Dune Is a Hard Book to Adapt


This post is by Geek's Guide to the Galaxy from Feed: All Latest

Anyone who’s seen David Lynch’s 1984 film knows Frank Herbert’s book doesn’t translate easily to the screen.

Schools are closing their doors, but Opendoor isn’t


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

This week Natasha Mascarenhas, Danny Crichton and myself hosted a live taping at Disrupt for a digital reception. It was good fun, though of course we’re looking forward to bringing the live show back to the conference next year, vaccine allowing.

Thankfully we had Chris Gates behind the scenes tweaking the dials, Alexandra Ames fitting us into the program and some folks to watch live.

What did we talk about? All of this (and some very, very bad jokes):

And then we tried to play a game that may or may not make it into the final cut. Either way, it was great to have Equity back at Disrupt. More to come. Hugs from us!

Equity drops every Monday at 7:00 a.m. PT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

5 Leadership Lessons Everyone Needs Right Now From Github COO Erica Brescia


This post is by Amelia Ibarra from SaaStr

One of our top sessions from our recent Annual at Home event was from Github’s COO, Erica Brescia. For those unfamiliar with her background, Brescia started off as the founder and COO of Bitnami, a 75 person startup. Just over a year ago, she sold to VMware and the company has since doubled in size.

In her session, Erica shares her hard-earned leadership lessons–  from selling her company to what she’s learned at Github, we’ll share her most essential leadership principles for any stage of business.

#1 Build a Support Staff Early

The truth is, founders are frugal. You want to lead by example and get everything done with your own two hands. But that “do it all” mindset, is actually harming your ability to execute. In fact, every task you do that is not actively building your business is distractive of the work truly adding to reaching your goals. Time is a founder’s most precious commodity, and you must use it wisely.

Erica’s Key Advice:

  • Hire an Executive Assistant or Office Manager right away
  • As you scale, evaluate how you spend time
  • Speak openly to others about the support you are getting

#2 Focus Leads to Deep Thinking

A question posed by several founders is, “How do you use your time to focus more clearly on building the business?” The answer is simple. Continually handoff chunks of work so you can remain focused on the bigger picture. Saying no is far more important than taking on more tasks than you can handle. In fact, Erica says no about 90% of the time and claims, “it’s probably still not enough”. You can’t do your best work and focus unless you leave free time to take care of yourself physically and mentally.

Key Points:

  • Say no more often
  • Delegate Aggressively
  • Schedule time for focused work
  • Take time out of your element for deeper thinking

#3 Push Decision Making Down

Now that you have a team, learn to rely on them to make important decisions. Making the shift from knowing every day-to-day detail, to allowing your team to make decisions is crucial for business growth. Think of it this way: You are an airplane 40,000 ft up. You can see all the houses and shapes, but you can’t tell if that’s your dear Aunt Susan walking down the street. As a founder or COO of a company, it is virtually impossible to know every small detail happening within the company at a given moment. You can know general concepts, but specific details are not crucial to your vision. The people closest to the problem, probably know best.

Key Points:

  • Communicate your vision and expectations
  • Empower your team to make decisions
  • Facilitate cross-functional collaboration

#4 Communicate Thoughtfully

People in different respective areas of business have different perspectives. Each area of people has different priorities and digests information very differently. If you want someone to remember something, tell them five times in five different ways. Always be careful about what or when you communicate, and your implication of decisions.

There are four key characteristics of achieving effective transparency:

You must be…

  1. Timely
  2. Strategic
  3. Shareable
  4. Actionable

Key Points:

  • Have principles for what, how, and when to communicate
  • Adapt how you communicate as you scale your business
  • Communicate in partnership with managers

#5 Know What Great Looks Like

If you’re just starting out, chances are you’ve never had to hire someone in a senior position role, and it may be hard to know who to hire. These are some of the most crucial hires you will make in your business; having the right person can make it, and having the wrong person can break it. The best thing you can do is meet as many exceptional people in that field as possible. Even if you could never possibly afford to hire them, you can learn how to find people on top of their game, and you develop an archetype of the type of person you need in your business. It’s crucial to lean into your network when making important hires.

Key Points:

  • Be proactive, and find out what great looks like early on
  • Leverage your network to learn from great leaders
  • Build archetypes specific to your company

BONUS: #6 Create a Growth Environment

After hiring great people, you must create an environment in which they see clearly how they contribute to success. Everyone wants to feel like they belong. If you have burned out people who don’t feel valued, supported, and cared for, they will either quit or drag the rest of your business down with them. In a study by Mckinsey, there is a 21% improvement in workforce effectiveness when employees’ mental health is supported.

Key Points:

  • Build and communicate a clear mission and vision
  • Use OKRs to drive execution and help people see how their work contributes to the company’s success
  • Build an inclusive environment and cultivate a sense of belonging in all the employees
  • Invest in mental and physical health and wellness

Watch Erica’s full session below, or click here to listen to it as a podcast.

The post 5 Leadership Lessons Everyone Needs Right Now From Github COO Erica Brescia appeared first on SaaStr.

SaaStr Podcasts for the Week with Byron Deeter, Elliott Robinson, Henry Schuck, and Jason Lemkin


This post is by Amelia Ibarra from SaaStr

Ep. 373: Bessemer’s 5th Annual State of the Cloud Report returns for a definitive look at the cloud industry today. Byron Deeter and Elliott Robinson, partners at Bessemer Venture Partners, offer macro trends in the public and private cloud markets, strategic advice to cloud founders, and insights into why entrepreneurs should feel auspicious about the future.

 

This episode is sponsored by Linode.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from a session at SaaStr Annual @ Home. You can read the podcast transcript below.

 

Ep. 374: ZoomInfo founder and CEO Henry Schuck shares how he built a business from scratch and grew it into one of the most successful IPOs of the 21st century—and what it was really like…the good, the bad, and most of all, the ugly. He reflects on where he went wrong, what he would do differently, and how to avoid making the same mistakes he did.

 

This episode is sponsored by Outgrow.

 

This episode is an excerpt from Jason and Henry’s session at SaaStr Annual @ Home. You can read the podcast transcript below.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Byron Deeter
Elliott Robinson
Henry Schuck

We’ve shared the transcript of episode 373 below. You can also jump down to the transcript of episode 374.

Transcript of Episode 373:

Byron Deeter:

I’m going to dive in here with a little bit of an overview. To say that 2020 has been unusual, and unprecedented, and momentous would all be understatements. But let’s just begin by taking a little look back at how we’ve gotten here. We want to take you through the cloud journey over the last several years. We’re going to start with some dates that predated COVID and really go to prior SaaStrs. If you look back on February 5th, 2019, which was the SaaStr Annual, hopefully many of you were there in person, we gave the state of the cloud presentation and talked about the power of the industry, and the power that’s been building in terms of market capitalization of just the public cloud companies and what they show. That was February 5th, 2019.

Coincidentally, SaaStr Annual was slated to be February 5th, 2020 this year, where we were going to reveal that the cloud had passed the one trillion market cap mark, which was exactly one year after the SaaStr Annual 2019. It was a meaningful milestone for many reasons, and yet, just a few days later, the world change pretty dramatically. If you look at the March volatility, the major indices fell 30% pretty much across the board as the health crisis started to take hold, and the economic crisis was starting to be previewed.

Now, the cloud index fell along with it. The blue line here is the Bessemer Nasdaq Emerging Cloud Index, which is an index that we’ve tracked for many years, which is the basket of the pure play public cloud stocks. You’ll see here from this blue line, the 30% fall that rapidly rolled through our entire industry. Now, as April came, we started to see those climb back. You fast-forward to May, you started to see not only the indices roll back, but specifically this blue line of the cloud industry. As we rolled to June and July, and then all the way through to August, we saw essentially a separation that is reflected over the longer time arc here as well.

If you go back to before 2014, what you see is the power of the cloud. You see that both organizations embracing this cloud movement, but specifically in COVID, more and more companies turning to the cloud as their solution for business continuity or for business growth in these times when shelter in place is making on-prem solutions difficult and in many cases, impossible to use. It’s also been a powerful moment for technology to be a force for good. We’ve seen many of the cloud community companies help usher in this transformative, somewhat defensive posture, but also allowing companies to reinvent themselves and to grow.

To give a few examples, when the entire restaurant and hospitality industry was forced to reinvent themselves, most restaurants shutting down entirely due to shelter-in-place mandates, Toast, which is a leading point of sale solution and vertical SaaS application and mobile application for the restaurant industry, and an all-in-one restaurant platform, rapidly switched and helped offer new solutions for online ordering, contactless delivery, and allowed restaurants that had never before provided takeout, and were literally facing bankruptcy shutdown situations to suddenly create an entire new line of business.

Another collection of their customers actually turned their kitchens into service offerings. This here is an example from a Burmese restaurant called Thamee, in DC, which has partnered with World Central Kitchen, and they’re donating thousands and thousands of meals to people in need, healthcare staff, and frontline workers, Black Lives Matter protesters in the community. You see that these teams and these small businesses across America rallying with the help of technology solutions provided by many of you on this call and cloud providers more broadly, the same needs existed with the physical world that we saw with the virtual world in many ways, and physical store owners had this crisis moment where they were shutting down. They had to reinvent themselves.

This million business milestone was passed in March by Shopify, one of the leading storefront providers, and a cloud vertical solution for eCommerce, where they grew 400,000 storefronts between mid March and mid April, because of small businesses, again, that had been only physical before, and found that to survive and hopefully ultimately thrive, the cloud solutions were their way forward. We celebrate businesses like that, and of course, the platform we’re on today with Zoom, that has really become a communications platform that’s defining this COVID era. They’re giving us the connectivity to communicate with our colleagues, friends and family. They’re facilitating virtual schooling, they’re helping governments organize. They’ve helped with life’s most important and sacred moments, whether that’s birthday celebrations, weddings, and unfortunately, even in some cases, the last goodbyes. But it is really incredible and inspiring to see how these companies and these cloud leaders have ushered in this new phase of innovation and growth, even in the hardest moments of society.

What we see is this unlocking of cloud power, and we see this acceleration of the trends that we’ve known are building through the years. It reinforces the growth of the industry. If we look at that and step back, you can think of this, again, from the leading perspective of the public’s first, which is this evolution over time. Just 12 years ago, the entire market capitalization of the top five cloud companies was less than $14 billion. When you roll that forward just seven years, that was up 8X, you roll that for just 12 years, is that a staggering 61X. Just in the top five names, the growth has been spectacular.

If you think about the broader hybrid vendors, so the Amazons, Googles and Microsofts that have cloud businesses that are growing and building within, the same trends exist there. If you look at the IAS vendors, they passed $130 billion revenue milestone this year. We’ve all seen AWS and what they’ve done with their platform. It is staggering. Even at spectacular scale, they’re still growing at 30%. Azure has been gaining on them rapidly and is growing a double that rate. Still has some market share to go, but is providing a fantastic offering that many of you benefit from. Google Cloud, AliCloud International, et cetera, the industry has just been going through this massive transformation, and has been responsive to the market demands of COVID in ways that wouldn’t be possible in a non-public cloud, non-scalable way that’s allowing the continuity and the power in a modern format that wasn’t before possible.

But if you think of all these stats out there, there’s one number that for me is most impressive. It’s 94%. What this number means is across all industries, 94% of businesses today use at least one cloud solution. We are truly living in a cloud first world today, where businesses not only understand, but they now embrace and are looking to lead with technology solutions from folks on this Zoom, who are cloud first and providing that next generation of solutions. If you think of this in the context of software, it’s particularly powerful because for years, we’ve been seeing the visionaries out there promoting this transition. But it takes a long time to build.

The dark blue bar here is cloud as a percentage of worldwide software spend. For years, it barely registered as it was building. What we’ve seen over the last several years is that compounding starting to develop, and if you roll forward and see what happens, if you go to 2032, out just a dozen years from now, how massively that transformation takes hold. The 50% mark is going to cross within the next three years, and the vast majority of all software quickly will become cloud. If you think of this over this arc, and in fact, if you reinvent it in a circle chart or a pie chart, you can see visually how cloud is eating software.

You’ve got this dynamic within the next couple of years where cloud becomes a majority, but it just rolls forward. You get this almost eating effect, I think of it as Pac-Man in motion, where truly, cloud is taking over the core of technology and all of software. If you think of this from a market size standpoint, there’s often this debate, is that good or bad? What happens when cloud has consumed software? What happens to growth? What is the potential? This fantastic, staggering growth that we’ve seen over the prior years, is that sustainable? Can it continue? There’s all sorts of implications. For you out there founding new businesses, is it too late for investors, public and private? Have I missed my window, or what is fair value?

This is the chart that we think helps answer that, which is to zoom out, and think of not only cloud and its current market size, or not even just software in its current market size, which mind you, is a multiple of that. We have through that 2032 range, we show how the growth rates are certainly sustainable, and in fact, in some industries will accelerate as you get this compounding building, and you get this sea change effect as the industry realizes and embraces cloud.

But you actually should zoom out another level. You should think of this as the technology industry as a whole is really the addressable market by all of you. Because more and more hardware is becoming soft. It’s the software within hardware that’s powering innovation, and powering efficiency, and powering growth. Really, cloud absorbs hardware, software and services. As you see more opportunities for automation, and as you see more of the technology of the cloud and software percentage of technology reveal itself, it’s really that 3.7 trillion dollar market that’s addressable.

As you think even more, both broadly, in sector, and in geography, the global GDP is increasingly becoming tech-based. As you think about cloud as hands down the most powerful force in all software, and really now in all of technology, and we all know that technology is increasingly driving other industries and innovation across industries. We absolutely believe that a large percentage of global GDP will be cloud-driven and cloud-based in the years ahead. When asked specifically, “How does this end, or how does this play out?” We absolutely believe we’re still in the early days. What has become obvious to those of us in the cloud community, and what’s starting to become more and more obvious to the world, has a long and powerful future ahead.

That’s going to be the basis of the rest of this conversation. We’re going to talk you through a little bit of the learnings from these leaders and our experiences working with many of the innovators. Then we’re going to end with some predictions. With that, I’m going to let my partner, Ell, take it from here and guide you through some of the lessons learned and some of the 10 laws takeaways over the last many years of working with these leading companies.

Elliott Robinson:

Thanks, Byron.  As Byron walked everyone through, there’s been a lot of change and evolution that’s taken place in the cloud software market. Today, there’s more than 140 private and public cloud companies that are worth more than a billion dollars, including a lot of companies that are speaking at SaaStr. Here at Bessemer, we’ve been really lucky to work with some of the best, as you can tell from my partner Byron’s Zoom background. But what we really like to do is try to share best practices amongst the many years of experience we’ve had working with cloud companies.

