I think knowing what I do now, I probably would have been more patient. But these things were so hard to know at the time.

And then there are also other constituents for me to keep in mind just with my fiduciary obligations, like, what do my investors want? What do my co-founders want? What’s good for our employees, etc. So it was a reasonable decision.

For Dropbox, the go-to-market motion made sense to Drew because Dropbox expanded organically in its hyper-growth phase. And so for him, this thing is just a good buy and a no-brainer. So we knew that we were selling it for cheap at the time, especially relative to what we could raise. And then, as during the rest of 2021, like, valuations are way up. And we basically sold it to the public SaaS multiple at the time.

The flip side of that, though, is we grew way faster than we thought we would have. We just kept growing in profitability, so we definitely left money on the table by selling it when we did. Even if we had just sold it to a private equity company later, that would have been a bigger outcome for us.

But, I mean, to your point about it being a blue-chip company, it looks really good and it’s a nice story. We all made money on it, and I think these were all great aspects of it.

But it is funny that some people have assumed that, like, oh, my God, you were so lucky to sell your business. And it’s like, it was just a really good business and we sold it for half off.

Sometimes people are a little confused by that. Like, why would you sell it for half off? And it’s like, I wouldn’t recommend that because as a private company, it’s really hard to sell your business. Do you know anyone who has $165 million in cash type of thing?

So it’s interesting to see the different angles that you can look at this through. But, yeah, I’m really proud of what we built with DocSend, and it was a great business. So if we had not sold Dropbox, we would have been fine. But it was a great purchase on Dropbox’s part, so credit to Drew and the team for being like, yeah, this is going to do great, we should definitely buy this. So it was a great purchase for them.

And they like, I don’t know if they still talk about it in their earnings, but for the first two years, it’s still performing very well. And they always brag about how well it’s doing. Although they haven’t announced or released the kind of ARR numbers post-acquisition.

Mark MacLeod:
Got it. Fascinating. Well, first of all, congrats. Honestly, that’s an amazingly great outcome. Whether you left money on the table or not, it’s tough to say. You probably did, but…

Russ Heddleston:
You never know with these things. I think it’s very hard to say.

Mark MacLeod:
Yeah, I’m curious, back when you were doing the sales move-up, the market was not going well, did you approach corporate development? Did you just go to product leaders? Like who did you go to? Because many people listening to this face that issue. They’ve got companies that are underperforming, they’re too small to be banked, they can’t run a process. So they’ve got to figure out how to land this thing themselves.

Russ Heddleston:
I mean, the thing that worked for me was talking to the CEOs of the companies that were of interest because typically you need an executive sponsor if you’re selling to some company.

Mark MacLeod:
So you went directly to the CEO.

Russ Heddleston:
Yeah. Or in some cases, an executive at the company. And it was great for me because I would just be able to trade notes with them. While I worked at Meta before DocSend I would have founders coming to me, asking me for advice and they were often cagey about what they were working on.

And my view is always I would be so bad at my job if your idea sparked me to drop everything, everyone, we gotta go do this thing. The founder has way more to gain by sharing information to understand what is on the big company’s roadmap and how the big company thinks about that value proposition because there really aren’t new ideas.

It’s more about execution, timing, details, that sort of thing. So I was always very open with people I caught up with at these companies that could be either competitors or acquirers of the business. And that was nice. I learned a lot from it.

And then those relationships, even in 2018 allowed me to go get a real and fast “no” from the people who mattered. So I didn’t have to get all excited about, oh, I got a meeting with Corp Dev, I could go have a conversation, I don’t know, it’s still kind of small. I don’t really know, it’s a feature. I did inspire some other companies to try to clone DocSend, and then I, a couple of companies found out that it is harder to clone than you might think, and it’s also hard to compete with simplicity.

So none of those other competitive products ever really mattered or took a dent in DocSend’s growth. But it is worth noting that if you are open like I was, you might inspire someone else to just try to clone you. So to the extent that funding matters, that’s good to be aware of.

I just never had luck with Corp Dev, although I did learn from Corp Dev people, a couple had just great conversations and I thought they were great just to educate me. I wasn’t trying to get a real answer if they’d buy, but I was talking to a Corp Dev person who was very kind to spend time with me.

And that business was more of a sales-driven business. And he was very kind to explain to me that they only like to buy things they can have a business case for, such as selling it through their channel.

And with your product, you can’t even sell it. You tried for a while, but you just told me that it was hard to sell. So why would I try to go sell that? And then all the evidence of what you have is working is this thing that doesn’t require salespeople, which is cool for you, but I don’t really know how I would buy your company, plug it into our company, and then accelerate the revenue.

