Y Combinator: The Ultimate Startup Launchpad with Michael Litt

Discover the secrets behind transforming startups into scale-ups, insights of being part of Y Combinator in Silicon Valley, and navigating the ever-evolving tech landscape.

Delve into the Transcripts for Essential Takeaways from this Episode

Mark MacLeod:
In this episode, I sit down with Michael Litt, co-founder and CEO of Vidyard. Vidyard helps B2B companies create engaging video content to grow their business.

In this episode, we talk about the magic of Y Combinator and why there’s no other accelerator like it, why he chose to build his company in the Kitchener Waterloo area, the difference between founder versus exec CEOs, and how he has scaled himself a CEO over time, how he’s driving innovation in his company through AI and other means, and how running a venture fund has made him a better CEO. I hope you enjoy the discussion and I hope you subscribe for future episodes.

Michael, welcome to the startup CEO show. How are you doing today?

Michael Litt:
I am very well, Mark. Thanks for having me. Big fan.

Mark MacLeod:
Yeah, thank you. Likewise, it’s a true pleasure. You and I first met, I want to say maybe it was like 2011, 2012, whenever you had just graduated from YC and you were raising your seed round, and I was at Real Ventures at the time and I couldn’t get over that pre-money that YC has. And anyway, now you’re very firmly in the anti-portfolio. So that’s a lesson learned on my end.

But it brings up maybe my first question, what are your thoughts on the program today? Do you think that founders should just by default try and get into it just because of the visibility and I guess the team osmosis, we all learn from each other and there’s just this fairy dust of people who graduate from the program. What are your thoughts?

Michael Litt:
Yeah, thank you. You know, it’s funny, that story of passing on valuation is still very much true for YC today and probably makes up some component of why I would highly recommend being a part of the program. You know, at the end of the day, when you start a company out of undergrad, you’re a byproduct of the ecosystem that you existed.

And I think the problem with a lot of tech ecosystems around the world is they’re trying to emulate components of Silicon Valley. The reality is Silicon Valley is un-emulatable because of its scale and the sheer volume of people who have built interesting companies that are floating around that ecosystem.

And Y Combinator is like a black hole for that ecosystem. It’s a center of gravity that attracts a lot of really amazing founders who have graduated from the program and founders who had nothing to do with it but are willing to go and speak to YC founders specifically for the benefit of being able to invest in them. And I have it on fairly good authority as a new LP of YCS’ latest funds that they are some of the highest performing venture funds by far and away in the world. And I mean like orders of magnitude in some capacity. It’s an incredible program.

What makes it incredible, while you think about an ecosystem like Waterloo or Toronto, it’s a good ecosystem. It’s gotten a lot better, and I’m sure we’re going to talk about that. But at the end of the day, it’s a relatively short ladder compared to what happens in Silicon Valley. And there are rungs at every single level of that ladder. When you go to Silicon Valley, there are a lot of people doing a lot of things. It’s an infinitely tall ladder and there are no rungs at the bottom, right? There’s a lot of grift, there’s a lot of noise.

And Y Combinator automatically puts you up to a place on that ladder that is far higher than you could get to in an ecosystem like Waterloo or Toronto. Or even if you just showed up to Silicon Valley on your own, because all of a sudden you are going to dinner and you’re hearing Mark Zuckerberg come and tell you about, you know, the founding stories of Facebook, Marc Benioff coming and talking about the founding stories of Salesforce and the things that because they have chatted host rules, you may never read in the books.

And so you get exposure to the inner workings of how these companies are made. And then of course you get exposure to some of the brightest minds in the world that want to go to YC. I mean, the acceptance rate is less than HBS. And so as a finishing school for like an engineering undergrad from the University of Waterloo, there’s absolutely nothing better.

And so when we went to YC, we had two paths in front of us. There was a stay in Waterloo, found the company raised some money from existing programs, known pricing, known valuation, very attractive terms, or YC, which at the time was a black box, and all we knew was we were giving up 7% of the company for $20,000.

Every YC founder I talked to said, it is going to be a life-changing experience and to this day, I highly recommend people go to it. And if you ever get a chance to talk to Mike McCauley, I highly recommend you interview him for the show. Founder of Bufferbox. My partner at Garage Capital will tell you that he and I almost got into a fistfight because I was so forceful about him applying to YC.

He went to the program and he was going to go to some lesser accelerator program in Canada that no longer exists. We’ll just call it that. Got to YC, had an amazing time, and six weeks later he was flying around with Mike Moritz, the founder of Sequoia Capital in his private jet, sold his company to Google and the rest is history. It’s an incredible program, and it gives you a big leg up.

The exposure you get to the network, the exposure you get to Silicon Valley is bar none. And once you have that network, once you have that exposure, you keep that for the rest of your career and that network remains for the rest of your career. And I think that’s just such a powerful entity.

Mark MacLeod:
Wow, that’s a huge endorsement. I completely agree with what you’re saying about the valley being un-emulatable, which brings up my next question. It would have been so obvious for you to graduate, raise capital, and just stay there and just be on that network 24/7 but you chose to come back to Kichler Waterloo, which is in its own special place, but I’m certain you gave up something. Maybe talk us through that decision to come back and build up in Canada.

