EP8: Alex McNaughten - Going all in as a Founder

Martin Tobias (00:01.887) Hello. This is the first bet. And every successful person gets interviewed about how they won, but very few people drag them back to the moment before they knew it would work. When the information was thin, the money was real, and they pushed their chips in anyway. That's what we do here at the first bet. I'm Martin Tobias, managing director of incisive ventures, and I've made bets three ways as a VC, as a poker player, and as a CEO.

My guest today is Alex McNaughton, and he built a career training salespeople how to sell, ran an advisory of over 130 businesses in New Zealand before he was 30. Then he saw what was coming with AI and thought that that could add a scalable way to help more people, I think. And he actually made a pretty significant bet of selling what he was doing in New Zealand and moving his life and whole company to San Francisco.

without a Stanford PhD, without a big network, and made a a a major life bet on a new company in a new place. I actually backed him in that bet, and I'm pretty ac excited to hear him talk about that decision. Alex, welcome to the first bet.

Alex McNaughten (01:21.666) Martin, thanks for having me on the show. Excited to talk to you today.

Martin Tobias (01:23.923) Cool. Well, maybe you could take us back you know, to that time you know, when you decided to make this major life change, first into the company and then second into the you know, going to America thing. what was going through your mind?

Alex McNaughten (01:43.874) Yeah.

Well, I'll I'll set the scene a little bit. I I just turned thirty. and you know, I had two companies that I was running, both profit profitable, lived in New Zealand. Like I lived right by the beach, had a sea view, like one minute to the ocean. Like, life was good, you know, like life was good. I think I've I've taken home like half a million bucks a year, which in San Francisco terms doesn't sound like a lot, but in New Zealand that goes really, really, really far. Yeah. and

Martin Tobias (02:01.308) Nice.

Martin Tobias (02:11.728) That's a lot. Yeah.

Alex McNaughten (02:15.746) The the I guess like the decision point for me was you know, like saw the AI kind of wave like just starting and I'd been reintroduced to two friends of mine, Alistair and Dan, who were keen to build something but didn't know what to build. And they're like wicked smart, like like a million times more technical than me. Alistair had just graduated from Cambridge with a master's in machine learning. And I guess the the decision for me was like, do I

like go all in on this like new tech, new you know, new tech wave, new people who I'd never worked with before, and new country. Or do I just kind of stay on the same trajectory I'm currently going on and you know just keep keep growing what I'd already built. and yeah, so that that was kind of the decision point.

Martin Tobias (03:08.698) And and how did you th how d how did you think about that? What frameworks did you use? Did you l think about Jeff Bezos' regret minimization framework or anything like that? Or think it was an interesting opportunity to work with your friend who was a technical person? What were some of the things, ways that you weighed leaving a little bit of security for an unknown risky thing?

Alex McNaughten (03:30.639) So there was there was a few things going through my mind. There was like the first thing was like, okay, I'm curious about working with these guys and I want to like work more in AI. So how do I minimize the risk of that going wrong and like figure out quickly can we work together for 10 years and like be in the trenches for 10 years? So that was like that was like part of the decision. and what we the the people and that was a big part of the decision. And you know, they'd come introduced to me through someone I really trust and respect.

Martin Tobias (03:52.612) People.

Alex McNaughten (04:00.48) So that helped. But what we actually did is through my last company, we f we we put a small piece of money aside, kind of funded a trial marriage, I would call it, where we worked together for ninety days to see if we liked working together, basically, and build some stuff together and solve some problems for my then customers through that company. and that kind of became our initial seed capital, basically.

Martin Tobias (04:12.556) okay.

Alex McNaughten (04:25.114) so that was like one part of the decision-making process. But then I think like the bigger part for me was more will I regret not going big here? versus like the I guess safe and comfortable life that I had like already built and was continuing to build. And you know, the upside of go build a venture-backed AI company is huge. and the downside of like

well, I could always just come back to that or kind of, you know, at least I'd have an interesting story to tell and I could go kind of like fail up if it didn't work out and like you know, work on something else interesting. So that was kind of how I looked at it. It was like a very asymmetric bet, and ultimately made the call to go all in and sell my company and move to San Francisco.