And I was fascinated. So there’s not a great go-to-market fit there. So that informed me as well where I was, yeah, maybe it’s not worth it to try to go talk to companies that have a different go-to-market fit from what’s working for us because it’s going to be hard to make a business case for talks at that company.

I think it’s worth talking to whoever will talk to you, but I do think it’s much more effective to either talk to an executive who can sponsor an acquisition or just the CEO of the company if you can do that.

Mark MacLeod:
Now, you knew Drew from before, but were you literally just cold contacting other people and trying to figure out their email and just emailing them, or were you getting referrals?

Russ Heddleston:
Generally not, although it has happened for me, like cold emailing a Corp Dev person or adding them on LinkedIn, they’ll respond because their job is to kind of know what’s going on in the market. So it’s often not terribly hard to get on the Corp Dev person’s radar if what you’re doing seems relevant if you seem credible as a team type of thing.

But, generally, asking for introductions is the best way. For me, I’d already have a pretty good background, Stanford for undergrad and grading computer science as a business at Harvard, and so I was able to get some connection to the person.

Mark MacLeod:
I was going to ask you about that. In hindsight, obviously, I’m sure it was a good education and you learned a lot but a big value proposition of Ivy League is the network. For folks who are maybe earlier in their career thinking of doing a master’s somewhere when you look back, like having that access, was that kind of really important to you?

Russ Heddleston:
It’s so hard to say because when people ask me whether it’s worth going to business school, in the short term, no but in the long term, maybe. You’re taking two years out and it’s a big opportunity cost, and it depends because the network is great. I’ve made so many good friends, there’s all these intangible things.

So there definitely was a benefit to me for sure, because those Stanford and Harvard people would go off and do interesting things. There’s definitely some unfair advantage there. Stanford is so embedded in tech, though I feel that’s unique. And then Harvard Business School also has a lot of people now that go into tech, especially venture capital, so they’re pretty well connected. I don’t think you need it, though.

The reason that people would spend time with me or respond is generally just based on the credentials I had the product we’re building, the company we’re building, and the way we are thinking about something. And so it’s interesting to share notes with a founder who is thoughtful about something and building an interesting product. So those credentials definitely were what mattered.

And a name brand helps to get in there. But if I didn’t know what I was talking about, if our product wasn’t that interesting, having the background that I have wouldn’t have gotten me that far. Frankly, it’s not going to compensate for real value. And it’s the same with the relationship with Drew, having him look at DocSend even if DocSend wasn’t doing very well, sure he would have taken a look.

But to spend that much money requires that the company is just a really great company. So our financial statements just stood for themselves. It’s also worth noting that as a startup, it’s useful to be well-run. It’s useful to have your finances in order to have an accounting firm and some business intelligence systems in place. One, so you can observe your own company, but then two, it’s so much easier to either raise money or sell the business.

So at one point in Dropbox’s diligence, they were asking me for what I considered to be too much. So I just said, it’s take it or leave it, we’d be happy to not have you buy the company. If you need any more information at all, that’s fine. We’re not going to give it to you. Then they said, great, we’ll buy the company. We’re done.

They had everything they needed. It was pretty clear everything was going through Stripe. You could double-check our retention numbers, they had all the data so everything matched up. There weren’t any skeletons in the closet.

As a company, that’s always a concern on the buyer’s side. So, having the content of a well-run business can’t be kind of really covered up if you’re selling the business. And I also think that getting intros and talking to people, if you’re a founder, just being smart about what you’re working on and thoughtful, that is also what counts for the most.

Mark MacLeod:
Yeah, I really love that you brought that up. Music to my years. Obviously, as a former banker, I was preaching that to my clients all the time. And I coach CEOs through deals now and I tell them all the time that if I buy shares in Alphabet today, I can change my mind tomorrow and sell them. If I buy DocSend, I’m stuck with it. So you’re selling trust every step of the way. And so being well run, being able to respond to diligence requests in a timely manner and have it be accurate. All of these things just add layers of trust. So such an important point that you brought up.

I don’t want to end without talking about your new thing. So, tell us about your new company and also tell us about the motivation to get back in the ring and go back to the beginning again when you could just decide to stop working.

Russ Heddleston:
Yeah, great question. Happy to chat about that. Yeah, it is nice to have freedom. The first company I had, we sold to Meta. It was a talent acquisition, but we had good timing getting there before it was public.

So, yeah, to your point, I could retire, I could go get a PhD in something, or pursue some other passion. I feel fortunate that I like software. It’s fun. I was never in software because I just wanted to make money at it. It’s always been something that’s interesting to me. Software is very scalable. I enjoy building well-designed products. It feels a little like arts and crafts in a way.

