Patrick: [00:02:18] My guest today is Zac Bookman. Zac is the founder and CEO of OpenGov, a budgeting, and financial management software for local governments. Before he founded OpenGov, Zac was an advisor to US Army General H. R. McMaster in Afghanistan, a law clerk, and a Fulbright fellow studying corruption in the Mexican government. This conversation is one of the most unique and wide-ranging of any I've had on the show. We cover how Zac built a world-class sales organization, why you should build momentum in your business, and the role that capital efficiency still plays in building great companies. We also dive into the details on how local government works from mayors down to school board meetings. Please enjoy my conversation with Zac Bookman.

OpenGov Origins

Patrick: [00:02:56] Zac, I always try to think of an interesting place to begin these conversations, but I don't know how hard I need to work for this one because we're going to talk about a topic that I've never covered before, which is how the government works and why software businesses may be interesting to build in this sector. Everyone always wants big markets. I don't know if there's a market bigger than government. Maybe you can begin by explaining the origin stories here, both for you and for OpenGov, why what you did prior to OpenGov brought you to that point, and what the point of origin was for the business itself.

Zac: [00:03:26] Thanks for having me, Patrick. I'm really excited to be here. I grew up near government. I grew up in the Washington DC area. My father was a civil servant. In DC, everyone knows someone who works in government. It's an industry town. When I came out to the Valley and we actually started raising money for OpenGov, it's funny, but a lot of investors said, “This is crazy. I came to the Valley to get away from the government. I don't want anything to do with this.” I studied government. I went to law school. I did a Master's Degree in Public Administration. Then I went down to Mexico and studied corruption in the Mexican government on a Fulbright fellowship. I had a brief law career. I was a law clerk for a federal judge and then a trial litigator. Then I went overseas to Afghanistan.

I served as an advisor to US Army General H. R. McMaster, on the anti-corruption task force. We started OpenGov, the four of us. I was living in a half a shipping container with two soldiers in Kabul, in 2012 when we got this off the ground. Our chairman and co-founder, Joe Lonsdale, who's a co-founder of Palantir, and two really bright young technologists from Stanford got it going back in the Valley. Basically, for the prior couple of years, this is ‘09, ‘10, ‘11, we had been studying the California budget crisis, post-recession. All these governments hit the wall. Three in California actually went bankrupt. 12 were predicted to go bankrupt. We were coming of age wondering like, “Wow. How is this possible? These bedrock institutions aren't a bedrock at all.” As we dug in, we saw they're using 30, 40-year-old green screen ERP systems, back-office stuff, using COBOL and DOS.

We were like, “This is crazy.” We started talking with local governments, Budget Directors, and we were like, “Hey. Give us your budget data” and they'd be like, “How do we do that?” I'm like, "You're the Budget Director. What do you mean, 'How do we do that?'" They said, “Well, come sit with us and look what we're dealing with.” The city of Palo Alto had paid 10 million bucks to a German software conglomerate for an ERP system that was delivered on 20 disks and had green screens. We were a little naive, a little courageous. A lot of credit to Joe. Just, hey. When the world's supposed to be operating up here and it's actually operating here, that's a lot of white space for our company. We just dove in and built a product strategy and fought our way to building categories.

Patrick: [00:05:45] We're going to come back to what the original product was and how you built it, and sort of what that whole state and federal, local government systems look like, but I want to go back to, prior to OpenGov starting, your experience in Afghanistan. How did you get there? What exactly were you doing there? What lessons, looking back on it, can you pull from that experience?

Zac: [00:06:05] So a guy I know helped author the surge in Iraq and was one of the brain trusts of General Petraeus. I was talking with him. This is while I was practicing law. He said, “Wait a second. You studied corruption in Mexico. You're a trial litigator with criminal experience. These guys would kill for your experience. I'm going to call the general right now.” General McMaster was leading the task force. General Petraeus had set it up. General McMaster wrote me and said, “I want you on my strategy team, son.” It took a year to get the contract. They sent me to Blackwater to shoot guns. Then I went over and it was a surreal experience.

I showed up in a sports jacket. Everybody's in fatigues and they're like, “Who is this guy?” There was a lot of, I'd say civil-military friction that had to be worked out. I ended up helping to run a rule of law team that was one of about half a dozen different teams on this anti-corruption task force, which was at the International Security Assistance Force's headquarters, which is next to the embassy. It's a military base, but we were advising the Afghan Attorney General's office on investigations and prosecutions of high-level corruption cases. You might remember the Kabul Bank scandal, that kind of thing.

Patrick: [00:07:17] What do you take away from that time, that you think has applied or helped you in building OpenGov or anything else that you've done in life sense?

Zac: [00:07:26] A lot of lessons. Thematically, OpenGov, we build and sell back-office systems to power a more effective and accountable government. A lot of the work I've done, my passion is to have an impact, help people at a scale that really can make a big difference. There's some thematic thread around transparency, openness, and anti-corruption, even budgeting. A budget is anti-corruption tooling, but really, it's about how to get large groups of people to align and execute and that's the name of the game. Whether you're building a company or whether you're running a government or a task force or a nonprofit, it's so difficult.

In Afghanistan, I saw General McMaster and General Allen, and many others working, it's incredible, deployment hours, as they call it, 18, 20 hours a day, six and a half days a week. You're bringing together, not just four or five different services, but the entire inter-agency bureaucracy and then the foreign consulting community, and contractors, and then locals, and warlords, and government. And it’s just like “How do you organize that? How do you align that?” I can't say we succeeded every which way from Sunday, but I can say that it was an incredible learning experience for me. Frankly, a lot of the folks that were there developed a lot of respect, not just for the coalition, but for all the partners and, of course, the Afghans who fought heroically for like 40 years.

Patrick: [00:08:53] If you're trying to align a large group on a big mission, what is step one?

Zac: [00:08:59] I think you have to have a strategy that actually makes sense. That might sound obvious, but I've executed on strategies that were just wrong. It's a little tougher to align people and communicate when it's the wrong strategy and even if you can align them and communicate, you're running off in the wrong direction down the field. I think you got to have clarity of that mission. I saw a lot of different missions being executed on in Afghanistan.

It's extremely confusing. I don't want to over lawyer it, but if the mission is to stop any and all terrorism, that's not achievable on its face. So, how do you set up a mission that is both bold and ambitious, but it also makes sense and people can align by it and at least has the possibility of being achievable? Then I think you've got to inspire people. That's one of the hardest things for a leader to do and it's one of the most important, but you've got to communicate clearly and also just speak to people's hearts, guts, as well as their minds.

Patrick: [00:09:56] At the start of OpenGov, what did that step one look like there? I'm assuming it's not an easy task to go build vertical SaaS in the space that, as you say, previously, the solution is delivered on 20-disc drives and green screen format. What did that original alignment look like? What did the vision look like, that allowed you to get a foothold?

Zac: [00:10:14] We've been fairly consistent mission-wise and it's obviously a very broad mission to power more effectively in accountable government, but I found since early, it was very attractive. People are selling ads. They're building widgets. Most of these companies have a great story about how they're changing the world and it doesn't fully ring true for a lot of people. We've had many problems. I've made tons of mistakes, but the mission and inspiring people on it has been one that has worked out fairly well and I think it speaks for itself.

