He walked away from $5M ARR—then built a $50M company. | Russ Fradin, Founder of Larridin

Russ Fradin (00:00:00) :
It is actually a miracle any startup ever works out. The number of things that can kill it, whether you become the scale of Nvidia, the scale of Stripe. It's actually just a miracle that an investor, when they give you a dollar, has a reasonable expectation that they might get back more than a dollar. I actually reject the idea that there's product market fit and then it's magical. All of these great businesses constantly reinvent themselves all the time. I mean, just look at the last thirty year history of Microsoft. Look at what Google is today versus what Google was in '96. I really started out saying like, oh, well, I want to raise $10 million. You know, I went and talked to someone in Andreessen and he was going to give it to me. So that was great. It is definitely true that compared to the last thirty years, if you're a multi-time exited founder and you're doing something in AI. It's a good time to raise your first round.

Previous Guests (00:00:46) :
That's product market fit. Product market fit. Product market fit. I called it the product market fit question. Product market fit. Product market fit. Product market fit. Product market fit. I mean, the name of the show is product market fit.

Pablo Srugo (00:00:58) :
Do you think the product market fit show, has product market fit? Because if you do, then there's something you just have to do. You have to take out your phone. You have to leave the show five stars. It lets us reach more founders and it lets us get better guests, thank you. Russ, welcome to the show, man. Excited to have you here.

Russ Fradin (00:01:15) :
Thank you. Nice to meet you, I appreciate it. Should be fun.

Pablo Srugo (00:01:17) :
Absolutely. So, I mean, you've been in the startup game for what, twenty-five, thirty years now? I see you're a board member at a bunch of different companies, including Udemy. Which is a very well-known EdTech startup and you've started multiple companies of your own. The one you're working on now, Larridin. Raised like, $17 million earlier this year and only been around for maybe, a year and a half or so?

Russ Fradin (00:01:36) :
Hasn't really been around for a year yet. Yes, we raised $17 million and yes, I think I'm officially old now. I joined my first startup in Silicon Valley thirty years ago.

Pablo Srugo (00:01:45) :
And then you had several companies before that. Maybe just, be good to get the really quick lay of the land in terms of your background, and then we can jump into at least your startup before this one. Dynamic Signal and just go deeper on that story. 

Russ Fradin (00:01:56) :
Sure, a long, long time ago when I was a kid before Netscape had gone public. I was maybe the first employee, one of the first couple employees at the first online advertising network and that company went public. And got sold for billions of dollars in the late 90s. And then I was probably the first executive, certainly very early before it had any revenue, at Comscore and spent a bunch of years working with the team there. And as an executive there, then I spent a year trying to fix wine.com. Which is not a great business, but it was a fun year and then I started an advertising technology company called Adify that got very big very quickly. I sold to Cox Enterprises.

Pablo Srugo (00:02:31) :
What year was this?

Russ Fradin (00:02:32) :
I think I started that in '05 and we sold it in' 08. If I remember correctly, which is a long time ago and then I started a HR technology company called Dynamic Signal. That took a little longer but got big and we sold to private equity firm. And then I spent a couple years helping my friend run Carbon Health before I started Larridin. And along the way about investing a lot of things, and been on a bunch of boards, and things like that.

Pablo Srugo (00:02:55) :
So let's go into Dynamic Signal. Maybe just walk me through, I guess we're talking like 2008, 2010, what's happening? What leads to it? What's the origin story there?

Russ Fradin (00:03:05) :
So we started Dynamic Signal probably January 2011. It didn't really become what it was going to become for another couple of years. So the original idea did not turn out to be the idea that worked. But to your point, in the early, early, early days this is when blogs were still a big deal before twitter was a huge deal. We had built a very large advertising technology company called Adify and we thought there would be an opportunity to do the same thing in kind of the influencer marketing world. And again, influencer marketing today same idea but very different

Pablo Srugo (00:03:35) :
What was influencer marketing in 2010?

Russ Fradin (00:03:37) :
Mostly bloggers.

Pablo Srugo (00:03:38) :
Okay.

Russ Fradin (00:03:38) :
Right? It was mostly long tail bloggers, you know, pre Twitter, pre Instagram.

Pablo Srugo (00:03:44) :
Well, anything video, because that's when. I mean, this influence really took off with, I mean, pictures, maybe. But videos, you know, huge. I think, for the influencer world.

Russ Fradin (00:03:50) :
But frankly, pre Twitter, the way you were expressing your opinion online was really message boards and blogs. And so how did you reach out? Find and identify the bloggers, and message boarders that mattered? And then ultimately, Twitter and Facebook, and things like that. And then, yes, of course, it exploded on the video side, right? What you see now on YouTube and TikTok is, frankly, the original idea for Dynamic Signal would probably be a great idea today. I'm sure someone is out there building it. Obviously, this is fifteen years ago, fourteen years ago. So a lot has changed.

Pablo Srugo (00:04:19) :
What was that exact idea? What did you want to do with influencers at the beginning?

Russ Fradin (00:04:21) :
A long time ago, we had built some tech leveraging our experiences at Comscore. We were really bundling three things together. Find and identify influencers you should work with, technology to allow you to work with them, track what they were doing, and then almost a backend to pay them, right? It's one thing to say, we're going to work with four thousand influencers to do this thing. But actually you have to find them, you have to identify them, you have to contact them, you have to make sure they're doing what they said they would do. You have to make sure they provide the right disclosures so everything is legal, at the standards where it should be. Then you actually have to pay them and send 1099's, and multiple currencies all around the world. Things like that and so we thought that was a good idea and launched the business doing that. A couple years later, it evolved quite a bit into what ultimately worked, but that was the original idea for the business.

Pablo Srugo (00:05:07) :
what happens in those two years? What works and what doesn't.