What we’re going to do today is highlight three of them. We’re all living through a really unique time with COVID. Companies are working more remote first, everyone’s trying to traverse the new landscape, and I think that these three have really stood the test of time since we published the first 10 Laws of Cloud report more than a decade ago. Let’s dive in.

Law number one, in the cloud economy, scale wins. A bit of a personal note for me, before coming to Bessemer, I was with a great fund in Toronto, Canada called Georgian Partners. I’m a big fan of Canadian entrepreneurs, so shout out to any of you on the Zoom today. One of the early co-investments with my prior firm in Bessemer was in Shopify. One of the favorite quotes that I always had from Tobi, and really, his philosophy was that reaching scale, it’s not just about the revenue, it really is about finding a product that sets the pace of innovation, and having this mentality that while you might be really excited about the product that you’re offering to the market today, you actually want to render it obsolete so that your competitors can’t just copy what you’re doing.

We’ve had a lot of discussion about Zoom over the last few months, as Byron alluded to, with everyone working at home. But if you just take a step back for any kind of market that we’ve had success with, with cloud software companies, the majority of the market, say 50, 60, sometimes 70% goes to the scaled leader. Then unified communications and video conferencing space, Zoom has definitely taken a new position as the market leader. This number might have increased just in the past week, but it certainly sits somewhere around 64, 65%, where you’re seeing companies like Skype, BlueJeans, and WebEx coming up just behind them.

Another thing that we’ve seen over the last decade is cloud companies have this unique ability to scale way more rapidly than they have in the past than many of their other tech market peers. If you look at companies like Cornerstone OnDemand, which we invested in a long time ago, it took them some time to get to 100 million of ARR. But if you look at new companies like a Shopify, a Twilio, a HashiCorp, they’re able to get there even faster, somewhere around four or five, six years, and that’s something that we’re seeing with all the cloud giants that are entering the market today.

Leveraging on some of Tobi’s philosophy, it’s something here that we call at Bessemer, Finding Your Second Act. Everyone knows Shopify for what it is today, but in the earlier days, it really was the best SaaS platform for SMB eCommerce providers. Then they found somewhere in like year 2014 and ’15 that they could layer in something like payments as an additional way to monetize their customer base. We call that a second act. What that does is not only did it accelerate the top line revenue for Shopify, but it dramatically opened up their total addressable market on a revenue basis. 

If you’re a cloud founder sitting at home today, and you’ve got a great value prop for your customer base and your market, you do want to think about maybe 12 months, 18 months from now, “What’s that next thing that I could layer into the market?” Not just for expansion in your base, but upsell as well, and more of a new platform, value prop you could take to the market. Byron gave a great example with Toast, one of my favorite portfolio companies. They started in the point of sale market, and then as the company scaled, they rolled out new value props and modules for payroll, or Toast capital, or ways to manage your employee base.

With Twilio, for example, they expanded into email. You can also find your second act inorganically via acquisition as Twilio did with SendGrid. Then in HashiCorp’s case, one of the most exciting cloud infrastructure software companies that we found, they’ve expanded their second act with Terraform in the provisioning space, and then Consul in the networking space. 

Law number three, this is huge, particularly in COVID, so we’re going to talk about this a little bit differently. Everyone is trying to figure out the go-to-market learning curve. Now, what we haven’t really seen over a lot of time, and we kind of predicted, was everyone in Salesforce is basically working from home. If you’re a founder today and you’re trying to scale your go-to-market org, in the early days, you’re in what we call the initiation phase. This is really founder-led sales. You’re wearing multiple hats, you’re probably the head of sales, head of content marketing, also head of inside sales.

But what you really want to do is as you’re finding your first sales leaders to bring into the org, we typically call them Renaissance Salespeople. They have this unique ability to evangelize your product in the market, learn from your early customers what they like, what they don’t like, bring that feedback loop into product, into marketing, and really start to make that flywheel work. You really don’t want to think about bringing in new salespeople until you’re seeing that first round of product market fit, and then you’re ready to go into the transition phase. This is when you’re actually building out your org. You might be thinking about BDR, some ISR, some field sales reps, and you as a founder can take off one of your hats and maybe move into more strategic sales with your biggest and most valued customers.

Here, what you really want to think about is testing out two or three reps, seeing how they work, see if their quotas are about right. Are they hitting their numbers? Are customers happy with what they’re seeing? You don’t really want to scale beyond that first batch of reps. A general rule of thumb is about two to three times their fully loaded cost before you start rolling them in. Again, this is supposed to be our COVID considerations version of this report, and everyone is an inside sales rep today. The one thing that we like to talk about is CAC payback. That’s really analyzing a period back, how much does it cost to acquire a customer? That’s your CAC. If you divide that by the gross margin, how many customers you get into Period Four, you can start to figure out against your churn, how many months, gross margin effected, does it take for you to turn that newly acquired customer into a profitable customer?

Why does that matter even more in COVID? Well, there’s just more uncertainty. We don’t really know how long it’s going to be before people are back in the field, flying on planes regularly where you can touch and feel your customers. Your churn might be a little more volatile in this period, so actually tracking your CAC, calculating it, gross margin affecting it, and figuring out what your CAC payback is on a monthly basis is even more important.

After you figure out how your go-to-market org is going to scale, potentially, you see success, you’re adding field sales reps, you might be going more geo-focused, more industry vertical-focused. Now, you’re in the execution phase. This for us means typically, you’re finding some sales folks that may or may not be a little more coin-operated, so less of that renaissance rep that’s really evangelizing. They’re are always going to be great shepherds and voice and face of your company, but these folks, you want to give them a territory, a good list of customers, maybe they even have their own book of business, and you let them go. Then the one thing that you always want to think about is nail it before you scale it. Make sure in the initiation phase you feel comfortable with the results before you move into the transition phase, and that’s the same thing with the execution phase.

Then my favorite personal law, number nine, tone starts at the top. What’s really interesting about this, we talked about it, and we updated the report before COVID, and oftentimes, people say things like culture, and values, and how we track that stuff internally. How important is it? Well, I’ll tell you one thing, portfolio companies of ours and founder friends of mine, who now have their entire employee base working remotely or from home, now, this really matters. You as a founder have to set the tone, and you can’t do it in a weekly stand up, or an all hands meeting in person. You got to do it remote. 

We have this framework that we typically talk to our portfolio company founders about. It starts with defining your culture and values early, really understanding and letting your early employees understand, “Why do we work here? What are we really trying to accomplish?” It also allows your early employees to find that values fit with you, your philosophy and where your company is going.

Number two, we really want companies to report and track these metrics early. If you can’t measure it, you can’t really change it. You’re just putting your finger in the air and doing a gut check. Then number three, 360 feedbacks. Our advice is you can’t really do these too early. It’s how we all get better, and as a investor and board member, one of my favorite things is doing 360 feedback for the founder or CEO, talking to the board members, talking to their direct reports, and giving a unique set of feedback to that founder.

Beyond that, there’s some great software, cloud software options you can use. Both Glint and Culture Amp are great solutions that many of our companies use. Then just a personal note, we’re living through a really interesting time here in our country and in tech. Statistically, I don’t look like your average venture capitalist, but I really do care about diversity and inclusion. It’s not just something good to do. It’s actually a great business strategy and competitive advantage. This is just a little bit of a shout out to one of my favorite companies. It just so happens they’re a Bessemer company, but that doesn’t matter. Edith at LaunchDarkly, they put their culture and values very publicly on their website, very prominently. They’ve got some incredible initiatives, particularly in the engineering and coding org about how to make diversity and inclusion a strategic advantage for them.

Byron Deeter:

Very well said, and we look forward to hopefully seeing you all in person at the next SaaStr Annual next year. Until then, stay well, stay sane, and stay cloudy. 

 

*****

Transcript of Episode 374:

Henry Schuck:

Every company big and small is realizing that high quality data is a necessity to go to market. My name’s Henry Schuck, I’m the CEO of ZoomInfo and DiscoverOrg. There’s no platform out there that’s brought together the breadth, the depth, and the accuracy of business information the way that we have. Business information is constantly changing. What we’ve built is this core AI machine learning engine that takes literally millions and millions of unique sources so that we can deliver 95% accuracy to our clients. We have data scientists who are embedded into our go to market motion. We’re looking at every single metric and figuring out, how to convert that a little bit better, a little bit better, a little bit better?

Henry Schuck:

I really want to build a business that in every single department, whether it’s sales, or marketing, or product development, I want every single piece of that business to be literally best in class. I think the culture of continuous improvement at our company is a big part of our success. We’re just going to grind this thing out. We’re going to work harder. We’re going to care more. You have to be paranoid when it’s good because I want to make sure that it’s repeatable. I want to make sure that if there’s something that we did last week that made it the best week ever, that we keep on doing it. Whose idea was it to IPO in the middle of a pandemic, anyways? It’s not a celebration. It’s really just a launching point for the next thing.

Jason Lemkin:

All right. Sometimes on these digital things, the crowd can be a little quiet. But let’s all give it up for Henry Schuck from ZoomInfo. It’s great to have him here. And Henry, thank you so much for making the time and joining us.

Henry Schuck:

Absolutely. We can just sit here and watch that movie on loop if you’d like.

Jason Lemkin:

It was pretty good. I did notice you’re a little fitter now than you were for a brief moment in that journey. I hadn’t noticed that before. Is that fair to say?

Henry Schuck:

I’m more fit now, or during the journey?

Jason Lemkin:

Now, now.

Henry Schuck:

Maybe. It might just be the camera angle.

Jason Lemkin:

Might just be the camera angle, yeah. It’s funny, I’ve learned over the years, it’s subtle, but if you see a CEO, a founder that you know and you see them get fitter, it’s a good sign. Invest, do whatever you can when they go because it’s a tell when they start looking good.

Henry Schuck:

I had somebody tell me once, “Sometimes I feel guilty if I take time away from work to work out.” And I had somebody tell me, they said, “Henry, you’ve told me that when you work out, you’re more productive at work. You’re a better version of yourself at work. And so why are you not just thinking about that as an investment into your productivity at work?” He was like, “Yeah, I could get behind that.”

Jason Lemkin:

It’s true. So this is a special session. First of all, we will try to do some Q and A, so click on Q and A at the bottom if you’re watching this on Zoom rather than on social media. Click in there, we’ll try to get to some of these questions. And this will be a fun session for two reasons. First, I think as a case study, ZoomInfo’s a super interesting company. We’ve obviously all used the product. And I think, but when it IPOed I was shocked at the scale of the company. Right? I didn’t know. There’s a lot of vendors. I knew it had broken out, so we were shocked. And Henry will share some stories as we wend through this of how folks maybe underestimated him on the journey, and what it took for him to build a decacorn. And it’s so interesting to see one of these products that we know and are like, “Oh, my God. The scale of the product,” and why. Why did ZoomInfo break out? And it is a competitive space. And how does this really work? So I think it’s super fun.

Jason Lemkin:

And Henry pointed out the company did not raise 11 $100 million rounds from Sequoia and Andreessen, and had its own sort of path through private equity and other things. And in some ways as a company, not a product, might’ve floated under the radar a little bit until it kind of exploded this year. So a lot of interesting things. Henry asked what he could talk about at SaaStr, and he did us a gift, which we’re going to go through, is he laid out his top 10 mistakes getting to the first $400 million or so in revenue. So I’m going to ask him about these 10 mistakes. And what’s great is so many of these are themes that we’ve all talked about in our community in SaaStr for years. And I think it’s special to get his time to sit down quietly and write them.

Jason Lemkin:

And it’s so interesting when a CEO or founder does this because you can hear their brain and their heart. The number one mistake probably was the number one piece of scar tissue you have. And then you can just peer into their brain. So with that, let me kick this one off because this could mean so many things. But mistake number one, being risk averse in investment outside of sales. A lot of founders might have the opposite experience. But what does this mean? Where did you hold back too much?

Henry Schuck:

Yeah. And I think you could probably replace sales with your area of expertise if you’re a founder or a CEO. And so I felt really tied into sales. I understood how it worked. I did all of the sales for the first … Not all the sales, but I was on the frontline doing the sales for the first five years of the company’s existence. I had regular quota carrying sales rep on top of everything else. And so every time it came to spend the next dollar, I was much more likely to spend it in sales than really anywhere else in the business.

Henry Schuck:

And when I was thinking about this mistake, I was thinking about: Why was it that I wanted to put all the dollars into sales, and I was much less likely to put it in marketing, or HR, or customer success? And really, I think sales was easy for us because you could see a direct line to rep. You put a dollar in sales, you saw it turn into money. And everywhere else in the business, that line was less clear, so you could put it in marketing. And do you trust the reports you’re getting about attribution and where the leads are coming in? You could put it in HR, but do you really believe that they’re going to strategically grow your talent?

Henry Schuck:

And when you think about not making the investments in all of those other areas, what you’re really telling yourself is either you don’t trust the people in the department, and so you’re going, “I’m not going to give that money to marketing because I just don’t really trust that they’re going to be able to execute with those dollars.” So go fix that, don’t not make the investment in marketing because you don’t trust the execution of the team or the leader. If you’re not going to make the investment in product, you have to ask yourself, “Why would I not be making that investment in product?” And it’s probably because either you’re chasing the wrong things, you don’t trust the product leader, or you don’t think your customers are going to engage with that side of the product.

Henry Schuck:

And so I think on this one, we always wanted immediate payoff, and so we never looked to, for the early portion of the business didn’t really look to making investments that had long-term payoff. And a lot of that is because we didn’t trust, or I didn’t, trust the leaders in those organizations to deliver me the results that I trust the leaders in sales to deliver. And so the learning here is if you don’t trust a team, and you’re not making an investment in that team because you don’t trust them, you have to fix the underlying issue there because these investments go a long way.

Jason Lemkin:

Well, that’s an interesting point. You took it a slightly different place than I was expecting. I thought you were going to say, “I trusted sales, so I just put, with limited capital, I put it where I knew.” But you’re really saying, “I didn’t know these other areas, and I’m not sure about the leaders I hired.” Did you hire the wrong first generation management team because you hadn’t done those functional areas before? Or why were you not able to trust them? Did you just make the classic mis-hires?

Henry Schuck:

I think I made the classic mis-hires. And then after I made the classic mis-hires, if I took marketing for example, after I made a classic mis-hire there, what I convinced myself of was what I was getting from them was better than what I would do myself in the limited time that I would’ve focused on marketing across all of the other things I was focusing on, instead of: Am I getting in just a vacuum what I would expect from a fantastic marketing organization? And I wasn’t ever getting that in the early days. What I was getting instead was something better than what I was able to do on my own. And it was just the wrong lens to look at it through.