I hoot and holler like most other founders and have a good time while doing it, but I think people really want to have an impact. They want to come home at night, tell their parents, tell their kids, “Look what we did for the world. Look what we can do over the next five or 10 years for our communities and our society.” In most jobs, you don't get to do that. I think in some, you do and that gets very special very fast.

How Government Works

Patrick: [00:11:08] There was a really interesting chart or table in an article that I read on OpenGov that shows the status quo of a government system. I want to really lay the groundwork for people here because I think most people understand government. They vote in elections. They understand probably services that they consume, but it's a pretty opaque system overall. I couldn't really tell you much about how a mayor's job looks. What does a mayor do with their time? Or what does a major elected official do with their time, a city manager, or something like this? Maybe you can paint the picture for us in as much detail as possible, what the levels are that matter, maybe starting from hyper-local, all the way up to federal. Just give us the background of what the system looked like when you arrived at it.

Zac: [00:11:53] A general-purpose government is like a holding company. No one would go pitch you or Bill Gurley for investment on a startup idea and say, “Hey. I want to pave roads, educate kids, process sewage, and generate electric power. Patrick, you want to invest in my company.” That's pretty much what a general-purpose city or town is and does. We collect for-profit and non-profit business lines into an incorporated entity. The shareholders are the residents or citizens. Those are stockholders, if you will. I'm just trying to paint a picture. They elect a board and those boards are called councils or boards or 20 other names. The board appoints a CEO, the Chief Executive, or Administrative Officer. They often have diminutive titles, which is confusing for a lot of folks who are just going about their lives.

It's called the town manager or the city manager or the city administrator. There's 20 other names. That person appoints an executive team and that executive team typically consists of some executives, but also General Managers of those business lines that we talked about, police and fire, and the librarian, and someone to recruit businesses and run economic development, what have you. The first thing to debunk is most people think the mayor is like the Chief Executive of a government. That's only the case in about less than 1% of our nation's local governments. Our nation's local governments are run by a manager. The mayor is the titular chairman of the board and it's often just a rotating position. They get to wear the purple crown for a year and then they cut a few ribbons and move on.

That's the design of the standard city or town, probably where you grew up. I'm speaking about the mind run of our, say 19,000 cities and towns in the United States. There's another 16,000 townships, by the way. I'll talk about counties. There's 3,000 counties. There's 13,000 school districts. There's 20,000 special districts. I'll bore you with that in a second. Then there's probably 20, 25,000 state agencies. We live in a massive amount of democracy. Counties are subdivisions of states. They run roughly similar. Most are general purpose. Special purpose governments are a mosquito abatement district or a sewage plant or sometimes an electric power utility or even the Golden Gate Bridge. They're organized somewhat similarly, but they have one purpose, to run the Golden Gate Bridge.

You drive across. You pay tax. They collect revenue. Then they determine how to spend it on paint or suicide nets or maintenance and run that government that way. That's your local governments, special districts. States are, I suppose big general-purpose governments, but that's the essence of our federal system. You've got a federal government and a state government. States are, as we just saw in the past week, fairly autonomous. We truly have a federal system, in contrary to many other countries that we're friends with and admire. Then you've got this sprawl in federal bureaucracy. Most people think government and they think federal. Probably half the total tax dollars in revenue roughly goes to and is spent by our state and local governments. It's really where the government rubber hits the resident or citizen road and it's where most of us will interact with the government most of the time.

Patrick: [00:15:06] It's such an interesting Russian nesting doll of systems, all the way down. I really like the idea of it being like a holding company, this strange collection of services, many of which are unrelated to each other, that we all have come to expect that citizens of whatever town or municipality you're talking about. Say more then about the role of budget in all of this. It's hard enough to imagine being someone sitting on top of all these disparate services and generating tax revenue, and allocating it appropriately. I think probably the approval ratings for a lot of government surveys are quite low. Just talk through how money flows through this system and why it's a mess, and why, I think it's hard to get things done.

Zac: [00:15:48] The budget is the heart of a government, in some sense. It's why we have a government. Basically, we set up these entities. They have a coercive authority to raise revenue and that's your taxes, but a huge, long tail of fees and fines, and other revenue-generating activities. They often run businesses. They may run them as non-profits, but they sell electric power, do inspections, permit these, whatever. They get a bunch of revenue and then have a big pie fight about how to spend. What we've set up in United States is to bring that pie fight pretty close to the people whose money is being spent. An interesting lens is actually through selling stuff to governments. They say that it's the closest you go to the people. School districts are really close to the people.

Everyone, parents, go … People fight. They shout at each other. People who sell technology to school districts are often in a lot of pain because everybody's got an opinion. It's really hard to make decisions. They want consensus for the decision. You never get consensus. It's too hard. Then you move up, towns and counties, and states, and federal, and you get increasing distance from the people and a little more authority to operate and move at speed. The budget itself is an anti-corruption device. I think it came from the Napoleonic Wars or something, where the European nations were spending money so rapidly that they eventually realized, “You know what? We might actually have to plan out how we're going to spend this money.” You don't probably live your life saying, “I'm going to do 47 restaurant dinners during weeknights this year.”

We don't live our lives like that, individually and yet a government … It's amazing, the level of depth. Most people, most laypeople I talked to, or many think that there's a line item in a government budget that says, “Fraud.” There's another one that says, “Waste.” One says, “Abuse and corruption.” They're like, “If I was running that government, I would snip that right out.” It turns out it's not that easy. It might be a 300,000 row Excel spreadsheet with 77 tabs, all interlinked, boiling down like, literally, “We're going to buy three refrigerators for the machine shops at the Parks Department.” It runs down to a high level of detail and the reason we do that is so that we can actually track the taxpayers' dollars and spend them well. In my personal opinion, it's darn near overkill because the amount of back-office work going on in these governments is extraordinary.

It's byzantine. It's extremely complicated. There's large numbers of people doing accounting and figuring out where the money goes. It's all running different funds. Another thing that people think, “They get that gas tax. Why can't they lower this fee or something?” All this stuff is in different bank accounts and there's actually rules and regulations that you typically can't spend electric power fees on somebody's pet project over there. It's very complicated. It's highly regulated. And the problem is we did it to ourselves. We make the rules. We are the people, but I'd say the budget is the planning device. It's extremely important. The accounting system is where you track every dollar and where it goes. Every government is doing this.

Patrick: [00:18:55] How do you think technology can help shape up the system and the effectiveness of all of this? Because if you think of local governments and all governments, it's this interesting bundle of services that we can opt into, based on where we live. I guess there's not a ton of variants. Everywhere has a police department, I guess, but there's a range of the quality of these services. If you think about this from the citizen standpoint, where the citizen is the customer, is how I'll frame it, how do you think technology can enter this picture and potentially make government better and that bundle that we receive, better for all of us?

Zac: [00:19:29] There's a bunch of ways. I'll start from maybe the things that are mundane and move to a little more ethereal, I suppose. The less people are doing hammer and tongs in Excel and access and building budgets with bubblegum and toothpicks and string wrapped around it, the more they might be getting strategic and planning on behalf of the community. There's just a huge amount of manual labor that can be saved. This is going on in all sorts of verticals, all sorts of industries. You know that story. That's the promise of vertical software. It's really the promise of the cloud as well. Number two, and this might speak to your point, bringing the people closer to their governments is generally a good thing in terms of alignment, trust, getting things done. One city manager I talked to put it to me this way.