Martin Tobias (05:17.163) Yeah. So what was w what were some of the additional things that that were in the back of your mind that were s sort of talking against it or the the arguments against going all in? Part of it is and I know you you know, you had to get your girlfriend and your f your teammates had to get their girlfriends to go there too, were s was family or friends saying no, or what were some of the things that were arguing against making the all in commitment at the time?

Alex McNaughten (05:29.43) Huh.

Alex McNaughten (05:47.129) So I think friends thought I was kind of mad. to be honest with you. because, you know, like I said, like life was good. Like in New Zealand, life's good. Like I'm spending a lot of time with friends and family, like I'm working a lot less hard than I do today, for a lot more money. And so so they thought I was kind of crazy. my family, interestingly enough, like would back me into just about anything. I think they've like learned to.

E ever since I dropped out of college, they've kind of just learned to just like let me do what I want to do and that it's gonna work out okay. So they were actually behind me. And my partner was also she she was very supportive through this and kind of was like, Hey, it's your decision and I'll move with you. but so the the thoughts going through my mind though, which is like kind of like that nagging thought in the back of your mind though, is always like, What's the opportunity cost of this? You know, like okay, like

Martin Tobias (06:40.822) Right.

Alex McNaughten (06:43.35) You you turn off the taps of like what you've been earning. How long's it gonna take for you to like get to that same level of earning again? What's the opportunity cost of like what that money invested could have been doing for you? Like we have we you know, we have we have we did have two properties back in New Zealand, I just sold one. so there was definitely like that kind of thinking going on. But again, the way I looked at it was always like, Well, the upside's so big here and I will regret forever not going after this and

Martin Tobias (06:47.272) I'm looking at the paper to like.

Alex McNaughten (07:12.942) the opportunity to support millions of people and transform a profession that, you know, from our perspective, like I think needs needs a lot, you know, needs change and needs to be done better. that outweighed any, I guess, you know, reduction in net worth growth that would have happened otherwise.

Martin Tobias (07:13.386) Mm-hmm.

Martin Tobias (07:29.738) So so there was a little bit of a capped downside, asymmetric upside. Talk to me a little bit more about how much in the back of your mind was a little bit of the frustration with your prior business, the lack of scalability and the opportunity related to AI. 'Cause I think you really loved your job. You liked helping people, but you were maybe a little bit constrained in your ability to help people at scale. And so

the I think a big part of it was the opportunity to to continue to to do what you were good at, but at a at a grander scale. Is that part of it? Or how did you think about that?

Alex McNaughten (08:08.642) That's definitely a big part of it. I looked at I looked at really the the the the jump as a continuation of my life's work. And I know that sounds kind of crazy when you're like thirty. It's not like that much life, but but that kind of what it felt to me was like, well, you know, I've been able to support two or three hundred companies through doing things in a very manual, human-led kind of services way.

Martin Tobias (08:16.936) Right.

Martin Tobias (08:20.712) Yeah, yeah.

Alex McNaughten (08:36.478) imagine what we can do now with this kind of technology. and to me it just felt like a very like I I this is gonna sound silly, but it actually was a really easy decision. And I didn't, you know, I didn't like wrestle with it very long. It was actually quite like once I sat down and thought about it, it was actually like maybe d despite from what people thought from the outside, it was actually a really simple decision. It was like, hell yeah, like let's go to San Francisco and do this properly.

Martin Tobias (09:01.658) Okay. w it it turns out as I've talked to many people who make big decisions, they're they're easier than than they look from the outside. let me just ask you one other thing about the potential, you know, case against it. you know, one of the things that got me interested is that you were in sales technology, but doing a little more sales coaching and you were taking a very different approach. At the time when you started it, there had been a lot of AI.

Sales tech funded all these AISDRs, these outrage, these sales loss. There was kind of in venture capital land, you know, maybe a pe people thought it was an overdone thing that that that I mean how how did you think about the risk of competition? You're going to San Francisco, but there were there was already a lot of heat in this sales area. How did you did that bother you at all? Or how did you think through how what you were doing?

in relation to all the other stuff that was being done a at the time, that certainly was a risk that VCs might not want to fund yet another thing like that.

