How to grow any business and why most businesses fail?

Mudassir (00:01.52)

All right, so do a clap for me when I say that. Please do aclap for me. OK, so this one syncs the audio and the video. Podcasting tool.OK, so all right. Hey Pete, welcome to the show. How are you doing today?

Pete Sena (00:17.154)

Doing good. Good to be here.

Mudassir (00:19.036)

Thank you, really appreciate the time and thank you forjoining us today. So I usually start whenever I talk to somebody with theearliest context of their life, but I wanna make a little bit of a changetoday. And I wanna ask you, what inspired you to become the person who you aretoday?

Pete Sena (00:37.678)

Hmm. Well, I kind of feel like the person I am today goesback to just how I was raised, like my parents, in terms of the person I amtoday, in terms of, you know, I see myself as being kind, compassionate, a bitof a selfless person in terms of putting others before myself. And I think allthat I learned from just growing up with great parents. As for like the...

entrepreneur I am today, I think a lot of that was just a matterof circumstance in terms of just the trials, the tribulations, the wins, thelosses. I think that experiences shape us and we shape experiences. So that'show I would answer that.

Mudassir (01:23.224)

Okay, amazing. So if you could run it back for us, what'sthe earliest context of your life you have today? Like the earliest, earliestyear that you have of your life.

Pete Sena (01:35.758)

Probably like seven years old maybe. Like in terms of likegoing back to a kid, is that what you mean?

Pete Sena (01:44.882)

Yeah, I'd say probably like, I remember being a kid and justalways taking things apart and putting them back together. Just like reallybeing obsessed with like how things worked and whether it was like toys ormachines or whatever it was. Like that's just been a big part of like my life.It's a curiosity. Curiosity typically fades when we become adults because mostof the situations we have as we're growing up turn into these linear stories.We're supposed to do this and then this and.

people project themselves on us. But I say for me, like theone thing that stuck from seven years old till fast forward to now is I'vestill like inherently curious and everything. Like even right before thispodcast, I was like playing with something and like taking it apart a littlebit. So I guess I'm still that seven year old curious kid in some cases.

Mudassir (02:34.24)

You mentioned something really interesting, which is, we arevery curious when we are young and child and all that. But as we grow, thatthing kind of disappears. Why do you think so? Why that usually happens?

Pete Sena (02:47.678)

So yeah, it's a great question. I think there's a lot ofreally good research that's done on this topic, not done by me, but just reallygood research around this idea that, like you look at organizations like theRight Question Institute, which focuses on like curiosity in general. There's alot of evidence that shows that as we go through linear education systems,those linear education systems teach us to think more linear and also bucket usinto, you know,

what I would call leaning into the way that other peoplethink. Right. So we, we model ourselves, model ourselves after others. And thenwe continue to just kind of go from wisdom and, and conventional wisdom oflike, this is how the world works or this is what happens next. And I thinkthat sort of upbringing, the education systems, these, these things sort ofstrip away the curiosity from people and

If you go back to like even the early industrial revolution,you can see that like people have been being put through these like machines inthese systems for a real long time to kind of standardize the predictable,reliable outcomes of control that people have on us. I think a lot of that,again, I grew up in America, so it's not the same everywhere in the world, butin my case, there's definitely a little bit of a sterilization that happenswith.

the curious mind in my opinion. And I think that the waythat we can break out of that is by regularly practicing creativity andcuriosity in our lives. And that's a big proponent of who I am and why I dowhat I do is that I believe that when we live a more curious and creative life,we have a higher sense of fulfillment, a higher sense of joy, a higher sense ofpossibility. There's a lot of data on that, a lot of different books that talkabout this, but I'm a huge, huge fan of curiosity and creativity. And I feellike it's the...

linear systems and the projections of other people'srealities that oftentimes limit us, right? When we go to a university that seesthe world a certain way, the way that others see the world typically impactsthe way that we see the world depending on the teachings and the modeling thatwe go through as young adults.

Mudassir (04:57.676)

Yeah, you mentioned that this is why you do what you do.What exactly is that you do? Because when we were doing some research, so wecome across that you host a podcast, you run a business, you do mentorship, andI could go on for like another half an hour. Like, what exactly is that you do?And why are you doing that?

Pete Sena (05:13.802)

Yeah, for sure. I mean, the why is really easy. I believethat creativity and curiosity are broken. I believe that they're broken inbusiness and I believe that they're broken people's lives. And when we leaninto a more curious and creative life, it's a happier, more fulfilled life.Like I said, just a few moments ago, I think the answer to the question of whatI do is everything I do in my life is around creativity and business building,right? So I host a show called Forward Obsessed where I interview

the world's best entrepreneurs, people who have built andsold businesses. I wanna get inside their head. I wanna take their heads apartand understand the principles that guide them, the values that drive them, theaha moments, the pitfalls that drive them. So that's the podcast I have. I havea number of different businesses that I'm an operator in, one of which is acompany called DS or Digital Surgeons, which is a branch information company.And that business focuses on building businesses, building brands. And we workwith

you know, folks that are starting a business in a garage allthe way up to Fortune 100 companies and everywhere in between. So that's thatbusiness. And then I'm also an angel investor. I do a lot of investments inearly stage tech companies, and that runs the gamut of different types ofcompanies. You know, some of my most recent investments are in med tech orcannabis, and a number of different emerging technologies or platforms. So I'dsay what all of the things I do have in common is I focus on

helping builders build. And when I say builders, what I meanspecifically is entrepreneurs. So people who are building businesses, peoplewho are creating products, services, experiences to change the world, mysuperpower is storytelling. My superpower is brand design and experiences. So Ibelieve that your story is your strategy and how you tell that story makes thedifference between success and mediocrity. So for me, what I wanna do is helppeople align with who they are as a person and where their vision is for theirbusiness or that venture.

and make those things come to life. And I do that a numberof different scales and sizes depending on who I'm serving at that time.