Michael Litt:
Yeah, for sure. First of all, there were three co-founders of Edgar. One of them lived in the valley. And when we got to the end of the program and we started raising money, we started talking about where we were going to start to build and hire engineers. That’s what we needed to do. That’s what we were raising the money for. We set out to raise $850,000. We oversubscribed. We ended up raising $1.65 million in a seed round through YC and you were a part of that process.

Mark MacLeod:
Made the wrong decision.

Michael Litt:
You know what? Startup investing is akin to gambling, I think, in a lot of ways. And anyway, we’ll get into that. But we started to analyze every single ecosystem that we could build and the higher end. And we talked about Boston, we talked about Austin, we talked about boulders, we talked about the valley, which was becoming a very competitive talent marketplace. The costs were pretty high. San Francisco had yet to truly become the place. The Bay Area was still where most organizations were building.

And we came to the fundamental realization that the money we raised would go a lot farther if we spent it in Canada. And we took advantage of a lot of the programs that existed to help fund R&D. Add to that, my dad was terminally ill, I just found out. A lot of people don’t know this story, but I’m from Kitchener Waterloo. I was born at St. Marys Hospital. Lived there my entire life. Was fortunate to do an undergrad at the University of Waterloo. Systems design engineering.

So we knew the ecosystem, we knew how to hire in the ecosystem. We needed some strong video delivery developers, and Google had a small YouTube office there that we knew we could probably at least get one or two engineers from to get us started. And so it started to look pretty attractive. Now when I told Paul Graham that we were going to do this, he told me that going back to Waterloo would be like climbing Mount Everest with a ten-pound weight on my back. And this is PG-ism like PG has a way of saying things that are metaphorical.

And you kind of walk away from that conversation and think like, what did he truly mean there? And, of course, when you climb Everest, it gets harder with altitude. And his positioning was the bigger the organization gets, the harder it’s going to be for you. With this ten-pound weight and no oxygen, you might die.

What I decided to do was not tell any of our investors we were going back to Waterloo and spending a week or two every single month for the first many years couchsurfing with other YC founders in Silicon Valley. And I was at every single event, I was basically in the valley. That was just the way we built the business, acquiring customers, talking to users, and talking to investors. Everybody kind of assumed we were. Meanwhile, we were building the business back in Waterloo.

And I felt like I could go to the valley and take in a lot of those inputs and then come back and go heads down and build and innovate, and then go back to the valley and do that in a cycle. And that was very, very productive. When we ended up raising series A with a Canadian lead, OMERS Ventures stepped in and kind of knew who we were and missed the YC round or our seed round and decided to invest.

I talked to Paul Graham and told him the story about my dad and what we were doing and how I was able to be close to my mom and support her, but also spend time in the valley and he said moving back to Waterloo might have been one of the best possible things you could have done. And we proved that it could be done. And so that meant that a lot of other YC businesses then went to Y Combinator and came back to Waterloo to build their companies. And I think since then there’s been about 60 to 70 YC founders that have come back to the Waterloo region to go and build their businesses and we were the first that broke the seal, so to speak.

And that’s an incredibly important part of building an ecosystem that ultimately led to the Garage story. So, yeah, we did feel like we could capture the best of both worlds. Still spend a lot of time in the valley, still have a strong network there. I think Y Combinator again is just a great starting point. And, you know, to the comment you made at the beginning of this on exit valuations for organizations just to close that loop, we still see companies coming out of YC raising at 1.5x to 2x the post-money caps of businesses and founders in any other ecosystem.

The dilution you give on the front end you get later on in the raise if you do it successfully. Then of course, now that you’re a wise founder, you have pixie dust. The more successful you are, the more people are willing to pay for your business because you have those really strong foundations.

Mark MacLeod:
Yeah, I love it. There was something special about the valley when I was at Real Ventures. Geography mattered a lot more then than it does now. I would encourage my founders to go down at least quarterly, if not monthly, just plug in. Every time I went down there, I came back and I was like, I’m not moving fast enough, I just need to go. It just lit a fire under me. And when I was running the investment bank, we had an office there. I was there every month. And it’s just a special place, that’s for sure.

Michael Litt:
You know, that’s one of the raw ingredients of YC, is every week you sit down, you have dinner with all of your fellow YC-ers that eventually become alumni, and everybody seems like they’re way farther ahead than you are. And there’s this, like, if you’re a competitive person, and I think most founders are, there’s this disassociation which occurs where, like, you want to go home, work hard so that the next week you have a really good story to tell about a new customer or a new feature that you shipped to make them all feel like shit.

Mark MacLeod:
Nice. There’s the spirit.

Michael Litt:
It’s this vicious cycle. And you know, the other thing is like, Silicon Valley is very much for profit. And a lot of the versions of YC that tried to exist elsewhere in North America were part of not-for-profit programming where there was no vested interest from the partners or people operating that business for you to be successful.