Russ Fradin (00:05:10) :
You know, what was interesting is we did sign a bunch of customers that paid us a lot of money. So, it's a long time ago but one year, eighteen months in. It was probably $5 or $6 million in ARR, which by today's standards is nothing. Obviously, but this is a long time ago. Maybe it's three or four, but it was multiple single-digit millions of ARR. We had customers paying us a lot of money. What we found was that we wanted to build a SaaS business that was going to be this long-term recurring revenue as applied by ARR, and we found out that because it was media related. At the end of the day, people just didn't view these as ongoing programs. So what we really figured out was it would take a while to sell it, and that was fine. There's nothing wrong with something that takes a long time to sell as long as you have a high LTV, and what we found was the customers. Yes, they would run the program. The program would be interesting, the program would be exciting, they'd be happy with the results. But they treated it just like any other medium buy, and so what we found. It really wasn't that sticky, and there were a lot of reasons why. It's hard to find them, it's hard to identify them, influencers burn out with you, you burn out with them, things like that. So there were a lot of reasons in hindsight why, but what it really turned out is. It's not that it was a bad idea. It's that it wasn't really a software company, it was a software-enabled agency services company. Which is what we set out to build and so we were fortunate along the way to see something really start working, and that became what the business.

Pablo Srugo (00:06:32) :
What are they using it like? They're launching a new product? So they're spending a bunch on media. This is one of the new things and then, okay, cool. Products launched, okay, next  thing, like.

Russ Fradin (00:06:38) :
I'll give you a great example, because it has a funny title that you will laugh at. One of our early customers was a movie studio. I want to say Lionsgate, but I don't remember. Who used us for the launch of the movie, Abraham Lincoln Vampire Hunter. Which by the way, is a good book. It is a bad movie. It is genuinely a good book. It's by an author who also wrote a book called Pride, Prejudice, and Zombies.

Pablo Srugo (00:06:59) :
Okay.

Russ Fradin (00:06:59) :
And, Abraham Lincoln Vampire Hunter is kind of a fun book, regardless. So it was one of these things that movie studio is an ultimate example of. They were totally happy with the results, but, the movie launched and if you then became core infrastructure for Lionsgate to use to launch every movie. You'd have a very nice software business. If you have to sell it title by title, by title, really you're just a different form of a media company and that wasn't what we set out to build. It might have been a good business, just wasn't what we set out to build.

Pablo Srugo (00:07:25) :
What are you seeing? You know, when does this become obvious? And then what do you do?

Russ Fradin (00:07:29) :
So for us there were these couple things happening. Which is we found it was getting harder and harder to recruit influencers, number one.

Pablo Srugo (00:07:35) :
Why is that, by the way? Sorry, just to pause there. Because for influencers, it's gravy, right? It's extra money.

Russ Fradin (00:07:40) :
I haven't thought about this in a long time, but I think if you look back. A lot of it was, bloggers were getting tired of blogging and they were just moving over to Twitter.

Pablo Srugo (00:07:49) :
Okay.

Russ Fradin (00:07:49) :
Honestly and in the early days, what was the Twitter ad product? What was Facebook ad product? Just wasn't clear. They got harder to recruit. Some random Twitter account was harder to recruit. It wasn't worth it. I also think, by the way, it is very true that any software business you try to build in this category. Only works if you're dealing with scale and I think what happened with brands is they started doing a lot of influencer campaigns. But with three or four influencers, and if you're Budweiser, and you wanna do a deal with Joe, Pablo, and Tina. You don't really need software for that. You need software if you're gonna deal with a thousand people at scale and pay, and all that. You can imagine why that's very complicated, but if I just wanna do a deal with whoever the Mr. Beast of 2012 was. I can just have my agency call him and do something deep, and experiential, and amazing, and custom. But that's the opposite of scale. So I actually think, totally unrelated, and then we can get back to Dynamic Signal. But for people that are paying attention to this and the influencer marketing side. YouTube a couple months ago had a big event in New York City and announced a series of AI tools. And the goal of those AI tools was YouTube sees a lot of, you know, Budweiser working with Mr. Beast or whatever. 

Pablo Srugo (00:08:55) :
That's right.

Russ Fradin (00:08:56) :
And are trying to make it easier for long-tail YouTubers to work with those brands. They like the idea of working with a thousand little Mr. Beast. But actually finding them, identify them, policing them.

Pablo Srugo (00:09:07) :
It's tough to manage, that's right. 

Russ Fradin (00:09:08) :
YouTube is building some AI tools around that. Which is a great idea and frankly, an obvious use of AI. So who knows how the space will evolve, but I can't claim to be an expert. I probably haven't thought about the influencer space in twelve or thirteen years.

Pablo Srugo (00:09:19) :
Well, it gets reinvented constantly and there's always these influence from other places. Some actually do well and some don't. Yeah, it's pretty crazy. So back to the storyline, I mean, you're kind of doing this. So the question was kind of what are you seeing that makes you stop and think. Okay, maybe this is not like the thing.

Russ Fradin (00:09:32) :
So we had this one area of all of the people we tried to recruit. By accident, we had this one area where the people would gladly join these communities. If you think about what was the community really in the beginning, obviously the business but what was it? So it was this hub site, mobile, whatever. But it was this hub site that had a bunch of content about brands. That brands wanted to be shared, you know, with disclosure that they felt was cool. Offers and movie premieres, and free tickets, and all of this stuff. And they wanted it shared out in the world. When we saw that, there was this one group of people that would consistently join these communities and consistently share. You didn't have to constantly replace them, constantly refresh them, it wasn't that hard, and so we saw it just by accident. Just kind of grew, you know, it was emergent behavior as they say, and it was the employees of those companies. It was the employees of Oakley or the employees of Lionsgate, or the employees of Home Depot and we noticed that. It wasn't the plan, we noticed that and we started talking to some customers about it. And started talking to some prospects about that. And it became very clear that there was a very large opportunity broadly around that insight of how companies were communicating with their employees. This was in the early days of social media, so you had employees that wanted to share things. Maybe I'm a salesperson, I wanted to share things on LinkedIn about my company, Oracle. But I don't wanna get fired, I don't wanna get in trouble, I'm not sure what I'm allowed to say, right? You have this very weird world where pre-social media, if you were the Wall Street Journal and you wanted to hear from Oracle. There were four people, I'm making this up, but there were three or four people authorized to speak on behalf of Oracle. Suddenly, Twitter comes around and there's thirty thousand people, right? And LinkedIn, by the way. If you're talking about B2B sales, it's much more LinkedIn. It's different if you're a consumer brand. Suddenly, I don't know, a hundred thousand people that work at Home Depot, or however many people work there. Might share the cool Olympics commercial that Home Depot always does about the Olympics that always makes people want to cry.