Jason Lemkin:

And what was the first VP you hired outside of sales that was your ah-ha moment that changed the game, that moved the needle? How were you able to change this? What was that game changing VP?

Henry Schuck:

Yeah. I hired a great sales leader, revenue ops, and now he’s our chief revenue officer. And what you saw when he came in, now you’ve written about this too, Jason, is the minute he came in, we thought we were really good. And he was immediately making impact all over like, “Why aren’t we doing this? Let’s do this,” and not just like, a lot of leaders can come in and just poo poo on everything. I can’t believe you guys are doing it this way. And oh, it’s an embarrassment that we’re doing it this way. The great leaders go, “Hey, we’re missing this opportunity.” Then they execute against that opportunity and give you results against it. And they’re able to do that over and over and over at scale.

Henry Schuck:

And so when we hired this revenue operations leader, all of a sudden, you could see everything he put his hands on turned to gold. And you were like, “Okay. Leadership can really turn around really any area of the company.”

Jason Lemkin:

Yeah. One other one on this. I want to get mistake number two first. But when you focused on sales because of this, looking back, obviously it’s ended up being an amazing journey. But did you end up with certain types of product feature gaps and technical debt because it wasn’t an area you were focused on? Did you miss some investments in the product in those first couple years because of this?

Henry Schuck:

Yeah, totally. We missed investments in the product along the way. We missed investments in building a great engineering team early on. And then I think maybe more so than anything, we missed investments on the account management and customer success side. We were so focused on the sales side that we didn’t invest the same sort of vigor around talent and training and onboarding, and just getting the right people and continuously giving them feedback in the account management side. And so in the early years of the company, we really struggled from a net retention and logo churn perspective.

Henry Schuck:

And that was another area where when we hired somebody good and you saw their numbers turn, yeah, it’s just magic. And you actually kind of convince yourself at some point, my business is different. My business is different. I have SMBs. My business is different, data and software together are just more complicated and less sticky than other things. You just convince yourself of all of these. You have this very special thing, so it can’t be best in class. And that’s just not true. You just don’t have the right leadership or structure to get there often.

Jason Lemkin:

That’s really good insight. You hear that a lot from data focused companies that high churn is okay. Right? You hear from a lot of HR focused companies that NPS is going to be low because employees hate using those tools. Right? They hate doing self assessment. They hate it. And that is true, probably true historically if you went into G2 and looked. But you shouldn’t settle for that, should you? [crosstalk 00:12:32] settle for that.

Henry Schuck:

And if you use Webex users and Citrix users how they felt about their conferencing solution, early on, they might tell you, “Oh, I hate conferencing.” And I think what you saw Zoom Communications do was make that an enjoyable experience, and that was a big differentiator. You didn’t have to settle for low NPS scores in video conferencing. You could be a lot better.

Jason Lemkin:

Yeah. It’s a super good insight. And I want to hit the next, number two, but especially in data, so many folks make so many excuses. Right? It’s ephemeral. It’s a marketing tool. Of course, it’s going to churn. If the asset doesn’t perform, if the data’s not great, I’ll just leave and try another one. This isn’t like Salesforce. It’s not sticky. But your lesson here I think is a profound challenge to founders, which is, don’t settle, it’s not okay. You can have 30, 40, 50, 60 NPS in any field. Right?

Henry Schuck:

Absolutely.

Jason Lemkin:

Not just … Okay. This one is niche, but it’s interesting, not doing mergers and acquisitions sooner. I don’t know that every founder would put this as a mistake number two. But it’s interesting because you put it second here.

Henry Schuck:

Yeah. So maybe I’ll give a little bit of a lineage. I bootstrapped the company with my co-founder in 2007. We put $25,000 on our credit cards and went to market. We built a really profitable business that had high margins. And we didn’t bring in our first outside capital until for seven years later, the business was already at a $25 million ARR run rate. And we’re doing that profitably. And when you have a profitable business, you have the opportunity to do M&A, and actually do that M&A with … We did M&A with debt. And so if you’ve built this growing, profitable business, and you’re able to loan against your balance sheet to go out and acquire competitors in your space, or other technology tuck ins in your space along the way, that is absolutely, in my opinion, a play you should run.

Henry Schuck:

And we were always kind of late to this. For every, our big acquisitions that we did along the way were a company called BrainKing in 2007, 2017, and ZoomInfo, which I founded the business as a company called DiscoverOrg. You changed the name to ZoomInfo after that acquisition. We made that ZoomInfo acquisition in 2019. And both of them, we had looks at those businesses a year or a year and a half before. And if we had done the acquisitions earlier, we would’ve saved I think $700 million in acquisition M&A costs. Now it’s hard to go, “Oh, what a mistake that was.” It’s a mistake in that the cost in capital was higher. Things ended up working great.

Henry Schuck:

But part of the reason why we didn’t do that is, and I think probably a lot of founders feel this way, is when you’re looking at your business that you’ve grown up inside of, you start to feel like you’re just like a kid pretending in an adult world. People who do M&A don’t feel like 30 year olds who started their companies, and we just didn’t have the confidence that we could pull something like that off. And we’re were always a year behind getting the confidence to be able to actually do M&A successfully. And it just costs us money along the way.

Jason Lemkin:

Yeah. The first point’s interesting because we’re all kind of … There’s been a bunch of talks already at this event. We’re all a little bit woke to the power of debt in SaaS if you do it right. Right?

Henry Schuck:

Yep.

Jason Lemkin:

It has to be for leverage. It can’t be in lieu of equity on its own because then you’ll spend it and you’ll get into trouble on the service. But if you’re at $25 million in ARR, and it’s predictable. And how much did you borrow to do the first acquisition?

Henry Schuck:

$200 million.

Jason Lemkin:

Okay. Well, you did take advantage of the growth in multiples that we’ve had over the last few years. Right?

Henry Schuck:

Yes, I did take advantage of the growth in multiples. And we protected equity.

Jason Lemkin:

You protected equity. But you were able to somewhat confidently say, “Hey, I can service that debt.” Right? Given the repeatable cash flows, right?

Henry Schuck:

Yeah.

Jason Lemkin:

And that’s something that whether it’s just to take a little bit of debt to hire that extra VP of product that you wish you’d hired back in the day, or whether it’s to do something. We should all, if we have strong metrics, strong revenue retention, we should be confident to do this. It’s sort of what you’re saying. Be confident. Be confident and do it a year early because you were going to get there. Right? You saw it already in the numbers at $25 million ARR. You were going to get to 100. The odds of going from 25 to 100 approached 100% at that point. Right? It’s just the resolution was unclear. Right?

Henry Schuck:

Yeah. And if you were confident about from an M&A perspective, if you’re confident that you could put two businesses together, get synergies out of it, grow them faster, and make them more efficient in the process, you have even a bigger pot of sort of cashflow to service the debt.

Jason Lemkin:

And did you … It’s niche because I want to hit the next one, but it is interesting. Did you feel like you had to get a discount, like they had to have a lower multiple than you as you build up your confidence for M&A? Is it hard to pay up versus having to pay down?

Henry Schuck:

I did feel that way. I don’t mind having some room to make mistakes on execution along the way. And so you do look for … Today, you get some companies who will tell me, “Well, Henry, you’re trading at this multiple, so why shouldn’t we get that multiple?” It’s like, well-

Jason Lemkin:

We should get higher. We should get higher. We’re growing even faster.

Henry Schuck:

[crosstalk 00:18:11] get a higher multiple because we’re more strategic. And the truth is there’s a lot of execution risk when you do M&A. And you have to be organized and focused. And so leaving you some room to slip somewhere is a useful thing to have.

Jason Lemkin:

Yeah. It’s a good lesson for founders because I mean, from the other side, it’s confusing. Right? ZoomInfo’s great, but whatever you’re trading at, you’re growing, I don’t know what you’re growing that you’re public. But let’s say you’re growing 50%, 40%, doesn’t matter, 60%.

Henry Schuck:

We’re growing 40, yes. Almost 40% [inaudible 00:18:45].

Jason Lemkin:

But Henry, I’m growing 80%. And so I deserve 40 X ARR because I know, I know, I know, but it’s not fair, Henry. Just draw a line, and founders are in this, you just need to be aware of it. Right? You just need to be aware of it. And every situation … I remember back in the day when Salesforce wanted to buy us in the beginning, the biggest acquisition they’d done was $16 million at the time.

Henry Schuck:

Wow.

Jason Lemkin:

And they’d met with us, and they were like, “We really want to buy you, but 16 would be too much.” Now you look at Tableau and MuleSoft. Right? And then you look at Jeff Lawson at Twillo. He’s like, “I’m not messing around. I’m not buying an itty bitty mail company. I’m buying the best thing, SendGrid, and I don’t care.” Even though the multiple was a little off, he’s going. And it’s a spectrum in companies of all the different rates. You were kind of in the middle, I think. Right?

Henry Schuck:

Yeah.

Jason Lemkin:

You didn’t want to mess around.

Henry Schuck:

I didn’t. I think the way, if I’m thinking in Jeff’s shoes, one of the things that I’m thinking is when I bring this asset in, what am I able to do with it when I put it in the product, when I give it access to my go to market team? How much faster can I grow it? Where are the synergies from that perspective? That was always really important. Actually, that takes us to mistake number three, which is not appreciating go to market as a strategic advantage.

Jason Lemkin:

What does this mean?

Henry Schuck:

So this means when we were doing, first, when we were doing M&A, when we were growing the business, I never thought of how valuable it was to have an incredibly efficient go to market engine. And we have a go to market engine that drives at 10 XLTV to cap. It does a 30 day, there’s a 30 day average sales cycle. It’s super efficient in generating leads and driving them through the pipeline with automation. And what I didn’t appreciate was when you look at a business, and you’re like, “What are the key assets in that business?” If you’re a founder, or you’re a senior executive at a company, and you’re thinking about your business and going, “What are the strategic advantages to our business? Or are there strategic levers here?” If go to market is just something you don’t even think about as part of that, that’s a major mistake because go to market, how you generate leads and find new customers and upsell and grow your customer base, that is a major, can be a major strategic advantage for your business.

Henry Schuck:

And it’s so often that I see companies where you have two companies, their features and product are in parity. And one is just running circles around the other one. And when you see that happening, it’s because one figured out go to market in a more precise, more efficient way. And that gives them an incredible advantage along the way.

Jason Lemkin:

Okay. I get that. That’s what I’ve observed. But what do you mean by leveraging that? You’ve got two companies. Right? Both have the same product. Maybe even the slower growing one is better. Sometimes that happens because they’re inwardly focused. But one’s figured out their go to market motion. Right? If that’s you, and that’s what you were, what do you mean? How do you take that to the next level? Why was it a mistake? That’s the piece I’m missing. What’s the investment or the action you didn’t take here when you had that advantage?

Henry Schuck:

So along the way when we were looking at acquisitions, especially when we were looking at acquisitions.

Jason Lemkin:

Bolted in.

Henry Schuck:

When you would look at an acquisition, you would go, “Oh, I have an opportunity to take what is a company that didn’t focus on go to market as in such a focused way as we did, and if I can take this team of 20 sellers, who are doing $10 million a year in ARR, what if I can take that team and make them do $20 million by just bringing in our go to market motion into that?”

Jason Lemkin:

Oh, on top, not get rid of them, but actually just add your expertise to their team. Take the same talent without training and tools and people, and just leverage up their revenue per lead, just increase their revenue per lead. Right?

Henry Schuck:

Increase their revenue per lead from an M&A perspective. Internally, the way I think about it too is if you can make go to market incredibly efficient, incredibly effective, then that gives you a strategic advantage to be able to take dollars that you would be spending there and spend them in product, and spend them in account management, and spend them in customer success and marketing. The more efficient you make your go to market motion, the more dollars you have to spend across the company. And I never really … I actually, when people would say, “Hey, ZoomInfo is a sales first company.” And I’d be like, “No. No. We’re a product first company. We’re a customer first company.” I hated hearing that. And it took a while to-

Jason Lemkin:

I’m with you.

 

Henry Schuck:

To just realizing that’s okay. That’s a strategic advantage of the business. We shouldn’t be embarrassed of it.

Jason Lemkin:

There’s something really interesting you said, which I think goes against some typical Twitter advice, which is that if you have an efficient go to market engine, the classic advice from VCs and others is pour gasoline on the fire. If you have an efficient … If you have 50 great reps, hire 500. Right? Go raise $200 million. And you’re saying an insight which is what I believe philosophically, although I don’t know if it works in the real world, which is if you have efficient engine, that means you can free up resources in other areas. It’s a weapon. Right?

Henry Schuck:

It’s a weapon.

Jason Lemkin:

Because if you’re inefficient, you end up having to spend every nickel in sales and marketing, every, it consumes all your oxygen. So you’re saying if your sales focused, [inaudible 00:24:23] good, put the money elsewhere. Don’t give into the fuel in the fire mentality, necessarily.

Henry Schuck:

Yeah. And then, by the way, if you’re putting money elsewhere and you’re making those investments in a smart way, that just should drive your ability to continue to invest in a disciplined way inside of your sales organization. So if I take the dollars from that strategic asset and I put it in other places, and then that should drive reinvestment back into the sales team.

Jason Lemkin:

That makes sense. So this one, we might’ve hit, and I like the fuel to fire at the end. It’s a good tie to the last thread. We might’ve hit this a little bit in the beginning. But what does this mean, hesitation stopped you going even faster?

Henry Schuck:

Yes. So I think that we did kind of hit this the beginning. But I think the way that I think about this was we’ve always been a pretty high margin business. But one of the things that we didn’t do was really think through prescriptively, where should the margin and the business be? And how should we trade? How should we think about growth versus profitability? And what did the market actually prefer here?

Jason Lemkin:

Got it.

Henry Schuck:

Instead of doing … And the reason why we didn’t do that, I think, is we had hesitation around trusting where that investment would go to change the profile of the business. And so if today, we’re 40% growth and 47% margins, then saying, “Hey, in the future, what does 60% growth and 30% margin look like?” It was tough to have that conversation along the way because we didn’t trust that the dollars invested downstream would turn into that result.

Jason Lemkin:

I got it.

Henry Schuck:

And so being convicted about making those investments and how it changes the face of the business, and trusting your ability to put the next dollar in marketing, or put the next dollar in sales, to have it grow, I think we got comfortable with who we were and how we were operating the business, and then didn’t take risks on that type of growth.

Jason Lemkin:

So whatever your own version of the rule of 40 is, it took you a while to believe it at a gut level that, that would work, that you could retain that. Right?

