Triangle Tweener Talks

00:00:03 - Jess Lipson
Wework was just still early. It was just in New York, I think maybe London, but definitely not here. And @sharefile. For the first 10 years of Sharefile, I think we had to move or expand office spaces like nine times. I'd have these landlords asking for five year leases and I just think like, how could I possibly know how much space I'm gonna need in five years? Welcome to Triangle Tween, a weekly podcast.

00:00:33 - Scot Wingo
By Builders for Builders where we explore the startup journey from the idea to the exit and all the lessons in between, with an exclusive focus on founders from the Triangle region of North Carolina. Tweener Talks is produced by Earfluence. Now here is your host, Serial, founder and general partner of the Triangle Tweener Fund, Scott Wingo. This is a conversation with Serial founder and Triangle icon Jess Lipson. Jess is currently the CEO and founder of Levitate. Levitate's a software company that helps small businesses manage their relationships in an authentic way. He'll tell you more about that. Jess previously founded ShareFile, also Raleigh founded, which is the co working facility we're in right now, and he has had a huge help in growing the Triangle startup ecosystem. Before we get into the conversation, I want to thank the Earfluence team, Jason Carson and cece. They helped produce this podcast and it wouldn't be possible without them. If you have any podcasting needs, definitely give them a shout. They're at and more details in the show notes. As a full disclosure, the Triangle Tweener Fund, where I'm a general partner, is an investor in Levitate. And here is my conversation with Jess Slipsen. Jess, thanks for doing this. Excited to have you on the Triangle Tweener Talks podcast.

00:01:49 - Jess Lipson
Absolutely, thanks for having me.

00:01:51 - Scot Wingo
Yeah, so I've known you forever, but what's fun about this is I get to ask you questions I don't know the answers to. So let's start at the beginning. Where are you from?

00:02:00 - Jess Lipson
I'm originally from Iowa. I was born in Iowa City, lived there till I was 8 and then my parents moved to Baltimore. My mom was a journalist and she was a journalist in Iowa, a small newspaper in Iowa. And she was nominated for a Pulitzer Prize, got an offer for the Baltimore sun. That moved us there. I was there Till I was 18, graduated high school and then I came down to North Carolina for college, went to Duke and I've been here ever since.

00:02:29 - Scot Wingo
Cool. What did you study at Duke?

00:02:32 - Jess Lipson
I was a philosophy major. So I actually came into college wanting to be a physics major. I was Big physics person in high school. And that was my intention, going to Duke. But then by the time I got there, kind of like looking through the course book, I was just fascinated by the philosophy classes. And a lot of what I liked about physics was kind of modern physics, which kind of crosses into philosophy. So I ended up actually deciding to be a philosophy major my freshman year and never changed.

00:03:02 - Scot Wingo
You're one of the only founders I know that has a philosophy degree, which is interesting because you're also like a very deep thinker. And, you know, of all the founders I know you're always looking very far out, but then also, like, very narrow. It's like, is that part of the philosophy thing gives you that ability to look across these time spans?

00:03:18 - Jess Lipson
Yeah. I mean, there's a decent number of people in tech that are philosophy. You have, like Peter Thiel, I believe, was a philosophy major. Reid Hoffman. I think there's a decent amount of crossover between philosophy and computer science. And part of it is probably, I think, in philosophy, I actually took, I think, two or three logic courses, like propositional logic, predicate logic. I did one course where we spent like two months proving Godel's incompleteness theorem through logic, symbols and stuff. And then even ancient philosophy like Socrates, Plato, Aristotle. There's a strong logic element to all the arguments. And so I think just like critical thinking, critical reading, logic, there's a pretty strong crossover between, I would say, technology and philosophy. I don't know if that's why I became an entrepreneur or interested in technology, but. And a long time. For a long time, in my early days, I would get the question, how has your philosophy major affected being an entrepreneur? And I think for a long time I just felt like it really didn't. But I do think that kind of thing, a philosophy major would say correlation versus causation. Maybe the same attributes that made me want to be philosophy major make me an entrepreneur kind of. Thinking from first principles, you know, I think is something that I've always done. I jumped into entrepreneurship very early, and so I didn't really have experience. I was just inventing things from first principles. And a lot of times that was. I realized why people do things the way they do.

00:05:00 - Scot Wingo
Because I, you know, physics and philosophy share that. Right?

00:05:03 - Jess Lipson
Yeah.

00:05:03 - Scot Wingo
Like, at the end of the day, it's like first principle thinking. Engineering has a lot of that too. So. So there's like, There's. There's a core, there's.

00:05:09 - Jess Lipson
Yeah, exactly. And so I did a lot. And I think part of being an entrepreneur, I guess, is like, you trust your first principle thinking to some extent over kind of conventional wisdom. And in order to be an entrepreneur, you have to basically be contrarian to what everyone else in the market is doing, otherwise the opportunity wouldn't be there. And so I think trusting, like, first principles over whatever kind of the conventional wisdom is is probably something that helps you be an entrepreneur.

00:05:40 - Scot Wingo
Yeah, we're either genius contrarians or foolish naives.

00:05:44 - Jess Lipson
Yeah, exactly. Yeah. I think they say one of the keys to a successful business is being contrarian and. Right. So being contrarian is a starting point, and then oftentimes you're not. Right. But you have to be contrarian pretty much to even get in the game.

00:05:59 - Scot Wingo
Yeah. And we'll get into it. But it's funny. So you build businesses people think can't be built. And people always ask me, like, you know, will it work? I'm like, well, it's working. And then they, like, ask me how. And I'm like, I don't know how he's doing it. So we can get into that. When did you first, like, get the sinking. You wanted to do entrepreneurship. Was it when you were at Duke or a little bit later?

00:06:19 - Jess Lipson
It was at Duke. So I was in school. I went to Duke in 1996. So I was kind of in school during the dot com boom that was happening in like 98, 99. And it was hard not to get caught up, I would say, in the dot com boom that was happening at that time, it felt like everybody had a startup idea and you lived through it as well. Idea to IPO in 12 months, and there were companies going, I think maybe even Netscape was like 4 million of revenue. And they ipoed and there was just such an energy around it. And I was in school at the right time. I had a little bit of exposure to Internet and took a couple computer science classes. And so I basically came up with a startup idea in the fall of my senior year. I was living with a group of guys who, two of them were computer science majors. And so we all kind of like, hey, here's the idea. We all worked on it together, and it was a great experience just getting exposed to tech and getting exposed to entrepreneurship then.

00:07:27 - Scot Wingo
So you're doing a little coding?

00:07:29 - Jess Lipson
I wasn't doing coding at that time. My other two roommates were. And me and my other roommate were doing more of the business side. And then I actually graduated a semester early, but then stuck around. And then March of 2000 was the dot com bust. So we kind of never did anything with the Idea post graduation rip.

00:07:53 - Scot Wingo
Good times. That was like.

00:07:54 - Jess Lipson
Yeah, exactly.

00:07:55 - Scot Wingo
I remember Fortune magazine came out. Yeah. It was like, no, this is not good.

00:07:57 - Jess Lipson
I mean, we would have failed anyway because we were so naive about startups.

00:08:03 - Scot Wingo
But what was the idea?

00:08:04 - Jess Lipson
The idea was called Easy Central and the original idea was actually kind of a password manager essentially. So back in the late 90s, especially in college, people were on multiple computers. Like you'd go to the computer lab, you go to your desktop computer in your dorm, you'd go to people go to Internet cafes. And so my idea was some kind of profile that could travel around with you where I could log into all my sites and kind of have a personalized experience. And we basically created a browser toolbar to do it. And then the idea evolved a little bit. So it was actually not a bad idea as I look back because I was way before any of the password managers, but we just weren't.

00:08:49 - Scot Wingo
NC State had one and it was from MIT and it was like it would take like 30 minutes for it to pull down your. Whatever it was.

