In this episode, Adam is joined by Santosh Sankar, Co-Founder and Managing Partner of Dynamo Ventures. In this conversation, Adam and Santosh recap the Manifest conference, how a possible recession will impact growth for businesses in 2023, how AI will help automate workflow for businesses in the future, and more.
Highlights from the conversation:
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Transcription generated by Otter.ai
Adam Vazquez 00:29
Alright, we’re back with another episode and we are here with the OG the original, or the OC really the original customer, but also the OG, Santosh Sankar. Host of the Future Supply Chain podcast and partner Dynamo ventures. Thanks for joining me, buddy.
Santosh Sankar 00:45
Thanks for having me back.
Adam Vazquez 00:47
I can’t believe this is the third time you’ve been on? Yeah, every time I introduce you to someone or with this week, weirdly, I feel like we’ve had these. I’m always like, Man, this guy is the one that that that took a bet on us. So I always have to thank you every time. Every time I do one of these.
Santosh Sankar 01:02
You guys are good partners to us. And what people don’t probably know is that you produce podcasts. But there’s a lot of other things you guys work on, given you’re part of a broader media platform. So for sure, I’d certainly encourage people to ask you questions about those offerings as well.
Adam Vazquez 01:22
Appreciate that. That’s weird. We’ve had a lot of internal conversation around that we kind of pegged ourselves a little bit too heavily in the podcast thing, I think. And so now we’re intentionally re broadening that message a little bit. But dude, I know you’ve been running around like a crazy person. How is manifest?
Santosh Sankar 01:41
Manifest? Manifest is awesome. So second year, I tend to judge conferences by what I come back next year, based on what I experienced this year. And like without doubt, has my endorsement. And like the Dynamo team showed up this year, John flew in from the UK. He navigated everything whether through at home, I think he had to cancel flights and be rebooked on a less desirable carrier, but ended up there and hung out and he had a blast he told me, but if I recall, right, I think you unfortunately fell victim to weather. So we’re not like I did.
Adam Vazquez 02:24
And now I’m embarrassed. Did not know John. John found a way through the UK in the undesirable carriers. But yeah, we had our flight canceled. And with Americans, which I’m sure you know. There were very few options. And those options skyrocket. I mean, it was gonna be $2,000 more. Yeah, why? Crazy? So yeah, it just didn’t work out. I’m very, very disappointed. I missed it. But I’ve only heard great things from everyone who was there? We’ll get
Santosh Sankar 02:53
tenakee. Nico. It was good. What it was technically a panel. So as panels go, you have to be very brief. You have to be to the point in regard to that. But by and large, I think there are good points made. I think the takeaway that the room had was, we’ve been running a period of like, broadly speaking growth since 2009, since the great recession. And we had a little bit of a hiccup during COVID. But if anything, then things really accelerated. And the venture market with that has also been kind of calibrated more on growth, maybe growth at all costs, to the detriment of just good discipline, fundamental business building. And I think what the room likely is taken away is it’s not about that anymore. It’s about how you need to grow. But how are you thoughtful about growth? And we’re probably going through a year here, where, frankly, growth is not as appreciated. It’s actually kind of being very thoughtful about how you build if you’re a later stage business, demonstrating a path to break even if not profitability, is where it’s at, which is a much different tune to dance to. Then a year ago, two years ago, three years ago, so yeah, maybe a bit sobering but equally felt welcome all among us, as well.
