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I'm David Subar,
Managing Partner of Interna.


We enable technology companies to ship better products faster, to achieve product-market fit more quickly, and to deploy capital more efficiently.


You might recognize some of our clients. They range in size from small, six-member startups to the Walt Disney Company. We've helped companies such as Pluto on their way to a $340MM sale to Viacom, and on their path to a $1.5B sale to Linkedin.

The Growth Equation Ep. 3: A Conversation with Ross Webb and David Subar about PE and Tech Success

David's Notes:

In this episode of “The Growth Equation: PE Perspectives on Product”, we flip the script. Instead of our usual format, my colleague, Interna principal Ross Webb, interviews me and dives deep into my experience with the worlds of product management, engineering, and private equity. Our conversation centers around bridging this culture gap between investors and tech and product management executives - how do you best translate between their two languages, and help tech-oriented minds perceive fiscal matters and vice versa? How do you improve the value of a portfolio company while still meeting the needs of both product and investors? 

I was happy to have a chance to sit in the guest chair, especially to talk about the nuanced dance between product innovation and investors with a close collaborator of mine. I hope you will enjoy listening to this conversation. Please let me know what you think.


[00:00:00] David Subar: Hi, this is an unusual version of The Growth Equation today. We're flipping roles. Instead of me being the host, my colleague and friend Ross Webb is. He's asking me questions about things that I've learned in the last nine years running Interna, particularly about private equity firms, product management and engineering executives, and how they best work together.

He asked me questions about what do I wish PE firms knew? What do I wish that product management, engineering executives knew? How can they align? What are some things that I've seen that makes them conflict? So I hope you enjoyed the episode. Please let me know what you think. Thanks.

[00:00:53] Ross Webb: Hey, welcome to The Growth Equation: PE Perspectives On Product. Hi, I'm Ross Webb, and today we're joined by David Subar, the founder of Interna, a tech consulting firm who works with investors and their portfolio companies. David, thanks so much for joining us.

[00:01:13] David Subar: Thanks for having me.

[00:01:15] Ross Webb: Great. David, the first thing I want to know is in working with PE firms over the years, what is it that you wish that they knew about tech and digital products that someone may be coming from a finance perspective might not be aware of. 

[00:01:31] David Subar: Know, investors and technology executives, they both speak English, but they don't speak the same English. The world they come from, their frames of reference are just different, and so because they're looking at what they perceive as different problems, there's oftentimes that they'll clash, and it's not necessary.

If they look at the same problem in the same way, they'll have a common language, and they'll be able to promote the company, get the company, create value for the company, get it more successful. So what does that mean? The first question that I ask investors is - product management and engineering for your company.

Is that a profit center or is that a cost center? If it's a profit center, you're going to treat it one way. If it's a cost center, you're going to treat it differently. Even if you're going to have them at the board meetings, what they're going to talk about, the board meetings differs between those two. If it's a profit center, then you need your Chief Technology Officer and your Chief Product Officer to talk about what they're building, what those things are, and how are they going to increase value for customers and for the company? If it's a call center, you're gonna have conversations about how you're decreasing costs for doing things. But the 1st thing that I'd want to know is, and I want, I'd want investors to know is, how are we considering our effort in product management engineering?

That's the most important thing.

[00:03:16] Ross Webb: Okay. So that's really interesting. So what else would you tell them then? If there were any shortcuts, is there any, you know, when we're talking about different languages, are there any shortcuts that you've learned over the years that you would give PE people coming from a financial perspective?

[00:03:36] David Subar: Yeah. So. I think it comes down to that common language. And I want to talk more about whether it's a profit center. Because if it's a cost center, you don't need to know too much differently than other cost centers you might have, like human resources, like finance, things like that. But the shortcuts are, you want engineering executives and product management executives that can talk to the thing I mentioned before - we believe we can create value for customers in this way.

We're going to put bets on the roadmap. Each bet is about creating value for customers. And each of those bets also creates value for us. You want to frame that conversation around those bets and you want executives, you want to have hired executives who can talk about those bets to you.

As well as translating it down into their departments to execute. That's the shortcut I want. There's a second shortcut, I think, that also people miss. Every investment fund has a timeline. All PE firms VC firms know this that, you know. Three years from now, five years from now, seven years from now, we have to produce the IRR that we promised our LPs.