00:08:56 - Jess Lipson
Yeah.

00:08:57 - Scot Wingo
So you'd log in and you'd just go do something for 20 minutes. And then finally it was not what we're used to today.

00:09:02 - Jess Lipson
The Internet boom was developing while I was there. When I was a freshman, I would telnet into my email and it was basically like command line stuff. And then I think when I was a sophomore, junior hotmail came out, which was just incredible. And so you started to see a lot more websites developing. So I kind of got caught up in the energy of that dot com crash happened. And then essentially I officially had graduated, but effectively I graduated a couple months later in May, and I wanted to stay around the area. Like my girlfriend at the time, Brooks, who's now my wife, she was two years younger than me. And so I looked around for jobs in the area and had the CED directory, which was like physical directory, just all calling startups. And one of them saw my experience and hired me as kind of lowest entry level employee. There were two founders that were full time at the time. And I came on this company called weshare, which got named to full seven and basically continued in the entrepreneurship world. And so basically while I was there, one of the assignments they gave me was to find a vendor to build our website and then learn how to do the updates. And so I kind of did some googling. I learned how to do Flash and I learned how to do website updates. And I was like, I could have built this website and for like five or six Thousand dollars that we paid the vendor. I could live for like six months on five or six thousand dollars. And so that kind of got me into coding and I just started to get deeper and deeper into learning just through Google searches and stuff, how to build websites and database driven applications and things like that.

00:10:51 - Scot Wingo
Yeah. And Full seven did a dynamic email signature.

00:10:55 - Jess Lipson
Yeah, yeah.

00:10:56 - Scot Wingo
This is like a deep cut.

00:10:57 - Jess Lipson
Yeah, exactly.

00:10:59 - Scot Wingo
And was one of the Rua. Was this name Rua? Yeah, yeah. So Don Rua, Dan Rua's brother.

00:11:05 - Jess Lipson
Yeah. And their dad. Those are the co founders. Yeah.

00:11:08 - Scot Wingo
Wow.

00:11:09 - Jess Lipson
Yeah, exactly. And I actually created the Full seven was basically email signature management. And I actually, despite not being a programmer, came up with the idea of doing these like, what were called server side includes, to be able to change out the image, but then change out all the links to the image on the server side.

00:11:31 - Scot Wingo
Because if you had a trade show coming up or something, you want your signature to reflect that.

00:11:34 - Jess Lipson
Exactly.

00:11:34 - Scot Wingo
Then after you wanted to flip back.

00:11:36 - Jess Lipson
Exactly. And so what the server side includes, you could change the image at any time and then also put hotspots on the image of different links. And so, I mean, I think email signature management is still like a reasonably decent idea.

00:11:52 - Scot Wingo
It's kind of weird. We haven't.

00:11:53 - Jess Lipson
Yeah, exactly.

00:11:54 - Scot Wingo
Why doesn't Gmail do that?

00:11:55 - Jess Lipson
Yeah, exactly.

00:11:55 - Scot Wingo
It's so easy.

00:11:57 - Jess Lipson
Yeah. So I worked on that for a little bit less than a year before I left to start my own business.

00:12:05 - Scot Wingo
Yeah. And then how did you meet Brooks? Actually don't know this.

00:12:08 - Jess Lipson
We met. Brooks was in the marching band at Duke. And after the Duke UNC game in January of 1999, when Duke beat UNC, Duke would take all the benches on campus and put them into a huge pile and then do a big bonfire. And so I basically met her outside, like the bonfire when she was coming back from the Duke UNC game.

00:12:33 - Scot Wingo
Very romantic.

00:12:34 - Jess Lipson
25, almost 26 years ago. Yeah.

00:12:37 - Scot Wingo
Don't get too close. And then Brooks was an intern for me.

00:12:41 - Jess Lipson
She was.

00:12:42 - Scot Wingo
I don't know if I remember that or not.

00:12:42 - Jess Lipson
Yeah. Auction over.

00:12:44 - Scot Wingo
And I met her. And within like 30 seconds, I knew I needed to because at that point in time, not a lot of people in the triangle knew about Internet stuff. And I was like, we're going to do this thing called an affiliate program. She's like, I've run 12 affiliate programs. I've done this, that or the other. And I'm like, where did this, where does this person come from? So much about like at that point it was just like this. Whoa. Where are you from? And then I felt bad because we could never like keep her busy enough. So she was just like, chew through all the work we would give her. And then she definitely. I forget the timeline, but that's when I first met you is she was like, my boyfriend's working on this thing.

00:13:20 - Jess Lipson
Yeah.

00:13:21 - Scot Wingo
That ultimately, I don't know when you started, but it's what became SureFile. Yeah. So, yeah. Tell us the origin story of ShareFile.

00:13:28 - Jess Lipson
Yeah. So I think maybe I met you even before that. I think I was probably working on some other startup ideas.

00:13:34 - Scot Wingo
You came to the Auction Rover launch. Yeah, yeah, I kind of remember that.

00:13:37 - Jess Lipson
And I remember Auction Rover like Brooks was so committed to it would go to like a concert or something and she would bring her Auction Rover business cards to put on all the cars in the parking lot and stuff like that.

00:13:48 - Scot Wingo
That was our gorilla marketing team.

00:13:49 - Jess Lipson
Yeah. And then she was an intern at Red Hat. That was still like, when Red Hat was relatively early. I do remember you agreeing to meet with me, which was awesome because I was just like just starting out in entrepreneurship. So the way ShareFile started, I created this website company and Brooks was working with me on it. She was still in college.

00:14:12 - Scot Wingo
Was this kind of like because you realized at full seven you could do this and you're like, yeah, I'll just do this myself.

00:14:17 - Jess Lipson
I kind of decided I wanted to do my own business. I was kind of jaded by the whole venture capital world after seeing the dot com bubble. And frankly, at full seven, it was still the dot com era. The bust had happened, but I just saw this case where we were so focused on just doing whatever we needed to do to raise funding versus focusing on building and getting customers. At that time, I just really did not understand why you needed VC if you could code. I was like, hey, if I can learn to code, I can just build my idea and not worry about trying to spend all my time and energy raising vc. So the easiest way to get started was a services business. So started this web development company. Brooks and I worked together. We just build custom websites, custom web apps, and we did that for a few years.

00:15:10 - Scot Wingo
And your relationship survived Working together, that's always a tricky one.

00:15:13 - Jess Lipson
Yeah, we were together like 24 hours a day. Eventually, I think we realized that it would be better for us to have separate companies. But one of our big clients in the early days was AOL and that quickly became 80% of our revenue. I really decided I wanted to work on software products and so I would usually like, be Working, I don't know, 10, 12 hours a day in the office on client projects. Then I would come home and I would work another three or four hours on my own coding projects. Just fun things that I wanted to build. And so I developed a few different product ideas. One of them was a digital asset management solution that we were actually licensing to aol. I developed a content management system. I had actually created some intellectual property around cryptography. I got a patent for it. I basically figured out a way to significantly speed up, effectively, SSL encryption and decryption.

00:16:12 - Scot Wingo
Cool.

00:16:12 - Jess Lipson
And so I thought about doing something with that.

00:16:16 - Scot Wingo
This is a weird sidebar. I watched the Satoshi documentary last night, and I'm not sure if I believe it or not, but it was entertaining. There was. There's these dudes in Chapel Hill I met, and they were super weird and they were like behind Rosemary street in a strip mall, and they were working on what became pgp. And I don't know, I can't remember their names or why they were here, and I don't remember why I met. Did you ever meet them?

00:16:38 - Jess Lipson
No.

00:16:38 - Scot Wingo
Okay.

00:16:39 - Jess Lipson
I did not.