And I heard, you know, PG told a company in her batch that she was working on a music startup. In our era, there were a ton of music startups that would be turntables. And PG was like an anti-music because everybody was doing it. And I heard him tell a group of founders if you want to drive your company off a cliff, go ahead and be my guest. This is why I funded 50 other businesses and got up and walked away.

And you just don’t see that behavior in a lot of other ecosystems. There isn’t that level of confidence in the feedback that people are getting in that tight ecosystem. Everybody’s competitive. So yes, you’ve captured it very well. It seems like Silicon Valley is alive and well, especially in this AI movement. It’s come back post-pandemic, but I think that’s also true for the Canadian ecosystem, thanks to all this capital gains inclusionary nonsense. That’s the silver lining in this whole thing. But yeah, we have a long way to go.

Mark MacLeod:
So, you mentioned Kitchener Waterloo is a pretty small area geographically, and yet it’s had a huge impact on the startup ecosystem at large. I know there are 400,000 Canadians in Silicon Valley and I know that most of the public companies have a Canadian and a leadership team, but I’m certain that there are University of Waterloo engineering grads all over Silicon Valley. And so what is it about Kitchener Waterloo that makes it this spawning ground for startups? Is it just because BlackBerry got started there, or is it because the University of Waterloo has the most relevant curriculum—What’s going on there?

Michael Litt:
I’m really good friends with a professor from the University of Waterloo named Larry Smith and I think he taught hundreds of thousands of students during his tenure. So a lot of people know who he is. We recently had an event, there’s a U-Waterloo Mafia WhatsApp group and a lot of them were talking about Larry. So we ended up having a salon seminar at our office where Larry came in and did a lecture. And I’ve had Larry come and talk to LPs before about what’s in the Water in Waterloo. And he takes it back to before the university existed, to the origins of the settlement and the Mennonite community that came to Waterloo essentially to farm and start their lives.

There was an independent grocery store in Waterloo that nobody could buy called Zeres for the longest time that got to a very significant scale. There have been incredible innovations that have ultimately come out of the region in military technologies from Blue Bin Recycling. And a lot of this stuff predates the University of Waterloo. And in fact, the founding of the University of Waterloo is almost a byproduct of that region’s bar-raising, independent mentality.

I think the reality is Waterloo was far enough away from Toronto to be its own economy. And because of that, these trade systems got developed and it was relatively close to the borders, and so there were all sorts of interesting things that happened there during the prohibition era, etc, that didn’t help happen elsewhere.

It’s also smack dab in the center of the Great Lakes and is accessible via the busiest highway in North America. So these ingredients, I think, are a core component of what started at the University of Waterloo, which was like when it started, considered a trade school, right? The idea of bringing work ethic and professional work experience to a professional degree program like engineering was scoffed by so many.

But what it’s created is grads that have work experience which is highly applicable and therefore very sought after. It also creates grads that see from that work experience how inefficient businesses are run. And they’ve got the skills to solve problems and build companies. And that’s exactly what happened to my co-founder, Devin, and I — We were working at BlackBerry, he was working at CGI, and I worked at cyber semiconductor. And we consistently saw that video was a very difficult medium to produce and use in the professional context.

And so we saw an opportunity to start the business. We had the skills to do so. We didn’t have a ton of student debt, because when you work every four months and go to school every four months, your costs of tuition are offset. Most people graduate from co-op programs with money in the bank versus heaps of student debt. There are so many contributing factors here that make it a critical component of the ecosystem, and that has just kind of accelerated its trajectory.

Is Canada the best place to start a company? Well, that is the big debate, right? I fundamentally don’t believe that any founder thinks about capital gains when they start a business. But does it limit the ecosystem long term? Probably. And, we need to not limit the ecosystem long term to encourage innovation, to encourage individuals like yourself to reinvest into the ecosystem, to stay in the ecosystem, to help uplevel the ecosystem with your experience and knowledge.

That’s why I’m a huge fan of this podcast because it’s one of the key ingredients to people who have been there and done that giving back, which is what makes Silicon Valley so special.

So yeah, Waterloo is a great place. There’s a lot of that going on, there’s a lot of interesting people there. All the BlackBerry executives, obviously a lot of them are still there. Mike and Jim have put so much money into that ecosystem and surrounding area. They love to give back to profs like Larry Smith. There are some amazingly powerful ingredients there, but I think it could be a lot better. And that’s kind of what I’m on a mission to help deliver over time.

Mark MacLeod:
I love it. Yeah, I mean, it’s hard to think of KW without you. It feels like you’re an integral part of that, especially with Garage, which we will talk about. But no, I love that.

I have to say the co-op program, I did that for my undergrad and I came from a poor family, I was the first to go to university and I couldn’t afford it and I wouldn’t have been able to do it without co-op. I will say, sadly, it was between Waterloo and Brock University, and I decided to go to Brock because the University of Waterloo was very male and I didn’t date one woman in the undergrad at Brock. So whatever, my rationale turned out to be redundant.

