The text below is a transcript of audio from Episode 31 of Onward, "Building a $1B startup without ego, with Christina Cacioppo."
Disclaimer: This transcript has been automatically generated and may not be 100% accurate. While we have worked to ensure the accuracy of the transcript, it is possible that errors or omissions may occur. This transcript is provided for informational purposes only and should not be relied upon as a substitute for the original audio content. Any discrepancies or errors in the transcript should be brought to our attention so that we can make corrections as necessary.
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Ben Miller:
Hello and welcome to Onward, the Fundrise podcast. My name's Ben Miller. I am the CEO and Co-founder of Fundrise. My guest today is Christina Cacioppo, founder and CEO of Vanta, a multi-billion dollar startup automating security compliance. Although most people only think about information security after they get hacked, Christina figured out that if she automated security compliance, it could dramatically change how the software industry works. Before Vanta, only companies with hundreds of employees could afford to sell software to Fortune 500 companies like Google or Amazon. Christina changed all that by automating security compliance. She made it possible for even a startup to be able to sell their products to the biggest companies in the world, opening up billions of dollars of sales for her customers and for her company.
Over the last five years when everyone else was investing in flying cars and cryptocurrencies, Christina was building a no-frills big business. Although she's based in the heart of San Francisco, her Midwestern ethos made her very different and very successful. I'm also proud to say that Fundrise Innovation Fund is invested in Vanta. Before we get started, I want to remind you that this podcast is not investment advice, it is intended for informational and entertainment purposes only. Christina, welcome to Onward.
Christina Cacioppo:
Thank you so much for having me.
Ben Miller:
So I want to roll back the tape a couple years to I feel like a moment that was one of the most stressful times in Vanta history. So here's how I set the scene. So you've invented a whole new software product that solves a real problem that's in security compliance for nearly every tech company in the world, but definitely a huge part of the tech industry. Orders are rolling in companies generating more than 10 million of revenue, maybe tens of millions. You're either worth a billion dollars or you're on your way. And then the VC industry funds 43 copycats whose mission is to take your business away. So can you tell me that story?
Christina Cacioppo:
That is what it felt like at the time, and I think I had a couple thoughts about it that were all contradictory in maybe classic founder fashion. One was just a little bit of disbelief honestly, because two years prior to that I had VCs telling me in so many words, nice job finding a small back office process. You could turn into a SaaS service, but you really shouldn't get venture funding because this isn't a large market. And I disagreed and they said it much more politely than that to be clear. But to then have some of those folks turn around and be like, oh, this is so valuable. I'm going to pour tens of millions of LP money into it was, there's a little bit of, "Ha, I was right." But now there's somebody who's very well funded.
But there was just also a little bit of disbelief. Because I think again, as a founder, you both have to believe your thing is going to work or you would be doing something else with your time, and most people don't believe your thing is going to work or they would've been doing it or done it. So that tension in some ways, it's like a new version of that or a different version of that. I think honestly, there was a part where I took it personally for a bit, especially if I talked to some of those people before and then had to reframe it for myself. Well, yes, I talked to those people, but I might've said, "Vanta's not looking for investment." Or, "We've gone with another firm." So they were annoyed by me and actually in all honesty, it probably was neither. This is capitalism and people are playing the game of capitalism and that's different than the personal emotions side.
But that cycle of being personally upset and then realizing that's not a really, I think, helpful or accurate way to think about it. And then I think finally, the trope about competition being good for customers is a trope for a reason. It is true. It did force us at Vanta to get closer to customers and better at what we did. And company building is hard, hypergrowth is hard, you can both try your best day in and day out and everyone at Vanta can try their best day in and day out and results are not 100% and that's all true. But I think it did force us to get better at what we did in a way that now on the other side of it, I'm very grateful for.
Ben Miller:
Because the same thing happened to us. We invented this idea, which they called real estate crowdfunding in 2012, and then from 2014 to 2017, even recently, there'll be every month or two an article will write the first real estate crowdfunding company ever, and they ended up with 150 copycats and billions raised, and I was mostly bitter and salty about it, because I literally watched these other founders join our website and scroll all over literally. I know you were on our site in 2012 when you started this company in 2014, so I'm not exactly sure what you mean by you invented this. But my takeaway from the experience, this happened to me a few years before you, so maybe I'm further in the journey, so here's what happened for us is that essentially all of the VCs were derivative thinkers.
They weren't original thinkers and they actually ended up giving the companies they funded a lot bad advice and they ended up, all these companies basically are almost gone now. And I really blame the VCs. I wasn't in the room, but I think that they chased a lot of the hot new ideas. That's why essentially they would fund 150 copycats. They're chasing the derivative, they're not original. And so they ended up chasing the next hot thing after another and that ultimately got them nowhere. So it was very, very painful. And there was actually one moment when SoftBank almost put half a billion dollars into one company. I was like, oh my god, this is going to be so painful. It's a really painful part of the VC ecosystem.