00:16:40 - Scot Wingo
I'm pretty sure one of them was like one of the cypher punks they talk about. It's a guy with a chest beard. I think he was here for some reason. I don't. I don't know why.

00:16:47 - Jess Lipson
Yeah, I became, like, I became pretty obsessed with public key cryptography at that time. And just like, thinking about the idea that, like, a check is such an insecure thing. You basically give someone your routing number, an account number, and like, there's all these, all these. And, you know, PGP was along those lines just like all the applications of public cryptography where that just should exist.

00:17:11 - Scot Wingo
Did you run across any of the early Bitcoin stuff like hash, cash and E Gold?

00:17:15 - Jess Lipson
And I think I was pre Bitcoin. This was like, I was doing this stuff in like 2003. Ish.

00:17:23 - Scot Wingo
Yeah, that's pretty early.

00:17:25 - Jess Lipson
Yeah. And so. But basically it kind of ties into ShareFile because the precursor to ShareFile for me was I had this idea coming out of Cryptography for a product that I called SecureNet, which essentially the idea was like, PGP is like a little bit too complicated for people, so creating some kind of a secure messaging layer that would allow people in a group to share files or messages or whatever. So, like, one of the problems I had to solve was that in public key cryptography, if you had a group of people, it wasn't designed for that. It was designed for Sending from one to one. And so basically I figured out a way to do it. And I was thinking about this as a product idea, but I did a focus group and basically realized that people didn't care nearly as much about security as I thought they did. And like, you know, now everyone posts.

00:18:23 - Scot Wingo
Their breakfast on every social media network and don't care anything.

00:18:25 - Jess Lipson
And then basically like the details of the mathematics of cryptography, people don't understand. And so like, if you really want to help people transfer files, they're perfectly happy to just trust that your company will like, even though your company has access to the files. That's fine as long as you're a trustworthy company. So I kind of pivoted away from this hardcore SecureNet type thing to something like ShareFile, which was a problem that I saw a lot of my website customers having, which is they wanted to create a client portal where they could have a custom branded login. Clients could come in and usually they were coming in to either grab like have folders with files in them or see notes or links.

00:19:07 - Scot Wingo
And back then you had FTP, right?

00:19:09 - Jess Lipson
Exactly.

00:19:09 - Scot Wingo
And you and I own understood it. But like Aunt Jenny's not going to understand FTP Exactly. At some point you're basically at a command line. It's like totally useless.

00:19:16 - Jess Lipson
And FTP, you know what I saw with FTP was like, it's a hardcore tech protocol and at the time web applications were coming out and so you had all these nice features, like if you forget your password, if it's a web app, you can reset it. If it's FTP, you're just screwed. Like you have to call the server admin and have them reset your password. And like FTP, if you're in the middle of uploading a big file and it fails, then you have to start all the way over. That's just like the way the protocol is. And so kind of those two ideas came together of like bringing some of the nice features of web applications to FTP. And also having a custom branded client portal was something that was a common use case for my SMB customers. So I decided to build it.

00:20:00 - Scot Wingo
Cool. And this is like, oh, this was 2005. 05. Yeah. And this is like just, you know, it's easy now to not realize this, but this is before Dropbox, Box G Drive, OneDrive, before any of that existed. Or was it even in inkling? This is way before cloud computing.

00:20:18 - Jess Lipson
Yeah. So there were ideas. So like there was a company in the dot com bubble, there were a couple companies in the dot com bubble era, one was called X Drive, it was a file transfer. It was acquired by aol. There was another one called Streamload. So there was actually like a generation of this stuff that happened in 2000. And so when I had the idea for Sharefile and I told people that a lot of people that were like VC types were like, isn't that like an old, you know, kind of dot com idea? Like, why would you do this? It's already been done. And like the companies that are doing it now are not like super successful. There was a company that came out like right before us, a year maybe before us, called, you'd send it.

00:21:01 - Scot Wingo
I remember that.

00:21:02 - Jess Lipson
And then Box came out around the same time as us. And then Dropbox was like maybe a year or two later. So kind of like us, Box and Dropbox in that same era of like 2005 to 2007. We're trying to do some stuff all around the same time.

00:21:17 - Scot Wingo
Yeah. And I think what you do as an entrepreneur is you're very good at finding that customer pain. And this is a common. Since I've done the Tweener list, it's interesting. Of the 300 companies on the tweener list, a good 100ish are bootstrapped and then this one you bootstrapped. And a lot of them do have this pattern where they start with a service business and they see a pattern of some kind, a customer need, and then they flip into a product. So that's a common way to bootstrap because you can't get seed funding because you don't want to raise capital. So the service business is the seed into the product.

00:21:51 - Jess Lipson
What did you.

00:21:52 - Scot Wingo
Did you turn the service off or just spin that out or.

00:21:54 - Jess Lipson
We spun it out. So we created the original company was called Novel Projects and then we split it into three. We kept Novel Projects, which is website design. Brooks spun out the AOL business into Brooks Bell. And then I spun out the product in what I called Novel labs. And so ShareFile, a couple years in, like that was 2003. A couple years in was when I had those three or four different ideas. And a couple years in I decided to focus on the ShareFile concept. Yeah.

00:22:25 - Scot Wingo
So it's O5. You've. You've kind of focused in on ShareFile. Give us kind of the sequence of things that happen.

00:22:31 - Jess Lipson
Yeah. So I built the original version along with a guy who was running the Novel Projects business. We spent three months together kind of getting MVP going for ShareFile and then I opened up a Google AdWords account. This was kind of like golden age of Google AdWords. And I put $100 into it. I decided I was going to spend two years with no salary and just reinvest whatever revenues I could make back in sharefile. So like first month I got 4 free trial or no, I think I got more than four free trials, maybe 20 free trials and four pay to customers.

00:23:11 - Scot Wingo
Did you have like a freemium, like.

00:23:14 - Jess Lipson
A 30 day free trial? Yeah, exactly. It was like a 30 day free trial. $20 a month was kind of where.

00:23:18 - Scot Wingo
We started unlimited files or did it like tear up with some usage?

00:23:21 - Jess Lipson
It had limits. Yeah, because back then this was pre AWS, so we were paying $3 a gigabyte for data transfer on.

00:23:31 - Scot Wingo
On probably on servers.

00:23:32 - Jess Lipson
You hosted solutions. Yeah, exactly. And we became beta customers of AWS. Actually in 2000, I think it was seven. So I got, you know, four customers. And so like that was $80 or something like that. Then I reinvested the hundred dollar budget plus the 80 and just kind of compounded the Google Ad spend. And then, you know, by just compounding and putting that on my credit card, within two or three years, I was spending like $300,000 a month on Google AdWords. And so all the initial scaling the first few years was Google AdWords and just optimizing conversion process and going from there.

00:24:16 - Scot Wingo
Yeah. And I think I heard you tell the story where you put it on an amex. So then you get all that. Yeah, and at one point they like came in, presented you with like the ultimate top AmEx thing and all this stuff because you're like running so much through that.

00:24:26 - Jess Lipson
Exactly, yeah. They didn't ask any questions until we were spending about 100,000amonth.

00:24:31 - Scot Wingo
Yeah. This is your account rep. Yeah, exactly. Who are you and what are you doing?

00:24:35 - Jess Lipson
Yeah, because we always paid it off. So he's kept us letting us spend more and more. But actually like the 30 days that I had to pay it off in the early days, our customer acquisition cost was so good because Google AdWords was so cheap that that became a form of financing. You know, we could put $20,000 in and oftentimes we could get a lot of it paid back because our 30 day trial would end. So by the, at the time the credit card bill was due, and so like by the time the credit card bill was due, I could basically pay the credit card bill with what I charge people when the 30 day trial expired.

00:25:08 - Scot Wingo
Cash flow management on an AMEX card. Yeah, it Always works good until they cancel. Yeah, yeah, I've had that happen before. Yeah, they're like, we want to see your books. I'm like, yeah, you're going to like what you see.