So as I did some soul-searching after leaving Dropbox, I thought “Do I want to be an investor? Do I want to go be CEO at a company? Do I want to go be an exec somewhere?” And kind of came back to being proud of building a product that people liked and that made a difference and it felt really good. And so I was, let’s just do that again. Especially now with LMS on the scene.

So I’m still on great terms with my co-founders from docs, but they’re both still taking some time off. So last year I found a new co-founder, Tim Su, who also studied at Stanford, also about the same age, it’s also his third company, so that makes us a good fit with each other.

We spent all last year playing around with LLMs. We built four different prototypes of things. We still want to build for the end user, not the economic buyer. We want to do something B2B-oriented. We want it to be something that wasn’t possible before LLMs.

And then the company I’m working on now, we got to it at the beginning of this year and couldn’t prove it was a bad idea. So we’re building it out and ticking all these boxes, I think it’ll do well. I’m excited about it, but yeah, I do describe it as failing to prove it’s a bad idea. Because the only way to prove it’s a great idea is to build it.

So, I try to poke around it to find all the reasons why it might be a bad idea first. The idea in this case is to use LLMs to gather all the information on a person or company. All the unstructured data that’s in articles, and interviews, go find it all and put it in one spot, and then make a profile out of it, which sounds easy, but how many Mark MacLeods are there? Probably more than one. Before LLMs, it was very hard to reliably figure out, whether is this the right Mark or not.

So the entity disambiguation problem is something we can use LLMs to solve. And using that property and a backend system, we can actually create interesting, unique profiles. It’s kind of a Wikipedia page for everyone else. Or this is a kind of new thing and it’s fun. It’s interesting.

If DocSend was solving the kind of boring problem of getting rid of attachments, I would say that Distill is solving the problem of no longer needing to Google for the person to learn something else about them.

Mark MacLeod:
Sounds like I could use it to learn about podcast guests.

Russ Heddleston:
Yeah, that’s certainly a great use case. It’s so cool to see what it turns up. Sure, LinkedIn obviously has a lot of information, but people don’t update it and it doesn’t have everything. And so you end up finding all this cool stuff that is not there. And so it is a professional identity tool. We are catering more to the person doing the lookups than we are to the person who has the profile. It’s still a neutral, positive profile. We don’t want to be in the business of saying bad things about people.

And as the person who the profile is about, you have the agency to influence it to make it look better. We want people to be proud of them and they generally are. They look really good. It’s this auto-updating thing that makes you look great, generally speaking. So yeah, it’s been a really fun problem to dig into and build another product around it. It’s a totally different value proposition than DocSend but go-to-market and some of the other properties are similar.

Mark MacLeod:
Fascinating. Super early and probably maybe too early to say, but do you think it could disrupt LinkedIn?

Russ Heddleston:
Well, that’s certainly not our goal. I do think in the same way that TikTok hasn’t destroyed Instagram they’re both out there alive. Instagram is trying to catch up. I think having worked at Meta for a while as well, I have a view on this, but the consumer is something that each generation will pick their own and there is more disruption there.

And then people do try to copy each other and there are multiple consumer social networks while for professional networks, there’s really just LinkedIn. But I think a lot of that has to do with you being unable to use a different network than your parents’ generation because those are the people you’re working for, so those are the people you need to network with.

So, LinkedIn will always be there and always do great. The difference with Distill is this kind of a different model. It’s not the person telling you what they want to about themselves. It’s this third-party system that’s giving you more of a consistent view of a person.

It’s an auto-updating profile on them where if they make an outrageous claim such as being the world’s smartest human, we might say they are quite self-confident, and play things down that are aggrandized. A lot of famous people don’t put anything on LinkedIn, so we’ll go find information and fill it in. So it’s more complete than you might otherwise find.

So I think in that regard, it won’t dethrone LinkedIn but I do think there’s a lot of room in the market for another professional identity product, certainly one with these characteristics.

Mark MacLeod:
Amazing. Well, listen, Russ, first of all, it’s been great to catch up, and congrats again on the outcome of DocSend. Super happy for you and really excited to see where you take Distill. It sounds really promising. Thanks so much for making the time today.

Russ Heddleston:
Yeah, it’s great to be here. Thanks again.

Hey, thanks for listening to the Startup CEO Show. If you’d like to connect with me, be sure to visit my website at markmacLeod.me, or follow me on LinkedIn at The Mark MacLeod, or X account @markmacleod_, and if you want to tune in again next week, be sure to subscribe on YouTube, Spotify, Apple, or wherever you get your podcasts. We’ll see you next time!