He said, “Trust is the coin of the realm. If you have it, you get things done. If you don't, you get nothing done.” We see that in companies. We see that all over the place. Technology can help you polish the budget, engage with your citizens, open up, operate. They have to operate in a glasshouse, but how many soccer moms and dads who are working late can go to the City Council meeting at 6:00 PM on a Tuesday and stay till midnight and so on? Put it online. It's 2020. There's a lot of things in areas that technology is helping to get citizens' sentiment, including even AI and mapping all social media and so on, but even mundane stuff like publishing the numbers in a way that people can digest and putting meetings online.

“Trust is the coin of the realm. If you have it, you get things done. If you don't, you get nothing done.”

I'd say three, you can get normative in the technology and actually change how people work. Rather than just mapping business processes and putting that stuff in the cloud, you can build processes and say, “This is the way it's supposed to be done.” Contractors, getting plans approved to renovate your house, Patrick, they should only have three steps, not 37 and they should be able to pay online. This is the way our technology works. There's a lot of really exciting frontiers there to make people's lives better and frankly, generate even more revenue or better capabilities for the governments themselves.

Patrick: [00:21:40] Do you think there's a chance that technology can enable an explosion in how we perceive the interaction that we have with local governments? I'll use permitting or something like that. It seems like we have Stockholm syndrome. We're just so used to it being a terrible experience. It's hard to imagine the rest of my life, it not being a terrible experience every time. People say., “Technology fixes these problems,” but in government, it seems to be far behind in a lot of other industries. Are there just structural issues with government, that will make it stick that way? So 20 years from now, if I build a house, I'm still going to have a nightmare of a time getting permits? Or do you think that we might be facing a seismic change in that world?

Zac: [00:22:22] Yes and no. I think government is going to be persistently 10 to 15 years behind, where you would want it to be and that's a structural issue. We actually designed these organizations, Patrick, that basically did not make decisions. You don't design an organization like this if you want speed. I sell software to state and local governments. Many of our purchases have to be approved by the board. How many company boards need to approve a software purchase? It's kind of crazy. Even an expensive one, you typically don't take to the board and yet over 25 or 50 or 100k, you’ve got the rec baseball coach is weighing in on it and approving. The nation's city managers know this. They're not dumb. They sit there frequently, chairing a meeting, or helping to run things.

They take so much flak from the public, but they know what they're operating in. They're like, “You voted on these rules. I'm playing in your system.” There's a lot of procurement rules designed to be deliberative. It's designed to think not quarterly. Like say a public company, it’s designed to think out decades. We want governments to protect us from criminals, to think about natural disasters, to build 20-year plans, even 50-year plans sometimes. So this is about how to take a community across generations for a lot of these local governments. It's not about … The number one goal is not to operate efficiently.

I would say the number one goal is to act with the will of the people as efficiently as possible and that's very different. That said, look, I think this COVID crisis is accelerating local government in a way that we haven't seen in 20, 25 years, maybe even since the advent of public administration schools or like McNamara and the era of great leaders going into government as a noble duty. There's something really powerful happening. Every government is getting laptops, getting online, getting video conferencing, getting cloud technology. I'd say the cloud revolution is needing local government. It's happening fast and furious.

Patrick: [00:24:20] I'd love to discuss for a while the lessons that you've learned, building vertical SaaS. Before we do that, I think we have to mention that this is a very regulated space that you're operating in and so I'd love to generalize those lessons overall, but also with a mind towards working in a regulation framework that can be challenging because I think while it makes it probably harder to do, it may also result in a business that's stickier and longer-lasting and better for investors and founders and everything else. So I think it's really interesting. Maybe you could begin by just telling us what vertical SaaS means to you. What does that concept mean? If you wanted to build a new vertical SaaS application in some space, again, back to first principles and step one, what would you do first? What are the early steps to building an effective vertical SaaS programming system?

Zac: [00:25:02] Vertical SaaS is basically trading off TAM, Total Addressable Market, for market share. You get more market share essentially by having more features in your suite, features that are configured or even customized towards the needs of your vertical. OpenGov is a solid example. We focus just on state and local governments. They actually do have unique needs. First and foremost is multi-fund accounting. I described all those bank accounts. Those are different funds. In corporate accounting, you sell goods and services. You get revenue. You dump it in your bank account. For governments, it's totally different. You raise revenue in order, mostly, to give away goods and services and you have all these different bank accounts that actually have governing structures, so your accounting system, your budgeting system looks very different.

Most businesses also don't need a permitting system. There's tons of features and capabilities to sell to a government. If I can build those and build them well, I should be able to beat the horizontal cloud or service providers every day of the week. That's why I'll win market share. If I can't, I'll lose, but I should be Workday selling to government because Workday takes its suite and sells it to pharma and insurance, and retail, and manufacturing. They've got to configure it and if they can configure it, they spend millions of dollars in consulting fees doing so. We should be able to do that mostly out of the box, with a lot more features. That's the promise of vertical SaaS.

You're not going to get your $100-billion companies typically, but you might get your five, 10, $20-billion companies and they can be really good businesses. I think that's why a lot of investors that have moved get more yield, find the vertical SaaS plays because industries are also transforming. Whether it's construction or banking or government or insurance, there's a lot of really exciting companies being built in all sorts of crazy places, certificate, for-profit, education, and car dealership software. I could name tons that I'm even friends with or invested in. It's exciting. The main theory is to trade off that market size to go really deep on the problems of a smaller group of buyers.

Patrick: [00:27:02] What have you learned about effectively building for the right customers early on? Because I would imagine, you mentioned the number, but tens of thousands of state and local governments. How do you decide who to build for first? Because I imagine that picking your customers in a large part determines the features that your product carries and therefore, its value to subsequent customers.

Zac: [00:27:23] Well, if we'd had you involved, Patrick, we would have saved about five years and we'd be six times the size. Basically, we've made every mistake in the book. I studied government for 15 plus years before we started this business, but you don't actually go to college or law school or your master's degree and focus on the local town. The fact of the matter is I had so many wrongheaded theories when we started this. I thought you know what? They all say they're different. They're all snowflakes, but they're really not. We can run things like this and build it this way. Nope.

That township with the green and the guy in the floppy hat doing the town crier thing over in Massachusetts, really is quite different than the town in Arizona. Their needs are different. Their accounting is different. Their workflows are different. Their citizens are different. Their wants are different. So we've made a lot of mistakes. This is not a monolith. Even state and local government is probably a collection of sub-verticals. We've gone through a big exercise, I'd say in the past year to focus in on that product-market fit and then focus within your product-market fit on your ideal customer profile and selling to people who have a high vision of buying propensity for your stuff, growing, and getting really good at that.

Patrick: [00:28:33] This may be an overly simple question, but I'm curious, I'll ask it anyway, which is when you're first building the product, what are you literally doing? Are you just trying to take stock of existing workflows and stick them into software systems? Is that basically it, just replacing previously manual workflows with software and then training the people to do it better?

