KP Unpacked

Missionaries Build Through It, Mercenaries Don't

• KP Reddy

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0:00 | 52:12

What's the difference between a founder who pivots and one who just quits with extra steps?

In this episode of KP Unpacked, KP Reddy sits down with Andrew Ackerman, Zero RFI's Head of Special Projects ringing a fresh perspective on what it actually looks like to go from AI-adjacent to AI-native, why corporate AI rollouts fail before they start, and why the best onboarding experience isn't a training deck, it's a video game tutorial.

The conversation gets real about the state of construction tech startups: corporates are running pilots, paying five grand, and building the same tool in the background. Vibe coding is pickleball. It's approachable, it's fun, and it's not software engineering. But it's changing how CEOs think about procurement, stretching sales cycles by months, and quietly killing companies that haven't figured out whether their customers actually love them or just tolerate them. Then KP and Andrew break down the missionary versus mercenary test, when VCs should tell founders to walk away, and why the next three years define the next thirty.

Key questions answered:

  • What's the difference between a missionary founder and a mercenary one?
  • When should a VC tell a founder to shut down and move on?
  • Why are corporates paying startups for pilots while building the same tool in-house?
  • Is vibe coding a real threat to SaaS or just pickleball for software?
  • Why does "we're on Copilot" tell you everything you need to know about a company?
  • How do you onboard an entire organization into AI without losing them at the first button?
  • What's the right pivot versus the wrong one?
  • Why do customers love Tesla but not Salesforce, and what does that mean for founders?
  • Should startups switch from SaaS to software as a service to survive?
  • How did KP's 30-year mission stay the same across five completely different companies?
  • Why is streetball the best analogy for early startup hiring?
  • What's happening at AEC Summit's 10th year in Brooklyn?

If you're a founder wondering whether to pivot or shut down, a VC trying to figure out when to give a founder permission to walk away, or a corporate innovation team quietly building behind a startup pilot, this episode will force you to ask whether you're a missionary or just waiting for a better offer.

Listen now.

Join our AEC Summit for a full-day event featuring developers, innovators, operators & business leaders and the massive new tech transforming the built environment

Fill-In Co-Host And Hair Rankings

SPEAKER_01

All right. This is not Nick on with me today. This is actually in fact not Nick. This is Andrew Ackerman. So one of the things I do whenever Nick fails on me, he's like, yeah, let's just reschedule the next week. I'm like, okay. And then I get a fill-in guest. So he understands how dispensable he is. So it's very important to me for him to keep like realizing it is KP unpacked. It's not Nick and KP. So hey Andrew, by the way, thank you for making me feel special. Hey, you can always like, I don't know, we'll see what we'll see what listenership is. We'll see what kind of feedback we get.

SPEAKER_00

You know, then it'll be me that you're saying on dispensable and getting looked at.

SPEAKER_01

Mostly I just like to give uh you know, because Nick, I always joke around like Nick's role here is that he's got really nice hair. And so, like, yeah, like that's his role is he's got really nice hair. And so he he like he doesn't love that. He takes the compliment, but he knows it's kind of a back-ended compliment.

SPEAKER_00

Well, you know, when you said that, I'm thinking I was already thinking about like David Letterman and Paul Schaefer, and he had no hair. So, like, yeah, on the other hand, like he can play all the musical instruments in the world, and I can't.

SPEAKER_01

But just so you know, like, and this is kind of funny, like we we used to joke around about like VCs with great hair. Who do you think in our little ecosystem, not in all ecosystems? I mean, clearly, clearly Mark Andreessen has no hair, so he doesn't win the great hair award. In our ecosystem of VCs that we all know, who do you think has the best hair?

SPEAKER_00

Well, I we all know, but like I'm actually partial to Jeff Berman because when I first got to know him, he had the man bun. Okay, and he was probably the only human being I've ever met in person where the man bun actually worked.

SPEAKER_01

Yeah. So my number one by far is Brendan Wallace at fifth wall.

SPEAKER_03

He's got great hair, man.

SPEAKER_01

He's got great hair. That's that's part of being in so galaxy just has great hair.

SPEAKER_00

So I I actually like I've only been in the room with Brendan maybe a handful of times. I always knew Brad. He's got good hair. Like let's not, you know, let's not take anything away from his hair. But yeah, it's not Brendan level.

SPEAKER_01

And we're not saying that, like, I'm not being derogatory. I think he does have great hair. And I also think Nick has great hair. So I just like you know, that so that that became the thing is like VCs with great hair within our little ecosystem. So I was like, you know, I think Brendan's number one, and I think Nick's a close number two.

SPEAKER_00

Interesting. I'm gonna have to go look at his LinkedIn profile again. I what I do know is that if we start talking about product, we're gonna lose like the two or three viewers we have. So it's probably something a little more a little more vaguely interesting to everyone else out there.

SPEAKER_01

Yeah. Well, so it's fun having you on. We've been friends for a long time. And then earlier this year, I kind of said, Hey, I need some help. And you kind of did some consulting, and I was like, Hey, why don't you just come on board full-time? You're like, sure, like, let's do it. And so you came on full time. So, you know, went through my standard hiring process of like what what was your first title? Special projects. Like, dude, I don't know what I can't tell you what you're gonna do. It's just all the things I don't have time to do.

SPEAKER_00

I because I we we had our first, like, and for those of you in the audience who don't know who we are, we met back in like 2017 when I was first getting into the built environment and investing in that space. And there may be like, I don't know, four people, four people that were actually

Why “Special Projects” Works Early

SPEAKER_00

doing it, and you were one of them. You invited me down to Atlanta, and I'm like, there are startups in Atlanta? I what the hell I'll go, right? So this is not my normal hiring process, just for the audience to know. But you call me up and they're like, Oh, I need some help with this. And we'd been joking about working together for a while, and I had a little time. So I said, sure, let's do it. And like 24 hours later, we had a one-page statement of work. And I remember we spent probably the most time, like, what do we call it? And after like five or 10 minutes, we're like, just fuck it, call it special projects, we'll figure it out later.

unknown

Yeah.