Christina Cacioppo:
Honestly, probably YouTube taught me, I think two things that maybe overvalued relative to where I should have been. One was just the newness and the quote, unquote, "innovation." I can't say that with a straight face, but the almost glory in my head of having made something new and how important that is and seeing for many people, that's not what they're optimizing for. They're optimizing for I think, an outcome. And the easiest way to do that is take something that someone else has already proven and try to do it better. And I think I was so oriented the other way, I didn't respect that or acknowledge it as much as something that's, again, very real in the game of capitalism, joking and not joking. I also think we joke at Vanta about the culture being Midwestern and there's good and bad of that. And when I say Midwestern, I mean a couple of things, but one is heads down, do your work and work hard and good things will follow and be nice and good things will follow.
And that's what we did. And personally, I didn't do podcasts and I didn't talk about it at all. We didn't talk about how big we were and there was just a vacuum that developed that let some of the less scrupulous folks come in and say, "Oh, Vanta's very small." You're like, "No, I'm actually five times as large as you and you know that." But you can also post whatever you want on LinkedIn or tell other VCs whatever you want. And it's a private market, so no one really has the data and just how much, again, the put your head down, do good work, good things will follow. Yeah, eventually, but in the interim, the information vacuums are real and I shouldn't have let that develop.
Ben Miller:
Definitely the lack of transparency in the private markets is so hard for people who aren't in that space to appreciate all of the both inefficiencies and just weird outcomes as a result. Then when this happened to me, I was talking to one of the Under Armour founders who happened to be an investor in Fundrise. Anyways, so he said, "Well, they can copy the product you have, but they can't copy your next product." And at the time I was like, "Thanks for nothing." But then we ended up shutting down the original innovation that we created and we ended up replacing it with a new product which basically almost nobody copied and the old product essentially didn't work. So that's why they mostly went out of business, because I don't believe deal by deal investing is a scalable business and it's not how Blackstone or Sequoia or anybody does it. What you just said was you essentially were focused on creating something original and doing what you thought was innovative, not derivative, and as a result, that's a process, it's not an outcome, it's not a product. And given time, it eventually is the winning approach.
Christina Cacioppo:
We do think it's a lot. It just takes time and it's a lot easier to be like, oh, that works. Copy, paste literally and figuratively. And then you can turn around and be like, that took them so long, they must be really slow, we did it really fast. And you're like, well, wait a minute. Sure, but why do all the words look exactly like I wrote those words. Literally I wrote them, I know them.
Ben Miller:
We actually had somebody copy our emails and they left our UTM links in it.
Christina Cacioppo:
Great. Love stuff like that. Yes. And you're like, come on, at least do it well.
Ben Miller:
The thing I worry about now is actually the same thing I worry about them, which is now instead of being copied by a startup, getting copied by an existing incumbent player who's just so powerful. For you, I don't know who that is. That's not Amazon or Google, but essentially it's the same fear, but now instead of it being a peer, it's a different risk. I don't know. Is that something you worry about with your company?
Christina Cacioppo:
Not really. I mean, maybe I should more. I think what we do is weird. They were and they weren't wrong five years ago to be like, this doesn't make much sense and won't work. Where there is, and I think one of the parts of that is you couldn't look up market and be like, oh, it's not really AWS because all this other stuff. It's not really like an audit firm, it's this bringing together of a bunch of different parts of other products or different parts of other markets around this banner of compliance and trust. And part of that was nice because we don't have this who can just easily move into it. People can, but it's a long put. Anyone would have to do a bunch of things they're not doing today. Like a audit firm would have to go build software. A hyperscaler would have to go do all this messy people stuff.
Ben Miller:
Okay. Well actually we've skipped to the middle, but let me go back because our listeners don't know that much about Vanta. And I'd like to go to some of the things I've heard you talk about in founding the company because when you created Vanta, you actually interviewed a lot of tech founders and executives and you really got at the problems they were facing and you had insights around you figured out what they wanted and you tried to give them what they were looking for. I had a mentor who used to say, when you're starting a business, focus on the problem, not the solution. So can you tell listeners essentially about the problem and why it was an important problem to solve? Because it turned out to be a really big business.
Christina Cacioppo:
Something a little much longer story, but the short version is twofold. We saw software companies not investing as much in security practices and protecting customer data as even they wanted to internally. It was just a tough prioritization or a tended to be below the line. That felt off from what these operators wanted to do from the increasing skepticism in the US globally about technology companies and what they're doing with data. It felt like we were having more scrutiny of software, less enamored by its magic, and yet companies were still struggling to prioritize this and that's the negative side of the observations. And then on the positive side, we'd see these companies that went through these really arduous manual compliance processes, which I would call verifying you have reasonable security policies and reasonably protect customer data. More complicated, but that's the high level plot of one of these audits.