Zac: [00:28:54] I would say that's a fabulous place to start. I would say I probably wish we started that way. We actually developed quite a different product strategy. We figured there's two ways to build this business. You could raise 50 million bucks, hire, say 50 engineers, and lock yourself in a room for five years. These systems are really big, an ERP system for government, I mean thousands of screens of software. We thought that's really risky. You're going to lock yourself in a room for five years, try to come out. Beg a couple of customers for a year or two to work with you. What if you miss the mark? What if you couldn't raise again? We developed a different product strategy. Our first product was transparency, as we called it, connecting the systems to the web. Even just eight years ago, it was PDF-printed budget books and that kind of thing. We put all that online. You could go through every dollar.

We became the leader fairly quickly in that. Then our next product was internal reporting, same cloud-based reporting. We started to compete a little bit with Tableau and Power BI and stuff like that, horizontal players. Then we went right into the back-office systems. We built budgeting and planning systems. Then we moved into the core accounting and financial system. Then moved into the permitting licensing code enforcement, all that citizen services stuff. We're expanding that way. I guess if it works, we'll look smart. It's starting to work, so it's getting really fun, but a lot of these businesses are a long gestation period. It's really key to get close to the customers and work with them. The more you can rip and replace, I'd say the more success you're going to have.

Patrick: [00:30:22] What have you learned about doing this in a highly regulated space? Probably a lot more rules and regulations than if I went to attack, I don't know, dentists or nail salons or something.

Zac: [00:30:34] Actually, dentists might be regulated too, but it's not the end of the world. Actually, as you pointed out, there can be some very nice barriers to entry once you really get up and running and establish yourself, including as a market leader. I'd say it's 20 percentage points harder than enterprise sales. A lot of your listeners are maybe enterprise software investors or enterprise service investors. Selling the enterprise is complicated. You got to find buyers and champions, and coaches. You got to navigate. You got to work on approvals and all that. Government is about 20% harder. You've got to typically take it to the board, as I said, and that's Tuesday night meeting. One of the things that's interesting on that is, it doesn't matter how expensive you are, the more boring you are, the easier it is to pass.

Visions of monorail, monorail, monorail, that is not easy unless people get whipped up into a frenzy, where it's like, “Hey, we're selling accounting and permitting software since 1947. Everyone has approved.” It's like, “Transparency. You can do great things for your community.” They're like, “I don't know. I wanted a bike lane.” There's the board and then there's procurement. We have set up, in my own opinion … I don't think I'm attacking anyone here. It's just almost like legalized corruption. It benefits incumbents. There's all these games. You've got to be listed on this procurement vehicle. You've got to do it this way. It takes time. It takes money. Startups have a big disadvantage. When you get on those things, it's easier to cut through the procurement red tape. It's the way so much business is done in state and local government and we've essentially incentivized that as a collection of polities, but those are the two things, the board, and the procurement practices, that make it hard.

Sales and a Great Product

Patrick: [00:32:14] It seems like there's just, again, thinking about this, a really hard enterprise to crack that you have to become a very good salesperson. You've said to me before that you've maybe gone from being not so good to mediocre at relationships and sales. What are the lessons that have allowed you to catapult the mediocre?

Zac: [00:32:30] I like to sell. I don't think selling is a bad word. I think it makes the world go round and it's just critical to building a software company or really any technology or startup company. A lot of people think of sales as the glad-handing, cocktail-partying real estate agent. Look, that can be … If you can build a relationship, if you can laugh, if you can have some fun and people like you, that's helpful. That is not the bulk of an enterprise sale. Enterprise selling is about process. It's about qualification. It's about being smart. Is what they're telling you true? Does the person you're talking to have authority. Do they have money? Who do they need to go to? How do these organizations work? It takes on this almost intellectual element. Then to really do it right, you've got to scale it out across a team of salespeople.

To do a good sale, it's not just salespeople. You might need sales engineers. Those are the folks who would demonstrate the software. I can barely demonstrate our own software, thousands of screens of software, deep accounting, or other business process expertise. You got to bring on subject matter experts. Then you've got marketing and collateral. Then you've got scoping. Then you've got procurement. It's this huge process to do this effectively. These enterprises are used to buying that way. So if you just walk up in a good-looking jacket, you talk a big game, the whole enterprise is designed not to buy from you. When I talk about selling and enterprise selling, it's much more about how we build a machine to distribute software, as opposed to how we shoot a bunch of finger guns and slap people on the back.

So if you just walk up in a good-looking jacket, you talk a big game, the whole enterprise is designed not to buy from you. When I talk about selling and enterprise selling, it's much more about how we build a machine to distribute software, as opposed to how we shoot a bunch of finger guns and slap people on the back.

Patrick: [00:34:03] Are there any secrets to doing that well, building that machine that you've gleaned, either from successes or failures, as the scope has gotten bigger over the years? If you were to go set up, running the enterprise sales division at some huge SaaS company, what would be the things that you would deploy, based on what you've learned about building that machine?

Zac: [00:34:20] The chances are they probably wouldn't have gotten to be huge if they weren't really good at this. A great product is the name of the game. There's a lot of examples where great products have lost great sales machines. You want both of them. I have more advice for, I'd say the zero to 100 million groups of innovators running a business and so on. They're very mature. One of the signs of their maturity is predictability. That's one of the things you're trying to do. A public market investor said, “Look, if I put a dollar in this machine how much am I getting out and when?” That's what people want to know. My brother is an investor. A lot of people don't want to go really deep in the machine and the sausage.

It's kind of gross. Oh my God. Everyone's on a quota. It's just brutal. You're making calls all day. I prefer to put the money in there and see if it comes out. Salesforce could probably predict four quarters from now within a penny, what it's going to produce. That's a very highly developed sales machine. A lot of companies, as they're growing through the stages, A and B, and C, and D have to build this out and they have to do it by hook and by crook. A few things. Rip and replace is part of creating a new category. Wow. There's this new technology. We don't budget for it. We've never heard of it. You've got a market now.

You've got to educate them. You've got to help them go find money. That can be difficult. Rip and replace is a nice place to be for both the entrepreneur and the investor. Two is high prices. I sometimes say, “Do you want to build a big company, medium company, or a small company?” Most entrepreneurs are like, “I want to build a big company.” It correlates with high prices versus medium prices versus low prices. It's not always true. You can have a distribution model where you distribute a low-price software, I think.

Patrick: [00:35:56] Shopify or Figma or something.

Zac: [00:35:57] Or you better distribute that far and wide and it better work. We talk about the SaaS death sometimes. Say 10 to 25 or even 50,000 can be a death zone if that's your annual sale price because it's very expensive to distribute this stuff. The organizations are designed to basically want lots of people and expenses to sell to them, to educate them, to navigate them, to hold them in your hand and flow down the river. High-sales prices are important. Also, they help the buyer take you seriously. Hey. We're a real player and this is serious stuff. We're a premium vendor. If you're looking for cheap stuff, I can recommend things.

I can tell you to go look at vendors. I don't personally recommend it. Three, I would say you've got to build the functions out and you've got to map it to the buyer. Very few buyers have the authority to get this done, so you got to get a technical win. You got to get what we call a political win maybe with the board or certainly with the Chief Executive. You've got to get the commercial win. It's got to map up to competitors and be worth it on the features and value. There's whole books and schools on this. I'm still a student. That's for sure.