Adam Vazquez 04:34
It seems like in the conversations I’ve had in this space, specifically supply chain tech, it ‘s like a renewed energy or it’s not exciting, because obviously the growth times are super exciting, but it’s almost like hey, we’re gonna use this as an opportunity. Like we’re gonna go figure this out. It’s going to be up from the ashes type story and people seem to be embracing that. Yeah,
Santosh Sankar 04:57
it’s its constraints, right? There’s basically a new constraint that has been put on entrepreneurs, the teams that they work with. And you know this, you’re an entrepreneur, like entrepreneurial people, when you put constraints on them, it actually forces them to be even more creative. And they find solutions to problems that he did not believe or did not think existed. And I found her a very early founder that we funded who I remember, he was running low on cash. And he kind of told me, he was listed, like, I’ve actually found out that I’m a better problem solver, when my back is about to be put up against the wall. When I have all the cash in the world and have all the resources in the world, I tend to find that I may not be as astute in allocating it. So
Adam Vazquez 05:53
yeah, fishing, you have to, you have to get creative. I want to talk more about the environment. But before we do, how did the event go? I know you held an event there as well as
Santosh Sankar 06:02
Oh, man, it was a blast. Yeah. Yeah. It was. Had a good happy hour, because you didn’t come. We weren’t able to hit our minimum and are willing to spend at a minimum. So a few of us were there. And I was trying so hard. Like, they’re like 20 minutes till you’re done. And like, I’m ordering everybody, two or three drinks. cysteine. You know, Hey, good to go. You’ll be okay. Yeah, but no, it was a blast. And I think, you know, when, when you think about a conference, I think conferences are great. If done right, you bring all the right people together. So it is just a very efficient draw of my tie, because it shows up on one face. And I mean, like on Wednesday, I had a board meeting because the entire board was basically at the event. And then prior to that, I think there were like seven meetings I had. So it’s hyper efficient, right? All before happy hour and a happy hour means multiple.
Adam Vazquez 07:01
So for people who didn’t make it to the event, and a D, get to impart all the things on the timeout, you all did record your talk, right? That’s the best ease talk that
Santosh Sankar 07:13
we show. So there’s a few different things. I think the panel that I did with Peter at Merce really beat in at Eclipse who I met literally on the spot, as well as the lateral brothers should be published in the next couple of weeks. And then separate from that of the hosts of the happy hour. Myself tide iron spraying Julian schematic Chris at fontinalis is live. So yeah, that is, that is a nice recap for folks and equally proxying good macro banter amongst the four of us. Yeah, I
Adam Vazquez 07:52
I love the illusion of the besties. It made me laugh. And then it was a payoff as well. I thought so. Good. Yeah, good conversation to tune into. So we talked a little bit about the environment that we are headed in . You know, some companies are already probably experiencing more than others, especially the bigger ones. What are you seeing in the space in regards to the looming recession? Or the slowdown? And how, how is that affecting the startups that you all work with? Yeah. So
Santosh Sankar 08:22
Our strongest teams actually started containing costs about a year ago. So they were able to kind of look at the signals, talk to their investors, their boards, look around the corner, is what I call it. And so that’s a great position to be in. And some of the younger businesses, right, precede seed businesses that are only recently raised capital, it’s much more difficult to ascertain what is the right hack forward. Because you’re kind of like I just raised two and a half million dollars and you’re telling me not to do anything. It’s never like, well, we probably ought to go do is review where we were looking to make investments or accelerate burn, and what we expected that to drive in the business and figure out one, is that still worth doing? Or is that the right objective in this kind of renewed environment? And if not, what is it that we should be calibrating towards? And what kind of burns should we have? And by and large, kind of the general advice we’ve espoused is kind of slow your burn. So lower it and slower it and if you need to accelerate an accelerator on the back of customer progress, and namely revenue, and until we kind of get signs as to Hey there some some more clarity or on the macro? Right now like who’s to say we may not hit an economic recession in, in the classic sense this year, although that’s what we saw, we saw a kind of material slowdown last year. But we may not, quote unquote, get two consecutive quarters of GDP growth. But there’s a hell of a lot of other challenges we need to deal with as the kind of American citizens in the American economy and equally global citizens in a global economy. And the exception to that is, there are going to be some businesses that great businesses will still be able to figure out, they’ll be able to raise money. That’s true, you have a conversation with your board as to why things are growing better than we thought. Should we accelerate and then plan to fundraise? Right? That’s all he’s by case basis. But in general, kind of rule of thumb, lesson burn slower down, take a quarter by quarter more data that’s
Adam Vazquez 10:53
so interesting, because it, you know, it sounds simple to say it, but it’s like when you say we don’t measuring more so by by progress or by revenue, it’s like, a kind of just going back to business fundamentals, right, like, like the startups are now having to operate more like just regular, you know, cash flow or cash flow basis, companies, as opposed to what they had been doing, which was an anomaly for a decade, essentially.
