In this episode, Brett Jurgens talks to Dan Daugherty about being a first-time founder and selling his company, Notion to Comcast in early 2020.
Welcome to The Big Exit, where we discuss startup acquisitions with the founders who lived it. Here’s your host, Dan Daugherty.
Dan Daugherty: Welcome to this episode of The Big Exit. Today, I have Brett Jurgens, who recently sold his company, Notion, to Comcast in January of this year. Brett, thank you for coming aboard.
Brett Jurgens: Hey, Dan, what’s going on? Thanks for having me.
Dan Daugherty: So I actually wanted to start out with my own little story of how we met. I was looking at old emails, all the way back to 2014 and you and I were communicating and you said, “Hey, I want to show you a prototype of what I’ve been working on. Can I show it to you?” I said, “Absolutely. Come on in.” And I remember you walked in with… It wasn’t probably the size of a brick, but it was close to it, of your sensors for homes. And if you remember that, I wanted you to start the story there of what you guys were working on, what problems you were trying to solve all the way, you know, six years ago and then how that morphed into what you are today, even pre and post-acquisition with Comcast?
Brett Jurgens: Yeah, I’m happy to. It was slightly smaller than a brick, you’re right. So good memory on that one. Look, so my co-founder, Ryan and I are both from a town here in Colorado, Longmont and we grew up together. We’ve known each other since we were four years old and we had a really unique relationship. He’s our CTO, I’m CEO. And so we didn’t really step on each other’s toes in terms of kind of backgrounds and skill sets. And he had a smoke alarm going off in his house one day. We thought we were gonna make the world’s best smoke alarm before Nest Protect came out with their product. And we talked to a whole bunch of people. This is while we had day jobs, by the way, just to give people a frame of reference. And so we started to just interview people on home security, on home insurance, on things that were supposed to protect their home, on, you know, things that started to become more home automation. We looked at multi family. We looked at all kinds of things and we really thought there was a need for a really, really easy to install, kind of all-in-one device and the iPhone came up a lot. It’s a, you know, heavily used example of great technology that combined a bunch of things. If you remember Steve Jobs kind of initial launch of the iPhone combining, you know, multiple products together, we kind of had that same thought. So we iterated, and six months before we quit our jobs, we ended up hiring our first employee. And we said, “if you can build a prototype of this multi-function device and make it work, in the next six months and our research and our customer research and those kinds of things continue to go well, we’ll quit our day jobs, we’ll do this full time and we’ll go from there.”
He built the prototype in five months instead of six. We quit our day jobs, you know, kind of with quite a bit of time, quite a bit of warning for our current employers. And, we found ourselves four months later in Techstars, we had a team of four. We raised our first round of $500,000 when we were in Techstars and, that’s kind of where the, you know the prototype story, you know, the background of that story came from. And from there we did a bunch of cool things that we can talk more about, but, about that time, probably before we got into Techstars in about 2015, I came, I probably walked into to meet you with that weird looking prototype, and now it looks sexy as hell. But it was not then.
How Notion Monitoring Works
Dan Daugherty: Yeah, no, I love that story. And were you scared? Were you and your co-founder scared of leaving your full time job? Or did you have enough interest in investing that you felt comfortable leaving your full time job?
Brett Jurgens: Well, so for maybe more background, Ryan, was in a couple of big companies in the golf industry doing R and D and product development using sensor technologies, big data sets and then also running manufacturing lines. So very related to what we’re doing now, but different industry. So he was in a little bit more of kind of the big company, little bit more secure job. I was actually the first employee at another start up before this. So in a way I went through something similar in terms of joining a startup, and I was able to kind of do start up on training wheels. And so for me, the risk factor wasn’t there as much. And I think it wasn’t there for a couple reasons. One we had six months of, you know, who became our head of hardware, building a prototype. We’d done a lot of research with customers. I started to talk to a lot of investors. And I knew that I wanted to start my own company, and so I was just really excited. I think the second thing that Ryan and I were able to do really well, partially just because we were friends, but I will do this with any other co-founders that I partner with. We had a really good understanding of where we were both at financially and are comfortably of how long could we go without a salary. When would we need to raise money? What kind of salary would we need to make for our lifestyle at the time? We were just really transparent about it. So we knew, you know, we kind of had a handshake agreement that after 12 months if we weren’t starting to, if we didn’t raise some money and didn’t start to have a little bit of a salary, we both would need to shut down Notion and we would need to go get jobs again. So we de-risked it through transparency, I suppose, in a way. And then we also kind of de-risked it through, a more comfortable way to do customer research and product development, which was we both had full time jobs while that was happening.
