Welcome to Episode 199! on Stein is the Founder & CEO @ Betterment, the online financial adviser built for people who refuse to settle for average investing. To date, Jon has raised $275m in VC funding with Betterment from the likes of Bessemer Ventures Partners, Menlo Ventures, Kinnevik and Francisco Partners, just to name a few. Prior to founding Betterment, Jon spent 4 years as a consultant at First Manhattan Consulting Group where he really honed his experience in working with banks and brokers including revitalizing a bank in Australia with the launch of a best-in-market auto-finance offering, resulting in 50% lift to revenue. As a result of his phenomenal success with Betterment Jon has won many awards including Fortune’s 40 Under 40.

In Today’s Episode We Discuss:

* How Jon made his way into the world of startups and came to found democratize the world of investing with Betterment?

* When does Jon believe is that critical moment when the founding team must hire their first employee? What is the right strategy to build the candidate pipe for hiring those first employees? Where does Jon see many go wrong here? What 1-2 questions does Jon always find the most enlightening to ask in the interview?

* Once hired, what have been some of Jon’s biggest lessons in terms of optimizing the onboarding experience and the first 60 days? How has their process changed over time? How does Jon determine when a stretch candidate is a stretch too far? If so, what does Jon believe is the right way to let go of an individual?

* What does Jon believe to be the 3 core roles of the CEO in any company today? From those, what has Jon found most challenging? What did he do to level up and overcome the challenges? How does Jon approach transparency with the team in delicate cases like fundraising and acquisition, etc?

* With the team and product in place, scale can occur, what are the 2-3 things that all companies need to focus on when product market fit has been achieved? How does Jon determine when is the right time to really put the pedal to the metal and scale?

Jon’s 60 Second SaaStr:

* Jon’s favorite book and why?

* What does on know now that he wishes he had known at the beginning?

* What is Jon’s biggest strength and weakness?

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Jason Lemkin
Harry Stebbings
Jon Stein


Harry Stebbings: Welcome back to another week in the world of the official SaaStr Podcast with me, Harry Stebbings, and if you haven’t already, you can see all things behind the scenes here on Instagram @hstebbings1996, with two Bs. It’d be awesome to see you there, but to our episode today, and a founder I’ve wanted to have on the show for a very long time, and so I’m thrilled to welcome Jon Stein, founder and CEO at Betterment to the hot seat today.

Now Betterment Is the online financial advisor built for people who refuse to settle for average investing. To date, John has raised over 275 million dollars in VC funding with Betterment from the likes of Bessemer Ventures Partners, Menlo Ventures, Kinnevik, and Francisco Partners, just to name a few. And prior to founding Betterment, John spent four years as a consultant at First Manhattan Consulting Group, where he really honed his experience in working with banks and brokers. Including, check this out, revitalizing a bank in Australia with the launch of a best-in-market auto finance offering, resulting in 50% lift in revenue, I love that case. As a result of his phenomenal success with Betterment, John’s won many awards including Fortune’s 40 Under 40.

And I do also want to say a huge thank you to the wonderful Charles Burnbaum at Bessemer for the intro to John today. However, you’ve heard quite enough from me, so now I’m thrilled to hand over to Jon Stein, Founder and CEO at Betterment.

Jon, it’s such a pleasure to have you on the show today. Huge thanks to Charles at Bessemer for the intro. But thank you so much for joining me today, Jon.

Jon Stein: Thanks for having me, Harry. It’s a pleasure to be here.

Harry Stebbings: Well I would love to kick off though with a little on you. So tell me, Jon; when you were a little boy, did you always dream of democratizing the world of investing? And how did you come to found Betterment?

Jon Stein: I never wanted to be in financial services. I didn’t know anyone in financial services growing up. I grew up in Dallas, Texas, and I don’t think there had been banks in Texas … or at least at that time there weren’t any big banks based in Texas since the S&L crisis of the ’70s and ’80s, and people don’t remember that, but it really wiped out a lot of the Texas institutions.