Henry Schuck:

[crosstalk 00:26:30] of the rule of 40 is like a rule of 80 today. But yeah, it was hard to-

Jason Lemkin:

But it’s true. Whether it’s 80, it’s hard. I didn’t believe that was true. I thought that was a silly-ism, the rule of 40 or 80. But if you have a well oiled machine, it is true for a while at least. Isn’t it?

Henry Schuck:

Yeah, absolutely. If you have a well oiled machine, you should be able to continue to invest and continue to grow in those areas. And I think we were just not convicted that the additional dollar would net the same return.

Jason Lemkin:

And there’s particularly this moment where on the sales team, you go from, you start, you have to believe that it really is bodies in, bodies out, assuming quality. Right? It’s a tough transition because in the beginning, you’re like, “Linda, Bob and Henry are so good. I just need more of them.” And then your sales leader’s like, “No, I need 40 reps,” and you don’t believe it. You don’t believe that it’s capacity. But you’re doing capacity planning for 2021 right now. Right? You know you need this number of reps.

Henry Schuck:

[crosstalk 00:27:32] in 2021. I think one of the interesting things here is I think a lot of people say, you hear a lot of people when you ask, “Why is your company successful?” They say, “Well, it’s because of the people.” And early in the early days of ZoomInfo, I got really frustrated with that answer. So I’d be on a webinar like this, and the CEO would say, “Hey, we’re really successful because of the people.” And I’d be like, “Come on. You’re really successful because of the product.” It’s got to be the-

Jason Lemkin:

It sounds like a platitude. Right? You didn’t believe it.

Henry Schuck:

Sounds like a platitude, totally. But then I found myself often, to that point, saying, “Man, if I had 10 of this guy, or 20 of that guy, or 30 of this woman, how much faster could I grow the business?” And that’s really just saying growth of your business comes down to the people. If you can look in your business, and I know everybody on this call can, and say, “If I had 10 more of him or 10 more of her, this business would grow exponentially faster,” then you really do believe that talent drives your business growth. And that’s an easy way to get to the core of what drives it, is to go, “If I clone this person 10 times, would the business grow faster?” And if the answer to that question is yes, for any number of folks in your organization, then you really do believe talent is the driver to success.

Jason Lemkin:

That’s a good insight. If there’s someone I’d say, “If I had 10 of her, I’m 100% confident,” then you’ve got to find a VP to go find that person for you. Right?

Henry Schuck:

Yep.

Jason Lemkin:

Can’t be you, going to your first point, because you can’t recruit 10 yourself. But go find the VP to do it. 

 

Jason Lemkin:

Henry, this was amazing. This was one of my favorite sessions of all time. These are the same mistakes we all make and keep making. But I think you’ve given us an incredible set of challenges to just make fewer of these mistakes. That’s the trick. Isn’t it?

Henry Schuck:

Yes.

Jason Lemkin:

Just make a couple fewer, and then watch how much faster you grow.

Henry Schuck:

That’s right.

Jason Lemkin:

All right. So this was a 10. I’m sure everyone is quietly applauding in cyberspace during this global pandemic. But I’m deeply appreciative for the time, as we all are, so thank you so much.

Henry Schuck:

Thank you, Jason. Thank you, everybody.

 

The post SaaStr Podcasts for the Week with Byron Deeter, Elliott Robinson, Henry Schuck, and Jason Lemkin appeared first on SaaStr.

It’s Not Easy Being a BookTuber


This post is by Geek's Guide to the Galaxy from Feed: All Latest

Daniel Greene, who makes a living through his YouTube channel, recently started a podcast. It’s a respite from the video sites analytics.

SaaStr Podcast #372 with 6sense CMO Latané Conant


This post is by Amelia Ibarra from SaaStr

Ep. 372: Latané Conant is the Chief Marketing Officer at 6sense, the company that allows you to achieve predictable revenue growth by identifying accounts looking for your solution, prioritize efforts and then engage the right way. To date, the company has raised $120M in financing from Battery Ventures, Insight, Venrock, Costanoa, Bain Capital, and Salesforce Ventures to name a few. As for Latané, before 6sense she was CMO and sales leader at Appirio where she drove 5X more effective field marketing programs and an increase in inbound leads by 300%. If that was not enough, Latané is also on the Advisory Boards of both Mediafly and Atrium.

In Today’s Episode We Discuss:

* How did Latané make her way into the world of SaaS and come to be the rockstar CMO and ABM thought leader she is today with 6sense?
* What does the preparation process look like pre-sales kick off week? What is involved? Who is involved? What needs to be ready? How does Latané feel about putting comp plans as part of the week?
* How important is a theme to having an engaging week of content? What can teams do to bring their themes to life? How does Latané advise others when it comes to keeping the content fresh and exciting?
* What is the right way to end the week? What are the right follow up steps to take? Where do many people go wrong here?

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
Latané Conant

Below, we’ve shared the transcript of Harry’s interview with Latané.

Harry Stebbings:

We are back on the official SaaStr Podcast, and we spent the last few weeks in the world of sales, and so this week I wanted to turn slightly to the world of marketing also, and discuss the coming together of these two worlds for the discussion on sales kickoff weeks. And there’s no one better to join me for this discussion than Latané Conant, CMO at 6sense. The company that allows you to achieve predictable revenue growth by identifying accounts, looking for your solution, prioritize efforts, and then engage the right way. To date, the company’s raised over $120 million in financing from the likes of Battery Ventures, Insight, Venrock, Costanoa, Bain Capital, and Salesforce Ventures, to name a few. As for Latané, before 6sense she was CMO and sales leader at Appirio where she drove 5X more effective field marketing programs and an increase in inbound leads by 300%. If that wasn’t enough, Latané’s also on the advisory boards of both Media Flight and Atrium.

Harry Stebbings:

So now I’m very excited to hand over to Latané Conant, CMO at 6sense.

Harry Stebbings:

Latané, it’s so great to have you on the show today. As I’ve said before, I’ve heard so many good things from Brian and the team at Venrock. So thank you so much for joining me today.

Latane Conant:

Well, Harry, you picked my favorite topics, [crosstalk 00:03:27] so I couldn’t resist.

Harry Stebbings:

I do want to start then with a little bit of context. So tell me, how did you make your way into the world of SaaS, come to be the rockstar CMO at 6sense and also that you are today.

Latane Conant:

Well, it was a little bit accidental. I always talk about being a recovering software salesperson. So I was a first Line seller at Appirio. I started running a region. I was running half the country and I was very opinionated about demand gen and marketing, which I’m sure was annoying to many people, but I was very opinionated about it. And so I started to build some of classic demand gen functions, like BDR team. So an outbound model and field model, cause we didn’t have those at the time. We were mostly a channel based play. And so I’m doing my thing just because I wanted to make sure my salespeople had enough pipeline. And then lo and behold, our CEO came to me and said, “I know you fancy yourself as a sales gal, but can you throw your hat in the ring at marketing?” And I mean, the rest is history, Harry, I never resist a challenge.

Latane Conant:

So I took it and was the CMO at Appirio and then found my way to 6sense. And that’s an interesting story in itself because I just fell in love with the 6sense technology. I had done an ABM pilot while I was at Appirio and you learn more from your mistakes than your successes. And it was so time consuming and we did everything right in terms of the content, the creative, the level of personalization, just everything. But it was so much work that the ROI, the math just didn’t work. And so when I saw 6sense had the capability to be able to make sure that all of your hard sales and marketing time and money and muscle go towards the right accounts, go towards accounts and market and then could help me orchestrate these campaigns. I was like, this is going to change the game.

Harry Stebbings:

I mean, 6sense has changed the game in many ways. I’m sorry, when you were speaking there, I was just thinking there’s two burning questions and I expected to go off schedule, from our previous chats, pretty quickly, but didn’t expect to this early, but let’s roll with it anyway. Question for you. I was having this debate with a portfolio company founder today and he was saying, “Harry, my marketing team is telling my AEs, ‘Hey, you can help as well on demand gen. It’s not just our job. It’s everyone’s job. Don’t just expect us to feed you all the time.’” Question for you. Should AE’s get involved in demand gen and filling pipe as well a little bit? Or do you think that kind of highly segmented, highly specialized is very important to know your lane.

Latane Conant:

As a recovering software salesperson? I don’t know what has happened. I feel like salespeople have, I don’t want to say gotten soft, that’s not nice. But you get paid the big bucks to own your business, to own your business model. And so I don’t understand this notion of not taking a role in that. Now you can push marketing and you can partner with marketing to make sure that you’re using the latest and greatest techniques and technology. And if I were a salesperson today, I would definitely be asking in the interview process, how is demand gen set up? Do you use intent data? Do you use predictive analytics? Knowing that I’m going to be five times more successful if you have those capabilities. But at the end of the day, salespeople get to go to clubs. Salespeople get paid the big bucks because it’s a hard job. And I think you’re still expected to prospect.

Harry Stebbings:

Yeah, no listen, I agree with you in terms of really owning that function. The second was, you mentioned there about kind of allocating resources to the accounts that deserve attention. And obviously all accounts deserve attention, but just kind of allocating resources effectively on an account basis. I have a lot of people that say, “What’s the right level for ABM, Harry?” It doesn’t make sense at 10K. Does it make sense at 50K or does it have to be 100K? How do you think about the amount that it has to be to justify ABM and that much higher touch?

Latane Conant:

Here’s the thing. If you have a true B2B sale, meaning multiple personas involved, longer sales cycle, I believe ABM is the most effective way to generate demand. And I think that unfortunately ABM has become equated with spending a lot of time, money and energy on one or two accounts and almost overspending on those. And that is not how I define ABM. I define ABM as using data, using analytics to make sure that you are doing the right things at the right time to accounts most likely to buy. And it sounds like, okay, what are you really talking about? So let me just take the Appirio example, ABM. I’m going to pick a few accounts. I’m in a certain industries where we’ve sold to before, we sold to this type of account. So let’s do it with accounts that look like that.

Latane Conant:

And I’m going to talk to sales and we’re going to come up with a list of accounts. And for this list of accounts, we’re going to send champagne. We’re going to have a landing page for them. We’re going to have dedicated BDRs just for them. That to me is old school. And that’s where you get underwater from an ROI perspective. So what I do is I run 100% ABM. And what that means is knowing who to sell to and knowing who not to sell to.

Latane Conant:

So for example, let’s apply that to an inbound model, Harry. So if I have an inbound model and I want to apply ABM, what that means is an account is going to come inbound and I’m automatically going to start to apply an account score. So I’m not just going to look at the one person who came inbound. I’m going to look at the buying team. I’m going to look at how they’re engaging. I’m going to look at the amount they’re engaging. And that’s going to determine, does sales followup, does marketing continue to nurture, what we do with that? Because I don’t want people wasting their time until an account is really ready. So that’s applying ABM at an account, like, inbound level. And then when it comes to an outbound motion, they’re not going to go and work accounts that aren’t showing any sign of intent, meaning they’re not doing research on keywords that matter. They’re not maybe coming to my website. I’m going to make sure that I’m pointing that valuable resource at the best accounts most likely to buy.

Harry Stebbings:

Totally get you in terms of that kind of much more targeted there, it makes sense. I do want to dive in, as I said on the schedule itself, because otherwise I could chat for days, in terms of your favorite week of the year. And I love this when you said this before, and as you said that your favorite week of a year is the week of sales kickoff. And you’ve said before, in terms of driving marketing and sales alignment, there’s nothing like it. So I do kind of want to start from the beginning because if we think about kind of what it takes to make it successful, the first is preparation. And you said before, do not underestimate the preparation required. So I’d love to start on that. And what did you mean by this and what have been some of your biggest learnings around it? What does it take from a preparation standpoint to be successful in sales kickoff?

Latane Conant:

I think a lot of people make the mistake of thinking that they can waste their team’s time, meaning they don’t have to be prepared for internal meetings, in general. I take a lot of umbrage to that. So just like for me, I would coach my team or an AE that it’s for every hour that you’re in a meeting, you should assume two hours of prep. And so you think about something like a field kickoff or a sales kickoff where you’re literally bringing these super highly valuable resources together for a day, two days, a week, whatever it is. Why would you not do the preparation to make sure every second counts? And you really thought through making sure it’s just a phenomenal experience. And I think too often people think, oh, it’s an internal meeting. So I don’t have to have a tight agenda. I can let people run over. Not every session needs to be phenomenal. Whereas when I think about internal events, I tend to put the same amount of rigor on an internal event as I would on an external event because my team’s time is valuable.

Harry Stebbings:

Can I ask, when you have your sales kickoffs, how long before do you start prepping for it? And what does that process look like for you.

Latane Conant:

So it’s about six months before. And then obviously it gets more frequent and intense leading up to it. I think you also have to, Harry, be stage appropriate, right? So if you’re a Series A company, you’re not going to hire a live band or something for your sales kickoff and maybe your sales kickoff is only two days. Sales kickoff doesn’t necessarily have to be expensive or quote unquote overdone. I just think you should think of it as more than just a meeting and really, really think through, what am I trying to get across to the team this year? And so what I like to do, typically, is I like to actually make sure that the leadership team, the executive leadership team, has done a strategy session. So logistics and stuff get locked like six months in advance because typically when we were traveling, right, you got to rent a place and book things.

Latane Conant:

But before we actually come up with the theme of sales kickoff, what I like to do is bring all of the executives together and figure out the theme for the year as a company. So what are we trying to do as a company? What’s our vision? I use a strategic planning tool called V2MOM. What are our key methods as a company? And then now how does that trickle down to what we need to do from a go to market perspective across sales, marketing, and customer success? Because that’s a pretty big input into field kickoff and getting the team pumped to go and execute.

Harry Stebbings:

Can I ask, cause it’s really interesting hearing you speak about kind of, especially the V2MOM process there and kind of strategizing around it because you said something else about kind of the prep stage. And it’s like the worst thing that you can do is come with a plan. And so I think you’re on an odd stand in terms of kind of preparation and not coming with a plan. And how do you think about that in particular?

Latane Conant:

So let me unpack that. When I say don’t come with a plan or a bunch of grandiose plans, come with actual things. What I mean is I’ve seen it where marketing presents, well, we are going to help you with battle cards. Our plan is that we’re going to launch better battle cards. Okay. I’m saying don’t come with the plan to launch better battle cards. If that is a key thing, show up to sales kickoff and say, we’ve launched better battle cards, check the portal. They’re live right now. And let me explain to you how you’re going to use these battle cards. That’s a big difference. So what I want is I want all of my sales and marketing and customer success teams to leave kickoff with all of the resources that they need done to be successful, not plans about things I might develop. Hey, we’re going to be creating a lot of case studies this year. How about we have five done, they’re right here ready for you to use.