Mudassir (07:18.012)

That's great. One thing that comes to my mind when you talkabout building brand and helping people find their identity. So I, in myexperience, I think a lot of people are not very self aware of themselves. Likepeople don't have that level of awareness or that level of clarity. And thesetype of people are like really hard to align with the values and stuff likewhatever they're building, right? So how'd you do that?

Pete Sena (07:43.958)

Yeah. How did I do?

Mudassir (07:45.456)

Because it's more like you need to have them understand whothey are and then understand what kind of business they're building. So how doyou do that?

Pete Sena (07:54.798)

So how do I do that for my clients or how did I do that formyself?

Mudassir (08:00.784)

Both.

Pete Sena (08:02.09)

Okay, so one, the thing that the audience should know aboutme is I don't believe there's any number one right answer to any of thequestions that you've asked me today. I think that everything is subjective. Ican only share my story. So my story is I was a designer and a coder from avery young age and I got along really well with computers, I didn't get alongso well with people. So self-awareness is something, leadership andself-awareness were skills that I learned much later in my career.

Earlier on in my career, I got along much better with acomputer because I would code something and it neither worked or it didn't. Itwas very binary. Humans are not binary, right? There's sort of slides inbetween. It's not zeros and ones. So I would say that a lot of companies andorganizations talk about soft skills and soft skills being things likeleadership, self-awareness, or EQ, emotional quotient. I actually think thoseare the hard skills. Those are the skills that require the most effort tobuild.

Mudassir (08:58.5)

I agree. Yep.

Pete Sena (09:01.79)

So I would say the journey that I went through, I would sayit wasn't until I started to really discover meditation and have a mindfulnesspractice that I started to really know myself. And the hardest thing to know isyourself, I think in some cases, because so many other people like to projecttheir realities on us. And I think a lot of times that can cloud or make muddythe way that we think of ourselves, right? Like if someone I respect thinks I'mgreat or thinks I'm not great, that can potentially...

Infect my mind like a mind virus to be able to do that. Soself-awareness, I think is difficult emotional intelligence is something thatUm, i'm a very introverted person So it was something that I had to work reallyhard at those skills versus design and coding Those skills came easy to me, youknow the first time I sat in front of a terminal And was kind of tinkeringaround with things. I was getting some pretty interesting things to happen evenat nine years old But you know there I was at 20 years old, you know running ayou know, million dollar plus company

and I'm in rooms with people and having no idea how tointeract with these people. But if you asked me to go build a program thatcould handle millions of views, that was easy for me. But dealing with peoplewas hard, politics and all that kind of stuff. So I would say once I learnedit, it became much easier to teach and other people and easier to spot in withpeople. One of the things that worked really well for me was holding up amirror. And when you hold up a mirror, you sort of have to look at yourself.And you have to, and I mean that metaphorically, not physically.

And I think with the founders that I coach, and I coach alot of founders, typically startup founders who have raised money and they'rebuilding a company, I'd say first time founders tend to be the founders that Iwork with the most because they require the most direction. They might have avision in their head, but they don't know how to get people to rally aroundthat vision. And a lot of times it's just because the picture in your head ormy head is not the picture in somebody else's head. So one of the things Iteach founders how to do is to take the vision.

I help them, I do something called story selling, where Ihelp them to take the vision out of their head and actually frame that visioninto something that people can hear, see, and touch and feel. And I have acouple of different exercises that I do with people to get to that. And what Ifind is that gets to a really deep sense of clarity and that clarity is thenthings that people can get behind or get excited about, right? So, one of thethings I like to reference is a great book called Drive by a guy named DanielPink. Daniel Pink had

Pete Sena (11:27.55)

worked on, he's a speechwriter for politicians. He was a lotof other things. But one of the great things in that books is he says, how doyou motivate people? Well, there's two ways to motivate. There's the extrinsicmotivation, which he calls the carrot and the stick, right? Which is money,reward systems, et cetera. And there's the intrinsic reward system. And what hebasically says is if you can activate the intrinsic reward system, what'sinside someone's self, that really works well. And he says, intrinsic rewardsystems are broken down by three things, right? Purpose, autonomy, and mastery.

And those three things make up an intrinsic reward system.So when you think about that, if you're a founder and you have a vision and youcan connect that vision with a transformation or a problem that you solve forthe world, for other people, then as you start to bring on people, because youcan't do anything alone, as you start to bring on people, bring on teams,recruit different folks, being able to create clarity on what that vision isgets people to get motivated because they see themselves in that vision. Theysee the transformation that they create.

And it sounds really simple to articulate here, but it'staking me 20 years to be able to do that for you in two minutes, because it'sthat level of clarity. And also I've had to make a million mistakes to kind ofget good at these particular skills, realizing that like certain questions willlead someone down a certain journey and certain questions will stop a person inthe journey. So I think understanding what things to turn on or turn off in adialogue with a founder is...

a really powerful thing. A good example, just to be veryspecific for a second, is I work with tech founders. A lot of them are product people.They're coders by trade. So I get along really well with them because I canrelate to them. But sometimes founders are really good at marketing or sales,but they don't understand the products out of it. So I think meeting peoplewhere they're at is a really important thing to do, no matter what you'redoing, whether you're leading them, coaching them, or working with them, gottameet people where they're at. Because in order to take people where you wannago, or take them where they wanna go,

You got to know where you're at right now. So that sort ofidea of kind of X marks the spot, I think is a really important thing.

Mudassir (13:28.932)

Yeah, you mentioned you made a million mistake, probablymore, you know, because it is like a 20 years long summary. So yeah, what's thebiggest mistake you have made? The one that you still remember today vividly.

Pete Sena (13:46.03)

Two show up for me. One is blindly trusting someone andhaving that backfire on me in a way that led to a very, very bad financialoutcome. That's one. And then the other one I would say, which is probably Iwould consider to be the most important for people to maybe hear on thispodcast, is not believing in myself. I think if you don't believe in yourself,nobody will ever believe in you. And I think that's the biggest mistake thatI've made in my life.