I felt far away from the capitals of finance in New York, and London, and elsewhere in the world, and both my parents were city planners by training, they became consultants … Consultant and a real estate lawyer, and I just didn’t know what finance was all about, and I got to college, and I fell in love with economics.

And I loved economics because it was this study of humanity. The science of how societies work, and how they function better, and how if we make better decisions the world will be a better place, and that was really fascinating to me. But when I asked people what they were gonna do with their economics degree, and many of them said they were gonna go help large institutions, and wealthy people make a lot more money, that didn’t fascinate me. I just thought, how can I use this to help society?

Harry Stebbings: Yeah, absolutely, and I couldn’t agree more with you on that mission, but I do wanna break the infused day up John into a couple of core components really when it comes to company building, starting with the people that make it happen. The team. Then, moving to the role of CEO, and the firm itself, and then finishing on maybe the investors that fund this. Does that work for you?

Jon Stein: That sounds great.

Harry Stebbings: Okay, so we all agree company’s nothing without the people within it. So, I wanna start to say on the team creation aside, I always think the hardest element’s kinda that first hire. When do you think it’s fundamentally the right time to really start building out a team? Think back to your early days, what was that decision making process on those first few hires?

Jon Stein: Initially I thought I could build it all myself. I really believed that I would be the lead engineer, and head of product, and the CEO, and all the things. And that was my business plan, I was just gonna build this automated investing service, and make it go.

As I began work, I took on more and more, and things were taking longer than I wanted, and I had taken a class in business school that said that companies with co founders are more successful than companies without. And so I was working at that time with my roommate Sean, who was an engineer at Google, and I met a lawyer, Eli, who knew securities a lot. And we started working together, and as we went we just kept needing more people, and I feel the right time to add people is when you absolutely can’t do the job anymore with the team that you have. There’s something so pressing that it has to be done, you need somebody to do it, that’s a pretty good indicator that it’s time to hire.

Harry Stebbings: Can I ask, are there any mental hurdles that you often see founders kind of hesitate on jumping over that really have to be, kind of, combative when adding to that first few hires?

Jon Stein: Well sure, I always sell myself as a creator, and someone who could do all the things, and wanted to be involved in all the things, and it’s hard to let go of things. And then a hurdle you have to do is trust your colleagues, and really give things away so that you can focus on new stuff, and change your job, and focus on the next challenge.

Harry Stebbings: You mentioned kind of the building out of the founding team there. In terms of, kind of, the first few hires as employees, I’m really intrigued. How do you think about, kind of, building the candidate pipeline in the early days? Are there elements that really worked for you when you look back on it?

Jon Stein: In the early days, it was a lot of my network that I was going to. I went to my former colleagues, to my business school friends, to my college friends, to my high school friends. Literally all of those people, somebody from each of those groups, and others worked with me. And then, I was going to the New York Tech Meetup, which at that time was a small deal, it became a much bigger deal in early 10s, but through that small community, I got to know a lot of people who were really passionate about changing things, and they became early employees, and connectors as well.

Harry Stebbings: Absolutely. I’m interested, ’cause when it comes to kinda adding to the team there, and the core seats the one it’s for, I recently had Mark Mader on the show from Smartersheet, and he stated that people often over index culture, and IQs actually the fundamental element as slightly contrarian thing to say. So where do you stand on the balance between the two culture versus IQ?

Jon Stein: It’s a false dichotomy, but both are essential of course, you can’t have a bunch of idiots running a company, and have it be successful. But you also, you can’t have a bunch of assholes running a company, and have it be really successful. You need both, and when we hire we talk about hiring for three things, horsepower, passion, and openness.

Horsepower to me is about intellectual curiosity, IQ as you say, and people who wanna just solve really challenging problems, and are good at it. Passion, you don’t have to be passionate about Betterment to work here, but it could be user-centric design, or Ruby on Rails, or whatever it is that you’re passionate about that’s relevant to our mission. I feel like that makes you a better colleague. And openness is how I think about EQ or the culture piece of it. It’s about listening well, and asking questions, and collaborating, and knowing that if we solicit all the opinions in the room, we’re gonna come to a better decision than any individual would on their own.

