Players, coaches, and team,
It’s been a very productive quarter. Though growth was slower than we hoped, we’ve made several important adjustments to our business that we believe will position us for a strong rebound in the second half of the year. We started to execute on our new plans last month, and we’ve already had more promising conversations (three) with prospects and partners than I can count. Our new small-but-mighty team is energized to keep building, and to fulfill our mission of helping every player be a player for life.
What is PlayerCoach? + strategy update
When we founded PlayerCoach, our original vision was to build an AI coach that would turn 10x engineers into 10x managers. Though we quickly found strong product-market fit—over the last year, dozens of developers asked our AI experts hundreds of questions about how to be better managers—these users’ employers failed to want to buy. After talking with several customers and doing the Five Whys while on a truckload of ketamine (thank you to our friends at Founders Fund for the intro to ATAI!), we realized that we were underestimating the productive potential of AI, and that our vision wasn’t big enough.
Starting last month, we refocused the company on a new ambition: Not to train human managers, but to replace them. Rockstar engineers don't want to be rockstar managers; they want to keep being rockstar engineers. But they get pulled into management, to help coach other employees. For engineering teams, it’s a catch-22: To scale your best talent, you have to sacrifice it.
With PlayerCoach, companies will no longer have to make this choice. Customers can tell us who their best engineers are, and for each one, we train a custom AI agent on an extensive catalog of managerial training resources and on that engineer’s individual body of work.1 These bots can then operate as autonomous managers: They run one-on-ones, provide regular feedback, complete performance evaluations, and even conduct interviews and employee terminations.
With this new direction, our goal is to make the Peter Principle obsolete: High performers should get promoted to their level of expertise, and PlayerCoach will take care of the rest.
We believe that this could be a category-defining business. Devin, a startup that aims to replace junior engineers, is already worth $2 billion. We are aiming even higher, and want to replace engineering managers, who make 80 percent more than junior engineers. Moreover, ChatGPT believes that our TAM is $800 trillion, growing at a CAGR of 200 percent.
Our primary goal for 2024 is to execute on this new vision, hit our revenue targets, and put ourselves in a strong position to raise a funding round by the end of the year.
Key metrics
Revenue
Up 1 percent this quarter (just under our target of 20 percent). We’re disappointed with this number, but I think it’s misleading for a few reasons:
The Home Depot, our biggest Q1 deal, slipped into Q2. They’re still on track to close, I promise, the Docusigns are out, it’s just a couple administrative things, they will definitely get done, and actually, it’s good they slipped, because we’d offered them an end-of-quarter discount, they won’t get that now, we should probably be glad they didn’t close in Q1, if you think about it, because dollars are real but quarters are just a construct.
We adjusted how we calculate revenue so that we’re no longer including verbal commitments to purchase not-yet-released products as annual recurring revenue. After talking with several industry leaders, we’ve decided that these agreements are not, in any remote sense of the words, annual, recurring, revenue, or agreements. Though this bookkeeping adjustment will make our growth rate appear lower this quarter, please note that it’s just an accounting change. It will also ensure that our sales team is focused on the right priorities going forward: Closing actual business,2 rather than securing non-binding letters of intent.
Churn was high this quarter, primarily because our two biggest customers, Monday.com and Fox Interactive, both declined to renew. However, they were both special cases, and they churned for reasons that weren’t applicable to the rest of customer base. Monday.com was bought into the prior vision of PlayerCoach, and wasn’t a good long-term fit for us. We believe it’s actually positive that they churned, because it will enable us to fully focus on our new strategy. At Fox, the team using PlayerCoach was reorganized under a new department. Our champions told us that they’d love to keep using us, if they could, but there was nothing they could do, just nothing at all. So we’re confident that these two customers were outliers, and don’t expect churn to be this high in future quarters.
