David Berglas

David Berglas

Interview: How to Grow from 3 First-time Founders to 27 Employees

Banner image attribution: Shoelace's TeamTalk Vimeo
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David (or known to everyone as Berg) is Co-Founder and COO at Shoelace, an automated ad retargeting platform for e-commerce stores. In 3.5 years, Shoelace has gone through two accelerators (Boomtown and 500 Startups) and grown their business to 6,000+ customers. They’ve worked with renowned brands like the Ellen Degeneres Shop, Kidrobot, 100% Pure, and more.

As soon as you enter the Shoelace office, you feel like you’re in a place where people can be themselves. The office exuded startup vibes: colourful interior, bean bag chairs, ping pong table, and peoples’ desks showing the fun, loud personalities they had. This was the absolute opposite of the corporate environment Berg used to work in. An ex-investment banker, Berg doesn’t show a trace of his past career with his chill demeanour. He’s not afraid to show humility and he’s exceptional at reading people - things that are apparent throughout our conversation as he speaks honestly about his weaknesses as a founder and shares tips on hiring the right people.

Shoelace

Left to right: Berg with his two other co-founders, Alexander Sloan (CTO), and Reza Khadjavi (CEO) Photo credits: StartupHere Toronto

 

Let’s start at the beginning, what are some challenges you faced in the early days of Shoelace?

We’re first-time founders and when we started, we had classic imposter syndrome and a lot of self-doubt, so one of the first things we did was apply to Y-Combinator (YC) and other accelerators. This wasn’t about the money but more about the external validation we were relying on as newbies. We weren’t sure our idea was good, but we thought it was good and if YC said so, then we were definitely good.

But our idea was, and to this day remains, extremely unsexy. We were rejected by YC and many other accelerators - we faced rejection for a long time in a pretty deep way, and not a lot of people wanted to support us. I think overcoming those rejections came naturally from never letting them define us, which is a continuous work in progress.

I still think that Shoelace is not at the level I want it to be and I do occasionally feel like if we received more external validation (e.g. a top tier investor, a high profile customer or killer business metric), we could be at that level. But I hope my brain will eventually learn that it’s always going to feel this way no matter what is happening in reality.

You guys have been hiring like crazy - 25% of your employees have started in the last three months?! In the midst of all this, how do you know who the right people to hire are?

We like to hire, what we call are, “unprovens” – people who, in their opinion and ours, have not come close to reaching their full potential in their career. That may be because they’re a new grad, they’ve been working in the wrong industry, or in an environment that didn’t allow them to grow like they wanted to. We like hiring people from those backgrounds, taking a chance on them, and then hopefully having them grow a lot personally when they work here. We like this quote originating from Sam Altman of Y-Combinator, “Hire for slope, not Y-intercept”. We worry less about where someone’s at and rather, what their rate of their growth is.

We also tend to take people of diverse backgrounds and experiences. For example, we have a few people here who dropped out of university. We’re overly loud and proud of people who have been rebellious in their history. It’s something that’s interesting to us and at least not important to us that people fit a certain mould.

How did you go about creating your company culture and deciding what’s important?

Our culture is still being built and changing, but our company values really define our workplace culture. We actually didn’t have these values formally until six months ago when we were around 20 people. They were created by my co-founder, Reza, and these values are really the ones that he lives his life by. Reza is definitely more of the work performance culture… and I’m more of the social culture haha. We realized that we need to put out principles that other people can use when they ask the question, “How would the founders think about this?”

There are so many managerial decisions, we needed to outsource that decision-making process to our people.

Here are our six values that govern Shoelace:

1. Focus on the nuclear reactor and not the bike rack

There’s an anecdote about these physicists who were commissioned to make a nuclear reactor, but instead of building the reactor, they spent their time arguing about where the bike rack outside of the power plant should be. Basically, if you put a bunch of smart people in a room there’s bound to be disagreements about very trivial matters which take away from solving the more important problems. We use this when we have meetings, we may be talking about something and someone might say, “That’s a bike rack” which means the topic isn’t important and we should move on. With this principle, we’re now arguing a lot less about bike racks, but the caveat is the nuclear reactors are not always obvious – we’re still learning how to effectively identify them.