Harry Stebbings: Can I ask, John, in terms of kind of stress testing that pre hire, are there any elements that one can do to really kind of draw out the desire quality like that passion and openness, pre hire in the interview?

Jon Stein: I like to ask every candidate some of the same questions. I ask them about their journey in life and what they’ve done in the decisions along the way. And in that, I try to understand, first, do they have this intellectual curiosity, are they constantly looking for new challenges? When they talk about their biggest accomplishment, are they excited, do they have that passion about it? Do they feel really invested in the work that they’re doing, that’s a way that I gauge passion. How do they answer when I say why Betterment, or what do you wanna do next, and they have a passion about the next step.

And in openness I always give them time to ask me questions, and that’s one way I sort of assess how curious are they, how open are they, how much are they listening, how much do they wanna know about other people. But, I also can assess it through the kinds of stories that they tell, and the way that they collaborated with past groups. No interview is perfect, but those are some of the things that I do to try to assess.

Harry Stebbings: Absolutely. Now, tell me, John, how big is the team today?

Jon Stein: Today we have about 250 people.

Harry Stebbings: Okay, so 250 people, I always think that it’s crucial to have a really great onboarding experience, the first 60 days being really optimized for the employee. I would love your advice here. What does great onboarding look like to you? I’ve just hired my first few employees, what do you wish you’d known at the beginning that you know now having onboarded 250 now?

Jon Stein: Well, in early days it was relatively easy because everyone was in the same tiny room, and everyone heard what everyone else was doing, and was part of all the conversations, and that made it really easy for somebody to come in, and pick up the culture, and pick up the customers, and pick up the product all at the same time. As you scale, I think the challenge is to bring it back to that. To bring it back to that small room setting where you don’t overwhelm somebody on the first day, but anything they need to know, and anyone they need to be in contact with is easily reachable. And for a while, we tried just documenting that on a Wiki, and we still do that.

As we’ve matured, we’ve built a much more robust onboarding process where there’s training, and key individuals come, and present about the different areas of the company to new hires. I do new hire lunches with everyone, as do others on the executive team just to get to know the new classes. And we put people through an ongoing series of education. We all spend time with customers on the phones, which is one of my favorite things. I just did my customer week last week, and I absolutely love doing that, and I’m happy that everyone still gets to engage with our customers in that way.

Harry Stebbings: I’m really interested there. Sorry, off schedule, but you said about kind of everyone spending time with customers on the phone. Does that include engineers? And how do you get maybe traditional functions that don’t engage in such a consumer facing role to be excited about kind of engaging with customers again?

Jon Stein: It includes engineers, our finance team, our people team. Everyone talks to customers because that’s who we are here to serve, and I said at the beginning 2018 my New Year’s resolution was to bring the customer to life at Betterment, and I realized we’ve always been a customer centric company. But as we’ve scaled, a lot of us are further away from the customer than we were before. And so, I just have to constantly be trying to bring those customers in, and get everyone to feel them, and to feel their pain, and their needs so that we can better serve them.

Everybody does it. I believe everyone here always will be talking to our customers.

Harry Stebbings: Absolutely. And it’s a sign of, as you know, a truly great organization, but you mentioned kind of being slightly removed with this scaling, and often that’s because of the specialization of roles. I’m interested, with the maturation of the company, how did you think about the transition from the jack of all trades, maybe, to the much more specialist vertically focused individual? And what do you think is needed to do that successfully?

Jon Stein: Everyone here wants to have impact. It’s part of hiring high horsepower people, they want to achieve, they want to strive, and do. So, a couple things have helped. One is focusing on the vision, everyone is here for the mission, everyone is motivated, and passionate about that vision. And so, even if you’re working on a specialist role you understand how your contributions ladder up through our objectives, and key results into that ultimate vision of the company, and so that’s been helpful to inspire the team.

Another thing is that we’re flexible and we’re open to people rotating to different roles. So, we’ve had lots of people who started in one position and moved over time into another thing that they were interested in. And I believe as we scale that will become increasingly important to get people exposure to more different areas of the business so that we don’t become overly siloed.