00:25:21 - Jess Lipson
I was actually shocked they let me go as long as they did because if in a given month I just ghosted, they would have been out $100,000.

00:25:30 - Scot Wingo
So I always tell people what you're really good at is finding these super horizontal solutions, but then getting really vertical at them. At what point in ShareFile did you start doing the verticalization piece?

00:25:41 - Jess Lipson
It was a few years in, so we always, we started horizontal. But we always would. Every single customer that came in, we classified their industry. So I knew what the distribution was by industry. And eventually we got a little bit worried about Google AdWords as our only channel. Because one of the challenges with Google AdWords is that actually the more you want to spend, the worse the efficiency is because you have to run out of supply too.

00:26:10 - Scot Wingo
There's only so many people searching.

00:26:11 - Jess Lipson
Exactly. Is limited supply. And you have to pay more to get more volume because it's like, oh, for bidding for the number three position, then it's cost us, you know, three times as much to be number one position. And that's what we need. If we want to get more volume, we have to make our acquisition costs like two or three times as bad. And so we decided to add more of a sales channel. It's tough when you bring a sales team into the picture to just be like, call the phone book. You need to have some level of focus. And so that's when we started verticalizing and we picked accounting as our first industry. So our sales team was always fully verticalized, focused on one industry. And then we kept expanding, and then our online marketing was more horizontal because it's tougher to do online marketing vertical.

00:26:59 - Scot Wingo
Yeah. And this is where you break conventional wisdom, because this is what makes VC's heads explode. Right. Because the conventional wisdom is you can't have an outbound sales team unless you have a, what we'd call an acv. Or we just call it arpu. Now we call it acv. You can't do that without an annual contract value. Everyone has a number. Usually it's. It's like 10k or 20k.

00:27:18 - Jess Lipson
And you're.

00:27:19 - Scot Wingo
You're here at 20 bucks a month doing it.

00:27:22 - Jess Lipson
Yeah.

00:27:22 - Scot Wingo
So how does, how do you break that conventional?

00:27:24 - Jess Lipson
Yeah, yeah. And for the one thing we had to do with the sales team is like, we wouldn't sell the $20 plan. We'd always sell the share file for accountants, which was still the only like $60 a month to $100 a month. Way below what anyone would consider possible. I think part of it is I don't actually think at that ACV we could make it work today because this was like post financial crisis and so the labor market was different obviously. And the equivalent of $1,000 ACV today with inflation is probably 2,000. But I think one of the things that I exploited was the fact that VC backed companies weren't doing what we were doing because VCs thought it was impossible. And so then that creates an opportunity if you're able to.

00:28:14 - Scot Wingo
You had a green space. No one was going after this tier.

00:28:17 - Jess Lipson
Yeah. So kind of like the difficulty of solving that problem becomes a moat if you can do it. Part of the reason we were able to be successful is I realized that the process of doing outbound telesales is actually a similar. I basically turned it into an engineering problem, just like online advertising, which is it's very quantifiable and you can test and optimize. We took every call that we made and we broke it into five separate segments, measured each segment's conversion rate and tested and optimized getting that to where it needs to be.

00:28:54 - Scot Wingo
Accounting, legal, no segment of, like the.

00:28:57 - Jess Lipson
Segment of a call itself. The interaction with the gatekeeper, you know, the hook that you do.

00:29:03 - Scot Wingo
Wow.

00:29:03 - Jess Lipson
You know, asking for the time you're.

00:29:05 - Scot Wingo
Waiting for the nose call.

00:29:05 - Jess Lipson
Quick questions. And so, but basically you think about metrics like, okay, well how many dials does it take to book a demo? What's the show rate on the demo? What's the close rate on the demo. So effectively you can figure out what's the cost to perform a demo through that channel and what's the conversion rate. And so you can come up with a very quantifiable acquisition cost. And then okay, well, how many dials does somebody make per day? And figure out what math is required to get a payback period of less than a year. And then with our model thinking, okay, well if we can get a payback period of this, it works and it scales. And so it kind of gets back to the first principle thinking, which is I don't care what VCs say, if my payback model shows that this works, then we should do it. And then we relentlessly tested and optimized all those metrics along the chain and got it to like a 10 month payback. And so even if it was a $60 a month service, if we're able to get that kind of a payback period. We feel good about, you know, acquiring customers that way.

00:30:14 - Scot Wingo
Yeah. And what's cool is when you build a system like that, now you have all this data, now you can even like go further in the chain. Right. So you start to see you hire 10 reps and some of them outperform and you try to understand what it is is that cohort. So we would do that at Channel Advisor and one time we. We had this really strong signal that it was college athletes. So we just like poured into college. Hiring college athletes. It didn't have to be like football players, but like. And it usually skewed heavy female for us too. So it was interesting. And then you would do that and you would see all the numbers come. It was really interesting. Now you can get the whole full closed loop type of a system.

00:30:47 - Jess Lipson
Yeah, exactly.

00:30:49 - Scot Wingo
That system's thinking, where does that come from? I don't think they've taught you that in philosophy.

00:30:55 - Jess Lipson
I don't know. I think it's just for me, very natural to be data driven. And it's actually part of the reason why I like SMB. Because SMB, you have the law of large numbers. And basically you're essentially looking at analytics. You can run the business through analytics because you have thousands of customers, you have thousands of demos that you perform every month. Enterprise is more kind of lumpy, artsy. You know, we made the quarter because this thing happened or didn't happen, you know, and you're like one shade away.

00:31:29 - Scot Wingo
From consumer and in SMB.

00:31:31 - Jess Lipson
Yeah. And so I was always drawn to that because I think it gives you the ability to like test and optimize. And I've always enjoyed it. And actually the work that we did back in the early novel projects in Brooks Bell days with AOL was a lot about testing and optimizing and trying different psychology and approaches and then seeing what works and kind of running a flywheel that way. And so I think I've always been good at it. It's kind of like how I naturally think about everything is probably from some kind of a XL model kind of type approach.

00:32:08 - Scot Wingo
I don't know between you and Brooks, where this is, but she's like one of the top people probably in the world, if not certainly the country, around understanding testing and how to do that. Right. And harness it and not AB testing, but multivariate out into infinity type testing. So I'm sure you have to kind of sprinkle a lot of that in there too.

00:32:25 - Jess Lipson
Yeah, yeah. She's very much has this intuitive sense of when there's bad usability in a process or something is off. And like, what, you know, how to design a workflow or a path that's going to convert at a high rate just intuitively, like, whereas I more come up with the model and like to measure and optimize things like that. So like, you know, she'll walk into a hotel and immediately be able to articulate like, this is wrong, this is wrong, this is wrong. Like, the lighting is off here. There's three fonts on that sign. One of them is this font, one of them is that font. You know, it's hard to turn that off once you see it. Yeah, exactly.

00:33:09 - Scot Wingo
Yeah. Okay, so share files. Chugging. You've got your first vertical. You're figuring out the go to market engine. You've kind of gone from just AdWords into a sales engine. Now do you start opening more verticals or like, how do you start scaling this thing?

00:33:21 - Jess Lipson
Yeah, we did. So we started with accounting and then we did architecture, engineering, construction and we just kind of moved through a list of verticals that kind of we were seeing on the online side coming in. But also we felt like they had a logical fit to what we did. And so like one of the ways that we would differentiate ourselves from say Dropbox was file sharing in industries where security was more important. Security and compliance and also professionalism, like custom branding. It's not our logo on the portal, it's your logo. And then workflows that were more about sharing with external parties. So like Dropbox is more for internal. Like, I've got my drive of files that follow me everywhere. We were always about what's the workflow if you want to share files with your clients to make it super easy or request files from your clients and, you know, get signatures on those files and that kind of thing. So we had certain industries where it was a natural fit. So we went into like the financial industry, healthcare, legal, a lot of security and compliance focused like professional services type industries.