Pablo Srugo (00:11:28) :
And these people, in terms of emerging behavior. They were not necessarily influencers. They're just going on the site, they're seeing these offers, they're like, oh, my company's doing this, I want to tell my friends, sort of thing?

Russ Fradin (00:11:36) :
They were people that worked at the company. Yes, I mean, who's to say who's an influencer, but yes.

Pablo Srugo (00:11:40) :
Sure.

Russ Fradin (00:11:41) :
You weren't paying them, you weren't recruiting them, it was just, hey, I work at Chase, and this is interesting, and I'm allowed to share it. And so, obviously, by the way, we'll move away from the influencer analogy. But at the end of the day, what did you really have? You had content brands were hoping would be shared. It was much more authentic when it was shared from Russ or Pablo than when it was shared from @Budweiser or @Home Depot, and it turned out you had these employees that really wanted to do it, frankly, without being rewarded. Then when you started adding in rewards and tracking leaderboards. The business obviously evolved over many years and frankly, it mostly, as it continued to evolve. Became a lot about non-shareable content, right? What Dynamic Signal ultimately was that became a large company we ultimately sold was really almost a mobile personalized intranet for increasingly disconnected workers. Where the sharing was a part of the business, probably twenty percent of the business.

Pablo Srugo (00:12:34) :
So it was more HR for the workers than actually marketing?

Russ Fradin (00:12:37) :
If you think about the constant evolution of a business, right? I mean, no business is exactly what it starts out to be, of course, right? That's why you do this podcast and frankly, every business evolves. Famously, the largest company in the entire world today by market cap was for a long time very much about video gaming. They've done quite a great job evolving into being worth, I think, $5.5 trillion. I just saw something like that and while I'm sure their technology is amazing for video gaming. It is not, in fact, video gaming that led to that. So, you know, every company evolves costly, right? Facebook famously was never let anyone in that weren't college students and they weren't going to have advertising, right? So, things evolve but if I look at what really happened is a business. It was this insight that there was content that people wanted shared. It turned out the people really interesting and sharing it where the employees. That became its own business. So just the kind of employee advocacy wound up being the space that we probably created. I'm sure there were some competitors at the time that were way less successful than us. That would quibble with that and whatever. But, it turned out it was this space that, I'm just going to say we created, since no one else is on this podcast to argue with me about it and so if you look at what really grew Dynamic Signal. About half of the people that work in America today do not have work email. It's not something you and I really think about, but you know, Walmart has two million employees don't have walmart.com email addresses, right? UPS has three hundred thousand drivers and people working in their distribution centers, that don't have at UPS email addresses. But every single one of those people has one of these in their pocket. That they use for banking and dating, and emailing, and getting your kids report cards, and all of the other things that normal traditional in office workers do with their cell phones. And so, we said, well, why don't we send people their schedule, their pay stubs and emergency announcements, and live stream video of Jamie Dimon visiting a branch in Schenectady, and blah, blah, blah, blah, blah. So when we sold it, I mean, I don't know what's happened to the business since. Probably eighty percent of the content was internal focus, but twenty percent of it was still that external, how we get our sellers more active on LinkedIn, right? Because if you have a world where, think back to 2012, 2013, 2014, you're a successful Oracle seller in your mid 40s at the time. So it meant for almost your entire career, you never talked publicly about Oracle, right? You would have been fired if you talked to a reporter. But now you're being told, hey, use LinkedIn more, you'll sell more, use LinkedIn more, you'll sell more and so, I used to pitch kind of content, convenience, compliance, and credit. Those were my kind of four C's to the business. Which is content, right? I'm going to give you the content I think you're certainly allowed to share. Convenience, right? It's going to pop up on your phone. Compliance, you will not get fired. So we're not going to make you do it, but if you do it, you're safe. This is safe, right? Something you don't find in this app, unsafe and then credit, right? We'll track what happens. We'll help you understand, like, oh, that thing you put on LinkedIn drove a sales lead for you, for your colleagues, for whatever, and we'll reward you for that. So. that became the zero to one product market fit that really helped the Dynamic Signal grow. Then it evolved and we turned out internal was bigger than external, and all of that. But if you really want to know how to go from a business that was uninteresting and I frankly would have kind of sold or shut down as an agency business into something that attracted a lot of venture capital.

Pablo Srugo (00:15:38) :
How big did it get? I know you raised over a hundred million. How big did it get revenue wise?

Russ Fradin (00:15:41) :
Probably around $50 million ARR, when we sold it.

Pablo Srugo (00:15:43) :
Okay.

Russ Fradin (00:15:44) :
And then I couldn't, well, frankly, even if I do. I'm sure I'm not allowed to, but I couldn't tell you. 

Pablo Srugo (00:15:49) :
Talk about compliance.

Russ Fradin (00:15:54) :
There was a smaller competitor in the space who had been bought by a private equity firm and the private equity firm that bought the smaller competitor also bought us. And put the two companies together. And, it's now a much larger company with lots of customers and I hope they do great.

Pablo Srugo (00:16:03) :
Maybe just a couple more questions before we jump to what you're doing today, which is in that moment where you're discovering. I just want to go deeper on this, because it's such a critical point. As you're seeing this emergent behavior and you're seeing these employees that you don't need to convince to do anything. What steps do you take at that time to then uncover what ultimately becomes, the larger opportunity and so on? Because once you have product market fit, things start to pull you, and everything else, all the other features are a bit more natural, you know?