Harry Stebbings: Absolutely, it was actually Mariam Naficy from Minted that stressed the importance of kind of having that flexibility within the organization to do that. I am really interested, in terms of kind of logo hires, often that’s kind of a lot of prestige associated with the logo hires that had Anand Sanwal from CB Insights, another New York founder on the show, and he said that we often overestimate pedigree. How do you think about logo hires, and does that really factor into a lot of considerations, do you think today?

Jon Stein: I look for the same thing, even in a top level hire that I look for in a junior hire, those same qualities. And as I think about the people who have worked out best here, it’s people who have exhibited them, who have been eager for more accountability, have really owned it, and led it. One of our values is own it and lead it. Who’ve been passionate about efficiency, another of our values. And I think that applies no matter whether you’re junior or been in the industry for 40 years.

Harry Stebbings: No, I agree with you. I do have one final question on team before we kind of discuss a bit of CEO-ship, so to speak. And it’s, when someone maybe is under consideration, maybe they’re struggling, how do you think about the kind of consideration of when a stretch candidate is potentially a stretch too far. What does that decision making look like for you?

Jon Stein: Well, I try to always hire the best for every role, and sometimes we find somebody that we’re just in love with opportunistically, and we have to change the role to fit the person. And sometimes we find somebody that we’re absolutely in love with, and it turn out we don’t really have a role for that person, and that’s okay too. You can keep in touch, careers are long, and perhaps your paths will cross again.

Harry Stebbings: For sure, and absolutely. I do wanna move to the role of CEO this day ’cause we’ve neglected to that kind of discuss you in your role within the company that. I’ve interviewed many, and the prevailing wisdom is the dominant role of CEO is management up scaling. I’m really interested, John, would you agree with this kind of motional thesis? And how do you define the role of CEO today?

Jon Stein: I think of my role as three things. Building the team, aligning the team, empowering the team. Certainly it starts with building the team. Hiring the right people. I also believe an important job of the CEO is to tell the story of the company and to lay out the vision that the team can align around so that they’re all moving in the same direction. And then empowering the team is about just making sure that that team has its care and feeding right? It’s the culture, it’s the resources, it’s the communication architecture, and so on that they need to do the best work of their lives.

And as long as I’m doing those things we’ll be wildly successful.

Harry Stebbings: In terms of the empowering element, I had Scott Belsky on the show recently, and he said that you’ve got to manufacture that kind of encouragement. Are there any elements that really work for you in providing kind of real morale spikes for the team as a whole that maybe aren’t so conventional?

Jon Stein: We do so much to engage with our team. I don’t think it’s the most important stuff. I think that the most important thing is hiring the right people. It starts there as you said. But the furniture, the trappings, the things that make us comfortable are pieces like our retreats that we go on, on a summer retreat, and a winter retreat. We have lunches in the office with our chef who everyone loves, and the office space itself is something people really appreciate about Betterment that can bring our dogs in, it’s a very comfortable environment.

We’ve paid a lot of attention to employee happiness, and it’s not just those physical things, it’s also things like how much are we investing in great engineering tools so that the engineers lives are good. That they can deploy easily in and spend their time on the most interesting problems. And look, it’s not just engineers, it’s all of us. We all wanna work on the interesting, challenging stuff.

So, empowering the team is about allowing the team to do their very best work.

Harry Stebbings: My word John, with dogs and an in house chef, I think I’d love a job if you’re offering. I would love to ask one final question on kind of that element of CEO-ship, and it’s in terms of the New York ecosystem, you’re at the center of it, you’ve seen many scaling CEOs. Where do you see CEO tend to make mistakes, or maybe kind of falter in terms of high growth times in scaling the team?

Jon Stein: It’s always challenging, and I think every industry, every CEO, every situation has its own challenges, and these are the hard things. People are challenging. While hiring the right people is so important, you never bat 1000, figuring that out quickly, and making changes when necessary is challenging. Changing organizational structures is challenging. Facing competition is challenging. Figuring out pricing. There’s just so many different things that a CEO has to deal with, and has to hire the team to be able to deal with.