A lot of times it took me years to really believe in myselfand have confidence in myself and I think that really held me back in a lot ofways.

Mudassir (14:25.752)

Mm-hmm. Wow, I'm pretty sure of that. So let's talk aboutDS, digital surgeon, and something that you started in college, made aneight-figure business. So let's talk about the success here.

Pete Sena (14:42.026)

Yeah, so I think like most businesses, founders or peoplewho start businesses typically see a world that's different than the world thatthey live or exist in. So at that time, when I was forming the company, I saw aworld where creative, technical, and strategic people were working together tomake cool shit for the internet. That was really what the vision was back then.It was just that simple.

It's got a lot more buzzwords now. It's got a lot morethings. But at the end of the day, the thing we did 19 years ago that we stilldo today is we help people grow their businesses. How and where we help themgrow their businesses has radically evolved over time. But I think back then,the problem that I saw in the world was I believed that there was a lot ofsilos that existed. A lot of companies that were, you had a department thatdid.

You had an apartment that did user experience, you had anapartment that did front end, a department that did back end. Everything wasseparated. And it was like a game of telephone, or where it's the first personsays something, by the time it gets to the end of the message, it's an entirelydifferent story altogether. So I believe that we could bring together aconvergence of design and tech and strategy under one roof, and do that in afast and collaborative fashion. And that was the original thesis back then, andit worked.

And the reason why is the transformation that I wanted tocreate in the world was I didn't want myself to be stuck in the ore, right? I'ma designer or a coder or this. I wanted to be and, and I found a lot of peoplewho wanted to be and too. So in finding that I attracted some reallyinteresting people along the way that, um, joined me in the vision and helpedus to create some world-class experiences for brands that, you know, run thegamut from, you know, the Lady Gaga's other world, which was a client of mineto, you know,

a manufacturing company that makes steel and nickel alloyproducts. So it's like we've had clients everywhere in between and I've workedon jet engines and I've worked on rap stars. So it's like, it's really been amix of things and I'm really blessed for the career that I've had because whatthat business did for me, agencies are a weird business. The service businessis one that it's a little bit chaotic. It's not as sexy as like starting.

Pete Sena (17:04.894)

next Facebook or something in some cases, because servicesbusinesses don't scale the same way that product businesses do. And as a resultof it, you get a lot of different experience in a business like that. You dealwith the people side of things, you deal with multiple different types ofdisciplines, the technologies are always changing. So I believe it's that chaosthat actually created confidence and creativity for me in myself and in thepeople that I work with. And...

That's ultimately how that business started. It's taken alot of twists and turns over the years. Now, if you would ask me, well, what isdigital surgeons today versus when I first started? When we first started, Iwanted to make cool shit for the internet. Today, if I'm gonna pitch with youand I'm gonna pitch right after this, we're gonna be talking about how we dobrand transformation. And ultimately what that basically means is how do wehelp a business to grow?

to know its customer, to meet its customer where they needand to meet and exceed those demands. And in a lot of times, the world we livein today, shit, we're in the AI era right now, right? But everything isstarting and originating from a digital channel or a touch point if you thinkabout it, right? The microphone that you're speaking into right now, theplatform that we're using, the social media page that you'll probably check outon your way to the bathroom later today, all of these things are digital,right? So I think at the end of the day, connecting together an audience.

with a message, with an experience, is all that a brandreally is. It's, you know, it's, I always say brands are the space you occupyin the hearts, minds, and wallets of your customer. It's what they say aboutyou when you're not in the room. So at the end of the day, how do we changethat message? How do we change that experience? We change the brand. And that'sultimately what we do at Digital Surgeons today. If you rewind back 19 years,we were using different words.

But what we were always doing is creating these amazingexperiences. Cause we still to this day believe experiences build relationshipsand relationships build brands. That's ultimately what we exist to do. Um, so Ihope that answers the question.

Mudassir (19:05.532)

Well, absolutely, it does in a very fantastic way. So I hada question right now right here. How to build a great brand? You alreadyanswered that. So I have a follow-up on that. You mentioned quite a lot oftimes that you help people grow their brand. How do you actually help anybodygrow their business? Like any business, because you mentioned jet engines, youmentioned rap stars, you mentioned manufacturers. Like you mentioned a wholekind of businesses. Like how do you, like fundamentally, how do you grow anybusiness?

Because a lot of people do struggle with that, even thoughthere's like, I don't know, a gazillion book out there. Like everybody talkedabout that, but it's not, presumably it's not that easy because everybody wouldhave done that, right? So how do you do that?

Pete Sena (19:46.454)

Well, one, I actually do think it's kind of easy. I thinkthe consistency and the repetition to do the work is the hard part. You know,there's a reason why the self-help section in the bookstore is the highestgrossing section of any bookstore. It's because people go out, they get theself-help book or the fad diet, they read the book, they've got all theknowledge now.

And then where they do, they don't do anything with it for aweek or two, and then they go back to the bookstore and they get the nextself-help book or the next fad diet, and they don't do the work. So I thinkthat a lot of times, the reason people don't achieve the success they want, andI've been a culprit of this too, I've made the same mistake myself is, you knowwhat to do, but you don't do the do, right? So at the end of the day, likedoing the work is the work, as stupid as that sounds. You know, think of itlike, if you wanna lose weight, like you have to eat a specific diet and youhave to work out.

Mudassir (20:29.508)

Hmph.

Pete Sena (20:39.134)

it's not going to happen overnight, right? It's the samething. Like I love the occasional alcoholic beverage. I'm Italian, I love toeat. There's a reason why I weigh 230, right? I probably should be 200 pounds,but I like to eat my meals and to do my stuff, right? So I know what to do, butthat's a good example of it. So to kind of come back around to that, there'stwo fundamental ways to grow any business, right? One is to get more customers.