Russ Fradin (00:16:31) :
I actually don't even buy that that's true, but let me answer your first question. So, first of all, I think. I mean, I've been fortunate enough to work with or as a founder for, like I said, the last thirty years. I think there's a tricky thing when you're a founder in Silicon Valley. Which is, on the one hand, you have to project extreme confidence that what you're doing. I mean, let's be honest. It's a miracle that any of these things ever work, right? Just a couple of guys, a couple of women, a couple of whatever, have a random idea and a laptop. Going up against hundreds of billions of dollars, trillions of dollars of companies, or doing something brand new. It is actually a miracle any startup ever works out, like ever, just flat out. The number of things that can kill it, and look, there's a reason they mostly tend to be based in a couple of geographic areas in the world. It's just miraculous that anything works, whether you become the scale of NVIDIA, the scale of Stripe, the scale of Dynamic Signal. It's actually just a miracle that an investor, when they give you a dollar, has a reasonable expectation that they might get back more than a dollar. So I think when you're a founder, you just have to have those ideas in your head at the same time and they are conflicting ideas, right? The conflicting reality has to be, I have to be very convinced that what I'm doing is amazing and excellent, and exactly what the world needs. And I have to be very quietly and not. Maybe not publicly to my employees or my investors. I have to also be worried that I'm completely wrong and open to any proof point that I am wrong, and able to adapt to that information. So what was the particular scenario? We had this issue where it is a hundred percent true that we could have evolved our positioning and kept doing that kind of influencer advocacy marketing business we were doing, right? Every single day we were signing customers. I said, I think we had, we probably had a customer. Our largest customer was probably paying us $600,000 or $700,000 ARR. In terms of generally accepted, as I said, it was. In my opinion, it wasn't going to stick around for very long.

Pablo Srugo (00:18:23) :
But that's a lot harder to say no to, than when things are just not working at all. You know, as you were in that gray zone, things were kind of working.

Russ Fradin (00:18:29) :
I went and raised a round in 2014. That was one, I mean, I've raised thirty rounds of venture capital. I went and raised a round in 2014. Where I basically said to investors, I know I have $4 or $5 million ARR, completely ignore that. I'm walking away from that. It's this $200 thousand in pipeline, that's what you're investing in. Sure, that is hard to do, but I think at your core. When you're a founder, like I said, you have to A, be trying to do something that is effectively impossible, B, be highly confident you'll be able to do that, and then C, be open to any little pieces of information that help you figure out how to do it well. So pivot is a dumb word, right? Because when you're running a company, you're changing all the time. I'm sure when you started your podcast, you had one idea, you've evolved it over time, right? So I think a better analogy is the way you're kind of hacking to the wind when you're scaling.

Pablo Srugo (00:19:13) :
Sure.

Russ Fradin (00:19:14) :
By the way, even when you have old product market fit. Now it works, sure but some companies cap out at $100 million, some companies cap out at a billion, some companies cap out at $10 billion, right? And the difference is not just luck. The difference is not just, well, the product grew, right? Fundamentally, all of these great businesses constantly kind of reinvent themselves all the time. I mean, just look at the last thirty year history of Microsoft. Look at what Google is today versus what Google was in '96. I would say what Google constantly had is a magnet for talent, and a constant push to reinvent themselves in lots of amazing and exciting ways. They have a lot of high profile failures, right? A lot of things they bought that didn't work out. A lot of proxy launch it didn't work out but that is part and parcel with things working, you know? It's very well covered the way Amazon does this so I actually reject the idea that this product market fit and then it's magical I will say it's very lonely when you're a founder you have an idea and no one likes you at all, right?

Pablo Srugo (00:20:04) :
Yes, I think there's a salient difference. I totally buy your point. You have to reinvent yourself, and your new thing's going to plateau, but the before product market fit is full push mode. Like, does this work? Does this work? And then after that, you've got at least some pull.

Russ Fradin (00:20:16) :
Right, does anyone care?

Pablo Srugo (00:20:17) :
That's right, exactly.

Russ Fradin (00:20:17) :
I would say this, by the way. My startup before Dynamic Signal. Adify, we had this idea for a company, and for the first three months. We were pushing these three use cases that we thought were all amazing use cases and after three months in. It turned out that people really only liked one of them and so that became the company for the next two and a half years, and then we sold it. Who knows what would have happened if it stayed independent? Would we have come back around those other two use cases, or who knows? I mean, I ran it for two years, so I kind of know but whatever. Yes, you constantly reinvent yourself, but yes that early stage when you're literally at zero is very lonely. Where you just have to be driven by your own extreme confidence that you have some chance of succeeding in this thing that is almost definitely gonna fail, right? But also being very open to any little points that help you figure out where to go. So like I said, I think it's much more like hacking while you're sailing or you're lost in the forest. Just finding your way, finding your way, finding your way, finding your way. Now, then there's a trick of, are you at the peak of the mountain or just a false peak and you have to keep at it, right? All of those are, you know, you can come up with a lot of artsy language for any of it, but that's how I think about it. So sure, pre anyone caring is very lonely. But it's actually just as hard to go, oh my God, people do care, but they don't care enough.

Pablo Srugo (00:21:29) :
Yeah, I mean, the great part is tough. I totally agree, because when you've got nothing, it's clear you've got nothing and when you've got insane pull, you've got insane pull. That middle part where you're like, should I keep trying to press this thing? Maybe it'll work if I tweak this one thing, or do I find some other opportunity? That's really hard to figure out as a founder.

Russ Fradin (00:21:44) :
A hundred percent.

Pablo Srugo (00:21:45) :
Just from timeline, when do you sell this company? Dynamic Signal?

Russ Fradin (00:21:48) :
Oh, we sold Dynamic Signal in probably 2020. I don't know, 2021, 2020, something like that. I'm pretty sure end of 2020.

Pablo Srugo (00:21:56) :
We have tens of thousands of people who have followed the show. Are you one of those people? You want to be part of the group. You want to be a part of those tens of thousands of followers. So hit the follow button. What happens between then and starting Larridin and what do you do? And maybe more to the point, why do you start this company at this point?