I’m constantly thinking about how do I hire more great people to help me solve the next set of challenges.

Harry Stebbings: John, does it ever get easier?

Jon Stein: I don’t think so. I don’t expect it to. You can hire more people, and look, since day one I’ve said, my goal is to hire myself out of a job eventually. Right? I would like to continue to hire people to do all the things, but the more people that we bring on, I find new challenges to occupy my time, and then I have to hire new people to take on those.

Harry Stebbings: No, I love that kind of hiring yourself, and scaling out of roles, but we spoke about the scaling teams there. We spoke about the scaling of you, the CEO, I wanna talk about the scaling of the company itself, so to speak. So from that perspective, say we’ve achieved product market fit, what are the two to three things that you think all companies really need to focus on when product market fit is apparent, and they need to scale? Could be in the Betterment phase so to speak.

Jon Stein: After a company achieve product market fit you’ve got to continue to hire the right people, but also identify their right metrics to track, and to guide future decisions. Listen to customers, don’t just take for granted that now you’re a leader, you’ve gotta continue to listen so that you can innovate in ways that are meaningful to those customers, and I think if you’re doing those things, watching the metric, listening to customers, and have the right people in place, then you’ll scale well.

Harry Stebbings: Can I ask, in terms of metric tracking, what’s your kind of guiding indicator in terms of metric that you’ll wake up and look at to determine the health of the business, so to speak?

Jon Stein: I look at annually occurring revenues and net deposits because we’re largely an assets under management driven business, but we also have a 401K platform that we sell that has participant fees. We have an advisory platform that we sell that has some servicing fees, so there are other measures of revenue that I look at as well.

Harry Stebbings: But in terms of achieving product market fit, so to speak, how do you think about capital efficiency, and when is the right time to really put the pedal to the metal on the burn, are there leading indicators?

Jon Stein: When you see healthy unit economics coming in, and more demand than you can handle, that’s a great sign that you wanna lean in, and put more capital behind that. I like to use the analogy of just finding campfires, and wanting to turn them into bonfires. I think it’s a great one when you see a little bit of smoke, you wanna lay on some more wood, and see if you can’t make it burn brighter.

Harry Stebbings: You mentioned unit economics there. Does that have to be a central thought for founders from day one do you think? Or do you think it’s something you can kind of scale into over time, and scaling of demand?

Jon Stein: Scaling will impact unit economics tremendously. You don’t have to have, you shouldn’t have it perfect probably on day one. You might’ve thought about it as it’s too much if you do, but of course you need to have a view towards what it will be in the long run in order to have a compelling opportunity that you would wanna work for, or that anyone would want to invest in.

Harry Stebbings: Yeah, absolutely. Speaking of investing, you have raised over 275 million dollars with Betterment. I’m really interested, how do you know, when you meet those investors, that those that want to invest is really a good match for you and the company. Are there kind of leading indicators for you in that fit?

Jon Stein: We’ve been so lucky with our investors that they all share our vision, and they have this long-term focus on better serving customers, and it’s one of the things that lifts me, and that carries me, and helps me stay focused is the board is focused on that long-term. Our Series A, we raised from Bessemer, and I like to say it was love at first pitch. We told them what we were up to, and they said we’ve been looking for a company helping us solve this problem of what should I do with my money for a couple of years, we’d like to be in business with you.

At each round we’ve found those kinds of partners who have shared our vision, who have shared our passion, and so they’ve been great partners to us in scaling.

Harry Stebbings: Can I ask, what advice would you give, say you were an angel investor, and a couple of companies who are going out to raise rounds, what advice would you give to them having been through several rounds of fundraising now, very successfully yourself?

Jon Stein: Take time to find investors who understand your business, and the unique considerations, time horizon, and other constraints required. Secure clean terms, keep it simple, look to market. Don’t accept anything tricky because that’ll most likely bleed into follow on rounds, and make it more difficult for you to raise going forward. And make sure that you’re bringing everyone along. Folks within the company get excited about fundraising, and wanna know what’s happening, and so teaching them is a good opportunity for growing them, and maturing them as leaders.