So if you can swing it and you can work at nights and on weekends and kind of make it work, it really didn’t feel scary to us at all. We were just excited. We were just really hopeful that this guy could make a great prototype that would allow us to quit our day jobs. So we didn’t think about it as a risk or something that’s scary.
Dan Daugherty: That’s so great how you actually looked at it in a different way, where here’s our individual cash flow, we have 12 months, if it’s not successful, it’s not successful. We learned and we move on. And that was your line in the sand and I can only imagine that that helped motivate you getting partnership deals, getting into Techstars, raising that initial seed round and then understanding where you would need to be for another convertible note round or an equity round to hire and grow out Notion. Is that pretty much right on target?
Brett Jurgens: Yeah, I think so. And I think the interesting piece that you’re kind of touching on here is we did it initially as just a way to make sure that we were comfortable and not putting kind of that unnecessary financial stress on each other or on the business. I think what, you know, looking back in hindsight, it was a forcing function and like you got to go make this happen. And that kind of stress to some people is a stress. That kind of stress to us was like exciting because it did force us to say we got to go make this happen or we have to go get jobs again. We don’t want to go get jobs again. We want to do this. And so it really did serve two purposes, though at the time we probably didn’t really understand that it was serving that second purpose. And I think the other thing for me personally that it did is like, you know, I always tell people my wife was our first investor. She didn’t write the check, so to speak, but that was the pitch. And so, from a personal level, in a relationship level, she was bought in. The 12 month agreement wasn’t just between Ryan and I, it was between our spouses and us and each other, and we just had a relationship that allowed for that to happen in a comfortable way, which is great. But I think it was imperative because I could come home every day knowing that I was in, you know, I had room to run. I had room to operate. I had room to explore. Super lucky to have my wife support me in that way. But I knew I wasn’t coming home with her every day saying, “Hey, where are you at with making a paycheck again?” It was like, you know what, we don’t have to talk about it for 12 months, like go figure out how to make a paycheck again, and if you don’t do it, that’s fine. But so I think it helped on a personal level for me a lot, too.
Dan Daugherty: That is so important. And, same for my situation as well, with my wife and then having additional kids throughout starting various companies. You’re right. You have an agreement, and it’s best to be transparent and open with even your significant other, because without their support, it doesn’t happen. It is very, very hard.
Brett Jurgens: Well, it’s hard enough. And if you come home to that level of additional stress because you weren’t able to be open or because they don’t understand what’s going on, man, it just it adds so much additional pressure. So, yeah, you know, pitch your significant other first and if they invest, then you’ll be happy.
Dan Daugherty: In the very beginning, how did you guys structure ownership? Was it 50/50?
How to structure start-up ownership? Being OK with 50/50
Brett Jurgens: Yeah, we did 50/50. Just the nature of the way the company was started, you know, Ryan kind of had the initial idea and we just started talking about if there could be a business around it. And the two of us were the two co-founders and there was no real rhyme or reason to make it anything but 50/50. You know, I think a lot of people get co-founders further along where, you know, maybe they were an individual and they did six months or a year and kind of really built things up. And I think in those situations, it’s, you know, it’s potentially right to look at other breakdowns. But we were good with just 50/50 and created an option pool early on for that first employee and all those kinds of things as well, my background being investment banking and doing investing in private companies and then working at other startups. I was somewhat familiar with the need for some of those kinds of things, but Ryan and I early on just split it down the middle.
Dan Daugherty: And at that time, what was the, if you remember, what was the employee option pool percentage?
Brett Jurgens: Well, when we first founded the company, we were just, we did it kind of a simple LLC that I ended up putting together and way didn’t incorporate kind of until I’d say, seven months in, sort of
leading into Techstars and leading into our first round. At that point, we really set up the official pool, which was we did about 15% initially.
Dan Daugherty: And that’s pretty standard from what I’ve seen as well.
Brett Jurgens: Yeah.
Dan Daugherty: As you raised additional funding, how many rounds did you guys end up doing that were equity rounds?
Brett Jurgens: So we did two official equity rounds. We did a seed round, and then a series A round. In total we raised just shy of $20 million.
Dan Daugherty: 20 million. And was that within a time period of two years about?
Brett Jurgens: No, it was about… So we started the company about 6 and a half years ago. We were in Techstars in 20, about 2015. And we raised our seed round, I want to say in 2016 and our series A in 2018.
Dan Daugherty: 2016, 2018, and then that gave you enough. How did you structure that? Or internally, how did you guys think about that? You said hey, for our most recent round, this will get us through x time and then we’ll have to raise another round? Or did you always have an exit in mind? Or was it just the right time, right moment, right, partner, to make those decisions?