Russ Fradin (00:22:15) :
I like starting new companies. I love working with my friend. I have this co-founder, Jim, I've worked with for twenty-five straight years. I didn't know the co-founder, I worked with for a long time as well, but he started a different company. He's amazing guy and I'm on his board, but he's not working with us here for a unrelated reason to his own stuff, his own timing. So, early 2021, I had this issue of I had just sold Dynamic Signal. I would normally have just started another company, but I hate remote work. I don't like debating it with people. If other people like it, amazing but I never liked remote work. The way the world has moved back to in-office is exactly what I thought was going to happen and so, I just did not want to start a company fully remote. I just had no interest in it and so, early 2021, it was the height of COVID. You know, I wanted to keep doing things, right? I have three kids. They were in remote school. A long, long time ago, you mentioned I was the first investor or one of the first investors in a company called Udemy and was on the board. And that founder, Aaron, who's amazing, had started a company called Carbon Health. Where I was one of his first investors on the board and Carbon was growing very quickly. Aaron wanted some help and I did not want to start another company at the time. And so I went and helped Aaron for a few years. So for a few years, I was very active helping Aaron and the team there with Carbon Health. And we raised like hundreds, and hundreds of millions of dollars. So that's what I was doing for a couple of years. So, I don't know, probably eighteen months ago, you know, I thought Carbon didn't need any more full-time help from me. I was ready to start something new, and my very long-time collaborator, Jim. Who had stayed inside the private equity firm to help run Dynamic Signal. He was ready to leave as well and so, he and I started talking about what to do next, and that's how we started Larridin.

Pablo Srugo (00:23:47) :
How much did, just the post-ChatGPT stuff, influence the fact that you needed to start something new?

Russ Fradin (00:23:53) :
I would say it this way. I was always going to start something new. Obviously, I like starting companies. I don't know, maybe at some point I will stop but as I have been doing it for a long time. I'm still not yet fifty. So I'm sure there will be a point where I stop being a founder of a company, but that point has not arrived yet. Given my experience of, you know, I'm not a biochemist and I'm not a physicist. I wasn't going to start a quantum computer, given my experience and what I was going to do. Of course it was going to somehow overlap with AI and I think ChatGPT is extraordinary. I wouldn't be retired living in Tahoe if it wasn't for ChatGPT or something.

Pablo Srugo (00:24:30) :
Gotcha, it wasn't so much like, oh my God, look what's happening in AI. We've got to do something. It was like, I'm going to do something, oh my God, look what's happening with AI.

Russ Fradin (00:24:35) :
Of course, of course, of course, right? And maybe six years from now it'll be, I'm going to do something with what's happening in quantum. Like, I don't know.

Pablo Srugo (00:24:41) :
Walk me through, since you've started so many businesses, and since you're starting from the point of, I'm going to start something. How do you approach it? It's you and your co-founder, how are you coming up with ideas? How are you finding problems? What is your method?

Russ Fradin (00:24:52) :
I think about it this way and look, everybody has different methods. Some people like to do something totally, totally, totally different, and that's great for them. I really think about this as, I start from the fact that it is so hard for any of these things to work. What are Jim and I actually good at? Not just like, hey, we're nice guys, but what are we actually good at? Where do we have a potential unfair advantage? Because when you're a startup, like I said, all of these things are so unlikely. I think it's useful to think about where you have some potential unfair advantage and, you know, Jim and I have spent our career selling expensive software to big companies, right? Is it possible I would start some amazing ground up. 
  
Pablo Srugo (00:25:27) :
PLG, SMB sort of thing?

Russ Fradin (00:25:29) :
Yeah, sure. Theoretically, but I have better odds of selling something that's going to be enterprise focused. My general perspective is, it's so wonderful to go to work every day with some of the greatest people trying to do something amazing. That, you know, I said, oh, great where can I do that an area. Where I have some amount of unfair advantage given that it's so hard to make anything succeed ever and so, like, I said I'd been selling expensive software big companies for thirty years more or less and as has Jim. And we knew we needed to find a CTO, because our very long time collaborator had started his own AI company. While Jim and I were engaged in our Carbon Health and he was still helping run our old firm. So our very long time co-founding CTO we didn't have. So we had to go find someone new and we had to go find some investors and so.

Pablo Srugo (00:26:11) :
But how do you go from just this broad idea of doing something for the enterprise to an actual concrete?

Russ Fradin (00:26:16) :
Oh, so then it was very much, what do we know a lot about? We know a lot about measurement and third party measurement. We know a lot about employee experience and employee engagement. I think at Dynamic Signal, when all was said and done. When we were no longer involved, I think we had sold thirty-five million seats of software to six hundred of the Fortune 2000 companies. So, we had sold a lot of expensive stuff to some very large companies that they really use for tens of millions of their employees. So we thought we had a decent handle on selling to IT non-security solutions. I don't really know anything about selling security. I know it's a huge market, not something I have expertise in. So we thought we were very good at selling it to CIO's and solving problems for CIO's related to their employees. How do you get your employees to adopt new technology? From our time at Comscore we had seen the good and the bad from building a very large third party measurement business and how industries can be reshaped when they have great forms of measurement, and tools. And how frankly the lack of those tools really holds back growth. And so we started a business around kind of those insights and our skill sets.

Pablo Srugo (00:27:17) :
Do you go out and do this classic customer discovery stuff or whatever? Or you just know enough about?

Russ Fradin (00:27:22) :
Sure, sure. Even though it's only been a year. I can't even tell you everything Jim and I thought about. Sure, but we had thirty phone calls with CIOs and heads of HR at very large companies running through our various ideas. One of the problems you have when you're a first time founder, you have the problem of you don't know anybody, nobody likes you and so you just have to work on your own little isolation tent, and hope your work out. That is a problem, it is hard. It's hard to attract capital. It's hard to get anyone to talk to you. Sometimes you build something amazing, like box.com. I won't even keep relying on Facebook. Aaron was a very young guy who knew nobody, and so it's extraordinary what he built with Box over so many years. One of the problems you have when you're a multiple time founder is people have these positive associations with you. They know the thing they bought from you last time was valuable. They know you sold the company for a lot of money. So there's this kind of correlation of you probably smart and so actually one of the problems you have in the early days is everybody likes your idea. 

Pablo Srugo (00:28:14) :
Right, a lot of happy ears. Yeah, I can see that.

Russ Fradin (00:28:16) :
Yeah, it's like, of course it's a good idea. Are they saying it's a good idea?

Pablo Srugo (00:28:19) :
Well, you're also not going to say anything too dumb. Because you know enough that the thing you're going to come up with is probably pretty good, and so that combined with you saying it, they're like, yeah, that sounds amazing. Let's do it.