And they would accelerate their business because it was easier. They would go through this rigorous process that then other companies would trust and so it was easier for them to sell the companies that were larger to them, to sell to healthcare, to sell to financial institutions, these regulated industries. And they would actually use these audits as a competitive advantage and say, we have these and our competitors don't, so we're more trustworthy so we should win your business. Big enterprise. It kind of worked and there was this I think bit flip where you say compliance to most engineers or most people and they want to run screaming from the room, it sounds like this terrible thing. Why would you spend time on that? And we sort of realized compliance actually is this market opener and revenue driver and trust builder. If you do it well, say you're going to do things and do what you say you're going to do.
And in order to do it well, you had to update. This was in fact updating the back office processes that were stuck in the nineties. But if you could get companies to invest earlier on because it was easier for them to do it, it was more prescriptive, the benefits were clearer. They started to build out their security programs and then they got credit for that with their customers, but seemed to be like it just made sense. And it was one of those where you're like, it's still an idea in a Google document, but it might actually work or is at least worth trying or testing. We couldn't really poke any more holes in it at that stage.
Ben Miller:
At Fundrise we call that product thinking and most people outside tech don't know that much about product. And so when we think about it, the way I try to define it is that you're seeing inside the mind of a potential user. It's like exercise in deep empathy and psychology. And I feel like I've seen you guys do this incredible job on product and I can see the product insights in the way you've executed. And I was curious if you have a philosophy or product mental model as you go about trying to figure out what products and how to build those products.
Christina Cacioppo:
I could try it. I think for me and prior to Vanta, I built all sorts of things that I thought were very cool and no one wanted, some on my own, some with other people, some at other companies. And I think those experience disabused me of the notion that I know what people want on my own, which in some ways was, oh, I'm not as smart as Mark Zuckerberg and I cannot in fact go into my proverbial dorm room and emerge with something a billion people use. But in some ways it was actually liberating. So you're like, okay, great, well that means I have to go talk to people and listen to them and I shouldn't expect to go into a room and emerge with whatever the equivalent of the Mona Lisa.
Ben Miller:
IPhone.
Christina Cacioppo:
Yeah, exactly, the iPhone. That's just not me. But if I go and talk to people and ask them questions about problems and what they do and why they do it and kind of really understand the incentives behind different actions, I think you can actually get quite a lot out of that at a high level. But with initial Vanta and starting with SOC 2 automation, it was just so clear that security teams and engineering teams wanted to prioritize security more than they did, but they couldn't really tie revenue to it. So when it was, should we go make sure all of our doors and windows are locked or should we build this new feature a customer wants? The new feature always won, always, always, always.
And they felt badly, but didn't change their behavior so you couldn't guilt them into it. Which I'm half joking, but I think that's actually what a lot of security companies do, just run around and be like, you should feel badly for not doing this. And then we found a couple companies that actually had a ton of practices in place and all of the security work done at a very early stage, and you ask them why and they say, "Oh, because we had the opportunity to sell to Google when we're a 20 person company, and so we just did whatever they asked us to do." And you're like, that is the motivation, that is incentive. How do you line that up? Because if you can line that up, people take the actions.
Ben Miller:
So just to try to recapitulate what Vanta is and what Vanta figured out or you did, what you guys figured out was basically you took a part of the business that clearly VCs originally thought was not interesting. The [inaudible 00:16:30] talking about compliance, security compliance. It's not going to be something that's going to be on the cover of Time magazine. Everybody suffered on the other side where companies have lost their names and passwords and all this data. So obviously that's a bigger and bigger problem. Everybody knew they should do it, but it was basically a risk rather than an opportunity and so they focused on the opportunities. And then you saw that by automating it and basically making it really easy and really low cost, not only did it basically lower the company's risk, but that it opened up markets for them. So rather than being a 500 person company selling to Google, you could be a 20 person company selling to Google and all of a sudden these Fortune 500 companies became an addressable market.
Christina Cacioppo:
You got it. That was great. Better than what I said.
Ben Miller:
Great, I'm glad, because we invested in you. But if I go back just again on your product thinking, I think part of what you have shown both in being able to channel, you can listen to the customer rather than tell the customer what you think they should be doing, you taking a problem that other people may not have found as interesting. It's a really low ego mentality. I think to be able to see inside other people's mind, you have to put your own ego aside and be in their ego. And that's hard to do if you're a big ego.