Dan Daugherty: Did your metrics change for what you really wanted to prove at series A? Did the metrics change for series B or was it always hey, this is the amount of revenue and the amount of users, and maybe, not in your case, but the, you know, monthly recurring revenue, whatever it might be. Did you notice that those metrics changed, or did they stay the same, or it just got bigger for your series B?
Brett Jurgens: That’s an interesting question. I think that for us, one of the metrics that got added on or became more important over time is the repeatability of what we were doing. I think as with a lot of startups, we had some early success with some big partners. A lot of our strategy and our go to market strategy was B to B to C through insurance companies and home services companies, and we got a couple of big wins early, and so then later stage investors started to say, okay, can you do that with you know, 50 more companies? Is what you’ve done early on, kind of a fluke, or is it more important? Earlier investors were more about kind of the active users and some of those more track-able metrics in that sense. But I think just given the way we structured our business model, that was one thing that did become more important is if we could kind of repeat some of the big deals and then if we could expand beyond the home, into small business started to become part of the discussion. Not necessarily a requirement. But really, can you start to take this more, you know, horizontal, and continue to get these big partners, started to become a much more important piece of the puzzle for us.
Dan Daugherty: How important was your network, both your pre-launch network and then your post-launch network, both in terms of investors and potential partners and maybe even CEO’s of potential feature acquirers. How important was that in your mind as it relates to success?
Brett Jurgens: I mean, critically important, I guess. You know, we relied so heavily on a lot of our networks, Techstars being kind of our first. Ryan, my co-founder, and I didn’t really have great networks kind of in the tech space, especially here in Colorado. Definitely not in the angel investing space or in the seed investing space. And so for us, like we looked at Techstars as a way to quickly ramp our network and then from there, you know, I think part of what I always saw my job as, as a CEO is to build out that network and then utilize it as best as possible. So it was imperative. I mean, I could tell you utilizing our network gave us pretty much everything we had. The first employee that we ever hired. He reached out to a guy that I was working with at the time, who had worked with him 10 years prior, and his LinkedIn message was, “Hey, I haven’t talked to you in 10 years. Just wanted to check in and say hi, hope you’re doing well”. And once the guy I was working with found out about what I was doing, he said, “Look, this guy Sean is the best hardware firmware engineer I’ve ever met my life. He just randomly reached out on LinkedIn. I don’t know what he’s doing. He’s a great guy. You should just talk to him to see if he has any ideas for you.” And he was the guy that we hired as the guy who built our prototype and like, it’s just serendipitous. So I think if you work hard and build out that network, it’s going to pay off and you just don’t quite know how. But it was huge for us, and I think, especially when it came to hiring people and when it came to kind of understanding how to grow the business, I leaned heavily on my network. I’m in a group of CEOs. There’s seven of us total. It’s just a private group. I would highly recommend anybody who’s a founder of a business to get a peer group that isn’t too big, but is really, really integrated into what you’re doing and you can be really open with and you can talk to on a monthly basis as well. One of the things I struggled with mentors generally is if I talked to them once a quarter or something like that, they just didn’t know enough. They weren’t kind of intimately involved enough. And this CEO peer group, as part of a broader network, has been huge for me from an emotional standpoint, a personal standpoint and also just like a business and strategy standpoint. So that’s been big piece I’ll just add to kind of the network question because I used to look at it when I was employed in another start up here in Denver, I was the first employee, and I would always like want a network. I didn’t really know what I meant by that. I just could tell it was going to be important. And it takes time, and it takes a lot of effort, but it’s been everything for us.
Dan Daugherty: Yeah, that’s I think that’s the common theme of successful entrepreneurs, is surrounding yourself with A players, both in terms of hiring but also growing out your network. One introduction leads to another introduction, which may lead to something you haven’t even thought about before, and I’ve seen that with the companies that I’ve started and that I’m running now, is you use the word serendipitous and it is absolutely serendipitous.
Brett Jurgens: Yeah, it’s just cool to be around people that are trying to change the world and trying to create new things and hearing their stories and hearing their ideas and opinions like it’s just fun. And it’s a lucky position to be in to interact with these people in my mind, and hopefully I can pay it forward and, you know, pay it back and be helpful and impactful for other people. But, you know, we just we continue to get so much help along the way. And it’s just a cool, cool community be a part of. I especially would say in Denver and Boulder where it’s such kind of a giving community. It’s just a fun, fun position to be in.
Dan Daugherty: Well, and it helps at least me, it helps with mental health –
Brett Jurgens: Oh yeah.