SPEAKER_00

So it's anything, right? I mean, I think the way you put it was you know, cats out of the bag, even though we're in stealth, I'm getting a lot of inbound. I just need someone who I trust to talk to kind of fairly senior people, and you know, have enough hours in the day. And I'm like, oh, I get to meet like you know, C-level people at like multinational companies, and I can do that. I'll I'll enjoy them.

SPEAKER_01

Well, I think like you've heard me talk about this, and since football season's coming up, we'll use the football analogy, right? I think when you start these things as a founder, you're just kind of playing streetball, right? You're just like, okay, dude, you like you go run down here, take a left at the car, and I'll get it to you. And it's a couple like who knows, right? It's just like kids showing up and playing, and that's like usually first phase of startup life, right? And then you you kind of enter team scale, right? Where you do have a team and like maybe you're like play more offense, but like a small high school team where you might also have to play defense every once in a while.

SPEAKER_00

You might also be still having that's a tease today, so you're the QB.

SPEAKER_01

Yeah. So I which is where I think we are, right? We're at that team scale thing. Like we're talking about another new hire, and I was like, I was like, I don't know, like let's just bring her in, like we brought you in, special projects, like who cares? And then she'll find her way and figure out whether she's a receiver or a quarterback or a lineman or whatever. You just start to figure out what you're good at in the current environment we're playing, and then eventually we'll get to what I consider functional scale, where this is what you do, and this is all you do, and these are your metrics, and blah, blah, blah. Like we're talking about, I was talking to Kirk a little just before this, and he was like, Hey, I need help with X. He's like, Who can I go to? And I literally was like, post on the all channel, and it's whoever can actually do it. Yeah, like it's not a job description thing. It's like, if you can help me with this task, please raise your hand. Like, if you have the capability, just raise your hand, right?

SPEAKER_00

So I'm gonna actually, you know, let me just jump in here, right? So, first of all, like every time I I met people at you know, at zero RFI, one of my first questions over them is have everyone had a startup before? Because I wanted to understand if they knew like what was normal chaos and what was no actual chaos, be worried. And for some of them that hadn't been there before, I'd be like, hey, this is like this is normal chaos, right? Like things like your messaging to customers. Like in the beginning, you're just trying a bunch of different formula out. You try to see when the customer leans in, when they give you like glazed eyes, they have no idea what you're talking about. Uh and then you get to the point where you kind of have a sense of what's working, and then you actually start documenting processes and people have real titles. So it is a very real thing that like startups go through. And if you haven't done it before, it can be kind of stressful. You don't know that that's normal, right? You can you just people around you don't know what you're doing. But as you grow as a team, certain things don't scale as well. Like the all zero channel that we have within Slack, that works. Sorry, we've talked about this. Like it works really well when there's 20 people and you know, like 20 channels, and like people are looking at everything. Once you've gotten to like 50 channels on Slack and you've muted 40 of them, and there's like you know, 30 people all contributing to all zero, it doesn't work as well. So, one of the things that I've played with a little bit is I I'll ask Claude, I'm like, I need someone to help me with this, like, go through all the Slack conversations. Who looks like they might actually know what the hell they're talking about and can help me with this? And that's like one of the big changes, right? So it used like even as much as two years ago, like you had no way of doing that. So I would have to like, you know, I needed someone to help me on like tech. I called Barry. Barry, like, who on your team can walk me through this? Or like I have no idea about anything. I call you, and then you're like, oh, you should talk to like Jared about that, wherever it might be. Now that kind of like unlimited cognitive capacity to just look at it all and figure it out is trivial. So I find myself leaning more and more on Claude for like general questions where I would go to someone else to point me in the right direction.

SPEAKER_01

Yeah. I think it's funny. Barry and I were talking about like, as much as I'm business oriented, I will exhibit kind of my engineering true colors.

unknown

Okay.

SPEAKER_01

Barry and I were joking around, I was like, because we both view everything as a ticket, like closing out a ticket, right? So when you post on Slack, okay, who's grabbing that ticket and closing it out in a in the form of like it might be a question, it might be like, hey, I need someone to review a proposal. So I think we kind of view like all task management as a ticket to the extent like, oh, everything should be on Lanier. Why don't we run everything on Lanier? And it's like, well, I think we might be the only ones that like the engineering brain side thinks of everything as a ticket. Other people actually want to have a conversation to discuss what's going on.

SPEAKER_00

Oh, no, no, no. Like I am like super millennial. I'll go through great, like great pains to avoid an actual like synchronous voice conversation. But I have actually like, I'll tell you there is a certain value to having it in Slack or emails because it becomes like this huge unstructured database that you can hit. So I'll have, I'll give you another example, right? So, you know, customer development or sales, in a way, it's kind of like being it's kind of like being an AI chatbot, right? You're sort of like every word coming out of your mouth, you're predicting what you think is most likely to make the potential customer on the other uh end of the call happy. Which is basically how the chatbot

Streetball To Team Scale Startup Life

SPEAKER_00

works. And like, you know, hopefully when you're done spitting that out, it makes sense to them. But you know, when you get started just like Claude, it really doesn't. There's no brain there. It doesn't, they're not thinking about what they say, they're just hoping that it makes the the user happy. Uh so you know, if you're doing good customer development, you you actually know what you're saying. But good enough customer development is the the customer like hears what you say, and then they come back to you. But that's exactly what I meant, and then they say it their own way. Okay, now I know what I meant by that. But what I'll use sometimes is I'm going into a new conversation, and I'm like, okay, customer acts is kind of like these other four or five companies I've spoken to in the past. I'm thinking about exploring A, B, and C. Take Cloud, any other ideas. And sometimes it'll come up with an idea I haven't thought about to explore with them, and it's not bad. And I flip this trial balloon, and either they you know they get excited and lean forward or they don't. Yeah. But having it in that conversation, yeah, it's part of the raw material that you can pull from.