Harry Stebbings:

Why don’t you think people do that? Is it because they’re waiting for a confirmation from leadership and then nervous about assuming a strategy without confirmation before starting? So it’s like, we’re going to do a lot of battle cards, wait for the response and then pursue it if it’s well received? Do you think that’s why? Cause I agree with you in terms of that action orientation.

Latane Conant:

Maybe It’s just an urgency thing. So one of my best and worst qualities is impatience. And so I tend to have a lot of urgency and I have a saying, never waste a deadline. And so to me, field kickoff is the culmination of a lot of deadlines. And people know that. People know, no we’re not going to talk about the new website. The new website needs to be done or at least part one done, right? So it’s a forcing function to deliver because if you think about it, sales automatically has a forcing function every quarter with quotas. Marketing and sales ops, and a lot of the supporting functions don’t have the same implicit deadlines. And so to me, I need to use things like sales kickoff, or it’s funny, we have a mini sales kickoff in a week to make sure that–things can just linger, Harry, and it’s annoying. I don’t like that.

Harry Stebbings:

I totally get you. Especially with the lingering elements. That’s the most annoying thing. And we share the impatience. So it’s a good trait to have, I continuously tell myself, though I think others around me would disagree. I do want to ask, though, cause once we have that kind of content and we’ve got the prep in place, you obviously have to go through some form of review process. What do you think the review process should look like? And when should it be done and how does that take shape?

Latane Conant:

It has to take place with the head of sales, honestly. I will help, but I have found people love to wait till the last minute to get their shit together. So you have to have an executive, maybe even the CEO, who’s checking and the content is due to them, not the marketing team. Because otherwise people will rock in and they will not have practiced, they’ll run over, their slides will look like shit. And we just can’t have that, Harry. That’s not the kind of shop we’re running. So we try to have content review sessions scheduled, call it two weeks before. And I also always have a designer right up through sales kickoff because you’re going to have stragglers and their stuff’s going to look like crap. And they’re going to be presenting on Tuesday, and Monday there’s going to have to be some designer making sure it doesn’t look terrible.

Harry Stebbings:

Yeah, no listen I love the directness to be honest, Latané. It’s not something that I always get doing the show, honestly. So it’s like truly refreshing for me as an interviewer. [inaudible 00:15:15] and presenting on Tuesday and the design is last minute on Monday. And bluntly, when you’re in these presentations and events, sometimes, I mean, we both know, God, they can drag on and keeping them fresh and lively, it’s hard. You said before in terms of really keeping that enthusiasm energy, you have to rotate presenters, not people. Loved it and thought it was a great book title, actually. What did you mean by this? And what have been some learnings on how to keep it really fresh and high tempo when sometimes it can be stale four or five hours in.

Latane Conant:

Yeah. So you’re actually unpacking two questions. So let’s take the rotating presenters, not people. That is actually a solve for a different challenge. And the different challenge is if you do break outs, people will all of a sudden linger and they won’t come back, maybe, or they’ll take a phone call or this or that. And there’s too much flex for people to get lost behind. Because you’re trying to move, like if you think about it, if I’ve got 10 breakout rooms of 20 people, that’s a lot of cats to herd. So typically what I like to do is say, no, you are a breakout track, the people stay. The presenters, if I have 10 breakouts, it’s only 10 people that I have to herd each transition. Does that make sense?

Harry Stebbings:

Totally does, it’s very different.

Latane Conant:

So that’s what I mean by that. And again, I made a big investment to make sure that we prepped and everything was amazing. Now you owe me being present here and not slipping off to do other things.

Harry Stebbings:

Yeah, I think that’s definitely hard for you, it’s the mutual respect. On the content itself. So now we’ve covered that. What have been some learnings on keeping it really exciting?

Latane Conant:

I mean, I think we talked about like dropping things so that they’re the first to see it. So like dropping a product release that no one else has seen. That’s cool. I want to be part of that. There’s fun things you can do. I’m all about stingers. So the theme is super important and you want to reinforce the theme throughout the program. And so a stinger is just a hilarious play on the theme. Like you take a movie clip or something like that. And it just keeps people laughing and energized.

Latane Conant:

And so you kind of want to infuse stingers and things like that. Have people dress up. Like we had our head of customer success. Our theme was around the 6 sensei saying, which is if you know everything, you can do anything. And so we created a character of a 6 sensei who knows and does everything. And so we dressed our head of customer success up like a 6 sensei, no one expected him to come in. He came into the room, all dressed up, we played music. Cheesy actually works. So keep it cheesy. That’s all right. Fun. Any type of guessing games or contests throughout, people love to get prizes, even if it’s something very minimal, they’ll do crazy things just for minimal things.

Harry Stebbings:

Can I dive in and ask, you mentioned the word theme there and I’m interested what makes a good theme and what makes a bad theme?

Latane Conant:

Yeah. So to be honest, I probably go a little too crazy on picking the theme because what I found is what you pick matters less than how invested you get in it. Meaning there’s no real bad theme. The key is that what you pick you really, really reinforce to make it fun and interesting. So what do I mean? We had a theme that was rise above the clouds. The reason we picked that is we wanted people to not just sell software. We wanted them to lead with strategy and take a more strategic approach and sell bigger deals. And so we had this whole theme. And so then we anchored that in airplanes.

Latane Conant:

So when they got there, they got a boarding pass. So the agenda looks like a boarding pass. We had presenters pretending to be flight attendants. We had a whole fasten your seatbelts spoof stinger. Each breakout–like one team was called the blue angels. One team was… and you get my point. It’s like you have team names that match the themes. You have content that match the themes. And as you’re doing the content review, you challenge people to infuse the theme. So instead of doing a deal planning session, can we call it a flight plan session? For example.

Harry Stebbings:

Yeah, I love that. I think it’s super cool to have the [inaudible 00:18:48] theme, especially when it’s like the boarding passes and the seatbelts and everything.

Latane Conant:

Even brought a drink cart. We had an airline drink cart made and brought that into breakouts. So, just like have fun with it.

Harry Stebbings:

I hope someone got to keep all of this memorabilia. Can I ask, in terms of the content itself. So the content progresses. And then the thing that I find kind of interesting, it’s like, as we get to an end, sometimes that can be a bit of an anticlimax. And you said before, hold a final general session. What does this general session look like? And what do you want to achieve out of it? Most importantly, I guess.

Latane Conant:

So basically from an agenda perspective, what you want is you want a really high energy kickoff with everybody together, right? So it’s like the high energy, everyone’s together, then go into break outs, however you’re doing those. And then what I mean is I’ve had agendas that end on a breakout. So people just kind of peter off. And so even if it’s a 20 or 30 minute closing session, you want to get people back together, recast the day, people love collages of themselves doing stuff. Just reinforce everything they’ve learned and kind of go through highlights of the week or the couple days.

Harry Stebbings:

Yeah, no, I get you bringing them all back together. Can I ask you, do at some point quota and plans for quota be attached to these sessions or does that kind of remove the fun from the room so to speak?

Latane Conant:

Oh my God. Well, our worst one was the last session was that rolling out the comp plan, which was just a terrible idea. And plus then they’re all together and everyone’s moaning and not good. And this is kind of the never waste a deadline. I think comp plans and territories need to be rolled out before sales. The process needs to be done, questions answered, everyone understands their comp plan. So that whole thing is behind you coming into kickoff.

Harry Stebbings:

Yeah no listen I totally agree. I think it’s a daunting way to end it. Can I ask that post the ending, it’s the start not the end, really in many respects. And when you think about like postmortems and the right way to follow up, what does good follow up look like post a sales kickoff? How do you like to kick the that really into action?

Latane Conant:

Yeah, so we have a solution called Mediafly that has like a sales readiness component. And so we try to have as much as the content as we can video-based or somehow transitioned into our learning platform, right? Because unfortunately not everyone will start at kickoff and so many great assets come out of it. And then the more the theme can sort of live on. So live on in your forecast calls or live on in future QPRs and things like that. It just sort of keeps the energy up and going.

Harry Stebbings:

Totally, I was thinking it would be strange for me to come into work as a pilot for the next year, but now I know it’s absolutely fine. If you’re hiring at 6sense, please let me know. But I do want to dive into my favorite then, Latané, which is a quick fire round. So I say a short statement and then you give me your immediate thoughts. So you ready to rock and roll?

Latane Conant:

Oh God. Yes.

Harry Stebbings:

It’ll be fine. Trust me. You can always trust a Brit. So tell me what is the biggest challenge of your role with 6sense?

Latane Conant:

Impatience.

Harry Stebbings:

In terms of expectations of the people around you?

Latane Conant:

Yeah I mean, so you have to understand when I came to 6sense and it’s way different now, cause I’m two years in. But I would say when I got to 6sense, I had been at a company that was global, big scale, large team. I mean we ran 500 field events a year, all around the world. And so then when I got to 6sense, it was me and one other person to start. So I had to temper my own enthusiasm and break down what we needed to do and kind of be okay that Rome wasn’t built in a day. So I think that’s something I’m always working on.

Harry Stebbings:

Sometimes you have to go slow to go fast, I’ve been told. It’s not easy. I agree. Tell me, who should be invited to that sales kickoff week? That’s a tough one.

Latane Conant:

This is hard. I have no answers here. I struggle with this. I hate having people not able to come. I mean, one thing now, Harry, is now that we’re virtual, I’m going to have to think about how this formula applies in a virtual world. A lot more people could perhaps come, which will be nice because I think that’s the hardest part of planning an amazing sales kickoff is, I would love to have everybody come.

Harry Stebbings:

But you can have everyone there if it’s virtual. I mean, there’s no cost increase in terms of adding an extra person.

Latane Conant:

There actually is if you do a good virtual event, you’re sending swag packs and there’s always an element. Like we just did a virtual event and we had a live performer, but we sent everyone the cocktail kit in advance and then we showed them how to make the cocktail. So, but you’re right with virtual, I would say there’s no reason why we wouldn’t want to expand the guest list for sure.

Harry Stebbings:

Yeah, no, totally. Tell me what’s the biggest surprise for you internally since COVID began. It could be in terms of pipeline movement. It could be in terms of team morale, but what’s been the biggest surprise internally since COVID began?

Latane Conant:

We haven’t missed a lot of beats and I’m surprised and proud of that. I think what’s interesting is Appirio, the team was pretty much 100% remote. So once you get to kind of a big global company, no one’s ever going to be in the same office, right? People are in Japan, they’re in EMEA, blah, blah, blah, blah, blah. And I haven’t gone into an office in 17 years. So sort of had this like remote thing already. And so it’s been interesting to see the team just kind of plow through. I think that the sad part about it is we’re still getting a ton of work done, but it’s not as fun. So that’s what I have to work on is the fun factor.

Harry Stebbings:

Now this is the incredibly unfair one of me to ask, but at what moment in your life has maybe changed the way you think the most?

Latane Conant:

I don’t know if it’s a moment, but certainly a career stop. And I mentioned Appirio a few times and our CEO was so into culture. He was so, so, so proactive about culture and creating amazing culture. And for him that was like always a high, high, top priority. And I just had never worked at a company like that. And that taught me so much about really what it takes to win, what it takes to retain people, how important culture is to a brand and how important it is to customer experience. And our thing at Appirio was you can’t deliver a great customer experience unless you’ve really invested in a great workforce experience. The rest is history. I believe that that shapes everything I do.

Harry Stebbings:

Yeah, no. And listen, I totally agree with you and it’s a supremely valuable lesson to learn. The final one there, and it’s a tough one, it’s, what do you know now that you wish you’d known when you join 6sense?

Latane Conant:

Honestly, I didn’t know shit when I joined 6sense and maybe that was good. Sometimes the less you know, the more willing you are to learn and try. And so I would say, I don’t think there’s anything I wish that I’d known. I’m glad that I sort of went in with eyes wide open about everything I didn’t know. Because I didn’t assume I knew anything and just got to learning.

Harry Stebbings:

Latané, as I said at the middle, I think it was, not many people are as open and honest as you, the transparency is awesome. And honestly, I so appreciate you taking the time. So thank you so much for joining me today.

Latane Conant:

Sure. Thanks Harry. Fun to be on your show.

Harry Stebbings:

Absolutely loved having Latané on the show there and such exciting times ahead for her and for 6sense. As I’ve said, great to have such a transparent and direct conversation and I absolutely loved it. And if you’d like to see more from us behind the scenes, you can on Instagram at hstebbings1996 with two Bs.

Harry Stebbings:

As always. I so appreciate all your support and I cannot wait to bring an incredible episode next week with the CEO at HashiCorp.

 

The post SaaStr Podcast #372 with 6sense CMO Latané Conant appeared first on SaaStr.

Warren Buffett invests in an unprofitable business


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

The whole crew was back, with Natasha Mascarenhas and Danny Crichton and myself chattering, and Chris Gates behind the scenes tweaking the dials as always. This week was a real team effort as we are heading into the maw of Disrupt — more here, see you there — but there was a lot of news all the same.

So, here’s what we got to:

We wrapped with whatever this is, which was at least good for a laugh. We are back next week at Disrupt, so see you all there!

Equity drops every Monday at 7:00 a.m. PT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

SaaStr Podcasts for the Week with Jennifer Tejada, Ben Chestnut, and Jason Lemkin


This post is by Amelia Ibarra from SaaStr

Ep. 370: As organizations race to achieve relevance and a competitive edge in the digital era, automation is fueling the fight. Join PagerDuty’s CEO, Jennifer Tejada, as she discusses the need for agility and innovation and how automation is aiding adaptability and allowing enterprises to surge ahead.

 

This episode is sponsored by Linode.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from a session at SaaStr Summit: Enterprise. You can see the full video here, and read the podcast transcript below.

 

Ep. 371: It’s no secret that businesses today are struggling with an unpredictable economy. In this session, Mailchimp Co-founder and CEO Ben Chestnut will share the story of Mailchimp’s founding amidst—and despite—the dot-com bubble burst, and how the company navigated a number of inflection points in the first 10 years of its founding.

 

This episode is sponsored by Outgrow.

 

This episode is an excerpt from Jason and Ben’s session at SaaStr Annual @ Home. You can read the podcast transcript below.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Jennifer Tejada
Ben Chestnut

We’ve shared the transcript of episode 370 below. You can also jump down to the transcript of episode 371.

Transcript of Episode 370:

Jennifer Tejada:

But I thought today I would start off with a little bit of good news, and that good news is the fact that digital acceleration has truly become a reality. And with that, it’s a transition that we’ve seen take place over several decades. I’ve been in software since the ’90s and for over 20 years, nearly that entire time, we’ve been talking about digital transformation, developing strategies, architecting new technologies, and moving beyond digitization to rethinking our businesses, our products, and our services in a way that’s optimized for a digital world.