Two is to sell the existing customer more things or morevalue. It's really that simple, right? Now, assuming you have some customers,right? So what I look at for every business is first and foremost, what's thevalue that you deliver, right? What's the value you deliver? What's the problemyou solve? Okay, so I like to think of it as ABCs, right? First off, who's youraudience? B, what's your brand? And C, what's the category you exist in, right?ABCs, audience, brand, category, right? And then D is...

differentiation or difference, right? What makes youdifferent, what makes you better? It's that simple. So what I go through withall my clients is a simple exercise. I call it the ACT toolkit. It stands forA-C-T. I like to think of simple things. Because all the business books, andlook over here is a giant bookcase and it's got all the fancy books in it. AndI can start reading off the titles to you. But what I'll tell you is the bestmarketing is simple. The best brands are simple. The best articulation ofthings is simple, right? So let's just break this down for a second, right? Howdo you grow a business?

Jet engine business, rapper business, right? Well, one, eachof them are trying to connect an audience, an audience that has a need or awant, right? The company that needs to buy jet engines because they're buyingaircraft or building aircraft is the same as a rap star trying to get people todownload their streams and go to their concerts and buy their tickets, right?At the end of the day, there's an audience that has a need or a want. You haveto know what that need or that want is. You have to figure out a way to makethat business different. So first is A is audience.

Who's your audience going really deep on that? I can takeyou through a bunch of that. C is what are you communicating to them? What isthe message you want to communicate that's gonna connect with that audience?And then T is what are the triggers and touch points? So the trigger for thejet engine might be filling out an RFP form on the website to basically applyto buy this jet engine. The trigger or the touch point for the rapper might bebuying tickets on LiveNation.com or whatever ticket site or popping a streamopen on Apple Music or Spotify, right? So at the end of the day,

Pete Sena (23:02.494)

Marketing is really just understanding how to find peoplethat have the need or want that you do and consistently get people to movethrough that funnel. So at the end of the day, there's pretty simple exercisesto do that. Where it gets hard and nuanced is when you don't know what yourvision is, when you don't know what your values are, when you don't understandthe transformation or the shift you create in the world. And that's where stuffgets really nuanced. And I can go much deeper down that rabbit hole if youwant, but at the most simple level, it's...

Those are the ABCs of how to build most businesses.

Mudassir (23:34.44)

That's the most easiest way of growing business I've everheard. I had a privilege of sitting with someone. The episode is not out yet,so I'm not going to say his name. So I asked him the same question. Why do somany people suck at marketing? Why do they do that? And he exactly said thesame thing. People focus too much on spending ad revenues, or we're just goingto increase our ads. They just don't understand the messaging. They just don'tunderstand the audience. They just don't understand the triggers.

So it's exactly the same thing. So, okay. Yeah, why do youthink so?

Pete Sena (24:05.77)

You know, I would answer that a little bit differentlythough. Do you know why I think most people suck at marketing?

because they want to smell their own farts.

Mudassir (24:16.078)

Okay.

Pete Sena (24:16.182)

I'm serious. What I mean by that, just to be a little bitcrass so people will remember that, right? Is they speak to themselves. Theyuse their jargon, they use their buzzwords. When you start to speak in the lensof the customer, your language changes. How you market, how you prioritize whatyou do changes. So I think that this idea of being human centered or customercentered is a buzzword that everyone uses. But when I lean in, one of the firstquestions I ask is, to a CEO is, when was the last time you talked to acustomer?

Mudassir (24:20.304)

Yeah.

Mudassir (24:33.733)

Mm-hmm.

Mudassir (24:38.853)

Mm-hmm.

Pete Sena (24:46.122)

When was the last time you actually watched a customer useyour product? And I can tell instantly from how they respond, whether it's onZoom, like we're on right now, or whether it's in person, their body languageand their response tells me immediately everything I need to know about theircompany. And in most cases, that's why people suck at marketing because they'renot speaking to their customer. They're speaking to themselves and people justtune them out.

Mudassir (25:00.838)

Bye.

Mudassir (25:10.276)

Yeah, but one thing to add here is in my relatively smallercareer compared to yours, I belong from a world of product. So that's all thatI know. And I've seen people doing this thing that a lot of people are solvinga problem that's nobody's problem. It's your problem. So you're trying to solveyour problem, and you are too ignorant of what the audience think about that,what the customer think about that. So most people, for example, thismicrophone,

the best of the best microphones. They cost thousands ofdollars. 99% of the world is not going to need that product, right? Maybe it'syour problem, maybe it's my problem, maybe it's somebody else's. And you'rethinking about, OK, I'm going to just price it cheaper, just going to massmarket that, and then all of a sudden everybody's going to buy that? No. Thatdoesn't exist. So that's very, very common in the product world. The otherthing that I, which you mentioned as well, the other thing that I've seenpeople doing is they build a product.

And then they're just like, you know, the ideas are comingin their head, so they're just listening to themselves and just, you know,doing whatever they're doing. So it's just not like I'm going to ask to Pete,I'm going to ask somebody else, like, do they find it valuable or not? It'sjust like, whatever is providing value to me, I'm just putting it out there.Right? Most people are doing that.

Pete Sena (26:26.006)

What's it, I would agree with you. I would push that onestep further. So let me use your microphone example as an example, right? Ifyou sell that microphone for a thousand dollars, right? And let's say it costsyou, you know, 50 bucks or less to make, right? Pretty high margin product. Soyou could sell a hundred of those at a thousand bucks and make a hundredthousand, or you could sell a few thousand of them at 30 bucks. And.

it's the same kind of economics, right? So at the end of theday, if I was trying to sell the thousand dollar microphone, what I would do isI would cater to, you know, one of the two things that drive humans, right?Fear or greed. Obviously some would say love, but I think fear and greed are thetwo big things, right? So if I lean into the fear and greed component, what Imight say is, okay, you're out there, you're searching for microphones, right?If I hit you with an ad with...

Mudassir (27:07.396)

Pin or grid? Yep.