Santosh Sankar 11:22
Yep. Yeah, like, growth, growth is not getting the premium that it once did, or or other, let me rephrase it. Sound growth is getting the premium investors, our investors have woken up and realized they were assigning a premium to things that had nothing to show for it. There, they’re just there, it might have not been growth, maybe you’re not ready to grow, maybe there is no customer conversation, there is no sound underlying reason as to why the business should exist, or the product is built in a certain way. Those businesses were raising money. And now there’s a return to this, and we’re being paid to do our homework. Go do your homework. Yeah,
Adam Vazquez 12:07
absolutely. So when when people start thinking about growth that in this context, and obviously, with what our company, does, we often get looped into some type of growth conversation, how are you advising companies to go about thinking about growth or executing, plans to grow when you know, the war, chest is going to be a little bit tighter, things are going to need to be a little bit more conservative, as they approach going out. And, you know, either hiring or whatever it might be whatever their growth plan entails.
Santosh Sankar 12:40
Yeah. So a metric that is always worth tracking, in my opinion, is dollar net revenue retention, which basically shows you period over period, how much you’ve grown or shrunk on a $1 basis from existing or pre existing customers. And in, in an environment where customers are tightening the belt, and equally, you have to be more capital efficient with how you operate and grow the business, this is a really interesting indicator, because it’s much easier to go to an existing customer and try to upsell them something that they need, and that you might be able to solve, then to go to an entirely new customer, right? You’ve already expended a lot of the acquisition cost in getting your toe in on the land, you need to expand revenues. So that’s what that’s sort of, I’ve seen kind of your groups boards focus on equally, that’s what I, I tend to focus on that, in general, as an enterprise investor, as an early stage investor, you know, sell small self acid and quickly try to figure out how you can kind of sell an adjacency. Right? But that has proven to be a great place for companies to focus on right now. Because you have a higher likelihood you’re a known thing, you have a higher likelihood of success. That’s not to say that you don’t go chase new customers, but you might be a bit more thoughtful when you do that. opportunity costs.
Adam Vazquez 14:16
So practically speaking, what can that look like? Like? Like you just said, Sell small, sell fast? Does that mean potentially offering a new market? You know, go to market strategy where you have a lower price? Hook? Does it mean investing more in customer success? How do you see that coming to life? Most often? Yeah.
Santosh Sankar 14:35
So generally what happens I’ll think of one of our software businesses, they take, they basically ascertain through customer discovery, what what their MVP is, right? What’s like that the most, the smallest unit of product and effort they need to expand, to solve a problem that somebody is willing to pay you money for. On the back of that You get the product and you start to make a little money, but you’re learning a ton. You’re learning a ton, you mature that initial module further and make it a bit more wholesome, version two, three, so on. But then you’re also going to start learning about, okay, these are all the other things related to what I do. And perhaps a good example of this is a company we have in London called raft. And James, in the saga at warped, has been amazing. And they actually started the business on the back of vision technology that can read bills of lading. And they can, it can be run, no, I’ve seen some nasty bills of lading, coffee stains, run over water damage, different languages, they’re also not standard documents isn’t like a universal format. So all over the place, and their initial product booths, basically, we can extract data and allow you to dynamically and put it into whatever system you need to write, and the sold contract on the back of that. And then increasingly does start to build workflow optimizations adjacent to that, that the freight forwarder would have to deal with. Next thing, you know, right? This was like 2018, I think is when we wrote the first today, they’re basically systematically going through and figuring out how do we make the freight forwarders life easier, right, rather than throwing people at problems, how can they be smart throw technology at these repetitive issues. And on the back of that, it’s basically a more mature workflow product where you can buy different parts of the workflow, you can over time, they’re talking about different aspects of monetization, around three to four different features. This is all separate from the fact that when they land these contracts, they might be landing in the office, like they might land that New York office for business or large freight forward, right. And then that business likely has offices on the West Coast, in the south and the Midwest, she goes to them, you have three more offices, but similar size, oh, these guys have a London office, and then they have a GAO, their own ‘s Asia office. So it can also work as much as is on the feature set, or capability set across regions and gels, which is very natural as you go to a medium to large enterprise. So that’s kind of what we mean by land and expansion.