Alex McNaughten (10:01.805) Yeah.

Alex McNaughten (10:05.774) That look, that was definitely a definitely a risk. And like one of, you know, one of the big risks is like, can we get funding for this thing? And what you just described definitely came up. the way I saw it, and maybe it's because I just lived in this world for so long, is that I I just strongly believed that the world and the sales world just didn't need another email spam canon, which is what I saw with like a lot of like, you know.

Martin Tobias (10:13.648) Yeah.

Alex McNaughten (10:31.702) a lot of what was being like a lot of what the the money and attention seemed to be going on like how can we send more emails? How can like do more top or funnel volume? And I just felt that there was this like missing hole, which was like, okay, well that's part of sales, but what about the rest of it? What about from first conversation through the close through to ongoing customer relationships? And it didn't feel like there was much going on that was like meaningfully making the world a better place for all of that. And you know, there's

five point seven million B2B salespeople in the US, you know, tens and tens of millions globally. And and that just felt like a huge opportunity. And we just needed to ultimately find the right investors who saw that with us.

Martin Tobias (11:05.17) It's the building globally and and that's a publicity and we just need it for all the

Martin Tobias (11:14.027) Okay. So if i if I can summarize, you know, you you were starting something new that was unknown, but you just told me three ways that you minimize the risk in this new n new one. One is the fact that the the opportunity was asymmetric that you could help a lot more people than you're traditional. It was continuing something you'd already done, but at at potentially a much greater scale and that

That that was one way to do it. The second way is that you were going to work with new people that you may might not have worked with before. So you did this 90-day try before you buy. So you got a little more information about them as a way to reduce the the risk of working with new people. And then the third is that you were going into a potentially crowded category, but you thought deeply about what the other people were doing and you came up with what you thought was

A different way to help salespeople than the majority of the people. So a differentiated product strategy. Are is that fair, those three things?

Alex McNaughten (12:12.46) Yeah, I I think that's completely fair. And, you know, on the impact piece, a year into moving to San Francisco, we've already had a s like many multiples bigger impact on the sales profession than I had had in my previous services type businesses. a year into moving here. So that's already coming true and and continuing to grow, which is exciting and very rewarding.

Martin Tobias (12:37.854) Okay. So it's it's turning out better than you thought. That's that's good. so what you know, were the other gremlins or what were the unexpected things that you faced in the year or two after you made that decision?

Alex McNaughten (12:58.42) so making the decision's one thing and then you actually have to go and like make it happen and and then like you know like the the things that you that you don't know when you know before before you make decisions. So like like some of them are like very operational, like, okay, well we want to move to the US, like how do we actually get there? Like how do we how do how do we stay in the US? How do we get the visas? How do we how do we raise capital? like all of those kinds of things.

Martin Tobias (13:04.577) Yeah.

Martin Tobias (13:24.778) Mm.

Alex McNaughten (13:29.068) that was definitely I don't know if I'd call them gremlins, but they were just kind of the things that came next. And then also it was, you know, I think a big part of it is like when you make a big decision like that, it's like the people around you you kind of have to take them along the journey with you, I noticed. So, you know

That's something that like I know I did with my partner and my co-founders had to do with their partners and they've all been phenomenally supportive, but we had to take them on the journey of like, okay, well like here's why we wanna do this and here's here's how it's gonna look and and and and the opportunities in front of us.

Martin Tobias (13:47.659) Something that I I did.

But it's what we have to make function like, okay, well if I would want to do this if

Martin Tobias (14:03.211) So so you made you you made a decision for yourself, but you had had to convince like some other people in your life to do that. Where you you strike me even from the first time I met you as a very sort of confident guy. Not not that you're right all the time, but you're fairly confident in your abilities and and taking a big decision to l leave New Zealand and move to San Francisco, the the the belly of the beast took a lot of confidence. Where do you think

Alex McNaughten (14:10.488) Yeah.

Martin Tobias (14:32.04) And you said your parents allowed you to kinda do what what you wanted. Where do you think this confidence in in yourself has come from in your background?