00:34:33 - Scot Wingo
Yeah, and it's, you know, me seeing someone else's tax return is kind of like catastrophic. Almost like, you know, so they really care a lot about. You can't just like send a. Even just like a Dropbox link or something. You got to like be really careful and it's not really architected to like the workflow. Yeah, yeah, yeah. Kind of funny part of this story. You generated so much buzz at Sharefile, like all these inbound VCs that you wouldn't answer Them and it would drive them crazy. So they would like come to me and I'm like, he, you know, I've talked to him, he doesn't want to raise capital. And you know, they're like why? And I was like, he just is going to build it without it, you know, and he's so far he has and like no one could, you were, you were like oz in there. Like no one could figure out how the heck you're doing stuff. It was really funny to see the collateral damage from you doing that.

00:35:16 - Jess Lipson
Yeah, yeah, yeah, No, I kind of having been burned by the dot com thing. And also honestly, like as a first time entrepreneur with the idea that I had with Sharefile in the early days, I don't think anyone would have funded us. And then by the time they were all wanting to fund us, we really didn't need them. Yeah, like when there's definitely year that I sold to Citrix we were already, we grew like we were growing 65%, generating 20% profit margin.

00:35:41 - Scot Wingo
Yeah.

00:35:41 - Jess Lipson
And so like we generated in the year that I sold like a couple million dollars of profit and so, and we were growing fast. So like I didn't feel like I had any use for capital if I was going to raise it at that point.

00:35:54 - Scot Wingo
Yeah. And what was your top line the year we sold?

00:35:56 - Jess Lipson
We did like 12 million, 12 and a half million of GAAP revenue and like 15 of ARR at the end of that year.

00:36:04 - Scot Wingo
So you started in 05 ish and then when did you sell?

00:36:07 - Jess Lipson
2011. So it was pretty quick.

00:36:09 - Scot Wingo
Six years. Yeah, six years to an exit is awesome. I'm sure you had acquisition offers up until then. What about Citrix was interesting to you and why them?

00:36:17 - Jess Lipson
Yeah, it kind of all developed quickly. I think when the financial crisis happened I basically was like, okay, 2008, 2009, I was like, all right, well any hopes I have of an acquisition I need to put on ice for five years because it's going to take a long time for the market to bounce back. And then the interesting thing was a year later, the multiples that actually bounced back by like late 2010. I was really surprised. A couple things happened like early 2011. One, some of our competitors like Box and Dropbox were starting to raise mega rounds. Like I think Dropbox raised like a 3 or $400 million round. Box raised like 40 million. And so that brought them up to like 80 million of funding, which was unheard of. Yeah, exactly.

00:37:03 - Scot Wingo
Here we are sitting OpenAI just kind of casually raised like what 4 billion. But yeah, hundreds of millions was very strange back then.

00:37:09 - Jess Lipson
Yeah, the Dropbox round was like, I don't know, that was like probably the biggest VC round. So all of a sudden file sharing went from being like, completely ignored to one of the hottest spaces. And I was worried that even if our competitors were irrational, they could end up really hurting our business and it may not be viable for us to be bootstrapped and independent in that environment. And then at the same time, we got a couple small acquisition offers and then Citrix approached us and we decided to run a process where basically that's when we actually did bring some VCs into our process to look at the Citrix possible acquisition. But then also we looked at some growth equity funding. If we, at that point, if we did not work something out on Citrix or another acquisition, we probably would have raised a growth round. And so it was kind of like the external market, I think, was telling us that it may be hard. In retrospect, I actually think we could have survived it independent. I was probably overly worried about competitive.

00:38:18 - Scot Wingo
Threats there because it seems logical that, okay, Dropbox has got all that money, they can peel off 20 million and come out with vertical and come after exactly like you. You kind of like feel like they are, but they never act. Even today they haven't.

00:38:31 - Jess Lipson
Yeah, yeah, exactly.

00:38:32 - Scot Wingo
Yeah. It's kind of weird, like, you know.

00:38:33 - Jess Lipson
Or even if they just like flooded the search market with irrational bids.

00:38:38 - Scot Wingo
Yeah.

00:38:38 - Jess Lipson
Like, it could be bad for them. It may take them a year or two to figure it out, but in the meantime it could just crush, catastrophic. And so anyway, so that was why. And Citrix came knocking and we ended up, you know, going through a process with them that ended up taking probably six plus months, but ended up selling to them.

00:38:57 - Scot Wingo
Yeah. And then going back to the financial crisis, were you guys hit pretty hard by that or were you relatively immune because you weren't selling to like, dot coms and, you know, lawyers and accountants? Many of them survived. Maybe real estate, if you had that vertical, would have gotten creamed, but we.

00:39:13 - Jess Lipson
Did not feel it. Yeah. And so it's possible we could have grown even faster. But if you looked at our revenue growth chart, you would never know the financial crisis happened at that time. And I think, if anything, the tough job market after the financial crisis probably helped us in terms of our outbound sales approach. There was a big pool of people that wanted to work for a really reasonable amount and they were willing to work really hard.

00:39:37 - Scot Wingo
Yeah. Okay, so you're going through the Citrix thing and you decide to sell the company. Has the amount been disclosed, what that was?

00:39:45 - Jess Lipson
It was 93 million.

00:39:46 - Scot Wingo
93. Nice. How old were you?

00:39:50 - Jess Lipson
I think I was still in my. I think I was still in my 20s maybe. So that was 2011? No, no, I was almost. I was 33. I think I turned 34 like two weeks later.

00:40:01 - Scot Wingo
Yeah. So having known you for a long arc of time, you haven't changed. I get this a lot too. Like, people are like, why haven't you changed? And I'm just like, I don't know. I have no desire to change. I like my lifestyle and who I am and stuff. What was it like to have such a big win after eating ramen? I mean, you were off the ramen trade for a while, but I think.

00:40:22 - Jess Lipson
It was a tremendous stress relief because you probably have this experience, or at least I know I do, that until you sell your company, there's always an existential fear that something horrible happened and it will go to zero. Like for sharefile, I could imagine, what if we screw something up and we lose everyone's files? You know, that's always possible. There's always a way that it can go wrong. And locking in the acquisition, I think takes away that stress. And then to some extent it's like, well, if something bad happens after the acquisition, that's not like fully on me. You know, there's a shared risk.

00:41:03 - Scot Wingo
The risk platform gets much higher in a way. Like having nothing is better than having the potential of something that could be lost.

00:41:11 - Jess Lipson
Yeah, exactly. And so like financially, after the acquisition, if that happened, there would be no implications for me because there was no element of the earn out that was on our financial performance. But I think also emotionally it was like, hey, if somebody acquires your company and then two or three years later the company doesn't do well, people are kind of like, well, I guess the acquirer screwed it up versus, like that guy screwed it up.

00:41:34 - Scot Wingo
Other people's problems.

00:41:35 - Jess Lipson
Yeah. So it was a tremendous stress relief. The year of the acquisition was the most stressful of my life because the possibility that the acquisition wouldn't happen. And I knew there was such a big financial implication for me and my employees as well to get it over the finish line.

00:41:53 - Scot Wingo
Did you guys have an option plan?

00:41:55 - Jess Lipson
We did. We had a really good size option plan. So, like, there were several people that made, you know, that became millionaires. And then I think every employee, even ones that had joined like a couple months before, made like at least $10,000, which doesn't sound like a lot, but, you know, for a new SDR that joined last month, that can be like, hey, I can buy a car or If I make 20,000 or 30,000 from this acquisition, I can put a down payment on a house or something like that. And so one of the things that surprised me was even for the employees, kind of in the long tail, how impactful it is to be able to have options and, you know, like buying a car, buying a house, that kind of thing is pretty impactful for an employee.