Russ Fradin (00:28:28) :
Jim and I were smart enough to know that whatever people told us, none of it was truly true. Until we brought them something and said, will you give me money for this? Not do you think this is a good idea, not what do you think these mock-ups, not brainstorming, right? So it is a necessary but not sufficient step to have an idea, feel good about it, go raise money for it, go build it. But you do not actually know if you have product market fit in an enterprise world. Where the feedback cycles are long, by the way. People don't buy things in one day, and it takes a while to get people on the phone, right? Even if you're connected, you know, call the head of HR at X or the CIO of Y today, speak to him today, give him a demo today. But you do not actually know you have something. Whatever content you put on the webpage, until you say, would you like to pay me for this? And so it takes a while, of course. Hopefully not too long, and a lot of things about experience, you can raise money faster, you can hire faster, you can get to customers faster, all those things are great. But it's very easy to have a false peak or something like that and so we have learned that lesson the hard way at Dynamic Signal, I would say. Frankly, Dynamic Signal succeeded too early, too easily, because of our success at Adify and I think if we had been first-time founders, we would have saved ourselves a few years at Dynamic Signal. Because it took us a couple years before we realized, oh, we've mostly been selling this stuff. Because we're just good at selling. It's actually not that great a software idea, right? So that's why it took us a while to get where we got. So we've been very sensitive at Larridin. My mantra is you should try and make new and exciting mistakes, not the same mistakes you made last time and so we've been pretty good at Larridin so far. I'm sure we've made a million mistakes, but we've been pretty good at Larridin so far about not fully believing things people tell us. Until we're asking them for money, because it's people's behavior that really tells you, like, oh, when I finally said these collections of words with this product, now people are buying. Now I'm onto something.

Pablo Srugo (00:30:19) :
And what was that? What's the idea that you ended up landing on?

Russ Fradin (00:30:21) :
Larridin, my broad insight is anytime lots and lots and lots of money moves from one category to another. Client server to cloud or, TV advertising to online advertising or when pharmaceutical advertising wasn't legal and then it became legal, right? You have the chance to build a very large, very meaningful third party measurement company and so we saw an explosion of what people were doing around AI. That will bring tons and tons, and tons of vendors, and tons, and tons, and tons of spent. But also the reality of corporate America is you do not just tell twenty thousend employees, hey, here's CoPilot or Claude or whatever. Pick your amazing AI tool. There's always a laggard in adoption. There's always a difference in people that are heavy users and light users. There's also a lot of questions around all of these tools about, it's cool that they exist and they're fun. Do they make people actually more productive, right? You're spending all of this money. If you're a big company, you know, General Mills is not spending what they're spending on AI because they think it's fun. They're doing it because they think it will drive more productivity for them through some dimension and so my general perspective was, the way you accelerate the development of these spaces and separate the wheat from the chaff is not excitement. When excitement cools a little bit what you have to get to is real measurement. What's actually happening and so at Larridin, we're building the first and only measuring company for AI. What's actually happening in your org, who's using, who's not using. Not a deep personal but this isn't about employee surveillance but, what's actually happening in different departments with AI in your org? What are the tools that are being used? What are the tools you know about being used? What are the tools you don't know about being used? And most importantly, are they actually making people more productive? So, the scale of investment. So, you know, as the company's grown. I've gone from thinking our customer would be the CIO to thinking our customer is, the CIO slash CFO. Because the scale of investment that all of these large companies are being asked to make in AI. It's really kind of unlike anything people have had to do in a long time and my perspective is some of it's going to be very valuable, and some of it won't be. And there's an opportunity to build the kind of trusted third-party source for each company on what is actually working and what is not. And what are the tools being used by people that are driving a lot of productivity but not being used well. We need to drive more usage of that and so I generally think there's going to be a giant business of being a measurement and enablement company around AI, and that's what we're trying to build.

Pablo Srugo (00:32:36) :
How do you measure productivity in such a horizontal way? For so many roles and so many different workflows, and use cases, and somehow tie back to productivity kind of across the board?

Russ Fradin (00:32:47) :
So productivity research is this interesting thing that's been around for the last sixty or seventy years. We are doing it in AI but productivity research is, I mean, you know, McKinsey has a multi-billion dollar business called the Corporate Health Index. That like, I'll keep using General Mills, I'm making this one up. I have no idea, but companies like General Mills pay McKinsey $5 million a year for their Corporate Health Index. Which is basically department by department productivity, right? So, it's always some combination of observed behavior, actual metrics, plus attitudinal behavior. By constant employee pulse surveys and so, we are taking that approach and applying it, using more behavioral data, and then leveraging it for AI tool usage. So, the first step you have to do is figure out what tools people like Russ are using, what tools people like Pablo are using. Are they using them a lot? Are they using them a little? and then you have to overlay some kind of attitudinal component on top of it. So actually, there was recently a company acquired, I think a week ago, two weeks ago, called DX, if I remember correctly. They were bought for about a billion dollars by one of the big public companies. I can't remember. Whoever's listening can Google it, but it's called DX and it was all about developer productivity. And I thought their approach was pretty interesting. It was, what AI tools are being used and what reports can we take from that. and surveying developers on top of that, and frankly, DX is a relatively new company. Good for them on a very large exit. Our idea, which we've been working on for the last year. Was similar to that, but not really around developer productivity, more around kind of overall tool productivity. Which is like, the reason I'm spending so much money on ChatGPT, or on Harpy, or on Gleam, or on Claude, name your amazing, amazing, amazing company. Where I'm sure you pinged their founders, I'm sure some of them have been on your podcast. For all of those companies, the pitch is not, hey, this software is gonna be used and your employees are gonna like it. The pitch is the software is going to be used, your employees are going to like it, and they're going to be more productive lawyers. (Context: Atlassian acquired DX for approximately $1 billion)

Pablo Srugo (00:34:32) :
Correct, but how do you? Just for my sake, so I understand that the category exists, but take these legal things. Like, are you saying, oh, your lawyers now produce 2x the number of contracts? You know what I mean? Is that how specific this stuff gets? Or like, how do you kind of showcase productivity for some of these?