Harry Stebbings: It’s funny, do you agree with transparency in fundraising ’cause it can be brilliant in terms of morale, and education, but it can also be disheartening sometimes if it takes a little longer than expected, or with the news? How do you think about that and with the transparency with the team around it?

Jon Stein: I believe in transparency in everything, including in those cases where it might take longer. It’s about properly setting expectations upfront that, hey we’re looking, we’re not sure if we’re going to raise money, but we’re thinking about it. We’re talking to some people. I’d say it’s part of my job always to be in market and getting to know where is the market today, what are the opportunities out there for us. So I’m always having those kinds of conversations and I believe transparency is essential, at least to our culture.

I understand there are some companies that are not transparent, but we’re transparent to our customers about how we make money, we’re transparent to our employees about our business plan as well as to our customers, and all of that, I believe, is important to who we are.

Harry Stebbings: Yeah, no, and I love that focus on transparency. I do wanna finish though with a quick fire round John, so this is my favorite of any element of the interview. So, I say a short statement, and you give me your immediate thoughts. About 60 seconds or less. Are you strapped in and ready?

Jon Stein: I’m ready.

Harry Stebbings: Okay, so tell me, I’m on a flight to the east coast, what book should I be reading?

Jon Stein: Currently I’m reading Measure What Matters. I’m enjoying that, I really enjoyed the life of Cornelius Vanderbilt, it’s called The First Tycoon, that’s a favorite if you’re looking for a longer read.

Harry Stebbings: No, I love that, I haven’t read the Cornelius Vanderbilt, but that’s one to add to the list. From the entire company building process, what do you know now that you wish you’d known at the beginning of the journey?

Jon Stein: Don’t try to do everything at once. Prioritization is key, have to focus, you always are gonna have a million good ideas, but you have to focus on the very best ones.

Harry Stebbings: One piece of advice you give to people starting to work on their idea?

Jon Stein: Make it real as quickly as possible. You can talk all you want about your ideas, but if you can show somebody something tangible, something real, you’re gonna have a lot more traction.

Harry Stebbings: This is a tough one and a self reflective one. What’s your biggest strength and weakness?

Jon Stein: My biggest strength is my openness and my collaborative style. It makes me good at bringing the team together, aligning the team, and, I believe, getting to a better place than I would if I did it on my own.

My biggest weakness. I don’t have a very strong ego. I think I can be differential, and I think that can be good at times, but it can also slow us down.

Harry Stebbings: Can people scale through company stages or do you think they are kind of, as a lot of people say in SaaS, destined for one stage?

Jon Stein: I think a lot of folks can scale, and some of it’s about endurance, right? It’s a long run if you wanna be a public company. Especially in our industry of financial services, that’s a long-term investment. There have been very few companies that have made that a journey fast. And so it’s about having a long-term focus, and remaining committed, and keeping energy up over the long term.

Harry Stebbings: And then I wanna finish today on the very exciting one, being the next five years for you and for Betterment, and those exciting times ahead.

Jon Stein: I think that what we are doing is inevitable, and I can not imagine a future where we have self driving cars, but we don’t have self managing wallets. And I believe no one is better position to build that self managing wallet than we are to manage your cash flow, your everyday transactions, turning those into smart long-term investments that will pay dividends for you as a customer for years to come.

Harry Stebbings: John, it really has been such a pleasure. As I said, I heard so many great thing from Charles at Bessemer, so thank you so much for joining me today.

Jon Stein: Thanks, Harry, my pleasure.

Harry Stebbings: So much fun with John on the show then. So many exciting times ahead with Betterment, and if you wanna find out more from John, you can on Twitter @JohnStein. Likewise we would love to see you behind the scenes here at SaaStr, you can do that on Instagram @hstebbings1996.

As always I so appreciate all your support, and I can not wait to bring you a set of brilliant episodes next week.


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