Michael Litt:
Yeah, Waterloo was not a party school by any stretch of the imagination. The undergrad is unbelievably difficult, the failure rate is very high in a graduating class. I think only about a third finished from the starting point, myself included. So like they kind of say, when you start systems engineering, look to your left, look to your right, and like it’s likely neither of those people are going to be here when you finish and that’s the reality of the grit determination.

But I had a similar story to you. My parents, you know, we did not have see-through on our tuition. Fortunately, my brother and I both applied to every scholarship under the sun, and turns out not that many kids apply for scholarships, so we were able to get a few scholarships to kick us off, and then the co-op program carried us through, and that made university possible for us. Otherwise, it wouldn’t have been an option.

And that’s a powerful thing, too, right? Especially, you know, as Canada looks to bring new immigrants into the country that are starting from scratch. Like, I think these institutions have a very powerful role to play in the future of innovation and the future of how companies and families get brought up in Canada.

Mark MacLeod:
Yep. I have to say that I didn’t know until this podcast that you had an engineering background because I always found you to be so good. I’d go to the market from the outside in. And so I’m just curious—How did you, other than just putting the reps in and making mistakes, turn yourself into this full CEO who can do all the things? What was your journey like?

Michael Litt:
Yeah, I’m glad it looks like I can do all the things from the outside. It certainly doesn’t feel like that from the inside. I mean, the story of founding Vidyard is, I think, maybe important here. I drove the idea of starting a business with my co-founder, Devin. And Devin is one of the smartest people I’ve ever met, academically, financially. He was an engineer in my class, systems engineering, raised by accountants, and so he had kind of a broader understanding of the world than I did.

But I grew up with an older brother, we both did the same undergrad program. We were highly competitive, and I wanted to see if I could punch above my weight and do something interesting. And so I took my last co-op term off to start a company called Redwoods Media, which is a video production business that eventually became Vidyard. And I applied to a program called Summer Company with the city of Kitchener.

They paid me, like, $3,500 through a grant program to go and build this thing, and that was my salary. And so there’s a bit of a do or die element to it, and we were selling video production services so I had to, like, put myself out there and, like, I was talking to local real estate agents, car dealerships, and anybody that would let me make a video for them about some part of their product lineup to fund this thing.

Because we fundamentally believed if we could fund the development of the software with the production services for Redwoods Media, we were a solution to a problem. We weren’t a solution in search of a problem in that way. And so, go-to-market was kind of embedded in who we were, because I had to put myself out there so much, so frequently. And we had a goal, which was to sell $50,000 worth of video production by Christmas of 2010, which we called Project Christmas.

We gave ourselves six months to do that, and we didn’t get there but we were close enough to say, like, you know what? We don’t need to go looking for jobs right now. We are in our fourth year, we should pursue this full-time and see how far we can take it. When we got to Y Combinator, Paul Graham took us on a walk around Pioneer Way, where the old YC office used to be, and kind of just said, hey, Mike, you’re going to be the CEO, because you’re the one that’s answering all my questions. Like, you’re the talkative one, and you’re the one that’s going to drive go-to-market, Devin and the team need to go and build the product.

And because you’ve got a product to market, I want to see you grow your MRR by 10% per week. So that just became my job, and it was pure survival. And, you know, I think the role of CEO when you start a company, the role of CEO is you’re not a CEO. You know this…

Mark MacLeod:
You’re a product manager until your product market fits. Anything else is a complete distraction.

Michael Litt:
Yeah. Yes. You’re the first sales rep. You’re running HR like you’re doing everything. And that’s the big difference between a founder CEO and a professional CEO. A professional CEO may have come into an organization largely through go-to-market leadership, which I think is the most standard path and I’m preaching to the choir here.

A founder CEO does everything in a business. They’ve written code, they’ve run HR, they’ve been a BDR, they’ve been an SDR, they’ve been a customer success manager, they’ve been a product manager, they’ve been a product marketing manager, they’ve been a demand gen leader, they’ve done everything. And so you end up having empathy and compassion for every single role. And then you generally hire the people under you to do the stuff that you figured out how to do, you scale and eventually you hire leaders to manage those people, and then at some point you realize, holy shit, now I’m actually a CEO.

So, to answer your question, I think succinctly coming from an engineering background, especially systems engineering, is all about pulling systems together to get to a result. Software, you have an input, it goes into the software and creates an output. A business is the same thing, right? You have an input, you get an output. The input is money and people, and then the output is products and customers.

Having a systems way of thinking about building a business is, I think, how I’ve applied my learning, my undergraduate, and my ability to learn quickly in a high-pressure environment like systems engineering, to becoming a CEO. I think the other part of it, though, is the constant learning of knowing what I don’t know and for lack of a better term, having my ass handed to me and experiencing ego deaths time and time again over being proven wrong, which has driven me to seek help and to seek coaching and seek support from higher experienced individuals. And that’s why I love what you’re doing, again, because, you know, you are providing the skill set and the thought process and the hard questions that a lot of these founders need to ask themselves in their process of becoming CEOs.