Russ Fradin (00:34:45) :
You have to start with just, frankly, what's on the ground truth of what's actually happening. Are people using these tools, number one, and what tools are they using, number two. Are they more productive? And by the way, each company has a different definition for each department. But are the people that use the tools more productive at their job than the people that don't use the tools? And there's integrations you're going to do, right? Some of that in coding, you're pulling in Salesforce, you're pulling in Salesforce data, right? In legal, you're pulling in contract data and then, by the way, is it worth it? That's always gonna be company by company, right? We're not gonna tell the CFO of JP Morgan Chase. We can tell her, whether this tool is worth it. What we're saying is we're gonna give you usage data and productivity data. Is it worth it? We don't know what you're spending and we don't know what your other priorities are, right? And frankly, worth it has a lot of different definitions. Maybe tools that are popular with employees that they use, even if it doesn't drive work value, is worth it to you, right? That's in the perk category, right? Employee haircuts. I don't need an employee haircut, employee haircuts might be useful to do. So we just want people to understand what they're actually getting out of the money they're spending. Are people using it? And by the way, not surprising as you see in any category of software. It's not like AI is some magical uniform. Some of the tools people buy are not particularly valuable. Some of the tools people buy are just not used. Some of the tools are amazing and extraordinarily valuable. And the way you're gonna build a successful third-party measurement business is, frankly convincing people they need a third party, right? Every software company comes in and tells you their software is super valuable to you. And our perspective is like, much like Omniture, much like Google Analytics, much like Comscore, Nielsen in a different way. You should understand the value of all of these things you're doing.

Pablo Srugo (00:36:19) :
Walk me through, maybe just a quick question around fundraising strategy. You raised, I mean, obviously as a multi-time founder, it's just a lot easier for you to raise. You raised, I think $17 million earlier this year. My understanding is the company would have been kind of at inception or so at that time. How did you think about the amount that you decided to raise at that stage?

Russ Fradin (00:36:35) :
Yeah, look. There's no right answer and if you're a founder. There is an element of if you're a founder over a very long period of time. There have certainly been times in my career, where raising money was relatively harder and relatively easier. It's one of these things of, you know, when you'll talk to VCs and they'll just say the opposite. You know, the entry price is on average or lower versus higher at different points. It's why they measure VC firms based on vintage. So what I would say is I started with who did I want to work with? And I had a pretty short list of who I wanted to work with to be the lead. I was very fortunate that the first person I talked to wanted to invest and that was great for me. I'm a big fan of Andreessen and of Alex since that was fantastic. So I really started out saying like, well, I want to raise $10 million. And, you know, I went and talked to someone Andreessen, and he was going to give it to me. So that was great. It is definitely true that compared to the last thirty years, if you're a multi-time exited founder and you're doing something in AI. It's a good time to raise your first round. That is definitely true. Although, you know, frankly, it was as easy to raise my first round of Dynamic Signal. The terms weren't as good. The amount of money wasn't much, but if you're a multi-time founder and so the data proves you're a pretty good bet on average. So it's not that hard to raise.

Pablo Srugo (00:37:45) :
I mean, team is the biggest risk you take and so if it's a first time founder, you just don't know. It's a repeat founder, you know, okay, at least they know what they're doing. You still have to take market risk, but that's going to add a lot of ease to that fundraise and rightly so.

Russ Fradin (00:37:56) :
Plenty of first-time founders will outperform me over, that's not the point. But yes, on average, if you're a VC, obviously multi-type founders are a different type of thing. So then, I knew I needed $10 million to build what I wanted to build and then frankly, I just had this position where, I've been out here a long time. And I have a lot of great friends that are investors, and I was fortunate that other people wanted to invest, and you make room, and you make room, and you make room, and we stopped at $17 000 000. Why did I stop at $17 000 000, instead of $25 000 000? I don't know. I think I probably could have raised $40 million. I don't think I could have raised $100 000 000. I mean, I could have if I had a totally different idea that needed the money, right? If I was building a robotics thing. But I probably could have raised $30 or $40 million just with relative ease without doing much more. But, you know, I don't know. Why did we stop at $17 000 000? Because we kept letting friends in and then at some point we said, OK, that's enough $17 000 000.

Pablo Srugo (00:38:46) :
Things in AI, I mean, you kind of alluded to this earlier. The scale, I mean, some of the things you hear about and just in terms of how fast some things can grow is just unlike anything we've seen. How fast have things gone? I mean, it's enterprise. Enterprise is in the notoriously, not fast. But, where are you at in terms of the product and just how fast has customer adoption been?

Russ Fradin (00:39:04) :
So we really didn't start building anything until January or February of this year. And, we didn't start selling anything until August.

Pablo Srugo (00:39:14) :
It's been like two months? Two months of sales.

Russ Fradin (00:39:15) :
We didn't hire any sellers until August, right? So I feel great about where we are.

Pablo Srugo (00:39:20) :
How many people on the team total?

Russ Fradin (00:39:21) :
Oh, twenty total people in the company, four sellers. So I feel great about where we are, but it is early, right? I mean, it is still very early for us. We have tens of customers, but not a hundred customers yet. It is early for us, which is, you know, that's how it goes. So there was a point I had no customers and there was a point someone gave me money and we said, aha, now we have something. And then it took us another couple of weeks to really nail the messaging. And now I feel good about it. And by the way, if you talk to me in nine months, there'll be twelve things I changed during that time, of course.

Pablo Srugo (00:39:49) :
Perfect. Well, listen, let's stop there. I'll ask the last three questions that we always end on. In this one, you can answer maybe for Dynamic Signal might make more sense. But when was the first time that you felt like you had true product market fit?