Christina Cacioppo:
I just think I'd failed enough. We can also talk about growing up in Ohio. That's a better story, but honestly, I think I had just built, I have a list on my website on purpose actually of things I have built. It's very long, no one has heard of any of them and it's actually because I feel pretty passionately about the quote, which is cheesy, but true is the job of the vast majority of your work is to figure out which portion soars. But it's like a 5% hit rate is what everyone has. But when you hear stories on podcasts, people make it sound like it's a 100% hit rate. It's not. And I think it's just that I tried to do the shut your eyes and imagine the future and build it and they will come and nope, just an empty baseball field here. No one's coming to my field.
Ben Miller:
So you're saying you had done 20 other things that no one's ever heard of and the 21st hits and people are like, "You're a genius."
Christina Cacioppo:
Exactly.
Ben Miller:
Okay, I'll concede part of it because I think it's true for all founders, all creators. Obviously you only know about where they succeeded and you only know about the people who succeeded. But at the same time, I also know that you, I hate to use the word strategic, because I don't like that word.
Christina Cacioppo:
I don't like it either. You should maybe use it, sorry. But when someone uses it at Vanta you're like, "What do you actually mean?"
Ben Miller:
Yeah, it's brutal.
Christina Cacioppo:
What is this a filler for?
Ben Miller:
What I mean is I think you were farsighted because you had a macro view that information security was a one-way ratchet is what you said. Quote, "a one-way ratchet." That information security was only going to get more intense, more important, more expensive, more attention. It's not just being in the right place at the right time, you have to know that there's a big updraft and that was a macro view that I think that was right, obviously in retrospect and continues to be right. It wasn't all accident. It wasn't just that you were doing 20 things and turned out the fidgety widget was the one that would take off.
Christina Cacioppo:
Thank you. I'm not very good at attempting things like this.
Ben Miller:
Here's my question for you. I'd look at that as a top-down approach. How do you bring that farsightedness to your or major decisions? You're looking at a major decision, you're thinking about 2024, 2025 or a big product, what's the practice?
Christina Cacioppo:
Oh, that's a good question. I think for me, and I actually learned this at Dropbox where I worked prior to Vanta, is my confidence in decisions comes from talking to customers. And if I'm talking to customers regularly, I feel good enough about my ability to synthesize, analyze, feel like, oh, this, that and the other connect. So let's go left, not right. If I stop talking to customers, I get real wishy-washy real fast and then is, well, I don't know, there's all these data points and you can connect them in any way you want. So who am I to know?
Anyway. And it was really annoying at the time realizing this, but it was really helpful because I just realized, oh, that's how I work or how my mind works, so I should always be talking to customers because if I'm not, I'm going to get real wishy-washy, which is not helpful at my job. But I think that's a very specific answer to me. And I think the broader is this is maybe too high level to be helpful, but when founders ask me for advice on this, figure out what makes you confident in your decisions and keep doing that. And for me it's talking to customers, but for someone else it can be whatever else.
Ben Miller:
Oh, it's funny, because I have that as a later question. Because I had this observation from talking to you and listening to you that one of my main takeaways is that I feel like you're more often right than you are confident.
Christina Cacioppo:
That's definitely true.
Ben Miller:
So then the problem is for you actually getting to confidence, which your other people, they may have a different problem. Why do you think that is?
Christina Cacioppo:
Again, I'd go back because I'm wrong a lot.
Ben Miller:
You feel wrong a lot.
Christina Cacioppo:
Yeah, I think there's some of that. There's also honestly probably some of, I don't like being wrong just as a general like in any part of life. I'd have to work on the perfectionism there. And actually on that, I've been able to reframe for myself, look, the product development. I think this is so true. I think the first thing you ship or the first thing you show a customer is always bad. No matter how hard you try and how much time you put in, you are wrong. But usually the fourth thing, the fourth version is pretty good. So the bar or metric of success or whatever is not, is your first thing good? It's, how quickly did you get to a good thing? And I think actually that reframe has helped me.
Ben Miller:
Oh good. I'm going to take this part of the conversation excerpt and share it with our team because the engineering product managers and team members often feel like when they ship, they're done.
Christina Cacioppo:
I mean, I think that's what we get trained to do in school is, are you right in the moment, in the test and the whatever? When you turn the thing in, is it correct? And I think at least product development, it's just not a helpful way to think, because I think you get a lot of analysis paralysis on the front side and then you've spent all that effort and then it's wrong and then you're demoralized.
Ben Miller:
They feel when we come back and we're like, great, okay, we shipped now there's these 10 things we need to change. They're like, well, we did something wrong. Rather than, no, this is great. This is exactly what should be happening.
Christina Cacioppo:
And in some ways people cared enough about your thing to tell you you should change stuff. What a gift. But actually, again, as someone who's made a bunch of stuff no one cared about, people care enough, that's amazing.
Ben Miller:
Yeah, that's a good way to reframe negative feedback.
Christina Cacioppo:
Again, crickets are so much worse. Silence is so much worse because then you're like, well, what do I do with that? Clearly it's bad, but cool, what next?