That said, because “Brave” and “Truth” are two of our core values, we want to be honest about this quarter’s forecasts. Based on early conversations with our sales leaders, we think it would be best to bravely lower our growth target for Q2 from 22 percent to 5 percent.3
The good news is that we’re still confident that we can hit our annual goals. We know that the market will be excited about the new products we’re shipping, and we expect to make up for the slower-than-planned growth in Q1 and Q2 with faster growth in Q3 and Q4. Our finance team figured out a way to compound a bunch of individually-plausible-but-collectively-impossible assumptions into a financial model that says we’ll grow by 6 percent this quarter, 30 percent in Q3, and 140 percent in Q4. We’re confident in this plan.4
Marketing pipeline
The marketing team had its best quarter ever, bringing in 45 new leads and almost $5 million in enterprise pipeline. These deals are still early, but we’ve had lots of very promising conversations and prospects are leaning in. For example, just yesterday, we talked to Capital One, and they said they were “not interested”—so we now expect them to close as early as next month.
While the cost of acquiring these leads was high, that’s because we’ve been experimenting with new marketing campaigns to support our new vision and our 2024 “enterprise-ready” objective. As we all know, this is a process that’ll take a few months, a few quarters, maybe, maybe, a year. We expect costs to come down considerably as we ship new features5 and refine our enterprise marketing campaign.6
Adoption
We hit an all-time high in cumulative product signups this quarter. Active users are also up 35 percent from Q4. Some of you asked if this is because we recently adjusted our definition of “active” to include anyone who interacts with an email (clicks a link, opens the email, is sent an email, marks an email as spam, etc.). We haven’t had a chance to do the additional analysis necessary to answer this question, but I’ll have the team follow up soon.
Product
No updates this quarter. Lots of good stuff coming soon though :-)
Team
We unfortunately had to part ways with a handful of team members this quarter, and executed a 14 percent reduction in force.7 Though we have plenty of runway, we believe that this rightsizing will help us remain lean and focused. It also gives us more options as a business, because these cost savings put us on a path to being profitable in 18 to 24 months, if we choose to take it.
We also had a team offsite last month. It was a very productive three days: We finalized the 2022 financial plan, wrote down this year’s OKRs on an Etch-a-Sketch, hosted a customer panel, and ate way too many tacos :-). The team also organized a resume writing workshop for themselves, which is the sort of proactivity that defines the PlayerCoach family.
Financial summary
Cash on hand: $1,200, plus a $11.91 REI membership dividend and a $500 million term loan from Speedy Cash.
Runway: 18 hours.
Last quarter burn: $33 million, which includes one-off upfront AWS bill and expenses for the annual offsite (rental of Las Vegas Sphere for $31 million).
Expected burn this quarter: $1,200, plus the purchase of a Black Diamond Mojo Chalk Bag and $315 million in debt servicing payments to Speedy Cash.8
Asks
To set ourselves up for our fundraise later this year, we’ll be sharing our new direction with outside investors soon. We’re targeting a handful of top-tier firms initially, and I’ll be in touch with each of you individually for introductions to partners. Don’t worry; we won’t be wasting time by having conversations with proletarian associate plebes. Here’s a quick blurb if you need one:
PlayerCoach is the world’s first autonomous engineering manager. All too often, great engineers are asked to delve into management to “scale themselves” for the broader engineering organization. PlayerCoach builds custom AI agents that enables these engineers to be both managers and developers at the same time.9 PlayerCoach’s founding team has been delving into this problem for over six years, and already has more than 50 customers, including Autodesk.10 Delve into more details at PlayerCoach.ai.
We'd also love your help spreading the word about our vision, so please share on your socials! If you need ideas, these are a few of the new taglines that we’re using:
You be the player, we’ll be the coach.
Players play. Let PlayerCoach coach.
If you care about your people, don’t make them care about people.
Finally, as always, we would always appreciate introductions to great talent. Though we’re continuing to hire across a number of roles, these are the key positions we’re focused on this quarter:
Rust engineers
Senior brand designer
Product marketing manager, with experience marketing technical products
Literally anybody who works at OpenAI or Anthropic
CEO
Looking forward to a great 2024,
Benn, CEO, PlayerCoach
If you spend enough time with early stage companies in Silicon Valley, you’ll notice that founders are often focused on making sure that their companies are well-positioned to raise another funding round from venture capitalists. “If we can get above a million in ARR this year,” we’d say, “we think that’ll be enough to close a great series A.” Or, “we need to double revenue this year without increasing our burn multiple, and that’ll put us in a position to raise a series B.”