That's going to frame the way you want to make those investments. And it's typical that Chief Technology Officers, Chief Product Officers, other executives of portfolio companies don't understand those timelines and don't know your particular timelines. So you should be frank with those conversations about, here's how we're framing the life cycle of this investment.

And this is what it means for the investment we're going to put on the roadmap and, and when that return has to happen, you should be frank about those conversations.

[00:05:45] Ross Webb: Hmm. But I think like, what about if it went the other way around? Like, what do you sometimes wish that like product, or, well, you know what, let's look at it from that way. What would you like finance to teach product and tech?

[00:06:01] David Subar: Well, finance within - so there's two finances, right? There's the investors, and then there's the finance within a company. But I'm going to about both of those the same way, assuming that you have a limited burn if you're not cash flow positive. Actually, first is - the tech executive product manager executives need to understand what it means to be profitable and how that's different from being cashflow positive, right?

Because those kind of bets they make are a capital investment that's supposed to produce some future rewards. So if you are cashflow negative, your portfolio company is cashflow negative, I want the finance folks to teach the technology folks and the product management folks is you have so many at bats.

Each of the bets that you're putting on the roadmap has a cost. And we can - we have X amount of capital we can invest in this. What are the best at bats that we can get? At bats in terms of capital that we're deploying and the amount of time that we have to the next raise. So it's not just what a bet on the roadmap costs, but how long does it take? And how fast do we have to show increased company value? 

So that limits the number of bets we have. And so I would want the finance folks to make sure the technology and product management executives and other executives in the company understand that and frame the things on the road map around the limited resources they have, which is capital and time.

[00:07:49] Ross Webb: I think that's really interesting, especially from a time perspective, because everybody, even in product and engineering, obviously think that they're obviously, you know, say time poor. I'd love to get your thoughts then on what products and engineering could be teaching PE. And as a follow up question to that, do you think product and engineering know enough about, say, financial matters and have a financial education enough to be able to be teaching PE in the way that PE need to learn it. Or do you think there should be more education? I'd love to get your thoughts on that as well.

[00:08:22] David Subar: Generally, technology and product management execs don't understand finance very well. It's not the world that came up from. And so, I would expect that unless you have a very senior or sophisticated technology or product manager executive, they probably need to learn that. But what needs to get learned on the other side, right? Because as I mentioned, there's, you know, there's the investor side and there's the operating executive side within the company. Not all that glitters is gold. So I talked about putting bets on the roadmap, but there's things that you have to do, in addition to things that create immediate customer value, immediate company value. And so architectures and code quality, things of R and D, those are things that don't create immediate value, but create general enterprise value over time, or create the increased velocity of creating things.

And that stuff - those are things that people that came from a finance background probably don't have background in. So that's the side of the conversation that the CTO, the Chief Product Officer can and should bring to the board conversation, the investor conversation is - we're going to make some investments that are like, oiling the machine. You could run the machine 24/7 without ever oiling it and maintaining it, like you could drive your car without ever charging it or putting fuel in it. But eventually that car is going to stop. And so, what those investments are that don't have immediate payback.

Those are things that the product management executive, the technology executive need to know, need to be able to explain and then explain the investment. Now, there's a fine line there. Because you can over invest in maintenance and not drive the car forward, or you can under invest the maintenance and decrease the amount of time you could drive the car at all.

And so saying, "we're going to refactor this part of code because we believe it's going to have this benefit". That's what the technology executive in particular needs to bring to the board meeting needs to bring to the investors.

[00:10:46] Ross Webb: I really liked that car analogy and you know, sometimes it gets really bad in product. And I'm sure some PE investors listening to this podcast are kind of nodding their heads actively, but I'd love to get your thoughts on some of the biggest ways that product in tech fail. And almost like other ways that PE firms can know in advance and potentially even redirect and maybe avoid the trouble ahead of time.

[00:11:19] David Subar: If your technology executive, if your product manager executive are talking about "here's the outputs we had", as opposed to "here's the outcomes we produced": that's a fail. Do you find this more in the technology side and the product side, but not exclusively in the product side?.. And this Is kind of the thing that I was talking about before. The question is, what does, what does your engineering and product management executives, what do they talk about? The outputs or the outcomes? If they're saying we increase velocity, we can get cut out 5 times faster, but not the impact that has.