Russ Fradin (00:40:01) :
The first time we felt we had true product market fit with what ultimately became the business, was when we realized. When we just had this insight of like, oh, gosh, across our twenty customers, the influencers that keep being active without us chasing them constantly are the employees. Huh, there's something there. Before we had talked to any customers about it. It was like I said, it was emergent behavior. Even though it was a top-down sale, it was very much by accident that it happened and so I remember sitting around with my co-founders going like, this is weird. Let's try and pitch this. Let's call five people and just pitch it this way. By the way, the sales cycles were longer, but it was very clear that it was real technology that people were going to use. When I left, we had many customers that had been around seven, eight years, like the entire history of the idea, you know, it was very sticky. I don't know what happened the last five years, but I imagine it stayed the same. We never had a real churn problem there. We had other problems, but we never had a churn problem and it was really just that insight of like, it wasn't just paying attention to what was working. It was paying attention to, why it was working. What was really, it wasn't the high level metric of, yeah, we closed Home Depot and they're paying us a million bucks or whatever it was. It was, what's actually going on here that's driving the real usage and kind of pushing ourselves to keep asking the questions of what was right. and what was wrong with the business.

Pablo Srugo (00:41:15) :
And then either at Dynamic Signal or any of the other companies, was there ever a point where it was the exact opposite? Where you actually thought things were just not going to work out and maybe everything would just like fall apart and fail?

Russ Fradin (00:41:25) :
A hundred percent, yeah, yeah, I help someone. So this is something where I was a kind of a founder. I never worked there full time, but there was a company called Social Shield that I was involved with founding with a couple of people. I was a board member and it was this interesting thing where it was actually the downside of market research. When we talk to people about it, they love the idea and I'll tell you what the idea was in a sec. They a hundred precent said they would use it, and they never actually used it. So we helped start this company called Social Shield in probably '09, 2010, 2011, and it was a set of tools for parents to monitor their kids' social media usage. So you've got kids that are eleven to sixteen. Who are they playing those Facebook games with? And we're running background checks. We find a lot of kids in active communications with registered sex offenders, convicted sex offenders who are pretending to be children. We actually prevented all teenage suicide. Your kid is talking about this on Facebook, alert the parent. So it was very cool. it was very impactful, and it was this really interesting marketing research challenge. Which is like, we would go and we would show this product to parents. And we would tell parents the story. And by the way, we would partner with police that would go into schools, and talk to parents about all of these things, and teenage suicide, and all this stuff. And the truth is at the end of the day, even when we fucking gave people the product for free. They wouldn't install it, and I think at the end of the day, there was this weird parental disconnect of like, am I worried about all of these things in theory? Yes, but when push comes to shove, I didn't want Jenny to know I was actually paying attention to her behavior. I didn't really want to do it. I didn't really want to have that conversation with my child. And so, yeah, I mean, it just didn't work. We tried everything. We had amazing people. We had the guy who helped build LifeLock. We had the best board, the best advisors, you name it and, actually, we got to a point where the company didn't even run out of money. It kind of ran out of belief. I mean, we just tried everything, and we got to a point where we're like, well, we still have three million bucks in the bank. And the founding team was just like, they had this set of ideas and everything they were going to work on for six months. They worked their ass off. They tried every single thing on that list and six months later, they came back to the board. And they were like, we're out of ideas. We're just confident this idea is not going to work. I don't know, it's fifteen years later. No one else built something, I think they were right.

Pablo Srugo (00:43:39) :
Probably right.

Russ Fradin (00:43:40) :
Actually, I wound up returning half the money to the investors and we sold the IP. I think if you were actually an investor in Social Shield, you didn't even lose much money and by the way, a lot of the people that worked on it have gone on to do other very successful things. Can you imagine? Look, the norm in Silicon Valley is you have an idea, you get very excited about it, you're able to attract talent, and it doesn't work.

Pablo Srugo (00:43:58) :
Well, it's funny and doing what you said. Which is common in the valley, not so much elsewhere. For me, as somebody who sees a lot of products that have pull and a lot of products that don't. The worst piece is when you have real sick talent working on something that's just not going to work and you're like, you guys got to go do something else. This is a waste of raw horsepower.

Russ Fradin (00:44:16) :
A hundred percent, look, there's the only thing that is really a risk when you're a founder. As long as you're following the law, is wasting your time. You know, my career is not over, but it's closer to over than it ever has been, right? And it's funny to sit here talking about stuff that's over the last thirty years. Because I remember it like it was yesterday and the truth is, as a founder, like, why did I say something positive about wine.com earlier? Because I was only there for a year. After about four months it was pretty clear that me and the other guy that had gone there to fix it had made a terrible mistake, and it was a shitty business. And we had unfortunately raised money from the worst investor I've ever worked with my whole career, which is its own different podcast. George and I are honorable people so we didn't quit that day. We did our best to find a good landing for the company and everything. It was just clear we're wrong it just wasn't a good business and by the way like that was 2005, it is twenty years later the website still exists. I imagine it's I have no insight but I imagine it's not a particularly good business today and so you know why do I look back on wine.com relatively fondly. I have a couple of horror stories about the investor, because I only wasted a year of my life there. If I had wasted six years my life there will be pathetic.

Pablo Srugo (00:45:18) :
Last question, if you had one piece of advice for an early stage founder that's kind of navigating, trying to find product market fit. Given everything you've seen as a board member, as a founder, as an investor, what could that be?

Russ Fradin (00:45:30) :
I think the point I was making earlier about both Social Shield and the early days of Dynamic's and the early days of Larridin. Which is, it is great to get excited about what people tell you, and that's wonderful. But a lot of people just want to be nice and want to be helpful. You can't really believe you have something until people are actually paying for it on the consumer side, actually using it, right? There's a reason repeat rate matters. There's a reason in CPG trial and repeat rate is the number one thing that matters. Which is like, Social shield, we had this problem of no matter how excited they were. People wouldn't even try it for free, but that's fine. Like, okay, I've tried it for free. Am I actually still using it? Am I actually converting? Am I actually, am I driving tremendous usage? Actually driving up till people actually pay me? And if not, it doesn't mean you're failing, but it means you have a lot of work to do.

Pablo Srugo (00:46:14) :
Perfect. Well, Russ, thanks so much for sharing your story, man. It's been, this has been awesome.

Russ Fradin (00:46:17) :
Thank you. This is a lot of fun, bye.

Pablo Srugo (00:46:19) :
Wow, what an episode. You're probably in awe. You're in absolute shock. You're like, that helped me so much. So guess what? Now it's your turn to help someone else. Share the episode in the WhatsApp group you have with founders. Share it on that Slack channel. Send it to your founder friends and help them out. Trust me, they will love you for it.