Alex McNaughten (14:42.45) look, I think I'd have to give some credit to my parents to start with. you know, we we laugh about it now, but like my mum would like tell me I was the best at everything when I was little. And you know, it's like objectively that wasn't true. But, you know, I think like when I think that's part of it. I think you know, look I had a good education, I went to good schools, I had some great mentors around me who helped me to

Martin Tobias (14:53.941) Ha ha

Alex McNaughten (15:12.058) See more, you know, g see more in myself than maybe I saw at those times in my life. and then I think then when you just have a pattern of like things going right, the confidence just compounds. You know, like the first time you do anything, you feel a bit nervous about it. But then like once you've done it a few times, it feels a lot easier. And I think that this being my third company and like

having been with my first company at the point of like having a mortgage and being down to like my last, I don't know, ten thousand dollars. This felt like such a small like compared to that, it just felt so different. Like it felt so much easier the third time round making that kind of decision.

Martin Tobias (15:53.788) So so part of it might be that y you have taken these bigger risks and started a few companies before. So you were able th through compounding some of these decisions to to build some of that confidence.

Alex McNaughten (16:07.958) Yeah, I I also just like tend to have a genuine attitude of like failure is inevitable. Like you're gonna you you can't like win absolutely everything, but like every failure you learn from and like every like failure in my life has like a great thing has come just just like the next thing has great b always been great. And I think that's just like a mentality I've always taken is like you're not gonna win it's kind of like with poker, right? Like you're not gonna win every hand.

Like I don't know, we met playing poker, but like you're not gonna win every hand. But as long as you pay attention to why you're losing and the other players and like the table and like stay focused, if you lock in for a session, like you'll do all right. And that's kind of like the the mentality I've always taken, is like it's gonna work out as long as you just I don't know, like do what you need to do.

Martin Tobias (16:48.39) Yeah, like

Martin Tobias (17:00.166) Do what you need to do or continue to make the the the best well the way I say it is continuing to make the best decisions you can with the information you have at the time. you know, like in poker, you listen to my talk with Alec Torelli. You know, in poker you've got two cards, you don't know what any of the next next ones are. You have to make a a capital allocation decision with the little information that you have. And in order to do that, you have to understand all the math of all that, but you have to understand, you know, the people as well. But

Alex McNaughten (17:09.484) Yeah. Totally.

Martin Tobias (17:29.891) If you string together enough good decisions, even if someone plays the odds against you and and and has a an an outlier outcome and k hits a one outer or something, as long as you keep playing with good decisions, over time you're you're going to net out to the positive and y you found that. So let's talk a little bit about poker. How have you found any use of poker strategies as a CEO or not? Is there any

Alex McNaughten (17:44.459) Exactly.

Martin Tobias (17:58.553) you know, commonalities that you find there between poker and being a CEO and making these kind of decisions?

Alex McNaughten (18:05.448) Look, I I I think I think yes is the short answer. you know, you you I I would I would talk about this like when we were fundraising, like you play the cards you've got in front of you right now and like and then like what's on the table is kind of like the ecosystem, the bo is like the board, right? And you know, if you're going out to raise and you've got like low revenues, then okay, that's the that's the card you've gotta play. So like figure out how you're gonna play that card. And

Martin Tobias (18:31.418) Yeah.

Alex McNaughten (18:34.594) or you know, if you're in a really crowded marketplace, you know, I kind of looked at that as like, okay, well the the table's full, w everyone's in this pot. So I I I don't know. I think I think like that's part of it is just like play the cards you've got. You've got or you're always gonna have live limited information, but you just try and play it the best way you can with the limited information you have each time. And like businesses like that, right? Like every decision we make on, you know, a go to market bit or a product bit is like

We're doing it with limited information and more information's gonna come on the next turn. and we're gonna then update.

Martin Tobias (19:08.77) Yeah, that happened.

So so w as a CEO, like can you share y you you talked about the the big decision of starting the company and moving, but are there any frameworks that you use on a capital allocation decision? You mentioned one with employees, you give people a ninety day try before you buy thing, which is I I think is a very good CEO tactic for any employee. But are there other things that you do for

making go to market decisions, making, you know, development higher decisions or other frameworks that you use to try to minimize the risk in a low information environment.