SPEAKER_01

So let's talk about this, right? Before you got here, you were like AI adjacent. Yeah, I I now you're like AI pilled, which I think is the reason I wanted to bring this up is like, you know, our listenership, our clients, it's it's all over the place, right? We have boomers down the Gen Z kind of thing, right? And I think sometimes, I mean, I get criticized for a lot of things, both at home and at work. But one of them is like, KP, you're just out here. I can't relate. Like, I don't get it. Like, you say things like the other day, I was on a podcast and I said, Oh, you know, like an MCP server. And everybody on the podcast was like, Hold up, you need to explain this to us, right? And I was like, Do I need to like I don't feel like I need like I'm explaining the internet, like I feel like I'm explaining how the internet works. But I did, I was uh I was kind and explained it. But you, I feel like have gone through your own personal transformation around how you work. And I think there's two things. I think one, you're a naturally curious person. That's why you've been an investor in startup. You're not a you don't lack curiosity. Maybe you just didn't have the platform to play, right? And then I think the other thing I do to people is I kind of give people the workload of 12 sevens, right? Like I give people the workload of like, oh, you're working seven days a week, 12 hours a day. And the only way you can actually have any time to yourself is because you're gonna figure out how to use the tools. Because if you're not gonna use the tools, there's no way.

SPEAKER_00

Yeah. Hold on, I'm gonna push back on that last part because so one thing that you did very well, and it helped a lot, is you made it very clear that everyone should be taking a couple hours each week just to be thinking about how they do what they do and to do it better. So, you know, it's one thing I've been with bosses that just drop extra workload on you, and then you're so far behind that you don't have any time to actually catch up and invest in your productivity. Uh, but you're very explicit, like those two hours a week that you're spending on figuring out a better way to do it, creating a project or a task or what have you, that is time well spent. Yeah, and there that that's the difference, right? You know, you give them the need. So that helped a lot. You did say one other thing that really resonated. Like, I didn't have a platform. So, like, let's kind of let's kind of like take that apart a bit. So, what one of the few gifts I have, other than you know, acceptable hair, is sorry, Brendan. I said acceptable. I don't know. We'll we'll compare a top 10, top five lists. I don't know if I'm there or not, but uh, you know, I think I get at least an honorable mention. Is that I've always been very cognizant of like explaining things in simple terms, even if they're overly simple sometimes, but so people can at least get started. So I feel like I don't know what MCP servers are. I'm like, dude, it's a magic wand, right? It's like an API, but you don't have to actually program anything, right? Is that truly accurate? Uh maybe, maybe not, but it's accurate enough. Like, okay, I got it now, let's keep going. So to take it back, right? About going back to about two years ago, like you start reading what everyone's doing, but I'm very much a like, I gotta learn by doing. I gotta learn by doing like back, I don't know if you remember Code Academy back in the dawn of internet time. So they had like code year. So you're supposed to like learn like it was like uh HTML and CSS, a little bit of JavaScript, and you could do that all. And I was actually between two startups at the time, and and like it hadn't been announced publicly that I'd left. So I just sat down, I had like a month or two, and I just banged through it. And when I'm done, I'm like, I don't really know if I've learned this because I was just doing their exercises. So I had to set for myself my own little project that I wanted to do. And then I'm like, okay, I really understood it. So the limitation here is like here I am in the venture world, or at the time in the venture world, but I was consulting for other VC funds mostly rather than doing my own investments, doing some of my own SPVs. So a lot of the things that I would have been using AI for, like figuring out how to prospect better, figuring out how to, you know, do my first pass through the decks and like a memo and all that kind of stuff, like I wasn't doing at scale. So I just, you know, I couldn't do it hypothetically. I wasn't able to like build those those muscles. You know, my book came up, came out about a year and change ago. So a lot of the stuff I was playing around with AI on were promoting

Using Claude For Slack And Sales

SPEAKER_00

the book and trying to get in front of different people, even video gen AI, but it's not the stuff that we're doing here. So when you brought me in and I had this kind of new set of tasks in front of me, it was like, great, let's start with the things that I find most painful. Uh let's start with stuff that I'm doing over and over again. I kind of know what good looks like. And let's let's figure out a way to take that off my plate or at least like get 50, 80% of it done faster. And that's the way I learn. Right. And I learned by doing. So that's really how my journey went.

SPEAKER_01

Yeah. I think also like it doesn't hurt. You know, we've got a great engineering team. I think they're pretty, they're kind of high empathy people, right? They're not like classic IT people, like, move over, let me show you how dumb you are.

SPEAKER_00

Listen, by the way, having someone to ask, and they can give you like, oh no, you're in the wrong direction, let me help you. That's gold. Yeah. But if you don't lean on him too much, you have to sweat first. If you don't sweat at the front of you on your own, you don't develop the muscles. I will say, you know, as much as I I love Barry, I haven't had to lean on him for this. And you know why? If I hit a wall, I just asked Claude. Yeah. And they told me, right? So it you know, this is like one of these unique errors in time where if you come at it from the right direction, it's actually easiest to learn with the least scaffolding. This will help you learn it.

SPEAKER_01

Yeah.

SPEAKER_03

How awesome is that?

SPEAKER_01

No, amazing. No, I I agree with you. And I think the, you know, being that we're like an AI native firm too, right? The way we have our knowledge management, and you know, there's there's so much information everywhere between Notion and Slack, and we've connected everything, and we have, you know, we've taken all this data, you know, we record all our calls using Notion. So there's, you know, so we we do a lot of that stuff. We all try very hard to keep our content accurate, right? Because of hallucinating and just weird stuff. But I do think it helps that we're AI native because it's really interesting. Like, I mean, one of the things you do is you work with a lot of our AEC clients on their transformation, and then the first thing they do is like, oh, well, our SharePoint servers on-prem, and you're like, whoa, like even before that, that's that's that's like already up on the scale.