Pete Sena (27:20.762)

Most people can't afford our microphones because they're thebest. So if you're not the best, don't even buy from us. Our microphones are$999. I am gonna click on that ad just because I want the cache to say I have a$1,000 microphone because now you've played to my ego. So at the end of theday, positioning is such a, I believe it was Marty Neumeier that saidpositioning is, or maybe it was Al Reese. Al Reese I think said,

It was positioning the battle for the mind. It was a book fromlike 20, 30 years ago, I think, a long time ago. And he talks about this ideaof positioning is everything. So I think in some cases, my favorite examplethese days of positioning is like liquid death. It's literally water in a beercan and 700 million dollar valuation last I checked a couple of months ago. Andit's the same freaking thing that is a plastic water bottle. So I teach a brandcourse and I put up the silhouette of the beer can.

Mudassir (28:05.548)

It's amazing.

Yeah.

Pete Sena (28:18.986)

And I asked people, what is this? They all say beer, beercan. And then I pushed the button and it reveals it's the liquid death thing. Isaid, so how much do you think this company's worth? And most people don't getit right. And I joke around and I say, well, what makes this $2 bottle of waterversus this 60 cent bottle of water? And the only thing different is brand,right? Is like liquid death's the cool thing. I was at a concert this pastweekend. I went to go see Post Malone and I'm there and everybody's drinking.

I felt old at the concert, but everyone's drinking theliquid death water, right? I'm like, wow, that's really the cool thing, butit's all about positioning. It's the same shit in the bottle, but thepositioning and the brand adds the value. That's what I would say I think a lotof people do is they don't understand how to use language or how to usepersuasion to, again, connect with their audience. If you think about it, ifyou want to sell a $1,000 microphone, someone who could afford a $1,000microphone.

Mudassir (28:55.708)

That's power, yeah.

Pete Sena (29:16.706)

there might be a very small set of customers or consumersthat will want that. So you gotta understand, if your product is not the bestpiece of audio file like thing on the planet, you gotta figure out how toposition it. And that's where I think that like, a lot of people just don't getthat. And then instead of trying to figure out what makes them different andbetter, they end up just trying to be like everybody else. And then they justget lost in the sauce.

Mudassir (29:41.796)

Absolutely, love the answer. So I was just doing someresearch on your amazing career and one thing that popped out is you helpedcompanies trade hundreds of millions of dollars in venture capital. So I was ina discussion with a couple of VCs who happened to be a guest on the podcast andthere's two more coming next week. I wanna ask this one particular questionwhen it comes to venture funds. So there's a whole bunch of debate going on,bootstrapping now that because it's 2023 and the funds are drying up and like.

all the shebangs, everybody knows about that. When it comesto you know, venture capital, why so many people get rejected? Like I want tounderstand from somebody who is not a venture capitalist. So I want tounderstand from your perspective, who is an entrepreneur, who helpsentrepreneur, who helps people do the same thing, who invest as an independentangel investor, like why does that happen so much?

Pete Sena (30:40.47)

Yeah, so I think it's a couple things. Let me attempt tobreak that down. So the first thing I think a lot of times, which is it's ahard answer, but it's the truth, is not a lot of startups are as great as theythink they are. That's the first thing. What I mean by that is that the problemthat they solve and the market that they plan on solving it for is not as big,as rich or as achievable as they think it is.

So what you have to understand about venture capitalists iswhen they're looking at what is the current day cost of capital, right? So oneof the big reasons why venture funds are dried up is because the cost ofcapital has gone up so much that in order for a VC deal to make sense, it hasto be a top performer in that fund because what's in the fund of funds isthere, right? So like, again, just not to oversimplify, but a lot of timesthey're looking at a business going, is this business gonna make us, you know,50X or more?

And they're gonna look at that and they're gonna say no. Soone is I think just comes down to is there's not all that many great, uniqueproduct ideas out there. That's the truth, right? It's an unfortunate answer.The second thing I think is a lot of times the ones that are really good, theydon't understand how to tell their story. They don't understand how to makesomething sticky. And I think that being able to do that, typically when you'regoing for, and when you say venture capital, are you talking like early stageor late stage? Just wanna make sure I understand what we're talking about.

Mudassir (32:06.685)

I think I have the most problem because late stages are likethey have the traction, they've done something, they've raised a couple ofrounds. So yeah, that's easy area. Yeah.

Pete Sena (32:10.654)

Exactly. 100%. Yeah, it's a lot easier. I mean, the twometrics of success, right, is like your growth inflection rate and yourrevenue, right? If you can nail those two things against a reasonable, totaladjustable market, then most people are going to get on board with that, right?If the metrics, I'm talking pre-revenue.

Mudassir (32:26.764)

Yeah, just to interrupt you here a little bit, while you'retalking about early stage founders, I also want to hear your opinion on TAM,Total Adjustable Market. Do you think that one KPI or whatever the figure is,is justifiable when you put it in our slide decks, when you put it in our pitchdecks? What's your opinion on that?

Pete Sena (32:51.918)

So look, some people like TAM, some people like SAM,Serviceable Addressable Market, there's a lot of ways to slice that. I think atthe end of the day.

Pete Sena (33:04.53)

I think what it comes down to is what problem do you solve?Who do you solve it for? And what makes you uniquely different in being able tosolve for that? Because I think that being able to solve for those two thingsas basic as that might sound, there's a lot of companies out there that areseries D in their funding rounds and they're doing really well. And they stillbelieve that they don't have product market fit, even though they definitely doby every textbook definition. So I think what it comes down to is the answer toyour question,

Mudassir (33:16.656)

Mm-hmm.

Mudassir (33:20.558)

Mm-hmm.

Pete Sena (33:34.526)

I think people look at total addressable market wrong,right? Where as an example, if I was doing this for liquid death, right? Justuse that because we just use that as an example. Well, the total addressablemarket is anyone that consumes bottled or packaged water, right? That's apretty big market, right? But do we believe that, let's say that, I'll use fakenumbers for a second. Let's say that number is a billion dollar market. Let'sjust make that assumption. And let's say if you can get,

Mudassir (33:51.08)

Absolutely. Yeah.