Ben Miller:
Took us a year to build first product at Fundrise and we launched it and we had to get SEC to sign off on it to qualify the offering and literally launched it and it was crickets. Nobody cared. It was about a year before somebody paid any attention. Let me go back to the early days for a minute because I want to talk about VC because you used to work at Union Square Ventures, which is a story venture fund. And that's actually unusual, I think for founders to be VC before they go into start a company, often after. I had Tomasz on and he said this thing, I feel like it happened to you. So basically VCs are obsessed with TAM, which means total addressable market. And I don't know why they just don't say market.
Christina Cacioppo:
It's way cooler when you have weird acronyms no one knows.
Ben Miller:
So total addressable market. And the funny thing is that the feedback you got from the VCs was that there basically wasn't a market for your product because essentially startups don't get SOC 2s. The market for compliance basically wasn't there. And I think your insight, again, this is me giving you back what I think I've heard, which is that no, if it was easy, people would do it. So Tomasz, I had him actually in the last episode, he said that his lesson in VC was that the startup creates the market. They don't go to market, the market comes to them in a way. And I think that happened to you. So you feel like, is that right? That's good to say in theory, but you lived it.
Christina Cacioppo:
I do. The way I've heard it said or said it, same point though is, if you wonder whether you have product market fit, you don't. That's not a question. There's a statement or the absence. And that was very much my experience. It was this overwhelming, this is working way better than it has any right to. And yes, maybe there's some humility or Midwestern-ness or whatever in that, but there's also just the product, it only half existed. You'd look at us and be like, "How? What right? Do you have to tell me you can take me through a security compliance audit?" And it was still working. People would ask those questions but be like, "But I really need this, so I'm just going to go" And it was, again, just very different than anything else I'd worked on.
Ben Miller:
Because you were getting dozens of companies coming to you. You didn't even have a website.
Christina Cacioppo:
No, we had this website. You can't really way back machine it unfortunately because of how we built it. But basically if you went to vanta.com in times it was white page, a little bit of black text, it said Vanta and had this email address, whatis@vanta.com? That was it. That was it.
Ben Miller:
And you had 100 customers by that point or something. That's definitely pull, not push. Okay, so basically I'm interested in how you think about VCs having now been on both sides of it. So you worked in VC, now you've been VC funded, you've gone through multiple rounds, you're in the ecosystem, tech ecosystem, you have a lot of peers. So how do you think about how venture works if you're talking to people who may start a company or super interested in venture and aren't on the inside, what's the inside look like?
Christina Cacioppo:
Much less shiny than people think, but that's not to say these firms aren't shiny. Union Square Ventures is incredible and the people I work for are incredible. It's just the pedestal that I think VC gets put on is superhuman. I think VC firms are really funny in this way where most of them are very small teams, very small firms. They're not like the companies they back, they're 10 people. Andreessen Horowitz at a couple hundred is like monstrous by VC firm size, but call it 10 to 40 employees probably run by one or two people with decisions made the way they want it to. It's not a scale thing, often it's not we're building a generational business.
My old colleague used to joke, it's like your uncle's small business, it's just they manage perhaps a billion dollars, which most people's uncle's small businesses don't. My uncle certainly didn't. But otherwise it's this bespoke small business. And I think any organization, the culture is reflective of the founders so you get very different firm culture and very different personalities at each. So it's this interesting anthropological expedition to go learn about each firm. But again, I think it's much more like your uncle's small business than it is Google. Even though I think it's considered to be a lot more Google than uncle's small business.
Ben Miller:
When we started our tech focused fund, I approached venture like I had approach other technology businesses and I'm like, oh my god, my competition is a couple people with a dog. They don't have operations, they don't have software, they don't have marketing departments, they don't have engineering departments. They're nothing like my other competitors. And I was like, is there an opportunity in that? And it's probably is, it's just an interesting thing about how venture works. So how did that affect your fundraising strategy?
Christina Cacioppo:
I think I thought of VCs as real people, not gods, but truly they're real people who are smart and do their jobs every day and do not know the business nearly as well as I do. So I think there are a couple parts of it. One was I didn't really ask them, you're polite, but I didn't ask them how I should run the business, which I actually think a lot of founders early on do because again, the glamour and the superhero-ness of VCs. When it's actually a turnoff because the VC's not going to run your business, they're investing in you such that you run it.
So dynamics are funny here, but I think there's a bit of coming off as too obsequious to a VC is a huge turnoff. Because again, they're backing you to be this generational entrepreneur or not someone who asks them who you should hire for your next role. So I think there's some of that. I also think again, the confidence of, look, I know this and you can quiz me about it and I'm here for your quizzing and like, I will take whatever question you have, but I do know this well with more what I win with are probably the really big things.