Dan Daugherty: Because you think the sky is falling every day or you think, wow, this is amazing every day. You have these ups and downs and even talking to Chris Onan on the last episode who, for those listeners that don’t know, was a co-founder of Galvanize that sold for roughly 160 million in cash. I had no idea that it was such a grind for them, where they were, you know, three or four months away, at any given time within the first five years, of running out of cash. And that actually made me feel a little bit better about the previous companies and even the existing company that I have is wow, you’re in the same boat, right?
Brett Jurgens: Yeah, you really aren’t alone, but you do feel alone a lot of the time as a founder, as a CEO. It’s absolutely true. And I think for me that’s why the network piece is important. But the kind of close knit peer network that I talked about, the CEO group, has been critical, I think, for everyone in the group, speaking for all of them, whether they want me to or not. But, you know, we just, we’ve been able to share everything and a lot of it is personal stuff, you know, it’s kids and relationships and just, you know, things that really are impacted by being entrepreneurs. And so it’s a grind for everybody, and I think it’s such a… It’s kind of like a taboo subject to bring up that being an entrepreneur is hard, like you’re supposed to put on a smiley face every day. Your employees need you to put on the smiley face every day. Your investors want that. You got to do it in public when you stand up on stage at a conference and you know a lot of people struggle with it. You know, Brad Feld and others have written and talked a lot about kind of the very serious and negative side of the pressures that people have on them. And so you need an outlet, and these people, these friends these friends that are also CEOs. Because my other friends don’t get what it’s like. You know, it’s you can talk to them, but you need other CEOs and founders to be able to talk to, even if it’s just one other. It’s been really important for me from a mental health perspective and from an energy perspective and an understanding of what’s going on in the world. So it’s critical.
Dan Daugherty: Knowing what you know now, what is one thing that you would do differently or would have done differently?
Brett Jurgens: We’ve been lucky and have had really good retention at Notion. But the people side of building a company and making sure you really understand who you need at what point in time. We messed that up a few times and nothing blew up, you know, nothing terrible happened, but we tried to hire really great candidates at every step of the way. And I think that what I didn’t really understand at some point in time was who would be great right now versus who we absolutely have to have a year or two from now and understanding if that person we hire today can develop into that person or become that person we need two years from now, or if we actually need to hire somebody today and then start planning for somebody else in the future. This was my first company. This was my first time being a founder, and I didn’t have good kind of instinct on what that looked like. It’s not just, you know, about hiring slow and firing fast. It’s more about knowing who to hire for the point of kind of the point of time, the progression point that your company is in. We got a lot better along the way, understanding the needs our team had, kind of where our team was strong and weak. But there’s definitely a difference in somebody, you know, bringing somebody on at a 10 person versus a 50 person versus 100 person company that I just hadn’t really experienced before, and I think I could do a better job of now. I hope I can do a better job of, you know, in the future. But that’s something I look back on a lot and can now look at it and say, oh, man, that was a great person, a great hire, but not the right time. That kind of thing comes up in my mind a lot.
Dan Daugherty: This has been very insightful. Thank you for that. And I have one last question for you that I like to ask other entrepreneurs and founders. What is your definition of an entrepreneur?
What is the definition of an entrepreneur?
Brett Jurgens: Yeah, my definition of an entrepreneur is anybody that can creatively solve problems and just doesn’t take no for an answer. I tell all of my employees, all the time, that they are entrepreneurs. I think some people take that title and say you have to be a founder, you have to be a CEO to qualify as an entrepreneur. And I think a lot of people like, want to be an entrepreneur. It’s kind of like a badge of honor to some people, I think, and to me, you know, it’s anybody who just has a tenacity and a view of the world that can, you know, things can be different. Things can be better and I can go do that. You don’t have to start a company, in my mind, to be an entrepreneur and to have, you know, that just thing in your gut and that thing in your heart and that thing in your head that all tie together to say, I’m going to go, you know, make a difference and, have the guts and have the tenacity to go do it. So that’s my kind of simple definition.
Dan Daugherty: I love that you can actually use that in all facets of your life. Whether it’s just being a CEO, the founder of your X right, of your division.
Brett Jurgens: Absolutely.
Dan Daugherty: Of whatever you’re doing at home or whatever it might be, just take that initiative. I really like your definition.
Brett Jurgens: Awesome. Well, it’s a good question and I think a lot of people should push harder. A lot of people should create more. And a lot of people aren’t willing to sort of jump into starting a company full time. A lot of people can’t afford to not have a salary for 12 months, like I said earlier in the call. But I also think a lot of people can make it work and you can do it in different ways. And so thinking creatively about how to make it happen is what it’s about.
Dan Daugherty: I love it, Brett. Thank you so much for taking the time. I wanna have you on again. We’ll dive deeper into specific things, but again, thank you for the great insights.
Brett Jurgens: Awesome. Thanks, Dan. Appreciate having me, this was fun.