Adam Vazquez 17:34
Love that. Like that’s super helpful and practical for people to be able to use. You alluded there to finding a tool or finding a solution that can automate repetitive tasks. I have to ask you as a content guy, and because of what you do, what’s your Have you played with AI? Any what? What’s your take on how that’s changing things for creators like us?
Santosh Sankar 17:58
So our q4 letter to our investors was definitely assisted by Chachi. Beatty. Oh, it wasn’t written entirely, because I don’t know if folks would try to write. I think that was one of our short letters, I think it was five pages. Wow. It’s very, very good at helping you start out, but equally helping you synthesize and write something more concise. So almost an editorial, it can either be in a pre-written fashion or an editorial fashion. But actually a few of us got into notions about AI products over the last week. So we’re all messing around
Adam Vazquez 18:37
amazing. Which is great.
Santosh Sankar 18:40
Yeah, it’s, yeah, it is quite good. I haven’t spent enough time with it. But over the last couple of days, I’ve written some things that hit the magic button. And it kind of just takes some of the fluff out. And when I read those, the car yeah, I didn’t need any of that doesn’t add anything to my copywriting. But we have a mantra here because a seed fund is a small business. Right? And so we have a mantras to, if we’re doing it more than two times in a year, we need to document it. And when we document that we need to figure out can we automate it? So a human never needs to worry about Wow, or doesn’t need to worry about it as much. And if that’s entirely possible, then document it thoroughly. So somebody else on the team could pick it up and actually do the task. And so we’re like heavy users of Zapier. I think we implemented Zapier Q4, for a bunch of our comms as we kind of speak to companies or we’re logging kind of progress in notion, and we’ve cut out on a weekly basis as a result of that. Probably 30 Odd emails, one would send on the team. Why just it’s been put somewhere within it, and it’s integrated back out, and the comms are automated for everyone. Ready to consume? Just one word: incredible. Just one workflow. Yeah. Yeah, definitely, I
Adam Vazquez 20:06
I think it’s unbelievable. I can’t wait.
Santosh Sankar 20:09
Adam Vazquez 20:11
I just can’t wait for the Italian future work part of the workflow. Yeah, it’s, it’ll be a lot of fun, a ton of hand wringing around, you know, it’s going to replace, it’s going to do this, gonna do that. And I think it’s pure enhancement, pure, you know, progress. And we’ve been using it quite a bit, just testing it, you know, like you used it for an investor letter. We’ve been using it for a lot of our own internal work. So not not trying to do a client facing yet but, and the work is so good. This will be you know, the prompts are difficult. But once you start to figure out a formula around that, I think that’s what’s going to be the key long term is where the recipes where the formulas in order to get the type of work out. And so we’re very excited about that. But Santhosh and I always appreciate your time. Always appreciate our discussions. Appreciate what you believe. Yes, from day one. And as always, it’s been an honor and a pleasure getting to talk with you.
Santosh Sankar 21:07
Yeah. Thanks, man. Appreciate your partnership.
Carlton Riffel 21:09
And that’s a wrap. Thank you for listening to this episode of Content Is for Closers. We hope you find this show really helpful as you grow your business with content. Maybe you know of other people who would find this show helpful as well. How about you send them our way? If you didn’t like this show and you want to tell us that, then you can head over to contentisforclosers.com where you can send us a message, give us some feedback, ask questions, or find detailed notes for every episode. Until next time, keep creating and keep closing.