2. Turn obstacles into opportunities

As a startup, our default status is for something horrible to happen. Big and bad things have happened and could happen again. They could be to our culture, to our customers, or things that are out of our control, such as third parties we’re dependent on. But the reason these things are not so bad is they present an opportunity to overcome them and advance our company. If we do that then we’re ahead of every competitor who’ll also run into the same obstacle. It’s a reminder to everybody: for the things which are unpleasant and challenging, there’s a way to frame them into silver linings.

3. Disagree and commit

When we argue about which decision should be made, what’s more important is THAT a decision is made. If you make decisions quickly, you can learn from the ones that don’t work out so well. But if you’re waiting and trying to find the best answer, you’re going to end up having paralysis by analysis.

4. Strive to grow

This value is the most important to our company culture and people’s lives. We want to hire people who want to “level up” their life. What I like to tell people at interviews is if you’re just looking for a normal job then you’re going to think we’re crazy. We want to be a bit extreme about this so we can be inspiring to each other. If everybody wants to grow, we’ll all grow together. That really starts at the top though, we [the founders] need to be good examples when asking our people to grow personally.

5. Act with candor, kindness, and enthusiasm

The most important one here is candor which, we believe, is synonymous to transparency. We ideally want an organization where every decision we make, our people know why we did that. Despite wanting this, it’s been difficult to pull off. For quite a while, we were awful at delivering or asking for negative feedback, but people need negative feedback- especially delivered in a kind and empathetic way.

6. Create more value than you capture

This one is about putting the team above yourself. We believe that if we build a really great company, there will be a slice we can each capture which will naturally fall into the right place. Let’s not worry about how we take advantage of the company, but rather worry about how we build the company and have faith that we’ll capture what we deserve. People here will want to get promoted or be given more responsibilities, which are very reasonable if not desirable asks, but we tell them we can only do that if it’s good for the company. We won’t do it just to retain them or keep them happy.

 

What has been the most difficult aspect about building up your company culture?

Relative to corporate settings, we have a very chill environment and I feel like our people can be as close as possible to their true selves. But a lot of people here think of Shoelace as family and that’s a very difficult thing to talk about.

There’s a great case study about Netflix’s culture and the CEO, Reed Hastings, often says “We’re a team, not a family”. In a family if someone is weak, you coddle them and take care of them whereas in a team, no emotion goes into who’s a part of it and strong performers are wanted. We have fired people who weren’t a good performance fit or a good culture fit. They were incredibly smart but not the right player on our team at that time - maybe in the future, but not now. I don’t like broadcasting that this is a family but the reality is for some people here who have gone through the hurdles of showing that they deserve to be on the team, it starts to become that for them.

Lastly, what advice do you have for first-time founders?

We like to say the Paul Graham’s essays (Founder, YC) are our old testament. It affected how we came up with the idea and we lived by so many of his essays (Berg’s favourite ones are linked in the next section) so some of my advice echoes them.

1. Have 3 co-founders for tie-breaking during decisions

Also, really understand what everyone’s strengths are, but much more importantly their weaknesses. For example, I am quite organizationally weak but my CTO [Alexander] is organizationally strong. He does even the smallest things like organizing the cords in our meeting room. His forgiveness of my weaknesses and accepting me for my strengths in other things, enables me to shine at what I’m good at.

2. Founder relationships are like marriages, and they always require work

I think the co-founder relationship is very similar to a marriage. I’ve been to a few marriages recently so I’ve been hearing officiants say things like, “Do you take this person in sickness and in health?” That’s basically the equivalent of saying, “This marriage is going to be tough and what you’re saying in front of your family is, you’re going to work on it instead of just ditch.” I think that spirit needs to be there in a co-founding relationship. Things are going to be tough, you’re not going to get along 100% of the time, and the only way it’s going to work is if you work on the relationship.

3. Accept or reject advice based on its source

Andrew Tai (Founder, Motoinsight) is an entrepreneur I really admire and he recommended a famous passage from a Teddy Roosevelt speech called “The Man in the Arena”. The main idea is it’s 0 and 1 in terms of the amount of courage it takes to be a critic compared to someone who is actually in the arena, fighting for their life, and maybe losing or winning. In other words, you should heavily discount advice you get from people who aren’t in your (or any) arena. Many advisors and investors have made their money elsewhere, and they may have not actually built startups themselves. There’s an unlimited number of people who want to give you their opinions so you really need to understand where the advice comes from.