00:42:40 - Scot Wingo
Yeah. I just had a call with a founder. I've become like the founder hotline. And you know, his board was saying, you know, employees don't care about it and you know, you don't have to do this. And I was like, well, it's like, what? You know, for me it's the right thing to do. Like, even if the employee doesn't understand, you know, giving, I kind of lean towards like what you did there, which is, you know, if you do have this big event, you want everyone that contributed to have some upside and even, you know, I reject that idea personally. Now, each founder can choose their own path and do their own thing and it's fine. But congrats, good job doing that. And you'll find that when you start your next company, those people are very excited to come work for you again.

00:43:17 - Jess Lipson
Yeah, exactly. So, yeah, levitate. My whole senior team, with the exception of one, is all former share file people.

00:43:24 - Scot Wingo
Yeah. So you sold to Citrix and that's awesome. And then you bought Citrix to town. So they ended up building the really cool building they have. That was like a couple years after, right?

00:43:35 - Jess Lipson
Yeah. So we committed to that building. I think it was about a year to a year and a half after the acquisition. So it's pretty. We committed to it pretty quick after the acquisition, which surprised me. And then it took another two years to actually build it and get it done.

00:43:51 - Scot Wingo
Always takes forever and it's a trillion.

00:43:53 - Jess Lipson
They finished the building two months before my three year retention package was up, which ended up being a nice way for them to extend my retention because it felt like pretty bad form to leave the company, you know, two months after they build you like a $50 million building.

00:44:08 - Scot Wingo
Yeah. And then unlike a lot of, like, whenever I've sold a company, I kind of like do my indentured servitude and I'm out of there. And you seem to actually do relatively well there. And they kept tucking more and more stuff underneath your purview, like, why did you do that? And what did you learn in that period?

00:44:23 - Jess Lipson
I had, like three years that I basically needed to be there, or as a huge financial penalty for me if I left. I'd never worked for a big company. Like, I'd only worked for any company for 11 months in my whole career. That wasn't my own startup. And that was, you know, full seven, which had. When I joined, it was like two people. And so I kind of went into it with the idea of, like, hey, I've never worked for a big company. I might really like it. You know, maybe I like it better than working at a startup. I don't know. And so they put me in a really good position there where there were two divisions of Citrix when I joined. One was like a $2 billion revenue business, the other was like 500 million. And then they created a third division for ShareFile.

00:45:11 - Scot Wingo
The little $12 million.

00:45:12 - Jess Lipson
Yeah, exactly. And little tiny share to the CEO for the first two years. And so they gave us a lot of autonomy. And then we basically doubled three years in a row. So we went like 12 and a half, 25, 50, 100 million. And we eventually did get kind of combined in, and then we got kind of pulled out. There was a whole, whole thing because we sold as a company. We sold GoToMeeting, we got ShareFile got combined into GoToMeeting, and then Citrix decided to sell GoToMeeting and keep ShareFile in. And so it was good learning experience. I enjoyed it. And eventually I got to the point where I didn't enjoy it as much, and that's when I left, because we had activist investors in the company for my last couple years, and so it got to be very different. I did stay a little while to try to make sure ShareFile was in a good position before I left. But I enjoyed it and it was successful. It was cool to see. It was just sold for 875 million.

00:46:13 - Scot Wingo
Yeah, I was going to. Yeah. So to tie that off. So 13 years later, you know, it just sold for 850 million.

00:46:18 - Jess Lipson
Yeah.

00:46:18 - Scot Wingo
So you created a unicorn. Yeah, if we round up a little.

00:46:21 - Jess Lipson
Yeah, yeah. I think it was worth more than that when I left, so I can say, yeah.

00:46:26 - Scot Wingo
Do you regret selling it? Do you, like, look at that and say. Or is it like, you can't think that way, like, you know, apples and oranges?

00:46:33 - Jess Lipson
I would say still to this day, I can't. I can't decide whether I regret it or not.

00:46:39 - Scot Wingo
At some point, you get kind of burned out on.

00:46:41 - Jess Lipson
Yeah, I think that there's something to be said for sticking with a company for a long time. And compounding, I think that if Sharefile was an independent company, probably we would have built Levitate as one of our secondary products and we would have built multiple products probably over time. And I think we probably could have been the core business, probably still could have been north of 100 million of revenue even as an independent. But I think that getting kind of the financial security earlier in my career, it's hard to put a value on that.

00:47:25 - Scot Wingo
Once you load up your personal balance sheet, you can take a bigger swing.

00:47:28 - Jess Lipson
Yeah, it takes a lot of pressure off. And so I'm happy with the outcome of the acquisition. I think if we continue to run it standalone also I would have been happy and it would have changed things. And so I still can't decide whether I regret it or not.

00:47:44 - Scot Wingo
It's a problem with having a philosophy major. Yeah, there's no. Sometimes there's the journey and not the answer.

00:47:50 - Jess Lipson
Yeah, yeah, exactly.

00:47:51 - Scot Wingo
Okay, so let's do like a five minute piece on Raleigh Founded. So I don't think everyone knows that you were pretty integral in that. Tell me the founding story of Raleigh Founded.

00:48:01 - Jess Lipson
Yeah, a couple of things came together. Brooks and I had this idea for something that we called Triangle Founded. Basically the idea was to have groups of founders who would get together and based on the number of employees they had. So instead of trying to glorify VC funded companies, we glorify job creation and entrepreneurship, being able to learn from each other. So like one of the challenges the Triangle has is just geographically spread out and like there's not enough connectivity between entrepreneurs and the community. And so we wanted to create kind of this social thing called Triangle Founded.

00:48:39 - Scot Wingo
Wasn't there part of this idea, if I recall? Like they were going to live together in like a house or something.

00:48:43 - Jess Lipson
That was a separate idea called Think House. Yeah, which we did.

00:48:45 - Scot Wingo
And you record it and it'd be like real world.

00:48:47 - Jess Lipson
We did that for three or four years. Think House but. And actually there was a piece of it that was like what Grep beat is today. We wanted to create like a tech crunch, have a group of entrepreneurs. Just a way for entrepreneurs to have that kind of like collision with each other and exchange of ideas. And then also I had a challenge at ShareFile where like this was back in 2012 where we created Raleigh Founded. So like wework was just still early. It was just in New York, I think maybe London, but definitely not here. And at ShareFile for the first 10 years of ShareFile. I think we had to move or expand office spaces like nine times.

00:49:26 - Scot Wingo
Did you have to personally guarantee some of them?

00:49:28 - Jess Lipson
Never did. I got away without having to do that. But I would have these landlords asking for five year leases and I just think like how could I possibly know how much space I'm going to need in five years? It was just incomprehensible. And then having to buy tens of thousands of dollars of furniture and then wire it with all the Internet every ton and just do it felt like.

00:49:51 - Scot Wingo
Then you ended up with this trail of subleases that you have to do.

00:49:53 - Jess Lipson
Yeah, exactly.

00:49:54 - Scot Wingo
So now you're a landlord.

00:49:55 - Jess Lipson
Yeah, exactly. And so it felt like kind of this unnecessary tax on entrepreneurship. And so being an entrepreneur and you were talking about starting things based on your own pain point. I was like this would just be super helpful to entrepreneurs if we could take that away from them so they could be focusing on their core, which is building a. Not focusing on office space or Internet or coffee or whatever desks. Brooks and I met Christopher Gergen who was working on some community type of ideas and then he knew this guy Jason Wieden who was just moving to the area who had some real estate experience. Christopher was like, hey, you guys don't run this yourselves, focus on your business. I've got this guy Jason, he can help with the logistics of like making this happen. And so we had some extra space in Brooks's office that she wasn't using. And we opened up the first Raleigh founded and right when we opened, I think we opened and it was already full and then with a waiting list and so just one of those things where it was like you do something and the market is immediately telling you there's a need. And then we expanded a year or two later into the warehouse district and I think we opened and like I think we opened full there as well. And so it was just very clear.