Jennifer Tejada:

With the advent of a global pandemic and the resulting recession, transformation efforts around the world and across industries, as you’ve all seen, have been thrust into high gear. And for some companies, this transformation is a requirement for survival, where for other companies, it enables them to exploit opportunities that are presented by the current environment. And this current environment that we’re in, marked by an ongoing global health crisis, by lockdowns, by remote work, social distancing and civil unrest and market volatility, it’s challenging in new ways that we as leaders have never experienced. Not the least of which, by being exhausting.

Jennifer Tejada:

This shift has come suddenly. It’s been extraordinarily fast and it’s been compulsory. It’s not like we had a choice, as opposed to more gradual like in earlier industrial revolutions. And it’ll be interesting to find out what sticks, which changes stick around and stand the test of time and which kind of return to the way they were when we find our new normal. Since the only real certainty is ongoing uncertainty, I found myself as a leader seeking inspiration. And I didn’t have to look very far. I looked to our customer base. Many of our customers are doing amazing things. They’ve helped us get through the stay at home and shelter in place orders and manage the fear and uncertainty of COVID, like Peloton. I don’t know about you, but all of my fitness is now happening in my home and within a six mile radius of my house.

Jennifer Tejada:

Slack, which has become an online collaboration lifesaver for many of us at work and also a social environment for us to engage with our peers. Netflix. My daughter is using Netflix Party all the time to feel that sense of watching a movie with her friends when she can’t be together with them. Shopify. We’ve seen tremendous results from their earnings recently because they are enabling the world to transition to e-commerce essentially overnight. Ocado, which is an online grocery deliverer in the UK which is getting food to people when you need it when you don’t really want to walk into a grocery store. And of course we know Amazon has been delivering all kinds of things from desks to working at home to common household supplies. My favorite though is Zipline. Zipline is a California drone-based delivery company that transports critical medical supplies like blood and vaccines in Rwanda and Ghana. And in April, it added COVID-19 test samples to its distribution.

Jennifer Tejada:

So it’s not all terrible bad news because Winston Churchill told us, “Never waste a good crisis.” And many of our enterprise customers at PagerDuty have delivered digital transformation programs that were supposed to take years in months. That is really happening in the marketplace. And it’s happening at companies that are 50 or 100 years old, where they’re having to find new ways to reach their customers with brands and services. Some of the examples that ready come to mind are remote work, contactless, curbside pickup, and cashless transactions, which we all experience as consumers. Some are less obvious like tele-health. This came from necessity. Teladoc, Cigna Virtual Care has been super helpful to my family. Maven Clinic.

Jennifer Tejada:

Or even manufacturing companies like Ford and Dyson transitioning their manufacturing lines to build much needed ventilators or Estee Lauder transitioning its cosmetic lines to build hand sanitizers when New York was really struggling to stop the spread of COVID. And finally we’ve seen social media play a role in organizing and catalyzing the global anti-racism movement. Much of this acceleration can be credited to this crisis, which while being chaotic, it’s actually the perfect forcing function for change. Prior to the pandemic, you had to plan and orchestrate and sell change. Often you needed consultants and boards and change management experts to be involved to help you convince your people that even if it wasn’t broken, they needed to fix it, to disrupt something that was working really well.

Jennifer Tejada:

There’s typically a very high internal cost to change, not to mention the external market risk and customer risk. And in this case, we’re now seeing an environment where your employees and your customers not only know they need to change, change is sometimes the only or the most immediate viable path. And in that case, this is actually a gift. I think of this crisis in some ways as a gift because change for us is now practically free. Relatively speaking, the ability to pivot your organization, the ability to move in a different direction, the ability to look at all those things as a leader you had on your bucket list that you wanted to do differently or experiment with, well, now you have that opportunity and the time is now to start ticking those things off your bucket list.

Jennifer Tejada:

The other thing that’s changing and evolving really fast is the role of the leader. We now have new stakeholders and new challenges. This crisis has accelerated the change in the CEO role permanently, broadening all of our responsibilities and our constituencies. It’s not enough to just make our customers happy or our employees happy. We have to think about all of the communities that we serve, our investors and the communities around us that need our help. We need to leverage our tech, our people, our position, our voices, our power, and that has become a central requirement in the CEO role. Trust has also become the most valuable currency. It takes years to build up trust with your customers and employees, and it can be destroyed in a heartbeat, in a minute. And that means that transparency, vulnerability, continuous engagement with our employees and our customers is now mission critical.

Jennifer Tejada:

And work is everywhere. It’s all the time. The lines between work and home have blurred. So who owns the wellbeing of our employees? We do. Who owns keeping them informed in a world of misinformation? We do. And our values have become increasingly more critical. You now have to go beyond explaining your values making sure everybody understands them. You have to lean into them and demonstrate with a high level of empathy that every decision you make, big or small, is values-led because your employees are looking to you. They are trusting you to keep them engaged in your mission. And as CEOs and leaders, sometimes that’s really challenging because we all need to provide a compelling future, a purpose to keep people who are dealing with things like isolation or their kids at home or the prospect of school not picking up in the fall, the stress of COVID and its impact on family members.

Jennifer Tejada:

We need to keep them engaged in the purpose and the mission so that they’re driven so that they can continue to find fulfillment and enjoyment in their work. And to do this, you’ve got to scale it through your managers. But management has changed. When I grew up in the world of management training, it was all about duty of care. First, do no harm and deliver the business results. Well, we have to now start with demonstrating personal care first. And this may not naturally come to all of your managers. It may not be first nature. That role of the manager is increasingly important, that frontline manager, not simply to direct priorities and direct work, but to model, to coach and most of all, to demonstrate care to your employees.

Jennifer Tejada:

I was speaking with Brad Smith, the chairman of Intuit, the other day, and he shared this simple process that they’ve executed at Intuit that I thought was really interesting. They’ve created a form and a flow for their managers to do check-ins. And instead of doing what we all naturally want to do, which is to check in on the project, check in on how the work’s going. Like is it going to be delivered on time, is it going to be on budget, will we ship it, will customers like it, will they understand it, start with the people first. How are you? How are you feeling about things? How’s your family? How’s everything going? This really resonated with me because one of PagerDuty’s values is people first. And this just feels like a great executable on that. They’re taking it one step further and they’re tracking it in Betterworks or Reflektive or one of their HR online systems. And I think that’s a really good way to help managers practice, but also hold them accountable to demonstrating that care for employees.

Jennifer Tejada:

The challenge is even the best management and training processes won’t always work. They won’t prevent burnout because when we’re working from home and we’re supported by this technology, there’s great technology that we’re using today which blurs the lines between work and family time. People are going to get burned out and you’re going to see that ebb and flow and going in cycles. So looking forward, we also need to innovate and automate policies around flexible working, childcare and lead to address some of these challenges. For example, at PagerDuty we’ve offered Newtonian days, spontaneous Fridays off to really enable employees to decompress and refresh and step away from the blue screen.

Jennifer Tejada:

We’ve also kicked off this concept of simple Wednesdays. Simple stands for stop internal meetings, plan lots of external ones. And the idea is that on Wednesdays, if we take meetings, they’re going to be external, customer-facing meetings. This has helped us to break up the meeting gridlock mid week and it’s also turned our collective focus forward and outward towards the market and our customers, which is where our priority lies. In addition of having an existing five months of parental leave, we extended emergency and caregiver leave and launched an online mental health platform called ginger.io for our employees. We also gave our employees an expense allowance for their work in home environments. And to support personal activism and anti-racism, we updated our 20-hour volunteer time off policy to include peaceful demonstration, self-education, and voting.

Jennifer Tejada:

I’m not suggesting this is perfect, that this is all inclusive or that you’re not doing a lot of this already, or frankly that you need to do all of this. But what I am suggesting is, we need to keep improving and experimenting and figure out how we create that purpose and that fulfillment for our employees while delivering on new needs for our customers. Sound easy? Not so much. One of the big questions is, how do we find the capacity as leaders, personally, and the capacity within our organizations and our teams to get some of this done.

Jennifer Tejada:

Nicole Malachowski is a retired Air Force officer and the First Woman Thunderbird Pilot and I’ve had the great fortune of hosting her to speak with our leaders in many occasions. And one of the things that she talked about recently really struck with me. It’s the fact that when you’re in combat and it’s chaotic, your natural instinct is to play defense. But the winning playbook to surviving and winning in a combat environment is all about seizing your advantage. And I’ve heard people talk about seizing opportunity, but this nuance is a little different, right? Because again, most of us normal humans in a chaotic or situation where we feel attacked and uncomfortable, we’re going to shift to the back foot. We’re going to shift to defense.

Jennifer Tejada:

Nicole’s astute point is that you are unlikely to win playing defense because someone’s chasing you suddenly. First, you need to identify and name your advantage. That sounds pretty simple and straight forward, and it can be surprisingly hard to do because we all think we’re good at lots of things. We all think we have many benefits. What is your greatest advantage? Be intellectually honest. Maybe it’s not that list that was in your last pitch deck, but what you truly believe your customers in the market reflect back to you as your defensible advantage. How’s your product essential? Do you solve a current urgent problem? How do you point your advantage at your customer’s biggest challenges?

Jennifer Tejada:

Next, focus on turbo powering that advantage. This is the hard part because if your company is anything like mine, we have teams working on all kinds of initiatives that were super relevant in January and not so much now. But we have people that are wedded to those projects that feel a deep level of personal connection to that work. And on close examination, even though they deserve re-prioritization or maybe canceling, people will be resistant to that change. Your job is to as quickly as possible shift your resources to strengthening your advantage. So how do you free up your people so that they can focus on being creative, they can shift to that advantage, digging in deeper, building a stronger moat with that advantage, being innovative and yet finding the capacity and the time to do that despite all of the personal challenges I just mentioned and all of the business challenges that are in play.

Jennifer Tejada:

I’m positive that you need to automate or eliminate anything that can create capacity for the stuff that matters, that advantage that we talked about. And making space is literally and figuratively space for transformation. So like us, as you’re probably scenario planning your butts off to maximize growth and conserve cash in case this pandemic goes on for a while, which it looks like it will, how are you going to do more with less, particularly in a cash-constrained world, and how do you know which projects to stop and which projects to accelerate? How do you leverage your team to do that? Well, for us we have to start with elimination. We had to ruthlessly prioritize our team’s investments and activities.

Jennifer Tejada:

And I was somewhat helped because we used the V2MOM methodology, where you stack rank all of your key initiatives, you stack rank the projects that support them. So, you kind of have to challenge that stack ranking in order to keep something that’s low on the list in play, or you have to make a really good business case for reordering that stack rank. And that’s precisely what we did. It allowed us to reshuffle some things. It allowed us to stop some projects or back burner some projects. Some projects that I particularly was very interested in and committed to. We had to put on the back shelf when the world started to change.

Jennifer Tejada:

Then you’ve got to assess your progress and then you’ve got to reprioritize again. I think the thing that surprised me was that you’re constantly having to monitor this, check your progress, potentially reprioritize because the market and the environment we’re in is evolving faster than in any experience in my professional lifetime. And what I’ve learned is this is really a cycle of days and weeks, not months. In this environment, I think the frustrating thing is the annual planning cycles that we’ve built our businesses around don’t serve us. They’re static and unresponsible to the evolving situation in front of us and we need something more dynamic and more fluid. Canceling projects to promote your advantage will serve you in this environment. So while it may be hard, cross some things off the list.

Jennifer Tejada:

Now let’s turn to the role that automation can play in accelerating your strategy and your business and your customer outcomes. As a startup, we covered a lot of processes together really quickly out of necessity and we haven’t really had time or the wherewithal to go back to them and harden them for scaling. And those manual processes, they build up like plaque on your teeth. You can’t really see it until it’s bad. And by then you’ve got a mouth full of decay and your teeth falling out, this whole set of painful bigger problems that are now harder and more expensive to resolve. And that’s where automation comes in, whether you’re leveraging robotic process automation from UiPath and your finance teams or your HR teams, or you use SaaS apps like Pendo to find insights and track and learn your customer behavior in your product, or you use People.ait o understand the auto and automate the process of gaining insights on sales capacity and sales productivity.

Jennifer Tejada:

All of these types of automation can not only accelerate work and get rid of manual work, they can help you institutionally learn faster, get smarter and get better faster. And those are the outcomes that we’re looking for. Earlier this year, we redoubled our focus on our enterprise segment where we have a strong leadership position. Think of this as something we identified as an advantage. And to shift resources, we had to automate more and more of our SMB offering and make sure that we could refine our product to make sure self service journeys were more productive and frictionless. We made in-app purchases available for all of our customers, and we are the only mobile app that you can run an end-to-end incident and response on, which is really important when we’re talking about supporting distributed teams.

Jennifer Tejada:

Another example we’ve seen plenty of in our customer world is this expedition of cloud migration. And in particular, we’re seeing this in retail and e-commerce and traditional consumer businesses where bricks and mortar brands have been forced to shift to 100% e-commerce overnight. And I remember seeing Andy Jassy speak about this at Reinvent, the idea of kind of cleaning out the garage and starting fresh as opposed to just digitizing the processes that were available today. So, we’re now seeing customers that are reinventing, reinvigorating the customer journey, leveraging the cloud as an automation platform for that. And all of you are very fortunate, many of you are cloud native companies. And so I think there is an opportunity and potentially an advantage here.

Jennifer Tejada:

This may sound kind of primitive when we talk about customers making that shift now, because you were born that way, but the biggest brands in the world didn’t start here; and underestimating those brands, do that at your peril because many of them have some of the best marketing, product and business operators in the planet and they have now gone Mach 5 into learning how to leverage the cloud to their advantage and they may be coming after some of you. So, the other thing to think about is your advantage of being a cloud-based company, that competitive lead or gap may be getting smaller for you and you’re really going to have to innovate on behalf of your customer in other ways.

Jennifer Tejada:

If you’re not already, you’re also going to need to retrain yourself and your teams to take a more agile approach to planning and capital allocation. Think about doing it on a rolling quarterly basis if not a monthly basis, so you can find opportunities for automation really quickly. You can pivot when you see a project that you’re investing in right now is not going to pay off for too long of a term. And at the same time, you can weigh up some of the long-term initiatives that are going to be really important for the future that are going to ensure that you can not only survive but thrive and come out of this environment much, much stronger.

*****

Transcript of Episode 371:

Jason Lemkin:

This is very exciting to me. Ben, thank you so much for coming and joining thousands of us in cyberspace here.

Ben Chestnut:

It’s about time you invited me.