Ben Miller:
So I'll ask you this and then you don't have to get into it and I can cut it. I have a saying and I walked a similar talk, which is that valuation is temporary, but control is forever. So I was very focused in my interactions with the money to make sure that the money didn't take over and try to run the business. And I think it was true for you too. Could you share some of your thoughts on that?
Christina Cacioppo:
I think having worked at USV, I was really fortunate and got to follow around some of the partners to board meetings and just sit in the corner quietly. And I was a year or two out of school, I didn't know which way was up, but I could tell that some of those rooms had 12 people in it and some weird status competition that was, who could say the smartest thing about slide five? None of which was helping the business or the entrepreneur. And again, I was 24, I didn't know what was happening, but I could tell that wasn't good. I could at least tell that with that.
So as a part of it, I was actually really scared of boards, not I think I hope for the accountability piece, but for the, I don't want 12 people in here playing some status game where my business is just a pawn in that I want a small room of people that I can be honest with and be like, here's what we figured out. Here's what we're working on. Here's where we're a little confused. What have you seen? Who should we be talking to? Please help versus something else. And today we've raised over $200 million and it's a three person board and it's me and our Series A investor from Sequoia and an independent. And yeah, we should make that board bigger over time, but it's purposely three people at this point for sure.
Ben Miller:
We have a few boards because we have our company board and we have funds and the funds are publicly registered, so they have to have independent third-party boards. So I actually have four boards, still a lot of boards for me, but they want to help. That's not as bad as someone who doesn't want to help and who's problematic, but even people who want to help aren't going to do the work. Doing the work is the hard part.
Christina Cacioppo:
Yes, I learned that at USV and then I had to relearn that a part of Vanta. But I think that the consequent also with investors, I'd look for people who were really excited to be investors, not investors who actually wanted to operate. They were the ones in the old meetings where you'd see them and be like, they really want to go fire all the sales leadership and just want the sales team. And they're not going to do that because they're VC, but you could totally tell they're backseat driving the CRO. No one wants to do that. And that was just a very different encounter actually to the guys I worked for who were investors down to their bones and loved it and had seen a ton in their decades of work. Definitely didn't want to run anybody's sales team, didn't think that was their place, didn't want to do it, didn't touch it, other people's stuff. And I really came to appreciate that.
Ben Miller:
I've been on both sides a lot in real estate as a person who took the capital from LPs and did the work. And then on the other side where I've given money. And both seats, I understand both sides have challenges and I understand why people behave the way they do often. You probably know this saying because you're so well read, but "ontogeny recapitulates phylogeny".
Christina Cacioppo:
I don't know that.
Ben Miller:
It's such a fancy saying, but it means the nature of something will recapitulate or act like the way it's structured. So if you have wings, you're likely to fly. So the structure of VC and the way that they raise a closed-ended fund, the way that they get compensated, the power law, the way they spend their time and they raise a fund every two years. And so they say, well, they need to show outcomes every two years, which means they need to have you raise money every two years. So there's all these things that affect their decision making. It's nothing to do with them as people. Very few people can transcend their incentives in the moment. So do you have things like that you've gathered over the years, little pearls of wisdom?
Christina Cacioppo:
About venture in particular?
Ben Miller:
Venture or entrepreneuring, product development?
Christina Cacioppo:
My maybe controversial take is I actually enjoy, in a way I don't know I would've expected, I at this point enjoy talking to the hard-nosed New York finance investors much more than the Silicon Valley founder magic types and vector incentives. And again, this is actually very tongue in cheek, everyone's wonderful trying to do their jobs, all that caveat, caveat. But at the end of the day, the people in Silicon Valley and the people on Wall Street are trying to get a return for their investors and that is what they're trying to do. To overly broadly generalize, I find the New York finance types are very clear about that and they say like, "Hello, my target IRR is X. If you come in below that, you're dead to me. Please come in above." It doesn't make me feel good, but I understand where we are here. I understand how to make this successful if that's my goal.
And I think the Silicon Valley types, again broadly generalizing, are founder magic, everything's great, world changing vision until it's not. And that point is much like when that crosses, it's much clearer and it's often very much tied to IRR and finances, but that's not what the conversation is around. So it's just harder to navigate. Am I vision-y enough for you? Should I try more vision-y? And again, this is all character, but I actually think there's something very real here and I appreciate the hard-nosed clarity that again, the stereotypical east coast style is versus the fluffy dreams of California, which sometimes come crashing out of the sky.
Ben Miller:
Well, so in early 2021, I've heard this story. I haven't heard it from you, that you could have raised at a much higher valuation, two, three billion, much higher than I think where you ended up raising, I saw this quote from somebody, which maybe you saw this quote because you turned it down, you raised a little round. And the quote was, "She has a gift for unflashy decisions that prove highly strategic."