00:51:13 - Scot Wingo
Then you had to buy something next door then you've always like been. It's always been chasing you versus you chasing it.

00:51:18 - Jess Lipson
Yeah, yeah. And so that was kind of how it started and we're still doing it today. We've got I think like five spaces now over 100,000 square feet. Like 400 companies.

00:51:28 - Scot Wingo
Yeah. I remember when I first did the tweener list in 2015, I was like why is there this explosion of startups? And then like the next year I figured out how to get it on Google Maps and it clustered over the co working and I was like, ah, yeah. And it was like, duh. It was like the co working definitely helped. Like I don't know, you know, it was a factor. I also credit like Shark Tank and the Social Network movie. A lot of things kind of like stacked up there to create an explosion of entrepreneurism.

00:51:56 - Jess Lipson
And one of my goals, the other thing I saw at Sharefile was like how much impact a successful startup can have on the community. And so like the impact that we had in the warehouse district and all the jobs we created and all the people that we hired that made their way into other companies. So like one of the goals with Raleigh founded, I stated early on is we want to incubate the next share file or the next multiple share files. And Pendo is actually a company that started in Raleigh founded and they give some credit to Raleigh founded kind of for their early success. And so I feel like we have one of those, which is Pendo and we've got some other ones that are doing really well and shift taking stock instead of rent. Yeah, yeah, we thought about it. We thought about the accelerator model versus 2020.

00:52:43 - Scot Wingo
So you do that as kind of like a side journey.

00:52:45 - Jess Lipson
Yep.

00:52:46 - Scot Wingo
And then your post Citrix, what led to levitate?

00:52:50 - Jess Lipson
I decided I wanted to. I decided I was too young to retire. I realized I wanted to leave citrix. I was 39, felt like I was too young to retire. And I was like, well, I don't really think I want to be a corporate executive. I don't think I would be a good VC and I don't think I would like to do that. And so kind of process of elimination. I was like, well, I did like.

00:53:09 - Scot Wingo
To be an entrepreneur. You haven't been totally positive at this.

00:53:12 - Jess Lipson
Point in the Congress.

00:53:14 - Scot Wingo
Those guys ruin everything.

00:53:16 - Jess Lipson
I just kind of felt like I don't know if I'd be good at it. And also the lifestyle of looking at companies and deciding what to invest in just doesn't sound, you know, that fun to me. And so kind of process of elimination. I decided like entrepreneurship is something that I know I enjoy. And so I decided I wanted to do another company. And one thing for me is like I've never had a shortage of business ideas. So like I always had a notebook of ideas. And so like when I left Citrix, I didn't know exactly what I was going to do, but I had like 20 ideas of things I could do. One of the filters I kind of put it through was I decided I wanted to do something where I was selling to similar customer types as sharefox. I figured I knew how to do that, I knew the people who knew how to do that, that kind of outbound SMB sales. And so I figured if I can pick one of my ideas that I have that are in that area, it will eliminate one of the big risks of distribution. So now it's about just making sure that the product is the right fit for the market. But I know we can sell to these people, I know we can serve them, I know what they need, I know how to build products for them. The other kind of things that I was looking at, I was really interested in doing something with email and calendar systems and AI. And so but I wanted to build an idea that could benefit from AI, but not was not 100% dependent on AI because it's easy to come up with an idea of. And this was 2017, so like, it's easy to come up with an idea of like, hey, we'll use AI to do time tracking so we automatically know where you're spending your time and you don't have to manually log it. There's a huge amount of risk that the AI works and can actually do that. And so I wanted to make sure that the idea could still be successful without AI, but then could benefit from AI.

00:55:04 - Scot Wingo
And so, and this is obviously like, you know, a long time before GPTs were exactly.

00:55:09 - Jess Lipson
This is five years before ChatGPT. So anyway, I kind of then got into this problem area which is, which I saw Brooks struggle with a lot, which is like all these relationship based businesses, they have Salesforce, they've got marketing automation, but a lot of the new business they generate comes totally outside of those systems with them just doing a good job keeping in touch in a more personal way with their network. And so the idea is like, can you use analytics from email and calendar to help people scale that process? Because most people know that they don't do a great job of keeping in touch with everybody who they want to be keeping in touch with. And the tools out there are not built for them. And so I figured the industries that I knew how to sell to, like financial advisors and lawyers and accountants and insurance people, they all fall in that category of word of mouth, personal, authentic, relationship driven businesses versus kind of hardcore sales approach. And so decided to build Levitate.

00:56:12 - Scot Wingo
So I think the original entity was Real Magic. Was that just kind of like another kind of an exploration platform before you kind of like zeroed in on what became Levitate or.

00:56:21 - Jess Lipson
Yeah, my original idea with Real Magic, which is not totally dead now, is that. And this was the Original idea of Novel Labs, and I've never been able to pull it off. But like your original idea with Novel Labs is incubate multiple products.

00:56:33 - Scot Wingo
Kind of like a venture studio, but like a solo entrepreneur. Like.

00:56:37 - Jess Lipson
Yeah, exactly.

00:56:38 - Scot Wingo
Having LPs or something.

00:56:39 - Jess Lipson
And then what ended up happening is like sharefile became successful and then we could never do anything else because it was. It didn't make sense. And then, so for real Magic, I kind of had the same idea, which is we'll launch multiple products over time. Levitate will be the first one, but we'll invest a certain amount of our revenue over time to launch like, new products to keep growth going for longer. And again, we're kind of, maybe we'll end up in the same position. So I've always started wanting to build like a, you know, a company that I can run for my whole life, like a Berkshire Hathaway platform. Start new businesses but keep the umbrella of the company. And I have not yet been able to pull it off. We'll see if I can do it with real magic.

00:57:26 - Scot Wingo
The context switching is very hard.

00:57:28 - Jess Lipson
Yeah, the context switching is hard. I think the toughest part is also having the discipline to invest in something that is not going to move the needle on the business. Once the business gets to a certain scale and like, you know, if the company is 25 million going to 50 million trying a new product, that's going to take maybe a couple or three years to get to a million, that is, it's difficult to justify that, but it's also necessary in the long term because eventually every product starts to slow and if you don't have the next one scaling behind it, then you end up with kind of a growth problem that puts you in a kind of a death spiral as a business.

00:58:10 - Scot Wingo
Yeah. Okay, so you started Levitate seven years ago. Yeah. So it's this kind of keep in touch marketing. What are some of the verticals that you guys are in?

00:58:20 - Jess Lipson
So we started in insurance, independent insurance agencies, and then we added wealth management, accounting, legal, nonprofit, and then now we're selling into home services as well. H vac, plumbing, roofing, and give us.

00:58:34 - Scot Wingo
An idea of the scale. So you've been at this. So first of all, you decided to do VC this time. Why? Why turn your stripes and become a evil VC background?

00:58:44 - Jess Lipson
Yeah, the original, originally I didn't. I wasn't planning on it. So my original plan was I didn't feel like I could bootstrap again because it's just hard. I mean, at Sharefile, I waited Till we had a thousand customers before I hired any employees. So it was just me, up to a thousand customers. So I was basically working all the time. I was coding, doing the marketing, doing customer support. This was like early cloud days. So, like, I had to bring my laptop with me everywhere I went to dinner or whatever, because if I got a call, the site was down. It was going to be down until I fixed it. And so I had to. I had to have a laptop with me like, 24, seven for those first. Whatever year or two. And I felt like, well, I'm like 40 now and I've got some money. I probably don't need to put myself through that. So I decided I'll hire a couple developers to start. I did start coding again. So I helped with the initial launch of Levitate. I coded some of it. So once you hire a designer and a couple developers and then a few salespeople, you need money. And so my original idea was that Brooks and I would just put in a certain amount of seed capital and that could get us to break even, and then I could kind of execute on my plan. What I realized after about a year was that we weren't going to be capital efficient enough to get to break even with, like, the capital that we were comfortable putting in, especially Brooks was comfortable putting in. And so, like, at some point, she was like, all right, well, I'm not comfortable with us putting any more in at this stage. And so we had to either raise VC funding or I probably would have had to shut the business down if I didn't do that.