Jason Lemkin:

Yeah. I’ve been asking Ben over Twitter for years to come and I think his kids got older, they had sports and spring break and it’s hard to lure someone from Atlanta sometimes, although you never know. Every once in a while someone has to have a meeting in the Bay Area or Paris and they’ll come but I’m super excited-

Ben Chestnut:

[crosstalk 00:02:10] finally aligned and I can be here with you and your audience.

Jason Lemkin:

What’s your gut on all the office stuff? Where will we be … has MailChimp gone, made any formal decisions and where will you be at the end of next year in an office? Have you figured that out?

Ben Chestnut:

I really like what Patrick Collison said recently on Twitter. I think when things do get back to normal and they will, six months after that, you’ll look back and things will look like nothing ever happened. Maybe that’s just faith, blind faith that it’ll get back to normal. I have family that was stationed in China for work and they said it got back to normal.

Jason Lemkin:

It’s definitely back normal. Even in Europe, like all the entrepreneurs I know in France, it’s like 90%, right?

Ben Chestnut:

Yeah.

Jason Lemkin:

All right, so no thinking of getting back to normal is sort of how you’re thinking as a leader, right, for all of this. It makes sense to me. I’m super excited. I think, I’ve been … I was trying to think last night whether I’m a 3X or 4X MailChimp customer but it’s fun to … there’s apps we use every day, right, but there’s not that many times you’ve been a three or 4X customer and it’s fun to see it and then MailChimp to me is so interesting for founders here because it took me by surprise how big it was.

Jason Lemkin:

Maybe it’s because you didn’t raise 11 rounds of venture capital, which we’ll touch into and bang your chest on TechCrunch every week with another huge round or maybe it’s because I wasn’t a marketer by training, right and I just grabbed an app here or there. MailChimp, several times I think took all of a surprise and it’s kind of a hero company because of that. So, I want to do … like I want to go back in time a little bit to the very, very beginning but to me, the most fun … I want to jump around time, if it’s okay and talk about breakout, right?

Jason Lemkin:

So, MailChimp is … I don’t know whether you’ve announced your numbers, you don’t have to comment but around a billion ARR on either side, it’s a lot of ARRs, whatever it is, it’s very large but it’s a category nominally with a lot of vendors, right? A lot of vendors, tiny, minute, they probably pop up every hour. There’s someone with some specialized … at least on email and we’ll talk about getting bigger and into micro animation. So, what was like the 10X feature … whenever it was, a million in revenue, two million, what let MailChimp break out for real from the competition?

Ben Chestnut:

It had to be freemium. It was 10 years in, 2010, 2009-ish when we launched our freemium plan, everything took off. It was this rocket ride right after that. I mean we went from, I don’t know, tens of thousands of users to a million in the first year and then it doubled and doubled and doubled after that. It’s been a crazy rocket ride from there.

Jason Lemkin:

So, that’s interesting so before you went freemium, which was like 2009-ish, is that right? Let’s talk about that-

Ben Chestnut:

Yeah, we didn’t have a free plan. We didn’t have a free trial before that. You had to pay.

Jason Lemkin:

You were nominally founded in 2001, right?

Ben Chestnut:

Yes.

Jason Lemkin:

We’ll talk about that. So, MailChimp wasn’t an overnight success story by any stretch of the definition. You launched … and the first two years before you went freemium, do you remember … it took you two years. Two years is a long time as a founder too, right? How big were you were … but you still managed to get to a couple million in revenue but you were not a differentiated tool at that point?

Ben Chestnut:

It didn’t feel like it. I was eating off the McDonald’s value meal, I was still eating ramen, that’s all I remember of those days-

Jason Lemkin:

Is that true, even two years in.

Ben Chestnut:

Yeah, like you said, I think my revenue is in the hundreds of thousands.

Jason Lemkin:

Okay, so freemium, which we have and … So, that is interesting because … and then, why did it work, were people … because freemium alone isn’t always a marketing strategy, is it? You have to have traffic. You have to have a denominator. You have to have people searching for you and finding you, so did you even know … and to me, MailChimp is interesting because I would think of it as lightly viral, right? If you’re on the free plan, you see the MailChimp at the bottom, if you take a look at the to field or whatever, you can see that it came where there’s URLs but it’s not Zoom viral, right? It’s not that real time. Why did freemium work besides that it worked? Did you even know?

Ben Chestnut:

Well, I think it was just perfect timing. I think there was a crisis going on. It was 2009, we were still reeling from the recession and people needed it badly. Small businesses badly needed help and there we were with the solution, a little bit like Zoom. A much smaller scale of Zoom, but we were there with the right tool at the right time.

Jason Lemkin:

What was, when you launched it, not to go too much in details, it’s interesting because it worked. It didn’t worked fast, it worked in 30 days or 60 days. The conversions happened, right? Your paid business went up, dramatically, quickly right?

Ben Chestnut:

There was immediate, yeah, server outages, people were running around like chickens with their heads cut off. I mean it was crazy. Yeah. I was at the time-

Jason Lemkin:

What did you do?

Ben Chestnut:

I was getting flashbacks from like the AOL dial-up issues where no one could dial in, everyone was complaining about that and I was like, “Oh my god. I’m AOL.” Nothing would stay alive it seemed like.

Jason Lemkin:

Man. Yeah and what was the first … if you remember, what was the first … I hate this word but what was the first choke or what was your first point where you had to convert to paid that actually worked? Did you test anything or what was that insight? When did you know when to throttle the free folks back when you first launched?

Ben Chestnut:

It’s a little bit weird with small businesses because sometimes with small businesses they need like five years to figure it out. You know how it is, it’s a grind. We never really found the one choke. What we found was that they just need lots of time to find their way and everything we tried just really didn’t seem to work. Sometimes they just needed to get to … 30% of small businesses die in two years, 50% die in five years. So, it’s like our sales pipeline, it needs to be five to 10 years. That’s the pipeline for small business, it felt like at the time.

Ben Chestnut:

So, all we really did was give them more time. That was really the only kind of choke point that we had to make people … they would shut down their business but they would keep their free MailChimp account alive. They’d get a job. They’d learned how business actually runs. They take that learning, quit, start their business up again and then-

Jason Lemkin:

With their list.

Ben Chestnut:

Yeah, yeah but it was really just … once their list grew to about 2000, that’s when they felt like it was less of like a forcing mechanism but more like a celebratory rite of passage, like if they could get their audience to 2000 and they had to start paying, they felt proud of that. We saw tweets of people saying, I’m finally a paid MailChimp customer. Yeah.

Jason Lemkin:

It’s interesting, I had an eye opening moment years ago when I first met with someone at SurveyMonkey when it was tiny and they said, “We don’t count churn when we lose a customer because they may come back in their next job with their next thing. We don’t actually count that. We don’t count that as churn. We wait some …” They waited a mammoth amount of time in the early days, probably not today as a public company. How do you think about that sort of churn because you didn’t really lose that customer, right? Even though the revenue paused. Do you have a nuanced view of churn at the very low end of the market?

Ben Chestnut:

At the very low end of the market, absolutely and a very nuanced view of ARPU as well. We kind of went lower ARPU because we want a larger denominator. We want more and more small users than we do very, very big users.

Jason Lemkin:

So, when you’re the CEO and you’re … I would imagine at this point, you’ve got a few dashboards at MailChimp. How do you think about the goals for those … because the smaller the customer usually the higher the churn, right? That’s the law, especially the very small businesses, right? The one person shops, it’s hard, right? What do you see on your dashboard in terms of churn and how do you incent the team or drive the team to do better in those tiny, tiny customers in terms of churn?

Ben Chestnut:

Well, what you do is you say what are the industries where … our small business customers are really tech savvy and they really push the limits of innovation inside of MailChimp and we didn’t say where the most revenue comes from, we said where do they push our limits because that’s what drives us, is innovating and then, we said, “Well, it’s eCommerce customers.” So, we really look at just a few slices of our audience and we say, what’s going to help them sell more? Those are small customers. They’re tiny but they can make millions of dollars after sending every email campaign.

Ben Chestnut:

They’re making hundreds of thousands or millions of dollars every time they hit send. We focus a little bit more on those and any technology that we get out of serving those sort of high-end, high-innovation, high-income customers, it trickles down to the small businesses.

Jason Lemkin:

It’s interesting that’s … I guess that’s obvious that … even back in 2009 when you converted, eCommerce was sort of your north star customer, was folks selling, and then MailChimp is almost like your ERP isn’t it? It’s certainly your marketing automation … but it’s almost more, right? Your list can be everything as a tiny vendor, right?

Ben Chestnut:

I can walk through at a restaurant and I can see someone … or at a coffee shop, they’re using MailChimp, they’re using it like a CRM. I see them with their database, the MailChimp audience screen up live. It’s less of the sending and it’s more of the analyzing the data of their customer base for sure.

Jason Lemkin:

Just one last question on this and let’s hit the next one. The step function of those going to freemium, two years, charging everybody, the second … again, give me your credit card, no chance for a small business to get to know you, to see if they want to fall in love, right? Freemium worked but what was the surprise and delight feature? People back then loved MailChimp, right? It wasn’t just the chimp and the cute ads, and I can’t remember because I didn’t know nothing about email, I just found MailChimp on a Google search which is probably our next slide I want to talk about. What was your surprise and delight? Why did they love you? Did you have a hero feature? What was that special product moment or feature?

Ben Chestnut:

I was a real stressed out entrepreneur in those early days and I was just constantly micromanaging everybody in the office like, we got to get this done. We got these goals. I have a Gantt chart of everything and I noticed nobody wanted to stay late. They just weren’t inspired but one day, people were staying late and I was like, “What are you doing?” They would hide their screens every time I looked. Then, later I found out what they were doing was they were planting Easter eggs and that’s what got engineers and techies inspired to actually work late and I said, “You know what, as long as we hit our goals, do all the Easter eggs you want.”

Ben Chestnut:

So, people start to infuse personality into the app. They started to build an app that they wanted to use and it turned out small business customers running a small business is dismal, I’ve learned over the years and they really need like a ray of sunshine, some sense of hope, some kind of humor in the app. So, I think that was sort of the … that was the thing that kind of was the key unlock for MailChimp in the early days, just personality.

Jason Lemkin:

Yeah, make it accessible, right? Make it fun and interesting.

Ben Chestnut:

Yeah. We’ve had … I’ve seen news headlines where we take down a billboard of Freddie and people complain. They said, “That was my only joy in life.” We’ve reduced the amount of Freddie in the app because people were saying it’s taking up too much space on mobile and everything and we’ve had … We get a deluge of complaints. I had one small business customer saying, “He was my only joy.”

Jason Lemkin:

That is a sign of something special. Yeah, and then this one … this is just one of your billboards. This is the one but MailChimp has always been bootstrapped which we can dig into but that especially means every dollar is scrutinized … in the beginning, at a force of necessity, for years and then it becomes part of your mentality and then, I remember, one day, I was driving up 101 in the Bay Area and I saw, I think that the one on the right. I’m colorblind, the yellow one, the classic one and I’m like MailChimp must be … like how can they afford these … I didn’t even know what billboards cost back then, right? I know today, they are cheap.

Ben Chestnut:

They’re expensive now.

Jason Lemkin:

Back in the day as a founder, I’m like, “Oh my god,” but still you were buying billboards and now I get it, it’s tech, you want to expand into tech, right? What did you learn about brand because all you had was that chimp on the 101 in the Bay Area and this display ad and brand advertising, it’s not intuitive to founders, right? It is non-intuitive, why did you do that relatively early and what were your learnings about how to build on your brand?

Ben Chestnut:

Well, that was always really cheap.

Jason Lemkin:

Yeah.

Ben Chestnut:

Always experimenting with different kinds of media. I was doing podcasts when they first came out, really just for affordable-

Jason Lemkin:

On an iPod.

Ben Chestnut:

Yeah, yeah.

Jason Lemkin:

Hence the name, yeah.

Ben Chestnut:

Billboards was just one of the things we always tinkered with. We have a culture of tinkering and experimentation at MailChimp. The thing about billboards and branding is … one thing is I always wanted something tangible with our brand. Everyone interacts digitally but you need something to feel. So, I always have like MailChimp toys, something that I want on your desk, that you can feel or see, that makes your brand real when you can see that in the real world, like you saw it in your car on highway 101. Then, with the billboards, I had a competitor. We would listen to their analyst calls every quarter and they said that they opened up a San Francisco office.

Ben Chestnut:

That was going to really stick to us because they could have a physical office right there in the heart of Silicon Valley and they would have everybody come to their office and I told my team, “You know what, why don’t you set up a billboard across the street from their office.” So, that was sort of-

Jason Lemkin:

That might have been the one I saw, right?

Ben Chestnut:

Thankfully my team saw that that was kind of a jerk move and so they said, “We like the idea of billboards. We won’t do that, we’re going to put them up and somebody put one up across from this building, I never heard of, called Moscone. I’d never heard of it at the time. They did it right before Apple’s Dub Dub DC and then right after that was Google IO and it just went viral. People took pictures of that mysterious monkey, posted it to this new thing called Instagram and it just kind of went viral from there. So, I mean, I guess the lesson is care about your brand. Try to get it physical not just digital only when you can afford it.

Ben Chestnut:

Always be tinkering and if you’re always tinkering then, when they really become available like CVS and all the people that do outdoor, once they saw us buy a couple, then they just went nuts that we’ve got all these other properties, how about the highway, how about this, how about … and then, it just kind of grew from there.

Jason Lemkin:

And then related to this like brand. Brand is really … it’s a funny thing, it creeps up on us as founders, doesn’t it? Because we kind of make fun of it in the early days. We think … At least we used to, we think that’s a Pepsi thing, a John Sculley thing. Brand is … The last thing you want to do in the early days is hire a marketer that just wants to work on your brand and then you realize they were right, like MailChimp has this brand and when does that work? How do you know when to invest in brand versus leads versus the other thing and how do you protect your brand today? Because it’s always at risk, right?

Jason Lemkin:

We’ll talk a little bit maybe more about doom that we talked about the other day, right? What have you learned about brand and when does it matter?

Ben Chestnut:

It matters always. It’s what … I was a designer at heart so brand meant a lot to me from the early get-go. I mean, I started wanting to build a global brand So, I might be the wrong person to ask about that.

Jason Lemkin:

Well, maybe you’re the right person.

Ben Chestnut:

I wanted a brand from day one. Yeah, maybe. The thing is like, it makes people loyal. It makes people love. I mean, I’ve always said, I don’t shoot for loyalty. I shoot for love. I don’t want people to just blindly use my product. I want them to use it out of its merits. You do want people to kind of just love that brand and it’s actually the most economical marketing to do because it goes viral that way. People tell their friends about it and that’s the cheapest marketing that you could pay for.

Jason Lemkin:

Yeah, for sure. So, this slide you guys put together, who am I seeing here? What’s going on in this slide?