Mark MacLeod:
Yeah, I appreciate that. Yeah, the right question can change your life, to be honest. Just opening up a whole new perspective can be really powerful.

Let’s switch gears — you know, I had Chris Savage, founder, and CEO of Wistia on here and he was like, 17 years in—I think you’re almost 14 years in. What drew you to video? Because you were doing video production before Vidyard. Did you just know that this was going to become the dominant medium? Did you think, hey, attention spans are going to go away, and so we need something more visual? What brought you to this space?

Michael Litt:
It’s a great question. Um, I like Chris. I mean, we’ve been like competitors for a long period of time, less so now but he’s an incredible entrepreneur. I grew up with a video camera in my hand, so every family event I was the kid with a VHS camcorder on my shoulder. And through high school, I got into freestyle skiing, and I wasn’t the most talented. And so I loved being behind the camera and filming and editing my friends and then sending those videos to sponsors. Each sponsor got an individual link, and when the view counter went from zero to one, we knew they’d watched it, and so we’d follow up.

And then when I got into undergraduate, often in systems, you have kind of like a capstone design project every single year and I would always produce a video to describe what we were doing and that would be a little bit extra for our profs to understand what we were doing outside of just the core presentation, little razzle-dazzle. And so video was like always a part of the way I communicated. I felt like you could communicate things more emotionally and powerfully with video than you could with other forms of media. And I just fundamentally wanted to help businesses understand how to do that better.

And so when I got into the co-op program and I went and worked at BlackBerry and Cypress Semiconductor and Roadtrek, I found that they were using video, or tried to use video to do things like report, and reduce customer service costs, so send someone to a video to show them how to do the thing versus telling them how to do it from a marketing perspective, and get customers to tell the story of how the product innovated and changed their lives versus the company doing that.

And something that I saw was that companies weren’t great storytellers and a lot of people didn’t have the technical knowledge of these products to produce high-quality converting videos. And businesses didn’t know how to put those videos online. And the best example I used early on was, you probably remember, the BlackBerry Playbook was an ill-fitting competitor to the iPad.

Even blackberry.com early on was using YouTube and when you clicked that video on the Playbook website, it took you to YouTube, where the first recommended video was an iPad versus playbook comparison video, right? And so, like, that was just, they were just bleeding their funnel to the competition. And so we saw, like, I could take this passion and transform it into a for-profit entity in the B2B space and video was still relatively early.

Like, up until that point, Flash was the dominant method of streaming content online. And of course, Flash, and I believe it was ActiveX from Microsoft or the competing Adobe versus Microsoft protocols that you had to pay for if you wanted to stream media on the web. And then HTML5 created this new open standard and when we emerged as a video hosting provider, a premium video hosting provider, even YouTube hadn’t moved on to the HTML5 streaming standard. In fact, the only organizations that had, I believe, at the time, were porn streaming services, which I’ll tell you, that’s the industry that leads innovation.

So there was a ton of green space and we built the business on that green space, helping businesses tell stories of video and then focusing on the technology to help them do that better and then focusing on who was watching and for how long, and helping marketers use that data to more successfully communicate with their customers, so on and so forth.

That eventually became, how do we help sellers do this? And then we saw the video boom in our consumer lives. The way we communicate, the way the next generation communicates with asynchronous video consumerization of the enterprise, how we bring that to the enterprise, etc.

So it’s been a very interesting journey and I think it’s well capsulated in something Byron Dieter said when he invested in our series B. Byron’s an incredible investor, one of the tier one B2B SaaS, probably most prolific in terms of go-publics. And he said to my wife Donna one time over dinner, he said, I don’t know about this video space, but I do believe that Mike and crew are going to be the ones that figure it out. I will tell you this, and I’m sure a lot of CEOs do, I don’t think we’ve cracked the code yet.

I think there is a massive opportunity, but we’re innovating inside of it consistently to find the true billion-dollar ARR opportunity that we fundamentally haven’t found yet. And that’s a big part of my job and that’s what’s so exciting about running Vidyard at this moment because we’ve got thousands of customers across millions of users that we get to iterate with and develop new technologies for, especially now with the emergence of AI, to reduce the friction of creating videos and telling stories of videos and putting those things online to improve the experience that their buyers have with their brands.

And our vision is the power of the future of relationships between buyers and sellers. B2B commerce is this massive category and video is this really powerful medium that I think is still underutilized. And it’s only underutilized because it’s still a very high friction asset. And this AI moment is potentially the moment where video truly becomes the powerful asset we all know and want it to be.

So, yeah, in 14 years I learned a lot about building a business, operating, building in video, and building in technology. But I think there’s still so much to learn.

Mark MacLeod:
How do you maintain your passion for so long and your energy to keep driving, keep innovating, and keep putting one foot in front of the other?

Michael Litt:
Yeah, it’s a great question. And I will say, I ask myself that question as regularly as I can to just check in with myself to make sure that I’m not, you know, driven by insanity. You know, like trying to do this same thing over and over.

Mark MacLeod:
You have to have some level of insanity to start a company in the first place.