Patrick: [00:37:03] Can you say more about those three levels and how they happen, so a technical, political, commercial? Are those three concurrent processes running side by side? What have you learned about getting those three kinds of wins? That sounds interesting.

Zac: [00:37:16] Let's say you are the city manager. This goes for private sector selling as well, but we'll call you the Chief Executive. Let's say you're buying a financial system. Your CFO would clearly need to be in that. It'd be absurd for you to buy that and not consult with your CFO. In fact, you'd probably say to the CFO, “You lead this.” Similarly, it'd be absurd for the CFO to buy it without consulting with the staff. All of a sudden, you can start to see the complexity here. The staff accountant, who spends all day entering cash receipts into the system is very different than the CFO, very different than the CEO. Now you've got to be selling to all of them. The user-level wants to show me the features, what's this going to do to my job. It's not going to threaten my job. Is it? Then the CFO wants a mix of safety, security.

Is this the market leader? Is it the right amount of spend? Is it going to meet my vision? The CEO, I don't want risk, I want a reasonable price, he's the one who's got to sit in front of the board probably and say, “This is what we need to do. We need to spend X hundreds of thousands or millions of dollars of taxpayer money on this.” The board is going to ask questions. You've got a political win around the narrative, the board, the CEO. You've got a commercial win that's required to get everyone to say, “All right. Fine. Spend $300,000 on this. Let's move on to the next topic.” Then you've got a technical win where all the staff, accountants, and others who touched this thing and maybe IT gets involved.

It's like, “Oh, this keeps getting more complicated.” You typically almost want to map up sellers, if you will, that all play different roles, other folks on our team. You can talk politics or you can talk commercials or you can talk technical and the technical could be a five-hour demonstration of the software, using your data, showing all your business processes. If you don't have all of those, you could get to the 11th hour. You think you have a deal. You forecasted it. We're not public yet, but to Wall Street, to your investors, whatever, that thing's not real. It's not real. If you can't forecast, it's pretty tough to build a business and make the right investments to have the business grow. It's certainly demoralizing.

Patrick: [00:39:17] You can certainly see why incredible enterprise sales forces have such a competitive advantage. A machine like this that's well-built, especially if you're talking about thousands of customers who are paying huge numbers, have to have all these wins going on simultaneously. You really see why it's no joke to build one of these things. The Frank Slootmans of the world, who runs Snowflake, are so revered for the systems that they put in place. What have you learned concurrent with that sales process and I guess ongoing support of these customers, and the continued iteration of the product alongside that? You joked, “Thousands of screens of software.” You don't even know how to demo it anymore. As the CEO of the business, how do you keep enough intelligence about what's going on, but push as much down as possible so that you're not a bottleneck?

Zac: [00:40:01] There's a few questions in there and they're all really key to doing this right. One is I'm in the market every day, trying to absorb information. I know, not just the names of the leaders of my competitors, but I know what colleges they went to. There's the old joke like, “Oh, a rep from Oracle seems to be army-crawling in the bushes over there.” It's real. It's hand-to-hand combat in some of these. You got to know the competitors. You got to know the market. You got to know how they're selling. Even the reps often should know who they're competing against. It's very competitive. It's why often top athletes get into it and that kind of thing. It can be a lot of fun, thrilling, the thrill of the chase and the wind, and team sport and all that kind of stuff. We brought in a lot of really good people and they are continuing to try to build this.

I'd say the next stage is how you build this so it can scale and that means training materials and the right management structures. Everyone needs management. It's something that I've learned painfully. Every four to eight people need a manager. People need to know they're cared for. They've got career paths. They need more comp. They're taken care of. So you’ve got to give them management structures. Then there's tons and tons of training and the training is not easy. You got to have teardowns on your competitors, strengths, weaknesses. The thing is it's constantly evolving, so there's no, “We achieved market leadership. Let's chill.” A lot of businesses do that. A lot of private equity-owned businesses do that and you can milk the cash, but if you're into a growth company, there's no end to features. If you're certainly selling to a big, complicated enterprise like a government, we could build for 10 years.

It's more about dialing in the investment on R&D and following the metrics about sales efficiency to know when you should hire more reps, what's your magic number, how's it trending, and how you scale this. That's the stage that we're at. Never-ending learning game on the competition, on your own weaknesses. Then you're building software rapidly, so how do you get that, not only out to the customer base or to the prospects, but how do you even train your people? As you start to get hundreds of people, just telling them what you have is a challenge. There's all these different functions from product marketing to product management, of course, that form increasingly key parts to making this all work. If you're broken in one area, it's the goal, the theory of constraints that holds back the whole business.

Patrick: [00:42:18] What else have you learned about how government, state, local governments, operate, that we haven't talked about yet, that you think would be interesting or relevant, I guess to anyone? Because everyone's part of one of these things.

Zac: [00:42:28] Most of our governments are not run by idiots. I know we like to think that. Trust in government, as you alluded to, is very low. It's the highest of the lows in local government. Believe it or not, there's a lot of competent lawyers, accountants, professional managers who are running our nation's Department of Public Works and serving as the assistant city administrator and all of these key roles. I do think … I do lament a little bit. I got a master’s degree in Public Administration. The school was founded in an era when the phrase good enough for government, you know this phrase, has become pejorative. You laugh at your colleagues' work and say, “That's good enough for government.” That actually came from an era when the best people went into government. Our post offices were gilded and made of marble.

A vendor had to be so good, ‘be good' enough for government. It is sad, I'd say in the last couple of generations, the disrepair many of our governments have fallen into. There's a lot of reasons, but we can't just pass the buck. We're all members of communities and certainly society at large. This is what we get. We get who we are. We get what we do and that's what's shocking to a lot of people. It's like, “Wait. This is my issue?” Yea, it is. They're just boards. Anybody can run for these things. If you really care, you can step up. If you don't care, you don't have a great claim to just saying, “Oh, everyone sucks.” You can lament the state of society or culture, but that's certainly not going to affect anything. I think that's a very interesting lens through which to look and most people do not spend the time looking through that lens.

Patrick: [00:44:02] If you could have a dashboard in your startup screen in the morning and it can only have three metrics on it that you could use to assess the health of OpenGov and your business, what three metrics would you put on that dashboard?

Zac: [00:44:13] We use exit or cumulative ARR. That's critical. I'll mention a couple that are maybe less critical. We're on a big train at OpenGov right now, building our professional services business. Building an enterprise SaaS company, I'm now of the belief that it's really two businesses. It's a software development and distribution business building and distributing cloud software, but you got to screw it in. You build the product and you've got to screw it in. Implementing it, you could charge by the hour. You can charge by the project. It smells like consulting, but installing or deploying or implementing, whatever you want to call it Is its own business with its own motion. What we found as we're driving towards cashflow positive is it's not losing money on your pro serve.

It's common that a lot of these businesses say, “Everything's about ARR” and I disagree. Chambers came on onto our board, a former chairman, CEO of Cisco, who you know. He said, “What's up with the services business?” Andreessen said the same thing. We were operating under the whole, “We'll distribute it. We'll make it up.” The ARR is worth, whatever, five, 10, 12. The services are worth one, two. The reality is more services equals more software. More services equals happy customers. Charging more for the services equals faster profitability. We're following our professional service's gross margin very closely.