That is a fail, right? You need to redirect those. If you cannot redirect your executives from talking about that, you have a problem. If your team cannot produce either outputs or outcomes, maybe they've got old code base that needs to get refactored and that's going to take them 6 months to do, you've got a problem and you've got to break that problem. Sometimes you open the patient and you say, there's not much we could do here, folks. We've got to walk away from this investment. And sometimes it's fixable and understanding the nuance between those two, you have to have seen lots and lots of cases.

[00:12:48] Ross Webb: That's that's really interesting because I know you've been working with PE firms for years and with tech firms for decades now. But I mean, you're talking about the patients. And I like, by that analogy, you know, sometimes, we've discussed this in the past, but by the time the symptoms are felt, it usually means that that problem is really, really intense. Maybe not, not fixable - it could potentially be fixable. But I'd love to get like, what are the questions that PE firms can really start asking to find out if their products and tech units are healthy?

[00:13:24] David Subar: Well, I'll tell you, I'll tell you how we do it, right? Because we evaluate a lot of portfolio companies for PE firms, for VC firms. And the first question we ask is what's the strategy of the company. Then we say, what are the attributes that product management and engineering need to fulfill that strategy.

Different strategies have different attributes. We might need to build code quickly that could decrease churn. Or we might need to have great data science because we're doing generative AI stuff. What are those attributes you need to know? And then how are they doing on those?

That's the third question. So - strategy, attributes, how they're performing on those attributes. And then what do they need to be healthy in each of those? This patient metaphor I used before is one we often use. And the one you just kind of hinted to before is - there are symptoms. Often by the time the investors or the board know, feel the symptoms, there's an underlying problem that might be intense, not necessarily unfixable, but intense.

And then there, so you have the symptoms, you need the diagnosis: what's going on, which is what are the attributes they need and how they're doing. And then you need the prescription: what are we gonna do to fix it? 

I would ask - and this is the way we do things, but let's say you weren't going to use a company like Interna, you're going to try to do this yourself. I would ask the product management engineering executives: do you understand our strategy? What do your teams need to do well to do it? How are you doing on those? And if you're not doing well, what are you going to do about it? 

Now you need some insight to be able to validate what you're being told, whether it's true or not. That's why people often bring in third parties. But that's the way we think about it. That's the way I suggest you think about it as an investor.

[00:15:30] Ross Webb: So, I mean, as as I mentioned, like - but what do they do if things are that intense if people come to them? Is it always too late in your experience? Or is it... I guess what I'm really trying to find out is - is it always just like we can't do it, the patient, we've lost the patient?

[00:15:51] David Subar: Not at all. Not at all. As a matter of fact, I'm going to make up a percentage. That's 15 percent of cases. There's, 

[00:15:59] Ross Webb: Okay. 

[00:15:59] David Subar: You know, maybe it's, you know, 25 percent of cases. I'm making that number up, but it's a relatively small percent. There's a percentage of companies that you're like, you know what, this is actually good. We've had some symptoms, but all the patient needs to do is cut down on sugar a little bit and they're going to be okay. There's a percentage of cases that are, that are, you know, can't save this patient. 

But there's that middle case where things need to change. And sometimes those changes are architecture. Sometimes those changes are process. Sometimes those changes are org design. Sometimes those changes are about making sure that everyone is focused on creating value for customers and the company - that's often the case, having that conversation. But it's necessary to have those conversations and understand it. 

A lot of times the patients are fixable. Sometimes the patients are fixable by those kind of changes and reorganizations that I just mentioned. Sometimes, unfortunately, those cases have to be fixed by changing the executive in charge. And, sometimes, it's about changing some of the folks in it, not necessarily the executives. Sometimes it's just a realignment between the various executives: sales, marketing, product, engineering. But all of this has to get anchored in: what's our strategy? Who do we create value for? How does that create value for us? 

And in doing that, if you can have your technology, if technology and product management are a profit center. If you can have your executives aligned to that, and be able to produce a team that executes well against that, you're going to be okay, assuming market conditions stay okay, but you need to transition to that model.

[00:17:58] Ross Webb: I love the transition to the model. What I'm challenged with, and I'm trying to go back to your language analogy earlier: if our finance friends in PE don't have the technical languages, how are they going to know how to evaluate and put together the plan? And how are they going to know whether... basically how are they going to detect whether what they're being told is accurate or not?

[00:18:26] David Subar: So, I would say there's a couple of components. One is, does the plan create value for our market and ourselves? That's something that you don't need to be a technologist to understand: 

[00:18:38] Ross Webb: Sure. 