On one hand, this makes some sense; in Silicon Valley, fundraising rounds are the elementary school grade levels for startups. The occasional high-achievers might skip one, but most of us have to pass through them sequentially. To graduate from high school, you’ve got to pass first grade, then second, up to twelfth grade; to achieve the breakout success that most startups are chasing, they have to raise a seed round, then an A, then a B, and so on. It makes sense to focus on what you need to do to pass the grade you’re in, and worry about the next one once you make it there.
On the other hand, this approach is a trap. Unlike elementary school students, companies don’t start with a new slate every year. Nothing resets after they raise a round. If a struggling student crams for weeks before their end-of-year exams and barely passes, they have all summer to rest before the next year starts. If a surviving-but-not-thriving startup limps past a million dollars in revenue and closes their series A, they have to immediately turn that same company into one making four to five million dollars in 24 months. Because, as I’ve said before, there is no step two. Whatever business gets a startup to their A needs to get them to their B. Money gives them resources, but it doesn’t give them a new market, a new product, or a new idea. A failing chatbot is still a failing chatbot, with or without the backing of some guy named David or Scott.
In other words, startups shouldn’t raise a round with the goal of spending that money to hit whatever targets will get them to the next round. They should raise money to test their idea. The goal of a seed round isn’t be to raise a series A; it’s to prove that the product and the company has a clear path to raising a series B, a series C, and beyond. If founder can close an A round, but can’t escape the feeling that something will have to change to close the eventual B, don’t do the A.
In her book Quit, Annie Duke explains why Stewart Butterfield shut down Glitch, the company he founded before starting Slack:
They had just experienced their highest growth in new accounts, but he saw a future where they would have to sustain [that same rate of] week-over-week growth…for thirty-one weeks just to break even. And that was assuming the new users they acquired were going to convert to paying customers at the same historical rate, a pretty big assumption since it stood to reason that the more eyeballs they got, the lower the quality those eyeballs would be.
Butterfield built a business that was passing its current grade, and could’ve easily raised more money. But Glitch was unlikely to pass the grades that were coming next. In those moments, it’s deeply tempting to keep going—to send the rosy investor updates, to build the optimistic financial models, to assume the pivot will redefine the trajectory of the company, to think everything will be different after you close this round—but it’s often wrong. Don’t raise money because you won the last race; raise money because you’re confident you can win the next race.
Well, right now, we prompt GPT-3.5 with a link to Maker's Schedule, Manager's Schedule and the engineer’s most recent 20 Slack messages, but we’ll eventually build custom agents on top of a proprietary LLM.
I mean, no, not exactly; we’re also offering free services to design partners in exchange for testimonials. But social proof and gated case studies that get downloaded three dozen times in six months will turn into money, right?
We also need to lower it because Autodesk, our third biggest customer, is probably going to churn at the end of the month. But they were oversold by a cavalier sales rep, are also going through a reorg, and our champion hasn’t responded to any of our emails in six months. Again, an unlucky and unique exception.
I.e., confident in our plan to eventually reclassify this year as “an investment year,” and say we’ll make up for the slow growth in 2024 with a banger of a year in 2025.
I.e., an Okta integration.
Like every other startup, we were either exactly 10 to 15 percent too big, or 10 to 15 percent has become the agreed-upon default for signaling that you’re tough but not in trouble. Anything less and you’re a weak-kneed coward who can’t make hard decisions; anything more and you’re admitting that something has gone horribly wrong. But 14 percent? It’s prudent but not tentative; courageous but not rash; steadying but not safe; serious, but not Serious.
We know that our APR of 460 percent sounds high, but unfortunately, lower rates were a zero interest-rate phenomenon.
This is the tricky part…the manager and the IC…at the same. time.
Please don’t include this customer after April 30.
1) I’m still scarred from one of my first jobs getting promoted to a player-coach role. Terrible experience giving me a new “manager/lead” role with all the responsibility and no authority, AND forcing me to keep doing my old job. 10/10 do not recommend it unless it's a very seasoned leader and a unique situation.
2) Great incorporation of random business principles that only sort of apply, mostly meaningless vanity metrics, and downright outlandish statements that are not unlike what people actually say.
3) Have you considered starting a parody site or maybe writing and starring in a Silicon Valley spin-off show?
Absolute gold. Loved the investor letter!