I'd say a third one is that magic number. Essentially, how do much you spend on sales and marketing? How much do you get back in the form of revenue? Really focusing on efficiency. COVID has been a minor blessing in this regard. Every government now uses the video conference. We were traveling around, spending so much money on planes, trains, and automobiles and not just the money. How many people are sleeping in cheap hotels and missing flights? That's lost selling time, let alone the morale impact of missing family or children and so on. Our productivity has just spiked in the last six months.

Patrick: [00:46:07] I was going to highlight that middle point. It's so interesting. I won't mention who said this to me, just because I haven't asked him if I can, but a very well-known enterprise software investor said to me once, “One of the hardest things to convince these young founders to do is charge for professional services from day one.”

Zac: [00:46:21] Oh, well, then the whole world gets it and I was the only one who didn't. That's great.

Patrick: [00:46:25] I think he said it was so hard because it so goes against the instinct, I felt that too, of wanting to get those first big wins with that huge software contract that's recurring revenue. I think his point was just like, “Look, people need to respect this is a lot of work and work costs money.” If you get that muscle built early, you'll be way ahead of peers. Even though it's not a high margin business, even though it feels unnatural, it's a great muscle to develop early on, is charge for services.

Zac: [00:46:52] I love it. Well, it sounds like you get it, but boy, I wish I'd gotten it earlier. I actually think most venture investors don't get it. I don't think they get it because a lot of their companies, they just … “Oh, it's a multiple ARR.” I think they don't get it in large. Some do. Obviously, I got beaten up a little bit about it. By the way, it doesn't have to be a low margin. You can dial it in. Chambers was like, “Man, we got 60% margins at Cisco.” You can dial that in once you get good at it, but boy, it takes a lot of muscle, a lot of things to be built, processes, collateral, but I find the buyers want it and I get that. If I was an enterprise buyer and you rock up to me and say, “I got this new-fangled software” and you don't have any plan to install it, you don't have your racy matrices and your Gantt charts, and your five-person team, and all the bios, and all the scopes and so on, I'm like, “You're a joke.”

“I don't think this is going to work.” We all hear about these massive tech disasters in governments. There's a lot of them. It's actually why we started OpenGov. There's a major disaster going on in California. Replacing their COBOL-based financial system, it was originally projected to be done in 2016, ‘17 at $100 million. Do you know what it costs today? You're ready for this? A billion bucks and going strong. The whole agency is set up for this thing.

I think that's because the consultancies have gotten so good at professional services and the big companies are so good. I call it the change order to help process. Change order took forever. We're very mission driven at OpenGov. We want to deliver value for our customers, but we've got to learn from the nefarious business tactics and make sure we stay aligned with our values and our ethics, but building a professional services business has really vaulted our company forward. I see a lot of young companies that aren't doing it yet.

Personal Growth and Feedback

Patrick: [00:48:36] Back in the eight years spent so far in building OpenGov, I don't necessarily just mean in the business, but in that eight-year period, what period or episode has been hardest for you personally, and what did you do about it?

Zac: [00:48:47] It's all about people. I'm actually scared a little bit to talk about it because I feel like I'm walking on eggshells every day, just how hard it is to build culture and to build organizations that work well together with both really motivated and hardworking people, as well as just really nice fun people. Three, four years ago, I had all manner of HR problems. I got some really helpful advice. My board said, “You got to fix this Zac. You can do it. You got to obviously hire the right people.” Everyone talks about that, but how you exit people is really key. There's no way to build a business and go through the phases, one, five, 10, 40 million, and recurring revenue and not need new talent and new management strength. How you exit people is really key. Don't give them that terrible performance review on the way out.

Celebrate ‘em. If you know somebody's got to be changed, you got to treat people with dignity. You've got to treat them with respect. You got to understand that people are people. They have needs. We brought in an excellent Head of Recruiting, excellent Head of HR, and people. We're investing really hard. Geez, I was in the doldrums reading the CEO rating on Glassdoor and the company's rating. It's really soared through spending time on this, spending energy on it, and bring in real managers, people who like it, people who love people in management, who know how to do it, who've managed large groups of people. I was so stressed running around like a headless chicken that I probably made every mistake in the book. Those are some battle scars that I remember like there yesterday.

Patrick: [00:50:16] Not to pour salt on a wound here, but what specifically about, say negative reviews on Glassdoor or something, do you think, were there for the right reasons? What were you doing wrong that anonymous reviewers would write about, that you've since fixed?

Zac: [00:50:30] When I was getting hammered, I was like, “I'm killing myself to make this work. I'm trying hard. I know we care about our values, so why is this happening?” I used to think to myself, man, this is some type of mob thing. What a business, Glassdoor? You get jammed with these ratings and then building a business out of that. I was like, “Isn't that the modern version of the mob?” I used to criticize it. I said, “I got to go deep. I got to introspect. Where there's smoke there's often fire. What am I doing wrong? What are we doing wrong?” I said, “Why don't I try to love this public rating system, whether it's Glassdoor or culture pulse surveys that we do and getting that feedback and that tough feedback?”

“Why don't I embrace it? It's a gift. Feedback teaches you. The problem is probably with me and not with that salesperson who left or that Office Manager that didn't work out.” And when I started to do that, things started to turn around. Obviously, bringing in the right talent and then working hard on the alignment is really key, but I found embracing it and seeking that feedback is probably the big difference-maker. There's tons of tactical plays that need to be run, including … I still get deep and I love the business and I love going deep, but the less I get up in everybody's business and the more I'm like inspiring and a figurehead, it seems obvious, but that's been really helpful. People need room to breathe. They need to be autonomous. They need to have some creative spirit so they can execute.

The last thing I'll note that we've done a few times, which has literally changed the trajectory of the business … Every manager and functional leader in a room, when the strategy is clear, if you're making a strategic turn or you're repositioning the company or you're moving to the next phase, get them in. Get everyone signed up. In a loving way, you might even need to say, “If this isn't the right strategy for you, we'll educate you. We'll train you. If it's still not the right strategy, we can help you move on, but this is the strategy and we all got to be aligned.” That's the old disagree and commit. Then roll it through the company. We've done a couple of those and the company just faults forward when we do it.

Patrick: [00:52:35] A lot of these lessons that you shared with us are big company lessons, big complex machines for selling, pushing through different levels of ARR. It's like having kids. Bigger kids, bigger problems. Bigger company, bigger problems, it sounds like, but really embracing and acting on feedback, good or bad. It's so interesting. I want to rewind to the earliest days. Any advice that you would leave entrepreneurs with out there, especially in vertical SaaS, which is space that you've been spending your career and know very well? What advice would you give the new entrepreneur that wants to build a vertical SaaS business successfully?

Zac: [00:53:12] I've watched some people succeed marvelously and I try to learn from them, even if they started after me or they're not as big as me, but they might be worth three times as much. They're just zooming off. It's really all about the product. Does the product work? In enterprise software, a product that works, that's worth a lot. Enterprise is enterprise. You've got to have the interfaces and the hooks, and the APIs, and the access controls, and the security. All this stuff is unending. It's why the incumbents have such a moat.

I would probably have invested less in sales and marketing early and more in product to try to get more fulsome closer to customers, know it works. Tear down the competition, know that I can rip and replace, and then pour the gas on, but being really good on product, really having a vision and a strategy that's right and not just vague or naive courage. You've got to have a lot of that. That's my second point. It's basically as hard as Ben Horowitz says it is in The Hard Thing About Hard Things. Have you read that book?