Christina Cacioppo:
I think that actually this may be a place where working in VC helped and doing it 10 years ago and also working for people who lived through the 2001 crash. And so we're always a little paranoid that was happening again. In a way I didn't understand in 2010, I just thought they were being paranoid. Now I get a bit more. But anyway, it was the two conflicting ideas thing. It was both, I believe in Vanta to the moon and back and think it's the best thing since sliced bread, and everyone should also believe that. At 10 million of IRRs at a $3 billion company? No. Will we get there? Totally. But I can't look a candidate in that face and be like, you should feel great about your exceedingly overvalued equity package. You should definitely come work here. We make good decisions at Vanta. Just can't do it. And it wasn't, I don't believe in Vanta. It was just a, is this the moment for this? No. If we again, put our heads down and do good work and also talk about it, will the moment come? Yes.
Ben Miller:
But you recognize that was a rare decision. Most people took the money at that valuation.
Christina Cacioppo:
But they're much less happy today. On a two-year basis, I still feel good.
Ben Miller:
It goes back to that farsighted strategic part. Another thing I think about you, again, this may be because not inside the San Francisco circle person. So this, here's another quote, this whole thing is going to be embarrassing for you. So here's the quote, "She's one of the most impressive startup founders operating right now." So inside the tech community, your generation founders, not the PayPal mafia who are the last generation, but the current generation, you're just super well-respected, highly regarded. Inside the tech community you saw a lot of people make good decisions, bad decisions. Now the tech community's in transition, I would love to hear what do you think is going on among other tech companies, valuations? Yeah, I'm just interested in your view of it's not about Vanta, it's not about you, it's just about the tech industry.
Christina Cacioppo:
So I do think the multiple reset, valuation reset is really hard. In some ways I understand the 2021 decision to value Vanta at 300 times revenue or whatever, and totally understand why that is compelling and alluring. And when everybody else is doing it, it totally feels like the right thing to do. I did have moments later that fall in the next year where you're like, still don't think I should have done it, but man, did that feel good at the time or solve some short-term problem. To the competitive thing, well, we just clearly have been the biggest and now we'd be struggling, but would've been nice for a bit. So I get it, but I do think my empathy for the founders is it's easy to imagine myself in their shoes and I get it. But for the people they hired, their outcomes are so much worse when they're sitting underwater in all this stock and then the founders have to walk around and be like, "Hey everyone, we're going to work really hard for three years and get everyone to neutral on their stock. Doesn't that sound great?"
And I am not the most motivational leader in that way anyway, and so having to go deliver that message is so hard. So this is just a long windup to some of the job shuffling and exec shuffling is I think very, it's really hard, but it's very reasonable. And I think there's non-founders across Silicon Valley being like, do I want to buck up for the next three years to get back to where I thought I was, where I never really actually was, but I thought I did so I feel like I'm losing something. And then I think the founders have to go have and navigate these conversations. It's really hard. And I don't think, we have another spicy take, a lot of VCs now say, "Oh well, shouldn't you have known? Or shouldn't you buck up even more?" And yes, but actually a lot of these VCs were the ones saying go, go, go in 2021 too.
And we were all doing it. I don't mean to point fingers, but I think there is a little bit of amnesia on the investor side of we were all participating in that. And at least for me, you're like, the advice is both correct and sometimes I'd a little bit of an acknowledgement that we were all wrong together in 2021. And the advice is still correct and [inaudible 00:39:39] both of those ideas. But I do think we're going to see more valuation corrections. I think even now, as much as I might not love the multiple environment, it's actually where the 10 year or five year average is. We're getting back to where pre-COVID was. This is normal, it just doesn't feel normal. It feels like such a loss because '21 was so crazy.
Ben Miller:
So this is happening also in real estate and I think it's happening everywhere, but in the places where I'm close to, I know the same thing's happening. In the tech transition, this going from crazy high valuation to normal valuation, there's this lag. It takes a while for it to happen. What inning or how far through it do you think the tech community is?
Christina Cacioppo:
I think it's a private market thing where it's laggy and then I think actually emotionally or in heads, everyone knows, but a lot of the numbers actually haven't changed, if that makes sense. A lot of the valuations haven't actually written down because companies haven't fundraised or whatever. We're sort of just prolonging that hangover I think. But also no founder wants to go slash the value of their company by 40%. And then again, show up and tell everyone who works for them and bet on them that this was a great decision. You can critique people not doing it, but I think it has to come with, well, do you want to sign up for that task? Because that's not great either.
Ben Miller:
But what you're saying, which is what I think I see as well is that mostly the revaluations haven't happened yet.
Christina Cacioppo:
Yeah, they haven't happened.
Ben Miller:
They haven't happened.
Christina Cacioppo:
Everyone keeps being like, oh, we'll fundraise in Q1 and then Q1 becomes Q2. It's this game of will it get a little better? Can I hold off until it improves? And while I both think it'll improve over a three-year period, I don't think we're getting back anywhere near where we were.