[00:18:39] David Subar: Are the things in the roadmap creating value for our customers and do they create value for ourselves? So Peter Drucker once said famously, the job of a company is not to create revenue and profit. The job is to create customers, and revenue and profit are a side effect of doing that.

He's mostly right. Side effect of doing that well, right?. So first that's, you don't have to understand technology. Then, does the plan that the technologist, the senior technologist, senior product manager leads, executive; does that make intuitive sense to you about what needs to happen? You as a investor, you are unlikely to have deep knowledge of, large language models or, um, serverless, you know, serverless cloud computing.

You have a choice at that point to either trust your executive, and if they've been doing consistently well over time, that probably makes sense. Or alternatively to bring in someone to give you a third party look at it. There's- and I'm not trying to pitch Interna, there's other folks that do it in addition to us, but that's one of the reasons that investors bring us in, is to give a third party look and also give advice on what should happen. 

So that would be my suggestion: Is your person executing well over a long period of time? Does it make intuitive sense, and if either of those aren't true, bring in someone for help.

[00:20:11] Ross Webb: And David - how did, how's that usually accepted by technology or product? You know, if PE are bringing in, let's say a third party like Interna or similar. How is that usually accepted by the actual product and engineering teams? Do they think this is someone coming to check up on us or?

I'd love to get your experience on that.

[00:20:33] David Subar: Yeah, so that can land a couple different ways. If it's around a new investment and increased opportunity, then someone coming in, a third party coming in, can be looked at as someone who's helpful. If it's around a land of pain, everyone's already in pain, it can be scary. It can be scary. 

One of the things I say to people when we come in is: we're not here to have your job. We don't want your job. If we wanted jobs, we would have jobs. We like doing this. We're here to help make the company successful and help make you successful. Our goal is never to replace executives. Sometimes that has to happen. But our goal is to be that translation layer between "here's the strategy", and "here's how we're producing a company of value."

And because typically executives and other people on staff have RSUs or stock options, increasing the value of the company helps them too. And so we frame it that way, which, by the way, is our intent. It's not subterfuge. Our intent is to try to increase value for the company and for every stockholder of the company, which the technologists and the product managers are among that staff.

[00:21:56] Ross Webb: And have you ever had really negative pushback on that? Or is it 

[00:22:00] David Subar: Sometimes. 

[00:22:01] Ross Webb: Usually down to the individual? Really? Okay.

[00:22:03] David Subar: I mean, sometimes, sometimes we do get negative pushback. That's typically in the case where, where the technology group, or the product management group is having significant problems. Sometimes those problems are in their execution. Sometimes those problems are in communication between the CEO and the CTO or Chief Product Officer. By the way, that's one of the easier problems to solve. And to the extent that we can show that we're solving that, then people tend to get happier and more relaxed.

[00:22:39] Ross Webb: Is it often the case where there needs to be a personnel change or?

[00:22:45] David Subar: It's, I would say it's sometimes the case. It's sometimes the case. If people fundamentally don't understand that their job is to increase the capital value of the company, If people don't fundamentally understand they do that by creating products and services of value to some customer, and that creates profitability and cash flow. If people aren't, if they don't fundamentally care about that, sometimes people have to get replaced.

[00:23:17] Ross Webb: Well, we've spoken about quite a lot of potentially emotionally challenging or stressful times in organizations. And I think you've given a lot of really great examples and solutions of how PE firms can address them. Looking on a much more kind of positive note How can PE firms promote growth to help accelerate success? Especially when it comes to the dealings with the technology and, digital product teams? 

[00:23:47] David Subar: I think there's a few things, and I want to talk about another kind of more positive example, too. Sometimes people call us in, they've got a good executive and technology department, and they call us in just to coach that person. Just to help them get there. 

But to answer your question more directly, it's by not having tension between the investors and the executives looking at each other and trying to get the last piece of pie off the table.

The way to promote success is by having both the executives of the company and the investor of the company looking outward and saying, how do we grow this company? How do we create value here? That alignment towards a common goal tends to promote success, tends to promote being able to retain great executives, tends to promote, even in this market, it's hard to retain great engineers and great product managers.

Tends to be able to recruit them better, retain them better, bringing together and say, Hey, today we serve this market. Here's the value we create. I keep going back to this because this is so important. Here's how it creates value for our company. And here's the next step. Here's the next market we're going to serve.