Patrick: [00:54:11] Yeah, of course.

Zac: [00:54:12] It's a little Bible for early-stage entrepreneurs, where it's just like, “Why is this so hard?” I remember reading it creatively. He understands me, but Elon Musk said, “You're chewing glass and you like the taste of your own blood.” It's not macho that I'm friends with and advising some outstanding women entrepreneurs and everybody's in pain at these early stages unless you love it. Some people love it. They must be masochistic, sociopathic. More power to them. I'm a little jealous. Actually, as we've gotten tighter product-market fit, most people and I'd say a lot of entrepreneurs are like, “I miss the old days with the garage, with the buddies and the trick duck, and tricycle, zooming around having fun” and I'm like, “I don't miss it.” It was so hard. I felt like we're going to fail like any second or every day you're going to hit the wall.

As we've grown, as we brought in talent, amazing people leading the business, my life has improved. My optimism has improved. It's getting more … My fun to stress ratio is going down. Keeping the faith. Having courage. I've seen a lot of companies look like they're going to die and then they work. It's just amazing how it works. I'd say that persistence is often rewarded. We've also often seen a lot of entrepreneurs, pivot, pivot, pivot, pivot, pivot, and then they hit. It's tough to over-generalize. The third thing I'll note is you got to build momentum. These businesses and frankly, almost any organization is about momentum. Why? Because we're people. People live for momentum, inspiration, encouragement. What's the next thing? Our minds naturally gravitate forward.

I started doing some things early. We close the sale. Bam. We hit the gong. We close a deployment. We start ringing a cowbell. We ship software. We want to exalt the engineers and celebrate. We've got to celebrate the small wins. It's a bit like, I don't know if I should share this, but like throwing a party in high school when your dad's out of town or something. If you call up the people you want to come to the party and you're like, “You want to come to my party?” They're like, “Well, who's coming?” You're like, “Well, so-and-so maybe, but the quarterback might be there and the prom queen may show up, but she says her mom might not …” Nobody's coming to your party. That's the lamest party. It's not going to work. If you call up everyone and you're like, “Oh my God. The biggest party ever, Saturday.”

“I got to go. I'm so busy. It's going to be huge. Everybody's going to be there. Bye,” you're defeating the holdout problem. These businesses are built brick by brick. You can't recruit the top sales guy until you get the revenue, but you can't get the revenue until you get the top sales guy. You can't get the top investor until you've got the exec team or until you've got the revenue. Everything's dependent. How do you break that? You break it through inspiration, selling momentum, and attacking that holdout problem. It's something I think about a lot because every stage of this business has that holdout problem. You typically can't recruit the people that you want because if you were them, you wouldn't work for you. You got to get to the next level and bootstrap each step of the way.

Patrick: [00:57:03] It sounds like you work with other founders as well. What other creative strategies have you seen for engineering momentum? Because I could not agree more that momentum is the lifeblood of getting people to work harder and be happier, and create something from nothing. It really is a magical thing. Have you seen other leaders do it differently than the gong and the cowbell, and your way of doing it?

Zac: [00:57:29] There's people way better than me. It takes a lot of, it's a technical term, I think sometimes called cojones. You have to have the steel courage to lean out way over your skis. You've also seen people fall flat on their face. I don't want to go there with Theranos, it was obviously wildly unethical, but if you're an entrepreneur, you can start to see how it happens when you're leaning that far out over your skis. It almost turns into a Ponzi scheme to try to get the momentum going. The thing is it sometimes works and people actually do build products and companies that work. It's a bit about that risk tolerance, even among what is arguably one of the riskiest professions, not physically, of course, but ego and all the drama that goes with it.

It's hype. Can you deliver? You've got to, I don't know, magic leap. It was maybe the last one. The thing is I don't even bet against people anymore. They may be down and out and they may come back. I've seen it. I've seen all the craziness and so have you. It's really a Hollywood type environment where it's like, “Who's going to bolt to the A-list next?” You don't want to bet on people. You don't want to be negative. You want to do what's best for your company, your shareholders, your people, your customers, but momentum can breed into hype. It's very important to find the line that you're willing to lean out on.

Patrick: [00:58:44] I love the topic. That's not in any of the business classes, I don't think, building hype and momentum in a business, but God, it's important in almost every success case that I've seen. Like you said, it's about balance. It's not getting too far in front of your skis, but being willing to lean a little bit and really push yourself and your team. I don't think I've seen anybody go through the kind of journey that you've been on from a brand-new business to now a fairly large business, not change a lot personally.

Sometimes that's for the better. Sometimes it's for the worse. It can be a really stressful job. John Chambers, who you introduced me to, said, “It can be very lonely at the top and no one really gets there unless they try it.” What have you learned, I guess on a more personal level, about improvement, adaptation, change, how you conduct yourself? I'm sure this is something that you've thought about because you've had to. What have you learned there?

Zac: [00:59:30] I think about it all the time. I think of interpersonal relationships and I mean personal relationships. I've learned tremendously from failing and from making mistakes and getting feedback from my colleagues at work. I don't know if that's cliché or innovative or what, but a company, for better or worse, particularly early stages, is often a reflection of the leader. Many organizations are reflections of the leader and I mean all the problems. As I solve problems, and I still see problems, I have to look internally and say, “What am I doing to contribute to those? How did those happen?” I grew up in a difficult home environment. My mother was an alcoholic. I guess a lot of entrepreneurs maybe have some adversity in their background, so many Americans do, but at least maybe a chip on the shoulder.

I want to prove myself or I want to compete or I want to do something great. It probably comes from a deep-seated insufficiency at the maybe self-esteem level. That drive can get you to a lot of places, but it probably doesn't actually get you where you want to go. You've got to temper with all the learning, all the self-development, coaching, reading, making your colleagues feel safe to tell you you're stinking or you're sucking. “I didn't like the way you did that or what you said.” I have found in my personal relationships that it's had a huge impact over the years. The number one job of a leader or a manager is to confront issues. Slootman said that in his piece, Amp It Up! I would say it's conflict management. Andreessen would say it's conflict management. What does that mean? I like to say to my staff and my team, “Work is basically one long series of awkward conversations.”

Work is basically one long series of awkward conversations.

It is. If you're not having awkward conversations, you're almost certainly not doing your job or you live in a fairytale business. Please, I'd love to invest in it because it's going to be perfect, but everyone else on earth has to say, “Hey. What's going on? Such and such is late.” Or, “Why did we lose that sale?” Or, “What's going on here?” You just basically have to have awkward conversations all day. Well, what do you have to do in your family life or your personal life? You probably need to talk things out and resolve conflict and you need to do it by listening, by reflecting, and by finding compromise, and by quelling those primal or innate emotions that well up and make you defensive or as my girlfriend likes to say, “Turn me into a rattlesnake.” I got to put that away and put the big boy hat on, hear people out and most of the time they're saying something really important.

Thoughts on Living and Dying

Patrick: [01:01:55] I have no good transition for this, but I know it's something that we're both strangely interested in, which is the topic of death. Again, I have no way to bring this up other than I'm really interested in it and I think you are too. Can you say why that's interesting to you and why a study of death is ultimately a study of life and what you've learned from that investigation?