Alex McNaughten (19:48.831) Yeah, yeah, look, I I I guess like part like it's it's always like risk mitigation, right? So it like if we look at hiring someone, like what are you trying to do? You're trying to in a very limited time frame, like figure out can they do the job and what's the risk of them not working out? And you're trying to do that really quickly. And like how are you doing that? Well, you're asking them specific questions, you're checking references, you're doing background checks, like all of that kind of stuff. So would I do I have like a specific framework around that? I

I not one that I've documented, although I'm probably running s like I I wouldn't say I've documented some of these things, which is why I'm like maybe waffling around the question a little bit. But like yes, there are definitely frameworks that or plays that I'm running that are maybe not explicit. but yes.

Martin Tobias (20:19.351) Yeah.

Martin Tobias (20:33.56) Well, most of the ones that that I use in a low information environment, you know, one of the ones I use a lot, and I'm sure you use it as a CEO too, is to try to get a little more information as cheaply as possible. So, for example, in poker, if it's going around and there's been three limps before me and I'm at the end, I might just limp with really shitty cards because it's actually a very low cost

Alex McNaughten (20:49.869) Yeah.

Martin Tobias (21:02.647) cost way to get at more information, which is the three cards to see if I have anything. and if it's if it's a low cost, like i if I'm the fifth person to limp, I've got a one in five chance already to to hit my hand. Even if my cards are really terrible, a one in five chance is pretty good if it's cheap enough, if it's a five dollar or whatever. so that's certainly one thing that that I do and it sounds like

you know, when you try employees before you you buy them or even in in go to market. you know, you you I I know that your company ha you know, you've tried different go to market paths, but you take a a a small amount of money and try this channel, a small amount of money and try that channel, and then you double down on the other one. So it's getting a little more information in a low information environment as cheaply as you can and then deciding which ones are working before you put out the big bet. Is that is that something you'd say that you do?

Alex McNaughten (21:48.021) Exactly.

Alex McNaughten (22:00.206) Totally. Totally. Like w we're doing that right now, for example, with ad spend. It's like historically at Grow all of our customers have come via inbound or referrals and we're now starting to do ad spend. And, you know, what do you do when you just start a new channel? Is we're putting, you know, a a small experimental budget to try a few different ad channels and see which one, you know, see what the results are and then update each week based on what we're learning and

you know, increase the budgets from there. So yeah, exactly. You know, buy a little bit more information and then make a better decision afterwards.

Martin Tobias (22:36.041) Yeah. Try to try try to get more information as as as cheaply as possible. Great.

Alex McNaughten (22:41.558) A big one is on the h like another one's on hiring. Like I'm I'm like a big proponent, for example, of using you know, some sort of psychometric testing through the hiring process. It's so cheap, you know, to do a psychometric test, but you learn a lot from that process and it's prevented some bad hires. And then it's also Yeah, so like a bit so sale like salespeople particularly. and you know

Martin Tobias (22:53.852) yeah?

Martin Tobias (23:00.19) So explain that a little bit more.

Alex McNaughten (23:09.664) A good example is a is a hire that we would we didn't make because something came up in her psychometric profile that for me was a red flag. It basically presented to me that she was not gonna stick around in the tough times. She was like a bit flighty as a as a character. And like up until that point, everything was looking good. Like amazing looking candidate.

Martin Tobias (23:28.219) Okay. Right.

Martin Tobias (23:35.239) basically what you can handle it to be a step.

Alex McNaughten (23:36.737) Interviewed exceptionally well, came from a, you know, trusted introduction. But then when that came out, then what I did is, okay, like that's some that's some cheap information, like to use your, you know, the framework you just mentioned. Then when I spoke to her again and like started digging a little bit around that area, found out, okay, that's not gonna be a fit for us. Because when I when I scratched the surface, she was the wrong kind of person for an early stage startup.

Martin Tobias (23:57.085) She's she's

She she's opportunistic and is only gonna stick around through the good times. Yeah. I I

That's a that's a good thing to know early.

Alex McNaughten (24:12.674) Yeah. W specially especially at seed stage, right? Where, you know, let's be honest, you're shoveling shit for a a fair amount of the time because it's that's that's what early stage is.