SPEAKER_00

Like the the word that the we wait for this phrase, and then we're like Well, you know, we're on co-pilot, and immediately like inside of the man, I feel for you. Yeah, because on co-pilot, it's not that copilot's part of my language, a shitty tool. Like when my mom was having trouble with her like 20-year-old laptop upstairs. Actually, a copilot helped us figure out what was wrong with it and how to fix it. It's not that it's bad, it's a little bit of a symptom, yeah, right? Because the kind of company that will reflexively choose copilot are the ones that are locking things down because they're so worried about misuse, internal or external, they lock stuff down so tightly that it actually makes the AI experience bad. Yeah. And then what happens is you got your people in your organization going in there, like, I tried it, it sucked, I couldn't rely on it, it's not ready yet. And it's not ready yet, it means I'm not gonna look about, I'm not gonna even think about AI for another year or two. Yeah. Uh that's the I mean you wrote about this, but that's the real danger. Yeah. And when I hear I'm on co-pilot, I'm like, oh man, I'm sorry to get it.

SPEAKER_01

No, and I also think like, you know, it's like early days of internet. I used to like deploy like ISDN internet routers and do all this stuff on-prem. And then I'd start setting up computers with you know, with like Netscape, and uh my clients would say, Oh, don't give the accounting department a web browser, just give lockdown. Only they can only have email. I'm like, why? Yeah, oh the waste time on the internet, and I was like, really? And like I I hear similar yet, right? I hear similar patterns today. Like, don't give people AI because they're just gonna goof around. I'm like, you know, they have a phone, yeah. Like they have a phone, and they're probably aren't gonna goof around. If anything, they're the things I would goof around on.

SPEAKER_00

I don't want going through your servers anyway, right?

SPEAKER_01

Exactly.

SPEAKER_00

I'll even turn Wi-Fi off so you get no.

SPEAKER_01

I'm probably on Calci and Poly Market on my phone anyway. Like, that's more fun than AI, anyways.

SPEAKER_00

It was either that or porn, but anyway, let's move on. Yeah, no, you're absolutely right. I mean, it's like, and and they will get it, right? Once you actually tell them, like, hey, you know, if I wanted to goof high use my phone, like, oh, but that's not, I don't think it's the goofing around now. I think it's fear of I don't know how this works. And they'll either use AI, get wrong answers, and somehow that'll kill the company. Yeah, right. Like there's a lot of steps in between they'll go, they'll do it wrong and the company will die. But that's the real fear. Or there's a whole different level of uh exposure that your company has with AI. It's kind of like those early days when everyone was getting viruses because they opened up executables and like nobody kind of knew what the danger zones are. And today, like, if you don't have people who set it up appropriately, you are exposed. Yeah. You know, and that's so like I have a little sympathy for this CTO who's like, I'm locking it all down. But the truth is, like, dude, it's your job, right? You gotta go figure out how to give the best tools to your people. And if you're worried about what they'll do with the best tools, you got the wrong people.

SPEAKER_01

Yeah. I I also think to your point of like giving space, right? I think it's also important that like the CEOs say, look, we know we're doing this AI thing, and you're my CIO. And I know like you're so busy between the accounting system and all the stuff going on. Like, I'm gonna send you to a class. Like, I'm gonna you need to go learn and get comfortable or whatever it is, right? But the opting out, I think, is like that's just not ex like the opting out is not acceptable. Where I'm just you know, I someone the other day was like, I'm too busy doing my job to spend any time with AI.

SPEAKER_00

I'm too busy badly to get better at it, right? You know, I I would actually say, like, this is where like the CEOs kind of can live by example. It's weird, like you're gonna send this guy who's like 50 plus or minus, and like well respected in there, and they're good at what they do, but like the whole world changed two years. Years ago. So I do feel over them. And then it's like you got to go back to like AI kindergarten. Right? And like, you know, can I do a product? I don't know. But you know, if the CEO is going out there and signing up for hackathons and doing this, I think publicly learning it and talking about it, like it sets the tone for the organization that this is good, right? It's okay. Admitting that you're just learning AI is far better than not learning AI. Right. And I will I will also say, like, because we do this with a couple of formally and informally with customers. It is a question of giving them achievable first steps. You know, the analogy I sometimes use is like when I was younger, I played a lot of video games. And I I wish I had that kind of time today. Yeah. But because my first foray into the into the internet world was I did a lot of UI and UX stuff for a startup. I have this like special appreciation for people who can do onboarding really well.

SPEAKER_03

Right?

SPEAKER_00

You can you have people build these like very richly featured

Why AI Rollouts Get Locked Down

SPEAKER_00

systems, and it's awesome. You can make it do everything but sing, and sometimes it can sing. And then you have like the newbie come on, and there's all these buttons, and they don't know what the hell to do first. So actually managing that onboarding is is critical. Like for a lot of the startups, you lose your customers right there, and then they cancel the subscription and they're gone. So I I tell people sometimes you gotta think of it almost like you know, one of those massive multiplayer online games. And you're bringing someone in, it's really complicated stuff. What goal does like you know, the the tutorial avatar tell them to do first? What is it, something that they can do and pay no attention to those 80 other buttons, you're gonna do, and you're gonna learn how to do it well enough, and it's gonna actually help you. You'll feel good about doing it, and you'll leave it saying, I gotta do this next. So if it were me, it's not just that the CTO or the CIO needs to understand AI, but I almost need to have a tutorial mentality or teaching mentality of like, how do I get my entire organization excited about learning? I make it easy for them to learn, make them feel like they've succeeded.

SPEAKER_01

Yeah, I think it's also like the industry makes people feel like less approachable, right? We throw this terminology out there, all this stuff, right? And you know why pickleball we're the ones saying MCP.