Zac: [01:02:12] My mother was an important figure in my life. She was a very troubled person. She passed away four years ago and it was really brutal. She was very ill. She was an addict. I took my first foray into some of the literature, The Tibetan Book of Living and Dying and even the Autobiography of a Yogi, as well as relationship books. One of the interesting things, at least that Tibetans, I think say is you got to meditate on death. You got to think about death if you want to live. My mother always instilled a sense of adventure and curiosity in me and it's the two things that I'd say drive me at OpenGov. In my leadership journey, in the business journey, I love the adventure and I love the learning. Every quarter is like a new year. I call them startup years as opposed to dog years. It's constant learning, constant challenge, constant adventure.

I think it's why I'm doing the same thing eight years on. I hadn't done anything for more than a couple of years before this. I remember as a kid boarding planes and thinking of all these people who are afraid of flying. I used to actually weirdly meditate on like, “What if this plane went down? Could I take deep breaths and enjoy that journey?” It's a super weird thing. I don't know. I was probably eight years old when I took my first flight. I think it maybe helps you get that extra juice out of each day or pursue challenges with zeal or take on things you're scared of, but I'm just at the very beginning.

The past few years have been difficult. It's been my, I guess adult entrance into death. I lost my mother, uncle, my grandfather, and a couple of friends this year. They say, “You don't really achieve adulthood until you lose a parent.” We're in a time, a very interesting and complicated time for our country. A lot of people are losing a lot of people. I don't know. For me, it certainly opened my eyes. We lost an employee at OpenGov recently. It's really painful and it's really hard. It's a time to bring people together and reflect on what we're doing and why it's important, and getting meaning out of work and life.

Patrick: [01:04:13] It sounds like a grim topic, but I think for those that study it carefully, ultimately, it's the most positive topics in a weird way. Maybe we'll transition and close on, what you think people can get from spending some time in the mountains?

Zac: [01:04:24] There's a few different theories on this. I love mountaineering literature. I've been climbing mountains since I was eight years old. My father introduced me to the mountains, the Adirondack Mountains in Upstate New York. Now I've had the good fortune to go around the world, on many different mountains. There's solace and solitude in nature. There's a tremendous challenge. Everyone talks about flow. Mountaineering is one foot in front of the other, stomping up a hill. Your mind clears. You can achieve a state of flow. You can achieve a state of flow on the golf course or playing the piano, but this is an area where I think a lot of people achieve that. Some of the literature says, “You get closer to God.” You get up into the altitude. You get up into the clouds. You get into the cold and you feel, not only a sense of accomplishment, but a sense of awe and wonder.

I don't want to take it to the religious level, but there's something bigger than you and that's really powerful. You, of course, get to see different cultures. If you're climbing with others, you get the camaraderie and it's really incredible camaraderie because it's often extremely uncomfortable. The last point I'd say, which is probably my favorite, it makes you appreciate what you've got, a warm bath or a hot meal, a good night's sleep. These are the things you don't get sleeping at 20,000 feet or being in the freezing cold temperatures and grinding it out to achieve a summit. There's, of course, many parallels with building a company or really even building a family or a relationship or anything else you do in life.

Patrick: [01:05:49] I was going to say it's mountains all the way down, I think, for sure. Is there a single moment in your mountaineering experience that stands out as the most magical, looking back on it all?

Zac: [01:05:58] There's a lot. Climbing Denali, for me … I remember being eight years old. My camp counselor had just gotten back from Denali in Alaska. I said, “I want to do that. I'm going to do that.” When I was living in Mexico, I trained on the volcanoes in Mexico and I literally spent the last few pennies I had at the time to go to Alaska and get into the summit. It was weirdly emotional for me. People climb it every year. It's a very special place, being up in Alaska, near the top of the world, and seeing the Alaska Range and very cold temperatures. It's just the culmination of a lot of work. For me, that was a very special time. I thought about my dad who taught me how to go on the mountains and felt a deep sense of gratitude, both for him and the world

Patrick: [01:06:43] Zac, this has been so much fun. It's a very unique, obviously, the space that you're building in, but also, a lot of unique lessons. Even though I've had tons of these conversations, a lot of things stand out. One final closing thought that I know you care a lot about and we didn't talk about earlier is the role of capital efficiency in all of this. We talk about momentum and VC, and the speed of tech, and all this stuff, and just capital aplenty, but one thing that doesn't get talked about as much is capital efficiency. Maybe just say a few words there.

Zac: [01:07:09] I have tremendous admiration. I've done it differently in part through just mistakes, as well as the coaching and the ecosystem I was in. We raised a bunch of money, hired great people. We spent a lot of that money and we're charging hard. We did talk about momentum. I would say the flip side is capital efficiency. Probably the entrepreneurs I have the most admiration for are the ones who have actually pinched every penny and they've kept it really tight. I've developed a theory in just the past couple of years as we're driving towards cashflow positive. Actually, spending less money can generate more revenue and it's almost counterintuitive for so many, but you tighten up. You understand what works.

Actually, spending less money can generate more revenue and it's almost counterintuitive for so many, but you tighten up.
You understand what works.

The machine works better. I learned a lot from the Founder Collective team, very good seed investors. They're in OpenGov. They started ragging on me a little bit. I started taking their lessons, their blog posts to heart and I started looking at some folks in the space that I'm in and other entrepreneurs and I realized, wow, don't pour the fuel on the fire until you've got a really good kindling going. Don't shift gears until you're in the five to 7,000 RPMs. You're just burning cash. I've also seen the noise come down. Every move we've made to actually tighten up or to remove unnecessary resources or to stop doing unprofitable things has calmed the company down. I sleep better. Everyone else sleeps better.

A thousand less email chains. 20 less meetings. A lot of entrepreneurs who come to me and they exalt the, “Let's go to Sand Hill Road. Let's do this,” I encourage them to think seriously. As you know, Michael Bloomberg didn't make $50 billion by raising a bunch of venture capital and a lot of entrepreneurs that we admire didn't. I think long and hard before going and raising the next round, just because it sounds cool. Certainly, the measure of a company is not how much money it's raised. It's how much it returns probably to its investors and its shareholders, the value it gives to the society. It might even be a ratio between capital raised and valuation.

Patrick: [01:09:09] Sadly, we have to turn to my traditional closing question for everybody after an awesome couple of hours together. Thanks so much for your time. The last question I ask everybody is the kindest thing that anyone's ever done for them.

Zac: [01:09:21] It may be a little ironic, but it's the tough love I've gotten from my business mentors, my board. It's the chance to fail. It's the chance to be told, “You suck” and not lose your job. It's a huge amount of pain. Boy, I wish somebody had saved me from some of it, but going through some of those gauntlets, I don't yet have children, but you want to raise kids with a little freedom, a little autonomy to fall down and experience that without permanent injury or really getting hurt. I know I've received a lot of that, that critical feedback I get from my team, from my board. I don't know if that answers your question because it's not a single individual, but it's really made me a believer in critical feedback.

Patrick: [01:10:07] Well, I can't wait to listen to this one again and pull the lessons out and hopefully, apply some of them myself. Thank you so much for your time.

Zac: [01:10:12] Thank you so much, Patrick.