Ben Miller:
So basically there's still a reckoning in terms of valuations for a good chunk of the tech.
Christina Cacioppo:
Yeah, you talk to VC firms, I know one that's roughly just any deal they did in 2021 or 2022, they slashed it in half. It's slightly more scientific, but not really. It was just everything was wrong here and so we were just going to slash everything in half. And then there's some firms that are carrying everything at their '21 values and then LPs are getting these updates with two different methodologies and trying to figure out what the heck is going on and confusing.
Ben Miller:
I went through the 2008 financial crisis and that was different. That was subprime mortgage and that was alt days and CDOs and CLOs and stuff that are really esoteric. But the same thing happened then and there was just more leverage. But it takes a long time for the change to work its way through the system and it's still working its way through. Let me transition to a couple last questions here, because I'm interested in your personal journey from a worker to a leader, because it sounds like a lot of that was about building confidence. Do you have a personal arc or a way you think about the journey that you've been through over the last decade?
Christina Cacioppo:
I think I got better with practice in the real world on real things. I hate in a lot of ways you have to practice on real people. People management is a clear one. I think that's not natural for most people and you definitely get better with practice, but you've got to practice on again, real people and that sucks. If someone can AI that, I am all for it. I don't really think it can, but there's a piece there. I think in the early days of Vanta when I wasn't doing product development, I've started doing everything else, because we had the skeleton of a product, basically. Everything else was all new to me, whatever it was, recruiting, engineers, sales, outbound emails, what? Anything, you name it, I hadn't done it and I just felt bad at everything. I probably was bad at it, hadn't done it. I was learning it, I was bad.
And Ira Glass has that wonderful quote, it's about making art, but how it's really hard when you have taste, some taste bar and then your capacity to create is below your taste and you have to keep going as you get better. But literally nothing meets your taste bar, the work version of that. And I think I distinctly remember running in Golden Gate Park and having this realization that it's, oh, I feel like I'm bad at everything, because I am, because I'm learning it. But my job at this stage is to do this well enough to be able to convince someone who's actually good at it to work at Vanta.
So if I end up feeling like I'm good at something, I probably have waited too long to hire someone and this is what the next several years will be and I'm just not going to feel mastery for years. We should maybe mourn that, but that's what it's going to be. And there was something again, actually very clarifying. Were you're like, oh, okay, I'm just going to swim in a sea of feeling bad at things for a while. But again, if that's what you're quote, unquote, "supposed to be doing", as long as you're getting better, it's much easier to be in that sea than again, to feel like you're actually messing everything up.
Ben Miller:
Yeah, but I feel like with a lot of people I work with and maybe manage that they hate that feeling.
Christina Cacioppo:
Oh yeah, it sucks. Yeah.
Ben Miller:
So they spend most of their time actually avoiding that. And I'm like, no, you don't understand. You can't learn to swim without going in the water. This is a part of the process and it seems to me that most people spend most of their time trying not to be in that emotional state.
Christina Cacioppo:
You just have to run straight into it because it sucks. It does suck.
Ben Miller:
Yeah. It's just a horrible feeling, but it's the only way across. Okay, the last question for you here. If you could wave a magic wand and change one thing in the world, what do you think it would be?
Christina Cacioppo:
Anything? That's my ultimate answer. But in undergrad now, many years ago, very old now, decade and a half ago, I spent a bunch of time studying and in Sub-Saharan Africa, and there was a development piece and a growth piece and an exciting change piece. And there was a bunch there I really liked. And I've paid attention to different countries and regions over the past decade and a half. And one of the things I find frustrating, for lack of a better word, demoralizing. But if I could wave a wand, I would definitely change it is, I look at the bad cell phone pictures I have from 2005 from my memories of various places I was, and they kind of look the same today and things are the same and they're not worse, but they're not better.
And it's been almost 20 years. I find it really frustrating. I would wave a wand and absolutely fix it because it was just dumb chance and luck I was born in Ohio and not Kigali, and other versions of me were born in Kigali, might not make the art at the level of someone in Ohio could, their art to the company or whatever. And that just feels deeply random and deeply unfair to me.
Ben Miller:
That's a wonderful sentiment to end with. So thank you for coming on Onward.
Christina Cacioppo:
Thank you so much.
Ben Miller:
You've been listening to Onward, the Fundrise podcast featuring Christina Cacioppo, founder and CEO of Vanta. My name is Ben Miller and I'm CEO of Fundrise. We invite you again to please send your comments and questions to onward@fundrise.com. And if you like what you've heard, rate and review us on Apple Podcasts. Be sure to follow us wherever you listen to podcasts. For more information on Fundrise sponsored investment products, including relevant legal disclaimers, check out our show notes. Thanks so much for joining me. We'll see you next episode.