SPEAKER_00

Yeah, do you know why pickleball is so popular? Because it lets old fat people pretend they're playing tennis.

SPEAKER_01

Well, first it says pickle. Oh, yeah, it's not very serious, right? Yeah, it's kind of approachable, right? It's already approachable.

SPEAKER_00

By the way, no offense to like the 98% of the audience that play pickleball regularly.

SPEAKER_01

Right, but it makes I mean, look, I'm I grew up as a tennis player, yeah, very competitive, all that. And the the thing that I've appreciated about pickleball is I can play with people of all levels, right? It's it's it's like a a you know, whereas tennis, it's like you sit there and it's like someone that's just they can't serve, they can't serve, right? Yeah, it's just it's just too hard, right? And pickleball, I was like noticing this. Like pickleball, the reason it's probably one, it's called pickle. Yeah, how can that be you know scary, right? It's pickle. And then they say things like, you know, in the kitchen, in the kitchen, yeah. Oh my god, like it's just like it's just very approachable. Like if they would have called it like ultimate tennis or something weird, right?

SPEAKER_00

You know, I don't know. I never thought about that, but you're right. There's a certain whimsy to it, right? Yeah, there was that makes it doubly funny when you you find like that friend who's like hardcore into it, right? And you're playing doubles and like he'll miss a shot and he's like, damn. I'm like, dude, it's pickleball.

SPEAKER_01

Yeah, my my it's kind of funny. My my cousin's an orthopaedic surgeon, he's a sports surgeon, yeah, and he always jokes around that like his first two houses have been funded by tennis players, like people that picked up like Alta tennis, pickleball because no one stretches before pickleball, like mixed doubles, right? Like that crowd, his third and fourth houses have all been pickleball.

SPEAKER_00

So I wonder, hold on. I wonder if part, other than the fact that Claude is really good. I wonder if part of the reason Claude has overtaking OpenAI is because open AI has AI in it, it's scary. Claude is just that dorky guy whose parents were French, and I got stuck with that name growing up. There you go. Maybe. Although anthropic sounds very like, I don't know. Everyone calls it, you know, I'll tell you. Everybody knows what anthropic is. I'm not gonna search it up on anthropic, I'm gonna search it up on Claude. Right, right. Right? So interesting. Okay. Uh so you what you're saying is we shouldn't call it AI, we should just call it, you know, thinking-ish. I don't know. Call it teletubies, like call it something. It's like, you know, we'll we'll figure up some cutesy names. Like, yeah, call it Intel, and then we're good to go.

SPEAKER_01

Well, let's shift gears to startup world. So part of your job at Zero R5 is working with tech partnerships. We just announced one with track 3D, which is super cool. I'm a little biased because I'm one of their big investors, so definitely very biased. But I also believe like you work with people you know because you know, right? We know what's real, what's not real, what makes them better. But part of your job is talking to a lot of startups around partnering with us to partner on our platform because we don't want to build everything. We can't build everything, and we don't want to build any everything. And so your rubric is build by partner. Hey, we need this feature, build by partner, right? And one of the things that we're seeing is startup world, especially in construction tech and prop tech, is in a pretty bad place, right? In terms of funding, and there's a lot of folks that built, you know, fancy websites, right? Apps, it now the customer is vibe coding the equivalent in an hour. So they're like, why am I paying you all this money? And in fact, we covered on a previous pod where we're seeing these construction companies that have innovation groups are now hiring product people, they're hiring developers. And the the low-hanging fruit for them to pay for themselves is to say, Oh, we're spending money with these 10 startups. I can recreate it, and then we don't have to pay them, right? Immediate ROI. So then it's like, oh, let's hire more people because we're getting value.

SPEAKER_00

I got I got like four bullet points already on my answer. You want to put a fifth on the board? Or you want to I can't hold more than six ideas in head.

SPEAKER_01

But I think it's like there's a reality, which you and I, you know, talk to startups all the time still. Like, what are you coaching them? Like, you know, AOE did your seed round, you're not showing venture growth. Yeah. So what do you guys do?

SPEAKER_00

So let's let's take that step by step. So let's talk a little bit first about you know how like who should be afraid, right? Who should be afraid? Who should be very afraid? You know, we talk to the startups all the time. There is the perception out there, rightly or wrongly, I can just vibe code that. I don't need it anymore. Now, the truth is, if you ever like try to vibe code on your own, you'll get to the point where like you're 60, 70% of the way there, and then you're like, oh, I'm almost there, I'm almost there, and all of a sudden it's 3 a.m. and you're still not there. So it's actually deceptively tricky to get that 99.9% reliability that you expect from software. Now, it's okay if you're using it as an internal tool to support yourself, and there's a human in the loop, and you can like kind of catch it when it hits an edge case and chokes. That's fine. But you know, the vibe coding, it's a little bit hyped. It's a little bit hyped. It's not like that easy. It's kind of the difference between like I could paint, you know, the the kids' nursery, but it's not going to be as nice if I had a real painter on it. Now, where you're willing to go and like then get your your IT team to harden it and get it those last you know 20% over the line versus where it's like you know not worth it, it's usually the big spend items down.

SPEAKER_01

Yeah. But here's here's where I'll argue with you about that. This is the difference, right? If you're some tech nerd, I use nerd affectionately, in a construction company. I guess and you went and told the CEO, like, hey, I think we can replace X, Y, and Z. Here's three slides on how I'd approach it, and here's my budget. Yeah, yeah, yeah. Whatever, dude. Get back to your day job. The difference is these people are showing up with prototypes that are already working, which is cool and dangerous to the site. Right. So the CEO doesn't know, like, there's still work to be done, yeah, but they're inspired to say, yeah, go figure it out. And they are hiring people in IT and otherwise to run deployment on it.

SPEAKER_00

So I think it's it's real for the startups because then that just pulls out their sales cycle.

unknown

Yes.