Martin Tobias (24:20.113) Yeah.

Martin Tobias (24:24.262) Yeah, what one of the frameworks I used when I was a a CEO and I learned it the hard way is I wanted to only hire people who had already had some startup experience and knew the depth of the shit that they were getting into. I hired a couple people as their first startup job. It's like, I'm working at Microsoft. I think doing the startup thing would be cool. Let me go to a startup. I hired a guy like that, and the first jay day on the job, he comes into my office and says, Where's my assistant?

And I said, What what the fuck are you talking about, assistant? Like we we don't have assistants here. he was j j just that first time out of the big company, even if they have a great resume, the culture shock of what you have to do and all the hats you have to wear in a startup tends to be, you know, a poor fit for a lot of people. So I want people who have maybe worked at a big tech, but then worked at a startup, and then I'm their second time startup founder or startup hire.

Because they kind of know what they're getting themselves into versus people that just have this dream of what a startup might be like because of what they read in TechCrunch or whatever. But if they don't understand the actual job, it can be tricky.

Alex McNaughten (25:38.457) Totally. Well like and and I think that goes like twofold for like salespeople in particular because if you've been working for Google and you've got Google's marketing engine behind you and all of the support, and then you go into a seed stage startup or early you early stage company and and you're having to sell something that isn't is half built and you know they have no marketing budget, it's it's like it it's a very different kind of person who could be successful doing the latter.

Martin Tobias (25:47.238) Yeah.

Martin Tobias (25:57.722) Yeah.

Martin Tobias (26:03.034) Definitely. Okay. Well, I know we have a lot of founders that listen to to this or people that potentially want to be founders. as as we wrap up here, i is there is there are are there any things that you would say to

people that were potentially thinking about making a a a big life shift from a a a safe job or a a a a safe career to doing a startup, of how you would recommend that they think about it or things that you found useful in your decision that they could use.

Alex McNaughten (26:34.636) I think accurately looking at what the downside is is is helpful. I think I think a lot of people don't do that and and maybe it seems a lot scarier because they haven't actually mapped the downside. So like in my case, like what was the realistic downsize downside? Okay, my net worth doesn't grow as much for a year or two and I have to go back to doing what I was doing and like so what? You know? That was like my worst case. And and it so when you actually like map the downside, it's a lot

Less scary than it sometimes can feel. And then I also think like if you you should take into account like where you're at in your life as well. Because if you're in your 20s or early 30s, that downside is just by sheer fact of time almost like almost immaterial, really, like when you when you look at it objectively. And then, you know.

Martin Tobias (27:05.891) Map the downside.

Alex McNaughten (27:31.99) I think maybe the only other thing I would add is everyone around you is gonna have an opinion about what you should do. And at the end of the day, they have far less information than you. And you know, make your own decision, but then just be prepared to take the people around you who, you know, your partner, your family, just like you have to take them along the journey so that they can feel okay with the decision. Like

Martin Tobias (27:33.091) Yeah, but

Martin Tobias (27:47.278) If you want to sit there, you're gonna be able to have this makeup.

Alex McNaughten (27:59.586) you know, like in my case, it's all well and good me saying like yes, we're moving to San Francisco. But my partner's like, that impacts her too, it impacts her job, it impacts her friends, her family. So I think like that's the other side of it. Take people along the journey with you because it's gonna make it a lot easier.

Martin Tobias (28:00.534) Yeah, I think.

Martin Tobias (28:05.991) Yeah, yeah. She her job and everything, yeah. So take the people along.

Martin Tobias (28:14.795) Make a lot easier. Okay. I think those are very usable by other people and I appreciate it. So where can people find stuff about you? Your website, growgrw.ai. Are you active on LinkedIn or Twitter if anybody wants to talk to you?

Alex McNaughten (28:31.532) LinkedIn and Twitter, mostly LinkedIn, like I'm more active on LinkedIn 'cause that's where most of our customers hang out, but I am on Twitter too. and yeah, G R W dot AI where they can learn more about growth.

Martin Tobias (28:42.922) All right. Well, thanks for your time, Alex. I really appreciate your perspective. I learned some things.

Alex McNaughten (28:48.281) Thanks a lot, Matt.