David Berglas's Favourite Books and Resources

Sources David Berglas

Radical Candor offers a guide to those bewildered or exhausted by management, written for bosses and those who manage bosses. Taken from years of the author’s experience, and distilled clearly giving actionable lessons to the reader; it shows managers how to be successful while retaining their humanity, finding meaning in their job, and creating an environment...

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where people both love their work and their colleagues. From the time we learn to speak, we’re told that if you don’t have anything nice to say, don’t say anything at all. When you become a manager, it’s your job to say it--and your obligation. Author Kim Scott was an executive at Google and then at Apple, where she worked with a team to develop a class on how to be a good boss. She has earned growing fame in recent years with her vital new approach to effective management, Radical Candor. Radical Candor is a simple idea: to be a good boss, you have to Care Personally at the same time that you Challenge Directly. When you challenge without caring it’s obnoxious aggression; when you care without challenging it’s ruinous empathy. When you do neither it’s manipulative insincerity. This simple framework can help you build better relationships at work, and fulfill your three key responsibilities as a leader: creating a culture of feedback (praise and criticism), building a cohesive team, and achieving results you’re all proud of.

Buy

Ego Is the Enemy draws on a vast array of stories and examples, from literature to philosophy to his­tory. We meet fascinating figures such as George Marshall, Jackie Robinson, Katharine Graham, Bill Belichick, and Eleanor Roosevelt, who all reached the highest levels of power and success by con­quering their own egos. Their strategies and tactics can be ours as well.

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Many of us insist the main impediment to a full, successful life is the outside world. In fact, the most common enemy lies within: our ego. Early in our careers, it impedes learning and the cultivation of talent. With success, it can blind us to our faults and sow future problems. In failure, it magnifies each blow and makes recovery more difficult. At every stage, ego holds us back. In an era that glorifies social media, reality TV, and other forms of shameless self-promotion, the battle against ego must be fought on many fronts. Armed with the lessons in this book, as Holiday writes, “you will be less invested in the story you tell about your own specialness, and as a result, you will be liberated to accomplish the world-changing work you’ve set out to achieve.”

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The essays that Berg recommends are "How to Get Startup Ideas" and "What We Look for in Founders".

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Consider another metaphor—one that Reed Hastings, the CEO of Netflix, introduced in a famous presentation on his company’s culture. Hastings stated, “We’re a team, not a family.” (excerpt from article)

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"The Man in the Arena" tells us that the man we should praise is the man who’s out there fighting the big battles, even if those battles end in defeat. In our day, when cynicism and aloof detachment are considered hip and cool, TR reminds us that glory and honor come to those “who spend themselves in a worthy cause.” (The Art of Manliness)

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Buy

Daring Greatly is not about winning or losing. It’s about courage. In a world where “never enough” dominates and feeling afraid has become second nature, vulnerability is subversive. Uncomfortable. It’s even a little dangerous at times. And, without question, putting ourselves out there means there’s a far greater risk of getting criticized or feeling hurt.

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But when we step back and examine our lives, we will find that nothing is as uncomfortable, dangerous, and hurtful as standing on the outside of our lives looking in and wondering what it would be like if we had the courage to step into the arena—whether it’s a new relationship, an important meeting, the creative process, or a difficult family conversation. Daring Greatly is a practice and a powerful new vision for letting ourselves be seen.

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I read this book when I was working a cubicle job- I wasn’t thinking about being an entrepreneur at that time and it really pushed me in that direction. It’s largely about company culture: how to retain and develop talent, think about people’s happiness and their motivations, etc. Hsei’s company, Zappos, has really high retention and a highly engaged workforce...

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and it was really cool to read about that overall. My biggest practical takeaway was companies shouldn’t outsource their customer facing roles as long as customer success is a competitive advantage. When someone calls customer service, they should talk to someone in head office and that's what we’ve also done at Shoelace. (Berg's Notes)

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