SPEAKER_00

The CEO thinks, oh, let's go see what happens, right? And three months is no big deal for a corporation. Right. Three months is you know, most startups will raise 18 months of runway at a time. Three months is one-sixth of their oxygen.

unknown

Yeah.

SPEAKER_00

Right? So it that's a big deal if your sales get done. And it's really more than that, because as you know, when you want to raise your next round, it could take three to six months anyway. So you really only have 12 months to show results. Yeah. So if three months gets pushed out, that's a big deal. So even if it's not totally true, the perception

Vibe Coding Threats To Construction SaaS

SPEAKER_00

that hurts that hurts companies. Yeah. Now, let me let me pose a question to you, right? Who should be more afraid of this? Salesforce or the guys like Ramp and Expensify that do your expenses? Salesforce. Absolutely. Why? Because nobody wants to mess with money. No, okay, that's not the answer I was expecting.

SPEAKER_01

That's what we never asked questions. I'm just saying, like security. No, it's much simpler. Right?

SPEAKER_00

Well, no, it's much, much simpler. How much does Salesforce cost versus how much does expensive cost? Yeah, right. It is, you know, six figures alone or more for many organizations for Salesforce. Yeah, it is like six bucks per person for the other ones. Where am I gonna put my, you know, what can I replace?

SPEAKER_01

So if I'm but here's something that I think is a little nefarious happening. Okay, well, I like that. Right. You lose people by using the word nefarious. Yeah, I I'm not on YouTube now because I said nefarious, and I think you cursed maybe. But I know corporates that are doing pilots with startups, paying them five, ten grand, whatever, and building the same tool in the background.

SPEAKER_00

We used to call that brain raping. Now that we're not on YouTube anymore, right? Yeah, and that's and that's a little skeezy.

SPEAKER_01

It's a it's it's happening a lot.

SPEAKER_00

Yeah, it's happening a lot more.

SPEAKER_01

It's happening a lot more because before it was more like getting the ideas, right? Yeah, now they're sitting there looking at like, oh, okay, so we're going to this pilot, and their team is like building behind them, like right behind them. Yeah, you know, and it's it's I'm saying it's becoming more the common thing than the exception thing. Yeah, because people are vibe coding, they believe you know whether they can or they cannot, yeah, right, they believe they can, and executive management believes they can because they see the quick prototyping, and they're like, Great, we'll pay these groups five grand for a five for a tutorial, yeah. And I I literally like this week I got on a call with someone that said, Yeah, we're piloting these three companies. I'm like, Oh, interesting. And then I get pitched by one of those three companies, and like, yeah, we're in a pilot with XYZ.

SPEAKER_00

And I'm like, Oh, that's cute, dude. Yeah, yeah, like they have no idea, or you get pitched by another company, it's like we got a pilot with them, and you're like, Yeah, let's let's take it up a notch, right? So, whether or not it is actually as easy as people think to get to a production quality, vibe-coded solution and you can get rid of the other guys. The truth is that we're at the stage in the cycle where enough people are convinced that it's worth a shot, that it's certainly hurting you know, the SaaS companies out there. And even if it's not the customer doing it, the other dynamic is what took you like a year to build, somebody who is bona fide good at coding too and has the vibe coding tools can now build it in two months or two weeks, even. So even if the customer can't really do it, now the competition is nipping at your heels. So it is kind of rough. So the the companies that when I'm talking to them, the ones where I'm like, no, you're gonna be all right, or you're gonna be all right if you do X, versus the ones like, dude, you're screwed, you gotta go think about something else. What it comes down to is a mixture of how urgent is it to replace you? And that's like, hey, it's a trivial amount of money, don't spend your time on that. I'm just happy it works, move on. You're gonna be okay. All right, you're gonna be okay. You'll have other competition, but they'll be like, what are they gonna do? It only costs like five bucks a month. They're gonna come in and offer for four bucks a month. Like, honestly, I'm not switching to an unknown provider to save a buck a month per person. We're good here. It's not a big part of my cost structure. So, again, you know, whether it's vibecode replace or new competition coming in, if you're small relative to the volume that the value you provide, you're gonna be okay. Just keep at it, get your cost of customer acquisition down, grow, go, grow to the point like, you know, whatever. We're just gonna use, you know, fill in the blank here and be done with it. Can it go ahead, yeah?

SPEAKER_01

Yeah, can I tell you like I have a more simple thing, right? A, do your customers love you? And B, do they love your product? The rest of it doesn't matter. If you go poll 10,000 Salesforce customers, users, yeah, and say, Do you love Salesforce? The answer is no, right? The answer is no. Do you love Mark Benioff? Do you believe in what he stands for? Do you like him as a person? Do you believe like you're part of something? Absolutely not, right? It's like all the Tesla people that, I mean, because I'm in Northern Cal, all of them have little stickers like I bought this Tesla before Elon Musk went crazy or something. It's a little bit of that, right? There's that there was that fanboy thing with Elon. And then they had a product that people like people still love their, like, they're not selling their Tesla, they love their Tesla. I don't love Teslas, I think they're weird. But people that have them love them. They've fallen out of love out of Elon, but they still get the car.

SPEAKER_00

They still get the car. Let's do a very quick tangent. I will say, like, yeah, there's a lot of wack-a-doodle going on there, but if you have to point to one person on the planet that did the most decarbonize, like it's still him.

SPEAKER_01

So I couldn't just drop 100%. But my point is, like, a lot of founders, they start, they get they get focused, right? On the next customer, the next customer, they forget the old customer that got them there. They kind of don't show them the love, they yeah, they don't return the call. Like, you know, like it's kind of funny.