Michael Litt:
Yeah, and to stick with it through the highs and lows, right? And, you know, we are recording this in May of 2024, and at some point in the future people will wonder what life was like. We are stuck in a 24-plus month period of macroeconomic instability, where building video technologies for go-to-market teams has been tough and bumpy. And the reality is companies aren’t spending nearly as much and go-to-market as they were, especially during the pandemic or pre-pandemic.

And, you know, we sell a product to sales teams and one of our largest customers had 7,000 users then they laid off 5,000 of those users and that is churn that you experience as a business. So what I would say is right now is marked with a difficult moment in the context of go-to-market tech that is offset by this exciting moment, which feels like an industrial revolution is happening.

When we built Vidyard, the Internet was a highly anchored thing, and it was really about streaming video for the lowest possible cost to transfer value to our users in the context of who was watching it and for how long, powering their sales teams to use a different medium to get attention, their process, so on and so forth. Very straightforward. Now, there’s this, like, there’s this entirely changing landscape where software has always had the promise of doing the work, but it’s made people busier.

We’re at this inflection point where point-and-click interfaces are going away, where you can do huge amounts of work with artificial intelligence. The most basic level of what an LMS can provide today that you ultimately couldn’t do prior. So this is like an entirely invigorating moment to be building in tech because it’s difficult, but there’s also this massive change, and it’s like a reshuffling of the deck and when this deck gets reshuffled, small businesses can become very, very big, and big businesses can become very, very small. And I’m a risk taker so it feels like I’m needed more in this world with the context and experience I’ve had over the past ten years of building this business than I might have been even two or three years ago.

Adding to that, I’ve recently gone through the process of rebuilding my entire executive leadership team. So something I’m sure you talked to a lot of CEOs about is how you know when to build and hire around you. It started with finding a gentleman named Jonathan Lister, who was the general manager of the LinkedIn sales solutions business. I mean, he ran Google Canada, then he went to LinkedIn, he ran the marketing solutions business, then he went to sales solutions.

When the sales navigator was a zero-dollar ARR product, he left when it was a billion-dollar ARR product. Now I get to work with this guy who has way more experience than me, is brilliant, and is looking at the business with a fresh perspective. And that led me to bring in a new head of talent, a new CFO, Chris Wolf, who ran biz-ops for Jeff Weiner at LinkedIn. And, this crew has reinvigorated me and operationalized the business to let me focus on building with AI. So this is a moment where, because of a lot of things outside of my control, I feel way more energized than maybe I did in the past.

And so I wake up every day with, like, what’s happened in technology? What’s the latest with OpenAI? What’s changing from a regulatory perspective? How can we use these products to make it easier for our users to communicate with video? That’s my dream. We have distribution, we have these millions of users, we have these thousands of paying customers. Let’s go build stuff for them and blow their minds and be at the bleeding edge of this change and see where we are in five years.

The last thing I’ll say is, I don’t know what the world’s going to look like in five years. I don’t know what the world’s going to look like in a year and a half. Based on the pace of innovation in AI, I think we’re starting to see some asymptotic capabilities of LLMs, which is nice because it means we can start to make some more accurate predictions about where the world is going and where we should be innovating, but at the same time, that uncertainty is incredibly exciting.

Mark MacLeod:
So you’re driving the roadmap personally then?

Michael Litt:
Yeah. So I see my role in three buckets, right? One is the strategy and the vision, which is all about product. It’s all about what we’re building for users. And so we’ve got this vision right now for what we call the autonomous sales agent and I’m happy to speak about that in detail. We’ve been building and launching technologies that are core ingredients of this broader vision to try to get an understanding of how people are using AI. Are they comfortable giving it full control over, say, their calendar and their email? Do they want to be in the loop? Are they comfortable with videos being produced in their likeness when they didn’t even sit down and click record? That’s the AI avatar’s product.

Like, we’re experimenting with human psychology here in software, products with non-deterministic outputs. So, like, you tell your avatar to go say something and all of a sudden it shows up with a British accent and nobody can tell you why. Like, that’s like a different paradigm of working with software, which is cleverly exciting. So vision and strategy, I spent a lot of time on, and where’s the puck going? How can we create software that’s capable of doing all this amazing work? The second thing is, do we have the best talent possible to go and achieve that vision and execute the strategy.

I just talked about this awesome elt I’ve put together, and then finally, do we have enough money to go and do those things? And that means, you know, are we looking at profitability? Are we flowing cash? How much are we burning? Do we need to raise more money to do some stuff? Do we need to acquire a business to go after the vision? Do we have enough money to do that? And that’s kind of how I ultimately break down my role and so I spend as much time as possible with product and helping think through ultimately what we go build.

But of course, I have an awesome product team. Devin runs R&D, and he’s very close to it as well. And because I wear this dual hat as an investor and an operator builder, I get to see what startups are building at the various earliest stages of tech, and they’re kind of taking this 5, 10-year look, and I’m seeing the capabilities they’re building and how fast they’re building it. We get to apply that energy to our business in the context of our vision and strategy as well.