Pete Sena (34:04.118)

let's say 10% of that billion dollar market, you're ahundred million dollar company, right? Approximately, right? So did I get thatmath right? But assumption, right? That to a venture capitalist might not beexciting, but that might be really exciting if they could get the company to ahundred million dollars and then maybe the growth stalls and then.

Mudassir (34:17.712)

Yeah, assumptions, okay.

Mudassir (34:29.144)

Yeah.

Pete Sena (34:30.89)

maybe they can sell that for the brand value and a privateequity comes in and brings in growth capital to take it to the next level. So Ithink what it comes down to is you have to look at venture capital or privateequity or debt-based financing, whatever debt instrument you wanna look at andfigure out what makes the most sense. And I think the problem that I see a lotof times is they don't get the story right, which is why they don't get a lookat investors. And they also don't have a proven track record. There's a lot ofdata out there to say like,

Mudassir (34:34.364)

Mm-hmm.

Pete Sena (35:00.21)

Second time founders raise capital a ton easier than firsttime founders because do you want to bet on the person who's never driven inthe race or do you want to bet on the person who's made some wins and losses? Iwant to bet on the person who's already been in the race. So that's what Iwould say. But in terms of services or total addressable market, I think thatmetric is important, but it depends on what level of scale you're trying toachieve. So when you think about SaaS as an example, right, software as aservice,

Mudassir (35:04.68)

100%.

Mudassir (35:24.964)

Exactly.

Pete Sena (35:28.482)

The economics on a business like that scale really wellbecause once you create a product and you've got that product market fit, evenif that total adjustable market's kind of small, you can pivot and iterate intoother markets, right? So a good example is take Salesforce, right? Publiclytraded company in arguably they created the CRM category, arguably, right? Andwhen they started that business, they were going after the oracles of theworld, right? They weren't going after small nonprofits,

one of the largest business segments that Salesforce has isnonprofits. They didn't incorporate nonprofits as a segment until much later inthe roadmap. So I think one of the things you have to look at is at what pointof scale does your current addressable market look like? And if you're able toachieve that in a relative rate, like what I like to see is when people say,hey, here's my service addressable market or my total addressable market.

Here's the breakdown of the category. Here's the percentageof market share that each of the main players have. Here's how I plan todisrupt each of these players. And then from there, that's where the forcemultipliers kick in, right? Because in some cases, if you achieve even 5% of atotal addressable market, if that creates a demonstrable return above andbeyond the venture capital investment, that business makes sense. But a lot oftimes the founder goes in and they're like, my product's better, it's shinier.

and they don't know about that stuff. And that's where Ithink that like, if you, I get pitched all the time, I'm an angel investor. Sotypically my check size is, I'll write a check up to 100K, typically is mycheck size. Typically my average check is usually about 25K is my average checksize. But I've written checks for 10K, I've written checks for over 100K,right? And when I see a pitch deck, the first thing that I look at after I getbought into the idea is did they do their homework?

And I look at what's the use of funds? What are their growthinflection points? And then how do they talk about the markets that they'regonna play in? And then I ask myself the question, okay, do I believe whatthey're saying is true? Do I believe what they're saying is possible? And do Ibelieve if they, I gave them everything that they needed? Because typically I'mpart of an investor syndicate. So if I write a check for a hundred grand, theother 15 people in my syndicate will also match that check for a hundred grand.And now they've basically just fully subscribed around, right, in some cases.If.

Pete Sena (37:49.63)

if that's the case, right? So that's, by going through thatline of questioning, that helps me to understand is the founder defensive or isthe founder offensive? What I mean by that is like, if I ask a question, dothey have the answer or are they gonna not bullshit me? Sometimes I'll ask aquestion on purpose just to see if they're like, that's a really good question,I wanna get back to you on that, I don't know the answer to that. I love that,cause that says humility. So there's a lot of these little tells, I think thatyou can pick up on and.

By no means am I a venture capitalist by any means, but Iwork with VCs all the time. And I think what most VCs will tell me when theylaugh about investments that have walked through their door is typically it's alack of preparation or self-awareness that comes down to the founder. So I hopethat's helpful.

Mudassir (38:20.124)

Okay.

Mudassir (38:27.82)

Mm-hmm. Yeah.

Mudassir (38:33.404)

Oh, it is, it is helpful. And I have my fair share offailures and I have my fair share of working with people who haven't been ableto raise a lot of money, but was fortunate enough to be a part of couple ofstartups where we raised 2.5 ones, 1.2 ones. So, when I ask you something whenit comes to founders, actually, because you mentioned that you work with a lotof first time founders because they need the most mentoring, they need the mosthelp and stuff like that.

What do you look for in a founder before you help them out?So you can't be like, oh yeah, okay, so there's like 100 startups and 100people reach out to me, yeah, I'm gonna just mentor like everybody. So therehas to be something, you're like, okay, so I'm gonna mentor him, him. So like,what's your criteria, what you look for in the founders when you're like, okay.So he's worth my hour, two hours, or like whatever.

Pete Sena (39:26.114)

Yeah. So I would say that there's a line that comes up a lotwhen I talk to these entrepreneurs and it's, is it the horse or the jockey?What they mean by that is like, you know, the horse being the idea or theproduct and then the jockey being the founder, right? So I look at horses andjockeys and when I'm talking to a founder, one of the things that I look, thefirst thing I look for, to be totally honest, is can I help the person?

And, you know, because a lot of times some people will cometo me and it'll be in a category that I'm not really familiar with or an areathat's like outside of my core expertise. And that'll just be very honest,like, look, you're not a fit for me because I've, you know, that's not, that'snot a category that I consider myself strong in as an example. Right. Ifsomeone comes to me from a pharma perspective, happened recently, I'm like,sorry, I don't have adequate experience in pharma. So I'm going to have to passon this. Right. So that's just, sometimes it's my own self-awareness to say,can I help them?