SPEAKER_00

I don't disagree. I don't disagree at all. I maybe it's because I'm like super not millennial this way. I don't need an emotional connection to my vendors, I don't need to be part of their mission. I just want the software to just eff and work. Yeah, you're and I will say, even if I love the software and I love the company, right? If I'm paying six or seven figures a year for it and someone says they're gonna vibe code it, I'm gonna listen to them and give it a shot. So I don't know. You know, do you know why vibe coding is so popular? Because people love the phrase vibe coding, it sounds cool. It's like pickleball, it's very approachable.

SPEAKER_01

Oh, pickleball is like it's very approachable.

SPEAKER_00

It's very approachable. Vibecoding is like got me a black leather jacket, right?

SPEAKER_01

Just like pickleball is an activity and not a sport. Vive coding is not software engineering, yeah.

SPEAKER_00

But uh, it's also fun, right? It's it's that's what I'm saying. It's fun, it's approachable, it's cool. You know what it is? It's like it's like you've suddenly gotten to a point in a craft where like your output looks good, yeah. Right, and so like vibe coding is great, like all those things that you were like, I could never do it before, I have no idea how this works, it just does. Like one of the guys I was talking to, he's like, it's not gonna replace your your software development team, but all that stuff that they wouldn't touch because it just wasn't important enough for them. Now you can do that.

SPEAKER_01

Yeah, that's all I'm saying. Vive coding is for like, hey, I really wish I could be a nerd and a software engineer. So I vibe code. I really wish I could play tennis, I'll play pickleball.

SPEAKER_00

Yeah, but you know, but but the difference is it's like it's fun. They play pickleball, they get a little cardio. You vibe coach, you get a little productivity. So I'm not gonna poo-poo it.

SPEAKER_01

But I think I'm not poo-pooing it. I'm just I'm just making this the episode that people get mad at me and that you inspired me to say.

SPEAKER_00

We should go back to the are you screwed part of the conversation, right? Yeah, so I talked about a moment ago, the ones that you're gonna be okay, you just gotta like your execution has to change. But if you're those other companies, like you're big and like people need to think about it, and now they're thinking about vibe coding it, you know, you got a bit of a problem, right? So a cut they fall into a couple of different buckets. Like if they're really early in the in their growth curve, like you're you're gonna be still born on that one, right? You're too early, you can't afford the gap, you're not cash flow positive, like that's bad, you're dead.

SPEAKER_03

Yeah, right.

SPEAKER_00

So you can try to do something totally different. And by the way, you know, going from SaaS to AI-powered SaaS doesn't work because now your competition is all in the same place and you're just entering a crowded field. So that's not the that's not the course adjustment that makes sense. You know, what I've seen some of them, shockingly, I've seen some of them do is switch from becoming a SaaS type model to a software as a service model.

unknown

Yeah.

SPEAKER_00

Because that flips the customer's mentality, right? So the customer's mentality is you know, I'm used to buying it this way. I want to have a person on the other end, and you can be that person on the other end. You and the relationship starts mattering. I like working with that guy. Every time I give it to Bob, it just gets done. I get the clean reports back the next week, we're good to go. And behind the scenes, you're just 80% more efficient than you know, the the 60-year-old guy that's like still using you know Windows 2003 with Bob the paper clip in the background, right? So I've seen a bunch of people make that change. It does, at least now, usually take you off the VC track. Yep. And that's changing, right? But VC has been historically not into uh service businesses, with the obvious exception of like General Catalyst, because they backed us and a couple more, they're getting there, but it's

Pivots Missionaries And When To Quit

SPEAKER_00

it's been like service businesses, yuck.

SPEAKER_01

Here's here's my point about that, right? When you talk to startups, they love to for for the non-startup listeners, right? They love to use the term pivot. And what I've always said about making a pivot is if you're still passionate and a little bit maniacal about the problem you're solving, when you pivot, you're still focused on the same problem. Yeah, you're just doing a pivot. My first startup, 1997, was web-based construction management. Because I was like, the internet's gonna change how we do construction. The market was too slow to adopt. I had to pivot into more like telecom construction, like building out networks and all. And I did fine. Second startup was BIM. People aren't gonna know how to use this software. I'm gonna build a company around BIM because I really want to innovate how we build buildings. That was my mission, right? Use technology to innovate and do better. That didn't work out, right? Because people misused BIM and whatever, still was able to exit that business. Then I started consulting with all these AEC firms, helping them understand innovation because I wanted them to do better, like go do better. And then I was like, okay, well, that's not scalable, basically. I was like, that's not scalable. There's not enough hours in the day. We still do consulting, right? Then I'm like, okay, I'm gonna go in VC because now if I can fund innovative startups, they're gonna change the world, they're gonna change how we do construction. That's going okay, right? It's it's it's hard, right? It's still very hard, unless you're a massive capital allocator, but it's going fine, right?

SPEAKER_00

For the people who aren't in VC, the reason it's hard isn't it's super fun, but the reason it's hard is that we don't know if we've made the right decision for 10 years. Two years is enough to tell us we've made a horrible decision, right? But until the company exits in 10 years, like we don't know if it's gonna be a big win, a push. Right. So that's what's hard about VCH.

SPEAKER_01

And so that's why I've augmented like my mission with Zero RFI to say, hey, no, we have to have a like we're still doing the same thing, right? This is been this is when when people say, How long have you been doing this? I'm like, my whole fucking life. Right. But I think that's where the rubber meets the road with founders. Were they building something that's opportunistic? Were they actually passionate? Look, I'm not gonna people can have different passions, right? It doesn't have to be, you know, altruistic or anything. You can be passionate about gaming. I'm sure the people at Kal Shi and Polly Market are very passionate about what they're doing. They feel like they're solving a world problem, right?