Mark MacLeod:
I love that. Your description of your role reminded me of an old definition by Fred Wilson where he talked about the role as being communicating strategy, vision, and values over and over again. Build the strongest team that you can, which I distill further down to building the strongest leadership team that you can. Because if you get that right, they’re magnets. They’re going to attract talent and so on and so on and then never run out of money. Simple, right? It’s just an easy job. I’m curious, do you find now that you’re able to take time for reflection just like big open blocks and just think through stuff or are you still grinding?

Michael Litt:
I try to do that. But it’s funny, I’m using the shit out of this product of ours called Prospector. Prospector does fully automated outreach on my behalf. 20 leads per day. I tell it to our ICP. I give it a prompt, I give it a type, like a style of email that analyzes it. And then it uses GPT 4.0 to go and build emails that are personalized for these users. Send them a video of me, and send them my Calendly link and I have probably five to six customer calls per week from prospectors. So like, I love that. Because I’m showing them, I’m like, hey, by the way, did you know that you responded to an AI-generated email like, wow that’s crazy.

And I’m like, hopefully that doesn’t devalue the experience because here I am IRL. I wouldn’t have had time to do that. What do you think about it? So I’m learning and I’m using the product. So, we just finished our fiscal year and so we’re kind of kicking off. So I have a lot of conversations. I do a lot of skip levels with people across the business to try to understand how they’re feeling.

Do they understand the strategy, vision, etc? I’m a pretty in-the-weeds CEO right now, but I’m hopefully getting into an era where I can spend more time doing stuff like this out in the ecosystem, spending time with other founders, and investors, and getting a feel for what’s coming, what people are thinking about, which is going to be exciting and in starting to travel again, I will have some more time for reflection.

I find when I do reflect and, you know, not to turn this into a coaching session, I start feeling like I haven’t accomplished enough or I should be spending time doing something else, like talking to customers, talking to users, like, you know, playing with our technologies, understanding how they can better benefit those groups. And so that’s probably something I need to work on because I feel like a recommendation is coming.

Mark MacLeod:
Yeah, listen, both are important, right? You need that input, especially from talking to customers, especially from dogfooding your stuff. One thing I’m amazed by is like 14 years in the level of kind of innovation and risk-taking and uncertainty that’s still going on because, you know, the last company I operated was FreshBooks and it was in its second decade and we were just making sausages.

We knew exactly what we were building and who we were going after. The marketing mix was nailed. We were just making the recipe over and over again. Maybe that’s good, maybe that’s bad. But I love that there’s still a ton of innovation and risk here. And if I think about that, what you’re doing is creating.

And we cannot be optimally creative when we’re stressed, right? That’s why, like, when we go for a hike or we’re in the shower, those insights just pop up, right? Because we’re given space for our subconscious mind which is ultimately far more powerful than our rational mind to go to work. And that’s when you, like, it just hits you, those insights. So you need the inputs you need to put the reps in. My mastery takes a long time. I think you put in the 10,000 hours at this point but then I think the missing piece is just space for the magic to pop up.

Michael Litt:
Yeah, it’s a good point. You know, I think that space probably exists more than I give it credit for. You know, where I’m actually at, we’ve got a small hobby farm here and we grow peaches. And, you know, last year we had four peaches. But at full scale. In a few years, we’ll have 5000 and I spend time here doing farm things like operating a chainsaw, clearing a path, you name it. We’re moving mulch and earth around and blah, blah, blah.

Jeff Shiner C of 1Password talks about how every CEO needs a tractor for farming. I think that’s what I’ve been able to identify, which are these things I like to do that are physical in nature, that aren’t necessarily knowledge work, that are problem-solving, that are activating a portion of my brain that allows me to create at the moment and then subconsciously process things that are ultimately happening with Vidyard and in the ecosystem and the fund.

Because my wife would say that processing never stops and I’ll often like, wake her up in the middle of the night with some idea that I’m like communicating through my sleep. She’ll write these things down and report back to me in the morning. But I find if I didn’t have that, I probably would find something else to torture myself with. And so it’s just part of who I am and I’m sure that’s part of the mix of a lot of the entrepreneur CEOs you talk to.

Mark MacLeod:
Absolutely. Yeah. You know, anyone who’s trying to achieve greatness cannot truly be balanced. No sports star, actor, or musician that we admire is balanced. And I think the expectations on the shoulders of CEOs who raise meaningful amounts of capital are the same as those athletes and others, you know, stars that we admire, so yeah, you have to be a bit obsessed, that’s for sure.

Michael Litt:
And I feel a huge sense of responsibility for our stakeholders. I think about our stakeholders in the context of customers, employees, the community in which we exist and can benefit, and then our shareholders and I think of them in that order. I know if I deliver an insane amount of product value to our users, they’ll give us that value in exchange. That allows us to create better programs to promote our people, gives them more growth opportunities, and so on.

That creates an impact in our community, and then our shareholders ultimately benefit. However, shareholders provided the ingredients for us to go and service those first three stakeholders. And that’s kind of how I think about what five years looks like in the context of our customer and our team. That’s the stuff that I process most consistently because I feel extreme levels of ownership over those outcomes.