I'd say after that, what I always look for is, do they havehumility and do they have grit? And why I say humility and grit is, humilitymeans knowing what you know and knowing what you don't know. And grit meansthat the things that you don't know, you're going to learn and that you'regoing to put the hard work and the work ethic in. So I look for work ethic alot in founders. Typically I also look for what I call the zone of genius,which is sort of...

is where the founder wants to spend their time and energy,something that brings them joy and fulfillment, but also that's in alignmentwith their core skill sets and superpowers. And I think that I look at that alot. And then I also just look at the business that they're trying to start anddo I believe in it? Do I trust that if they're super successful, will I beexcited that I worked with them? And so those are just some qualitative thingsthat I look at. And then obviously I also look at what I call believability.

Do I believe what they're saying or selling? And do I thinkthat if I get involved with them, that they're gonna be willing to listen andto put in the work to do that work? So that's a big thing I look at. Andthere's a couple of other things that I probably consciously don't evennecessarily know if I think about, but it's just a feel for me. It's aninstinct. I've been doing a lot. And I think where I've made the biggest impactis for founders that have a great product or a great vision, but they don'tknow how to communicate it.

Pete Sena (41:51.37)

and they don't know how to bring it to market in a way thatscales. I think those are areas where I can provide, 10 or 20 X value on mytime invested. And obviously in that case, typically I'm pretty well compensatedfor that either through stock or equity or ongoing fees. But like you said, Ithink it comes down to even if I wanted to work with everyone, I couldn'tbecause my time is finite. So I have to pick my battles and I also like to workwith founders that

are successful and because it makes my track record lookbetter. You know, if everyone that I, every founder I coached, you know, didn'tmake it to the other end, then what kind of coach am I? You know, so sometimesit's a little bit of stack on my own deck, to be honest.

Mudassir (42:35.364)

Yeah, so I want to be very careful and respectful of yourtime. So would love to chat more about founders and businesses and exit. Butone question that I really want to ask you is, so every single time we talk toany businessman, we talk about exits, we talk about liquidity events, like inone way or another, publicly traded companies, we talk about exit and this andthat. Do you think it's...

It's important, is it a necessity to have an exit in mindwhen you start a business? Is that really that important?

Pete Sena (43:16.078)

It's a great question.

Pete Sena (43:22.85)

There was an argument a couple years ago that I heard makingthe rounds, which is build to build or build to sell. And I actually am moreinterested in the founder who wants the build to build, where they like reallysee themselves changing the world, whether it's with the product or servicethat they deliver. Because in my experiences,

the businesses that see the biggest exit events aretypically the ones that solve a very big problem and actually go on to solveit. And what's funny is if you look at the businesses who have gone on to solvesome of those problems, those like unicorn businesses that everyone wants, mostof them don't wanna sell. You know, most of them wanna get, you know, either goto IPO or get some event. But in a lot of cases, like, you know,

You don't see Elon not wanting to stick with a business whenit gets successful. You don't see Zuckerberg or Benioff like building these businessesand wanting to step away or Bezos. They take it pretty far before they wannastep away. So I'm leery sometimes of people who build to sell because I thinkwhen you're building to sell, typically you're either chasing money or chasingego. And I would argue that money is ego. But I think when you do that, a lotof times,

For me at least, what that shows up as is, the bigger theego, the harder the person is to work with typically. So that's where like Ioften will. Yeah. So typically I'll sort of bow out on that because it's like,you know, I had a guy come to me the other day and he was starting a businessthat was gonna be a tech company. It was in the mental health space, reallyinteresting business.

Mudassir (44:54.071)

100%

Pete Sena (45:14.326)

but he was a know-it-all. And he came from Yale,know-it-all, and I asked a very simple question. I said, well, okay, help meunderstand, your entire business right now is based on OpenAI's LLM. So whathappens when a better LLM comes out, or what happens when a change to this LLMhappens, and you can't deliver against that? And he had no answer.

Mudassir (45:35.781)

Mm-hmm.

Pete Sena (45:41.694)

And he just tried to like keep talking and talking, butthere was no answer. And I was like, and I could just tell his ego is out ofcontrol. And it's funny, I bumped into him recently and, you know, asked me howmany dollars he's raised. Asked me how many paid proof of concepts. You know,he had these 20 companies that were gonna do paid proof of concepts. And he wastalking at this pitch day. And I said, oh, how's the proof of concepts going?Oh, we're still working on this. Oh, okay. So you could just tell that like,

Mudassir (45:55.58)

How many?

Mudassir (46:02.568)

Mm-hmm.

Mudassir (46:09.796)

And yeah.

Pete Sena (46:11.642)

ego was out of control. But so I hope that answers thequestion.

Mudassir (46:15.588)

Yeah, no it does. I think Noidol, they're like the hardestpeople to work with. Like the hardest people to work with on the planet.

Pete Sena (46:24.01)

Yeah. And one thing I just wanted to clarify is this persondidn't actually go to Yale. It was sort of, I used Yale as a metaphor theresaying like, smart Ivy League school. Just want to be clear for the audience,this is not an actual person that went to Yale. This is that kind of ethos ofwhat I call Ivy League entrepreneurs. And for me, I think Ivy Leagueentrepreneurs are like armchair quarterbacks because they think just becausethey went to a great school means they're going to start a great business. And

Mudassir (46:32.357)

I got it. Yeah.

Mudassir (46:40.549)

Yeah, yeah.

Mudassir (46:50.408)

100%.

Pete Sena (46:51.91)

I just, you know, watch out for armchair quarterbacks. Iwant to be, I want to get behind people who are in the game.

Mudassir (46:57.412)

Yeah, absolutely. So coming to the hour mark, again, want tobe respectful of your time. We have this ritual on the podcast. So what we dois we ask all our guests questions for our next guest without knowing who thenext guest is going to be. Don't make it a part of the recording. So we have avery great question for you. And then I'm also going to take a question, butobviously after the recording, so we can easily monitor that. So the questionthat I have for you is about AI.