SPEAKER_00

Can we put the P word away? Because like I hate when people say I'm passionate about things. Like if you're out there and like the overword, I'm not a LinkedIn profile size, I'm passionate about, like I just threw up in my mouth. What about I'm the TEDx speaker? Yeah, like it's it's it's one of those overused words. You ever hear the phrase missionary versus mercenary? Yeah. Yeah. So I I like when I first got into VC, people are like, listen, you want founders who are missionaries, not mercenaries. The guys that are like, oh, AI is changing everything. I gotta get in there and do something. But the moment they hit a rough patch, they're gone. Yep. Like they're not like committed to it, like, oh, it sucks. I am tired of looking my bank account go down. You know, I got a job for 250 grand doing XYZ. Startup's done, right? But the mer the missionaries are, and sometimes missionaries can be tough, they don't always listen, they think they know better, they should quit. But the missionaries, I'll give you an example. My favorite example, there was a startup, my old fund backed. The guy was taking his, he was uh an MD PhD student. He was taking his mom to get radiation therapy for her breast cancer, and he's talking to the radiologist and he's asking, like, you know, because you know, when you do that, they put two beams through you so that where they overlap, it's toxic. And where it isn't, the healthy tissue isn't like dosed. So he's like, Well, how do you know like how much you know radiation to put through and what angle? And like the doctor's like, well, you know, it's kind of more an art than a science. And the guy like basically trapped himself. Like, that's my mom right there on the table. It's also math. Like, what are you talking about? Yeah, and he's like, like, we've got all these patient data. The EHR is trying to uh medical records, health records, I have all the data. What the hell are you telling me? It's you know, yeah, I I think that's what we're gonna do. So he dropped out and he founded the company. Now, you hear that story, you're like, this guy's not quitting the moment he hits a bump. No, right? So that's what we look for. We look for the missionaries, not the mercenaries. And you know, when we hear the the other P word pivot, right? Part of us is is it the oh shit, this wasn't working. We had to do something totally different, pivot, or was it like, hey, we just saw a better path to the goal? Right. So like acceptable pivots in some ways are like, hey, we were gonna be like B2C, business to consumer, uh direct to consumer. And then we realized like we could go through other partners or you know, we could do the the B2B version of it, uh, but we're still like solving the same problem. We just found like a different point of entry. Yeah, like those are the pivots that we're like, that's cool, that's part of the normal experimentation.

unknown

Yeah.

SPEAKER_01

No, I I think that's all fair. I mean, and we see it now with construction tech because there's some buzz around it. Lots of folks with very limited experience jumping in. I was talking to one founder a couple of years ago that raised like 20 million dollars, got punched in the face so many times, literally shut down the company and gave his investors the money back.

SPEAKER_00

And that was maybe the most ethical thing he could have done at certain points. Most founders, if they still have money in the bank, they will pivot and try to make it work. But you know what? We're we're also the bad guys too on the when we wear our VC hats, right? Like I've had founders, they're like four years in and they're like going on fumes, but they're like banging against it, they keep doing it, right? And I love those guys, but at some point I pull them aside and I'm like, your time is better spent doing something else.

SPEAKER_03

Right?

SPEAKER_00

It's like I love you. And as a VC, it doesn't matter if you're like throwing Hail Mary's now, you know, maybe someone has a hundred, you know, 100 to 1 chance of catching that ball and running it. That's better than a zero if you shut it down now for me as a VC. But for you as a human being, we're in an awesome point in history with so many possibilities. Why are you trying to like you know get a 99.9% failed startup to like come back to life when you can just have a clean slate and do something new?

SPEAKER_01

I will say I've been having that conversation with a lot of founders because I'm like, you realize the next three years defines the next 30 years of your life.

unknown

Yeah.

SPEAKER_01

Is this what you want to be spending your time? Like, you just need to really think long and hard, you know. And I always say we're venture investors. We we get the you know, we have the honor of being part of your cap table, but it's mostly your company, right? And we we run we operate capital allocation through math. We expect so many companies to fail. Like that is our math. That does not like you're not gonna hurt my feelings if you say, KP, like I feel like I'm wasting my time here, I want to shut down. You will not hurt my feelings at all. In fact, I might respect you more.

SPEAKER_00

Yeah, it's true. I mean, most of us, it's funny, like if we've picked the missionaries properly, yeah, but the good people, you love them to death, they actually feel like they've let you down, and like sometimes they're like, I'm only doing it for you. And then you're like, Okay, I give you permission to bow out, right? It's good, it's baked into my numbers.

SPEAKER_01

Yeah, 100%.

SPEAKER_00

Yeah, we haven't really bad when people are like, No, there's a lot more juice here, right?

SPEAKER_01

Yeah, 100%. Well, very cool. This was a fun conversation. We'll we'll have you back on. So I suggest like when you have stuff you want to say, you should like just tell me, like, hey, I want to be on the podcast. And I think it was kind of a good break, you know. So Nick was in SF for the last month, so we did all of our pods in person, which was kind of different and weird. So I wasn't looking at a camera, I was looking over here. That was just really weird. But I think we were starting to get a little bit, you know, bro finance, a little bit like a little too TBPN, so to speak, about things.

SPEAKER_00

I don't even own the sleeveless vests. We're okay. Yeah, so I thought so.

SPEAKER_01

I figured this is a good thing. Yeah, and um just just a small plug, right? 10th year this year of AEC Summit. I think you were a speaker at like version one or two or three.

SPEAKER_00

2018.

Wrap Up And AEC Summit Plug

SPEAKER_01

Yeah, so a bit, right?

SPEAKER_00

I still have that logo, I'll share it with you.

SPEAKER_01

Oh, yeah, great. So it's gonna be in New York this year. So if you go to a summit.acummit.co, I believe you can get tickets. We it's kind of funny. Like every year I've like raised prices and made the group smaller because I was like the event manager. So I was just like, how do I cover my costs and do less work? Raise prices, reduce the number of attendees. This year we have some resources, right? So we've actually low we went from three grand a ticket to like a grand a ticket, and like I think bigger venue, bigger speakers, all the good stuff. So it'll be a lot of fun. It's in Brooklyn, so it's like yeah, it's in Brooklyn. All right, Andrew, good to see you. Thanks for having me.