Mark MacLeod:
Yup. Makes sense. Maybe as we start to wind down. Mike, you referenced earlier how you were both an investor and a CEO, and I’m a happy LP at Garage Capital. Maybe just tell us about that. First of all, I certainly say if I was your VC and you told me hey I was going to start a fund, I mean like, oh, that sounds like a big distraction. So, I’m wondering, how that came to be and how has been on the other side that made you better at your actual job running this company?

Michael Litt:
Yeah, I’ll start by saying I work a lot, like there’s no question but the parallels in the work, especially recently, have become far more extreme and useful. The way Garage started was founders were coming to us wanting to go to YC, and Mike McCauley was one of those. Mike McAuley gave me an opportunity to invest in his company. I couldn’t get liquidity. Six weeks later he would say twelve weeks later, but six weeks later he sold it to Google and that would have been an outcome.

I knew Mike, I was Mike, I knew what drove him. He gave me an opportunity to invest. I provided help and assistance by recommending him and pushing him to get into YC. He got it and I got no personal upside and I was like, would I have done that work regardless? Yes, of course, I am going to spend time with founders because I can learn from them as much as they can learn from me. And the next generation of founders is thinking about the world far more differently and far more creatively than a business that’s making sausages.

So if I want to stay on the competitive edge of what’s happening in tech and innovation, I better be spending time with startups. So if I’m going to be doing that, I might as well invest. And so Mike made some money so I asked Mike if I could invest some of his money. My brother and I had bought a house in 2008, subprime zero down, that we rented to our friends at the University of Waterloo on a promissory note from BlackBerry that they would hire me when I graduated. That was what helped get us approved for the mortgage back then. The bank would approve any…

Mark MacLeod:
Oh, you have a pulse, here you go, here’s your money.

Michael Litt:
Yeah, or like you work at BlackBerry, amazing. Anyway, sold that place and started investing the proceeds of that into startups. And one of our investors said, hey, we like what you guys are doing, we like your portfolio, can we invest in you? And then you invest on our behalf and that became fund two. So fund two was relatively small, $8 million pool of capital, fund three became a $35 million pool of capital, fund four became a $50 million pool, and then we raised a couple of opportunity funds that sit on top of three and sat on top of four, so we could maintain the structure.

My job with the Garage is not to manage fund dynamics, which there are a lot of fund dynamics. There’s a lot of LP relationship stuff, there’s tax stuff, there’s things that happen when you’re invested in companies, there’s liquidity events that you have to manage. I try to stay as far away from that stuff as possible, except providing my opinion based on the company and the founders.

I spend time with entrepreneurs and I decide if this is a deal or a company or a group of entrepreneurs that we want to pursue and invest in. The benefit that gives me is I am seeing we’re building at the bleeding edge of technology using artificial intelligence. We are finding the limits of LLMs, we’re finding the limits of these open-source models that can generate human forms digitally and use those human forms to communicate with customers. Super cool, super powerful stuff.

We know the limitations of these systems and so when we look at startups, we’re able to tell if this is like a ChatGPT in disguise, or if this is like a real innovation that is happening in a space where this individual is uniquely suited to innovate in this space. And that’s, again, because we’re ultimately building with technology. We’re also seeing what founders are doing, and understanding our capabilities, what we believe to be the limitations of this technology, could be stretched or pushed a little bit.

And so the two are working harmoniously together in the context of this vision and it turns out we’re pretty good at it. Charles Plantice did an analysis and suggested that we are the best fund in Canada at picking eventual scale-ups based on the way he manages his data. And when we look at benchmarks across U.S.-based funds, we’re kind of like a top performer.

So it comes down to having empathy and compassion for what it is to build and found a business and what’s required, and looking for versions of ourselves that come from different backgrounds and different locations that have unique advantages, building in certain categories, doing so in Canada, and supporting those founders to go succeed, I think the two work incredibly well together.

Initially, we had feedback on how you were going to do both. But the way we structured time, the way we structured the go-to-market with the fund, and the way I’m building Vidyard, makes it very possible. And the vast majority of our investors in Vidyard are also LPs, which I think speaks volumes.

Mark MacLeod:
Amazing. Well, I’ve got to say that it sounds like there are an awful lot of benefits there, a lot of work, and it may be awkward if a Vidyard competitor showed up looking for funding. But yeah, just going back to again how much risk and innovation you’re still taking today, getting that stimulation and seeing what the next generation is doing sounds really, really valuable.

Michael Litt:
Yeah, I think you have to keep the nose sharp. And when I get lazy or tired or stop pushing that innovation envelope like nobody’s going to do it, it’s clear that that is my job and my responsibility.

Mark MacLeod:
Well, Michael, given that you have at least two jobs, possibly more, I appreciate you taking the time and so much more we could have talked about, but I enjoyed it. Thank you very much.

Michael Litt:
Yes, thanks for having me, Mark. Cheers.

Mark MacLeod:
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.