And we never get to talk about it, so I hope this one willdo the justice. So paint a picture for us 50 years from now, what's yourworldview would look like? And assuming that you are the person who's tellingthat.

Pete Sena (47:41.902)

I'm not the person telling you?

Mudassir (47:44.1)

As you are the person, like 50 years from now, what's Petegonna tell today's Pete? Like what's the world is gonna look like then?

Pete Sena (47:51.618)

Well, I'd be surprised if I'm still around in 50 years, butthat'd be cool.

Pete Sena (47:58.206)

I think in 50 years time, we're going to see a convergenceon...

Pete Sena (48:06.73)

society that is a combination of artificial synthetic

Pete Sena (48:18.922)

I think the most succinct and articulate way to share this.I believe in 50 years time, we will not differentiate something as being AI ornot AI. I think AI will be in everything. It'll be in software, it'll be inhardware, it'll be in every product we see or experience. I think in 50 yearstime, we'll definitely see AGI by that point. So when you think about what AGIwill present for society.

I think it's going to be an interesting tug of war betweenman and machine. I believe what that will look like is going to be reallydependent upon the choices we make over the next 20 years. I think...

Pete Sena (49:04.81)

I believe it will be possible for a super intelligent lifeform to coexist with a human life form when the benefits serve both parties.But I think that if we don't act in accordance with ethics and intelligence asa global society,

Pete Sena (49:35.038)

in a way that I don't think we're prepared for. And I don'tmean Armageddon in the sense of like Terminator, we're all enslaved brains in abox for machines, but I mean Armageddon in terms of like what nation states andhow nation states interface with one another. And I would like to think that wedon't end up in...

a Hunger Games-like scenario where we continue to separateclassism and these types of things in a way where the super intelligence thenprovides more value than humans can. It's a long conversation, one that I wouldlove to have with you. I think in 50 years time, I do believe that...

Humans will coexist with machines. We'll have relationshipswith machines that are deeper or more intimate than the relationships we havewith humans today.

Mudassir (50:39.88)

100%? Agreed.

Pete Sena (50:41.059)

And I believe that.

Pete Sena (50:47.114)

in a world of infinite permutations and combinations.

Pete Sena (50:56.374)

the core instincts of the human condition I think will beamplified. The fear, the greed, the love. So I think that those primalbehaviors are still instinctual. We're talking about hundreds of thousands ofyears of evolution. So I think in 100 years, 50 years time, I think we're gonnasee a lot more of what we see today. But I would imagine the world in 50 yearslooks and feels more like a Blade Runner or Minority Report movie.

than it does a Terminator movie. That would be my high levelprediction.

Mudassir (51:30.888)

Okay, okay. So yeah, thank you so much, Pete. What do Ithink? Interesting, so I think...

Pete Sena (51:33.294)

What do you think?

Mudassir (51:40.496)

So my worldview is a little bit different than most peopleare anticipating it to go out that way. So I think AI is gonna getsophisticated, like a lot more sophisticated. Whatever we are just seeing, orwhatever we have just seen in like last seven months, since that, you know,Chad GPT thing came out, and I think that's the whole boom thing, you know, thehype started to build out. It's gonna get a lot more sophisticated. Like everysingle thing that we do, we touch.

we interact with is gonna be AI, if not affected by AI. Sothat's that, but I also think that it'll be, like I just, maybe I'm naive, likejust cannot comprehend the thought that, you know, AI is gonna be running sideby side with the human race or something like that. Like this is something thatmaybe I'm not educated enough or skilled enough, like whatever you wanna call that,to comprehend that thought, maybe.

But I hope I'm right. Sometimes you just hope you're right.But I do think it's not going to be a game of survival for humans. It's goingto be a game where if you know how to take advantage of AI, you're going to thrive.That's what I would like to think, a little positive, not the doomsday kind ofthing. That's what I would hope for, but still don't know what's going to goand how it's going to go.

Pete Sena (53:09.494)

No, I love that. I think that's an amazing point of view.One thing I would challenge you to think about is everything always has beenabout survival.

Mudassir (53:20.149)

Yeah, that's a solid point. Yeah, yeah, even with humans,it's about survival. Yeah, yeah, that's the reality.

Pete Sena (53:24.47)

But I think, yeah, you know, it's interesting. I'll share athought just because I want to capture it and definitely send me this so I cancheck it out and reflect on it. But...

Mudassir (53:31.964)

Mm-hmm.

Pete Sena (53:39.678)

What I think is pretty provocative about these technologiesis...

Mudassir (53:41.819)

Mm-hmm.

Pete Sena (53:46.822)

Nobody complains about something until it comes for theirjob, right? And that was the thing I think is really funny is like, whensomeone lost their job because, you know, robot manufacturing facility takesthe job of the manufacturer, the only person that's mad is the guy that loseshis job at the, or the woman that loses their job at the factory, right?

Mudassir (53:53.19)

Absolutely.

Pete Sena (54:13.906)

It's everyone is so self-serving in that when it comes foryour job, then you're gonna care, right? But until then, it's sort of like, wecontinue to sort of think that we're at the top of the food chain wherever wemight be in the food chain. So I think it's an interesting point of view in mymind where I believe in the next five years or even next two years, I believethat

Mudassir (54:23.566)

Oh yeah.

Pete Sena (54:42.13)

90 plus percent of jobs are going to be displaced in a waywhere it's not a matter of someone, an AI taking your job. AI is not going tocreate it. Yeah. Everyone's going to be using it. 100%. So yeah, I'm excited,but we should definitely stay connected. I've loved the conversation with you.Appreciate you connecting. Sorry that I jumped right into it.

Mudassir (54:50.408)

Nobody using AI. Yeah, nobody using AI. Yeah.

Mudassir (55:00.014)

Absolutely.

Mudassir (55:05.312)

No problem at all. Thank you so much, Pete. Thank you somuch for the time. And I hope we could do the same thing again.

Pete Sena (55:12.866)

Yeah, let's do it. This is fun. I'll talk to you soon.Cheers. Yep.

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