01:00:30 - Scot Wingo
I did one bootstrap and then I've done vc. Yeah, it's odd, but even though I'm older and more patient as a person, I'm less patient in building companies because once you've gotten up to a certain size, resetting at zero is just like, let's go fast.

01:00:40 - Jess Lipson
That was very slow. Yeah, exactly.

01:00:42 - Scot Wingo
Faster. Faster.

01:00:43 - Jess Lipson
Yeah.

01:00:43 - Scot Wingo
So, yeah. And then give us an idea for how big Levitate is now.

01:00:47 - Jess Lipson
So we have about 6,500 customers. We're about 25 million of ARR in scale. We have a couple hundred employees.

01:00:57 - Scot Wingo
Yep. And still same model, lots of direct, lots of go to market. That's bdrs, pounding the phones, obviously. Digital marketing and that type of stuff.

01:01:08 - Jess Lipson
Yeah, same playbook, basically. And I think we've evolved it and probably gotten even better, Even better at it than we were before. But, yeah, it's pretty much the same exact playbook.

01:01:19 - Scot Wingo
What keeps you motivated. So you could have retired and gone to A beach or whatever your thing is. Like, why do you keep doing this?

01:01:26 - Jess Lipson
I think that being an entrepreneur, I think requires some kind of temporary suspension of disbelief. And so the time I made the decision not to retire and to do another company, and then I jumped in to levitate. Once you're jumped in, then you're kind of committed. And so like, I probably spent a lot of time in the first couple of years being like, that was so stupid for me to do that. Why would I risk my reputation and like do this? Why didn't I just retire? Like now I've put myself in like this tough position and if I fail, then everyone's gonna just think I was lucky the first time. And like, you know, and so after I made that entrepreneurial leap, I kind of had some periods of regret, you know, for a while.

01:02:13 - Scot Wingo
Second time founders remorse.

01:02:15 - Jess Lipson
Yeah, exactly. But it's kind of like, you know, I did it because I thought too young to retire, which is probably true. And then once you're in it, you're in it and like, you want to see it through and be successful. And so I'm in it. At this point, we've gotten. It took us probably five years before I really felt we have product market fit, we have something that's not going to go to zero. And then now it's about like, how big can we build it? And that path to 100 million-plus in revenue. And I think it's actually now it's like a little bit more of a more fun time as a business. I think, at least for me, everybody's probably different, but the fear of existential failure for me is very strong. And so when we were in our first few years and that was a very real possibility, I found it really stressful. And I think now we have something of value. Now it may not be as much value as where we want it to be, but it's very, very unlikely that it's going to go away. And so this kind of scale up part of it, the 10 million to 100 million, I think in a lot of ways is for me at least, is more fun.

01:03:31 - Scot Wingo
Yeah. And you're 2x where you were with Sharefile, so you're in uncharted territory, which is fun.

01:03:35 - Jess Lipson
Yeah. Yeah.

01:03:35 - Scot Wingo
So you're finally off the map, right?

01:03:37 - Jess Lipson
Yeah.

01:03:37 - Scot Wingo
And oddly, you'll find that the path from 25 to 100 is easier to see and navigate than the path from 0 to 5. Like the, you know, product market fits the hardest part. And then like, it's a. It's A. It's a very strange, super counterintuitive part of this whole thing.

01:03:53 - Jess Lipson
I totally agree. Yeah, it's kind of like the product market fits almost like a lightning in a bottle type of a thing. It's art. More of an art than a science. And then the science.

01:04:03 - Scot Wingo
Grind it out. There's no other path. I've seen you guys do some events with like, you know, once you get to your size, you're kind of in this, like, potential IPO kind of company and the. Both the New York Stock Exchange and NASDAQ start courting you.

01:04:18 - Jess Lipson
Yeah.

01:04:18 - Scot Wingo
So I've seen you guys do the NASDAQ market site.

01:04:21 - Jess Lipson
Yeah.

01:04:21 - Scot Wingo
Is that you just like. That's just kind of like a fun thing or is that kind of. Do you have aspirations to an ipo? Would you ever think about doing that?

01:04:28 - Jess Lipson
I would definitely think about it. I think when I founded the company. Well, actually, when I first founded the company, the goal was to never IPO and to be like a SaaS, you know, and just run a closely held business for the rest of my career. But then I think I kind of changed once we decided to take VC funding. You know, that's not really practical as.

01:04:50 - Scot Wingo
Much as the lifestyle business is off the table.

01:04:53 - Jess Lipson
Yeah, exactly.

01:04:54 - Scot Wingo
Yeah. So you still have fail on the table. This one's off. And now it's like M and A or ipo. So you've got basically three choices.

01:05:00 - Jess Lipson
And so I think IPO was really interesting. And at the time, this was like, I don't know, five years ago. The conventional wisdom was like, you can get. To get to 100 million, you can IPO. The yardstick has kind of moved now and people are talking more. 250, 300, 500. It's. That may shift back.

01:05:20 - Scot Wingo
Yeah.

01:05:21 - Jess Lipson
But yeah, I would. I think it would be also great for the area there's. In the Triangle right now, there's no independent public software as a service businesses. And so I would love to kind of see one or two of those happen in the Triangle. And, you know, rather than just be on the sidelines saying, I want that to happen, like, I can be one of those. And so, like, I think it would be really great for the area to. To do it.

01:05:48 - Scot Wingo
Yeah, yeah. I'm a thousand percent aligned on that. And yeah, I think everyone's cheering for you guys. Yeah, we got to get Pindo out. Got to get you guys out. And I think those would be like, huge, huge wins for the area. Yeah, yeah.

01:05:59 - Jess Lipson
I think the interesting thing about the area is like, we have something that I think less than five markets have, which is three $10 billion market cap businesses. We don't get enough credit for that. With Red Hat SaaS and Epic Games. There's a lot of huge markets. I don't think LA has three $10 billion software businesses. There's less than five markets out there that probably do. And then we have all these great activity on the tweener side and we have this gigantic gap like in the middle. And so I think that's the big area where the Triangle not having any public SaaS companies. There's not that many public SaaS companies. There's probably a hundred. I mean, it fits on two pages of paper.

01:06:44 - Scot Wingo
It's going down because they're getting, you know.

01:06:46 - Jess Lipson
Yeah.

01:06:46 - Scot Wingo
So channel buyers are got bought by private equity. So. So there's. There's more of it coming off than coming on. For sure.

01:06:51 - Jess Lipson
You're a public SaaS company like you're known because there's just not that many of them. And so kind of filling that middle of the pipeline is the biggest challenge for the Triangle. Get those tweeners into the public markets.

01:07:05 - Scot Wingo
100% on board with it. Thank you very much for doing this. Appreciate it.

01:07:09 - Jess Lipson
Absolutely. My pleasure.

01:07:10 - Scot Wingo
Great to hear all the stories and I've known pieces of it, but it was cool to hear all the chronological order.

01:07:15 - Jess Lipson
Yeah. This is a lot of fun. Thanks, Scott.

01:07:17 - Scot Wingo
Thanks, Jess. For more tweener content, check out the Triangle Tweener time substack@tweener.substack.com for more tweener content, check out tweenertimes.com thanks for listening and we'll see you again soon. Soon on Triangle tweenertalks.