Here's how we're going to deeper serve this market. Here's how that generates revenue and profitability for us. Focusing on that and getting to the next step. That's why, also that that thing I talked about before, is the executives' understanding the life cycle of a fund that a PE firm might have or a VC firm might have what those goals are. That was why that's an important part of the conversation. We're here together on a mission.

[00:25:40] Ross Webb: What I'm hearing you say, David, kind of goes back to what you were saying earlier around communication and talking different languages. So I guess what I'm also hearing is that PE, personnel PE firms should be communicating more and more effectively. I guess we all should be, but specifically to the tech and product teams and saying the specific examples that you just mentioned. So really I'm hearing a lot on this podcast around communication. Is that fair to say?

[00:26:10] David Subar: There's a lot on communication. Let me give you a, I'll give you a story without naming that particular portfolio company. We'll figure it's a company we worked with. There was a company that was an online learning company. The company was growing. It was doing - growing 50 percent year over year consistently, 80 percent margins.

When we got there, I think they were doing the first year they were doing 75 million in revenue. So doing quite well. I regularly got calls from large PE firms. Can you introduce us to the CEO? And the CEO said, I'm doing fine now. I want to grow. We serve our customers, the people that are learning, we serve the corporations we sell these packages to, we serve the authors that are creating online video content for us. We're doing fine. 

There was one day where the CEO said two things. One is we want to grow faster. We need external capital. And I want to get some personal liquidity. That was the day that I could introduce PE firms to this company.

That was the day they took the investment, but the investment thesis was about growing that quickly, growing faster, actually. The investment thesis was about serving the people that were learning, serving the corporations that bought the packages, serving the authors, and then serving the capital holders as well.

And by bringing them all together, they eventually got sold for 1. 4 billion dollars to a large corporation, right? It was, we were constantly having that conversation about all of the folks in the entity, all of the folks in the ecosystem and how we serve them, which had to include, which included, the employees and the architecture and the things on the roadmap and the cloud infrastructure. All of that had to come together. That conversation had to come together. And everyone needed to be able to understand everybody else's language. In place, we helped, but eventually - by the way, our goal is not to stay at a company forever. Our goal is to get them healthy, to have those conversations, to move the company forward, to be able to increase value of the company, and then jump out.

We were able to do that there.

[00:28:33] Ross Webb: Which is exactly what you're talking about earlier about being outcome focused and not output focused, right? 

[00:28:38] David Subar: 100 percent.

[00:28:38] Ross Webb: And output would be, let me just sell more hours as a consultant, as opposed to - hey, we got to help you get to that liquidity event, whether it's a, you know, an acquisition or whatever it is. Based on what you were saying earlier, is that right?

[00:28:53] David Subar: That's a hundred percent. I have a friend who's a knee surgeon. He goes and fixes ACLs and fixes people's meniscus and places knees. He doesn't follow them around the rest of his life. He goes, he does a surgery, gets them healthy, and they go start walking and running again. That's the goal. That's always the goal.

[00:29:14] Ross Webb: As you said, if you wanted a job, you go get a job. 

[00:29:16] David Subar: If I wanted a job I'd get a job. 

[00:29:19] Ross Webb: Yeah, you're there to solve the problems. I've loved that. David, is there anything else that you'd like to add? I think, we're almost ready to wrap up. Is there anything else that you feel that we haven't touched on?

[00:29:31] David Subar: I Look, I am always glad if people just have questions like, "Hey, I'm talking to this portfolio company. I don't understand this". People should just ring me , or email me, um, or, you know, hit me up on LinkedIn. I am just glad to answer questions about this. It's fun for me. This is why I do it. Well, there's also economics, that's the other reasons I do it reasons I do it, but, like, I'm just glad to be helpful. This is fun stuff, so if people want to, they should feel free to reach out.

[00:30:02] Ross Webb: Fantastic. And I'm sure in the show notes, we'll put the links to Interna and to you on LinkedIn. And I've just got to say that for, for the listeners, you know, the way I discovered David, I just started asking him questions actually on a podcast similar to this. And then I was like, wow, he's got such an incredible way of looking at things that is really unique. And also as David was saying, David has got the ability to really take complex technical product, I'd say also cultural perspectives and organizational perspectives and put them in a way that is super useful, and outcomes-focused and just really, really interesting. 

So I'd love to thank everybody for listening to The Growth Equation: PE Perspectives on Product with myself, Ross Webb, and David Subar from Interna. Thanks so much for listening. Until next time. Bye for now.



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