Ben Chestnut:

That’s me and my co-founder. That’s my mother, she ran a hair salon in the kitchen. I couldn’t get an action shot of her actually doing her work. That’s just Thanksgiving, that’s just Thanksgiving. Over on the right, that’s my co-founder, Dan. He’s the tall one and that’s his father’s bakery. So, we both had entrepreneurial families and we both grew up in the kitchen, watching their businesses grow and then ultimately fail. That’s what drives us today, we really want to empower small businesses. That’s DNA of MailChimp so that they don’t fail like our parents did.

Jason Lemkin:

Yeah, I hear … and they failed while you’re … you saw them fail.

Ben Chestnut:

You see them and you can see that it’s not just a business that fails. It’s a person, it’s a family and the effects linger for generations.

Jason Lemkin:

Yeah. When we were chatting before this, I heard some of that linger in your thinking right? There is this … Conservatism is the wrong word but there’s this fear of doom that we chatted about, maybe attacks back to your childhood. It’s interesting that it inspired you to be an entrepreneur, right because these feelings linger with us, don’t they?

Ben Chestnut:

They really do and they also kind of tell you that doom and despair might be the norm. So, you just have to kind of be marching. Everyone is talking about 2020 is a dumpster fire and it really is and sometimes I asked people what if it’s always been a dumpster fire and we’re just now noticing it. Yeah, entrepreneurialism is about one setback after another, isn’t it?

Jason Lemkin:

Yeah, you told me when we were chatting before, which floored me a little bit, that even at MailChimp scale, you have doom thoughts. You worry that the company could fail, right? I feel like my SaaS learning is that after 10 million or so in revenue, you can go into a terminal decline, right, but it could take a decade, right? I mean, let’s look at Oracle and companies, like even if Oracle never releases a new product, we want it to be 2050 before those last Oracle servers are shut down in some data center but you have doom fear still today. Today, you still have doom fear.

Ben Chestnut:

Yeah, I tell somebody that I still feel this way, we could die tomorrow. We could die tomorrow and then somebody told me, “You know, you really can. Most likely, the plane will crash like this. The plane will just lie to a slow kind of embarrassing descent.” I just thought, that’s worse than crashing?

Jason Lemkin:

That’s worse.

Ben Chestnut:

Yeah, I do have that, that is the attitude that I think is necessary. I mean, isn’t their book about that Only The Paranoid Survive or something along those lines?

Jason Lemkin:

There is. What that means … like I think we all take away slightly different meaning from that title, right? That might have been more about competition killing you than doom, right?

Ben Chestnut:

Doom as well.

Jason Lemkin:

It is. It’s funny that the Intel … When we were growing up, I thought hardware was the hard one and software was the easy one but it’s backwards. These hardware … look at phones, hardware phone … but the cycles are so fast, but MailChimp will last 30 years at this point, if you don’t totally screw it up, Ben. Software is harder than hardware, which doesn’t even still make sense to me. Hardware is ephemeral, right? Software if you do it right … look at the Decacorns, right? Look at these companies, if you do software right, it’ll last 40, 50 years and if I was running MailChimp … like I’m jealous. I don’t literally mean jealous but it’s up to you, right? It’s your job now to build a 50 plus year platform and we’re not going to have that AOL experience, right? If we do it right.

Ben Chestnut:

That’s right. It’s like S curves. The first S curve is like the fastest and the tallest and then, there’s like lots and lots of subsequent smaller harder S curves. I look at some of those software companies that have lasted over the years, and it’s like constant reinvention is what I see in their numbers, right?

Jason Lemkin:

Yeah. Which phase … I wanted to do a little bit more in the early stage if we had more time, but tell me about the phases of MailChimp because today, we’re sort of this … we’re even more than a marketing automation platform, right? MailChimp is like a marketing platform. We’ve got social and images and timing and AI and ML and all of these things, but MailChimp stayed email only for a long time, didn’t it? Are we in the second phase of MailChimp or the third? What did you learn? What were those evolutions and why did they take a while versus a year?

Ben Chestnut:

Well, I always felt like … I read Crossing The Chasm a long time ago by Geoffrey Moore and he said, a lot of people want to cross that chasm. It’s important to cross it but they cross it too soon. I said, “Oh, okay, I’ll just dwell a little bit longer.” I think that that’s kind of the advice, if you read between the lines, it’s like really master what you do. So, I took that seriously and I mastered email and then, it wasn’t until I started talking to customers out in the Midwest. What is it that MailChimp’s brand means to you? They told me it’s marketing. It’s not just email. Get out of email, expand. That was when I was inspired but I wasn’t like a strategic … like a genius strategic decision that I made, it was talking to customers.

Ben Chestnut:

They said, “Dear God, expand, sprinkle that Mailchimp magic on other marketing channels.” So, that’s kind of what took us so long. So, I tell my employees, we’re in Act Two of the business. Act One was great. It took us really far. It’s not going to be enough. We’ve got to evolve from here.

Jason Lemkin:

Yeah, so I didn’t … you’re not on Act Three, I didn’t miss one, right? Act One was email, nailing it. Probably lasted 15 years though, Act One, right? Some part … better part of 15 years, right? Depending on how you count, depending on when you start, right? A decade-

Ben Chestnut:

We’ll still be looking Act One for a long time, until Act Two, except what, 30 … at least 30% of our revenue is my philosophy and then really Act Two has taken a hold.

Jason Lemkin:

I want to ask about proportionality, right? How big those product extensions need to be. Do you think of that as just the same customer and maybe more revenue from the time or do you think of this as accessing different customers and that has to be big because MailChimp is already big, right? You can’t add something that adds 2% to your revenue because it doesn’t move the needle, does it?

Ben Chestnut:

Yeah, maybe not so much a different customer, maybe a little bit like the whole world is skewing more to eCommerce. In a sense it is more … a little bit of a different customer but the product is more sophisticated and it’s going to require different amounts of sales. We’re looking into that, how do we broaden a self-serve app that just quickly sells like one point solution called email, that’s kind of easy but when you start to sell multiple channels across the whole platform that’s going to take more assistance and hand holding. Yeah, it’s going to take an evolution more.

Jason Lemkin:

It will, right? I never talked to a sales rep but did MailChimp have any sales people today? Did you have any sales people two years ago?

Ben Chestnut:

Not two years ago, no. We have small little teams that dabble a little bit but we just hired a chief customer officer, starting in a couple of weeks so yeah, changes afoot.

Jason Lemkin:

Change or maybe … there maybe a few hundred sales reps at MailChimp next year. That’ll be an interesting journey right there, won’t it?

Ben Chestnut:

Everything changes.

Jason Lemkin:

Well, it’s cool. Well, Ben, this was incredible. Is there anything I missed that you wanted to hit or chat about at the very end?

Ben Chestnut:

No, I hope all the entrepreneurs out there see us and recognize, we are transitioning from Act One to Act Two so watch us.

Jason Lemkin:

I’m excited. Let’s continue the discussion about Act Two. I think this is one of the great case studies, right? MailChimp, learning the freemium, doing it bootstrapped and then taking, depending on how we count, 12 years to go to Act Two, right? Whether we start in 2007, 2009, 2001, it’s a slow roll to Act Two, right? It’s a slow roll to get to 10 billion in revenue.

Ben Chestnut:

I mean, you can characterize it as slow, you can characterize me like making lots of money-

Jason Lemkin:

Deliberate. Yeah, lots of money. Yeah, so I want to track the next 10 years for fun as a fan and as a case study, right? It’s going to be a fun case study to see how MailChimp evolves on these two vectors today. So, we will keep pestering you Ben to share your learnings over the next 10 years on phase two. So, thank you again for the time. This has been tremendous and thanks to everyone for tuning in.

 

The post SaaStr Podcasts for the Week with Jennifer Tejada, Ben Chestnut, and Jason Lemkin appeared first on SaaStr.

The End of the Universe Will Probably Disappoint Sci-Fi Fans


This post is by Geek's Guide to the Galaxy from Feed: All Latest

Sorry, folks: There probably won’t be a Big Crunch.

The ‘Double Dragon’ Movie Should Be a Cult Classic


This post is by Geek's Guide to the Galaxy from Feed: All Latest

The adaptation of the 1987 arcade game didn’t get the credit it deserved—and would probably fare much better with modern audiences.

SaaStr Podcast #367 with Zoom Head of Global Sales Operations and Enablement Hilary Headlee


This post is by Amelia Ibarra from SaaStr

Ep. 367: Hilary Headlee is Head of Global Sales Operations and Enablement @ Zoom. Prior to joining Zoom, Hilary was VP of Global Sales Operations and Productivity @ MindBody and before that enjoyed similar roles with Alteryx, Invoca and Lynda.com. At Lynda.com, Hilary grew the support teams from 6 to 60 people and supported more than 60 net new reps in just 3 years. If that was not enough, Hilary is also a Limited Partner in Stage 2 Capital, the venture firm focused purely on go-to-market.

In Today’s Episode We Discuss:

* How did Hilary make her way into the world of SaaS and come to be the sales leader she is today with the global communications leader, Zoom?
* When thinking about sales ops vs revenue ops, what are the 4 key points to consider for founders? How does lead management and onboarding alter the question of sales ops vs revenue ops? Where does Hilary see operational debt the most? How does she advise founders on removing it?
* Given the broad scope of sales ops and engagement, is it not just rebalancing culture, comms, and change? As a business scales does there not come a time where it unbundles and scales out of sales vs revenue ops? How do the roles change with time and scale? Where do the breakpoints occur?
* Why does Hilary believe documentation is so important today? What is the toolset Hilary uses for documentation? How does Hilary train her team around the right strategy to document their processes? Where do many go wrong here? Where can you pick up small wins?

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
Zoom

Below, we’ve shared the transcript of Harry’s interview with Hilary.

Harry Stebbings:

We are back for another week in the world of SaaStr with me, Harry Stebbings, and last week we had Kyle Parrish on the show from Figma, unpacking the world of scaling into enterprise sales. And today I want to get one layer deeper into sales operations itself, and who better to have that conversation with than Zoom’s Head of Sales Operations and Enablement, Hilary Headlee.

Harry Stebbings:

Prior to joining Zoom, Hilary was VP of Global Sales Operations and Productivity at MindBody, and before that enjoyed similar roles Alteryx, Invoca, and Lynda.com. And at Lynda.com Hilary grew the support team from six to 60 people, and supported more than 60 net new reps in just three years. If that wasn’t enough, Hilary’s also a limited partner in Stage 2 Capital, the venture firm focused entirely on go-to-market. I do also want to say a huge thank you to Eric Yuan at Zoom, some fantastic question suggestions today. I really do so appreciate that.

Harry Stebbings:

But that’s quite enough from me, so now I’m thrilled to welcome Hilary Headlee.

Harry Stebbings:

Hilary, it is so great to have you on the show today, I’ve heard so many good things, both from Eric and Janine on your team. So thank you so much for joining me today, Hilary.

Hilary Headlee:

Thank you so much, Harry, I appreciate it.

Harry Stebbings:

Not at all, I’ve been looking forward to this one. But before we kind of dive into the meat of the show, I do want to start with a little bit of context. So how did you make your way into what I call the wonderful world of SaaS, clearly I need to get out a little bit more, but also come to be head of global sales ops at the juggernaut that is Zoom today?

Hilary Headlee:

Sure, I got into SaaS actually back in Minneapolis, Minnesota. I was starting at a consumer research and advisory firm that was doing qualitative research, which sounds very fancy and in a way it was. There were two wonderful co-founders, Mary and Vickie, and I just loved what they were doing in the research field. And it ended up that they were starting on having an ACV, or an annual contract value, and that’s where I first started to understand that type of repeatable business. And I fell in love with it.

Hilary Headlee:

Luckily, a couple of the gentlemen that I worked with were in Santa Barbara, and they were at a small company at the time, Lynda.com. So about 13 million in revenue on the B2B side, and they needed someone to come and run sales ops, and training, and customer success, and they gave me a call and that’s how I got up to California, and then it’s been about 10 years going to different SaaS companies, usually pre-IPO, a little bit crazy, a little bit chaotic. And they want me to come in and try to help operationalize and make sure that the sales reps have everything they need to be successful.

Hilary Headlee:

And that’s a lot of how I got to Zoom, it was a little bit on accident, I was actually researching job descriptions at the company I was at to hire a few more people and saw they needed a head of sales ops, and about fell off my chair. I loved the product, I loved what I was able to do with Zoom. And ended up reaching out to a gentleman that I knew and said, “Hey, is this really for real?” And from there the rest is kind of history, and I feel really lucky to be there.

Harry Stebbings:

I absolutely love that, and also I didn’t know that early at Lynda, I mean, what a journey that was as well. But I do want to start this on a topic that’s so important for so many founders today, and it’s kind of the [inaudible 00:05:00] of sales ops versus revenue ops.

Hilary Headlee:

Yes.

Harry Stebbings:

And you said to me before that it’s not that simple and there’s kind of multiple points to consider. And so I really want to kind of touch on that first. Like what are those main consideration points, do you think?

Hilary Headlee:

Yeah, I get asked this, I want to say it started to be a couple times a week of either revenue leaders who were thinking about should they maybe consolidate their organizations, or different vendors kind of want to have you talk about that, and just in general I think there’s a lot out there. I put together like 10 questions that keep floating around in my head about what you need to consider as an organization, or an ops leader, or maybe as one of those sales leaders that’s considering it. I think a couple of them that popped out is just how do you define sales ops, marketing ops, and customer ops at your organization today? What I mean by that is in marketing ops, you could have a very strong like B2B marketing ops, and a B2C marketing ops, and maybe even an e-commerce side there. I mentioned Lynda.com, we had a really strong B2C and B2B side. That would be a lot to take on all of those operations, plus sales ops, plus customer ops in that arena.

Hilary Headlee:

When you look at sales ops, are you looking just at direct or is there indirect as well? Those can be really big depending on how your distribution really marries out. And in customer ops, that can be cut a couple ways. Customer success operations might be more of that one to one, or one to a few alignment and assignment for onboarding and ongoing support. You could also have things like professional services, or managed services, you could have all of your technical support and more of your call center support operations as well, which to me are different disciplines and skillsets in their own right. So I think there’s some companies it makes sense to maybe smoosh all those together, and get the right kind of speed and synergy, if it’s there. I think in other companies it might be a little big. And for you to have that speed it might be better to kind of specialize and separate.

Hilary Headlee:

So that’s one of the first questions that I just encourage people to think about, is how do you really define those, and I think sometimes the smaller you are and the simpler you are, I think you can get a lot of speed out of that, maybe the more complex you are in ensuring the other kind of levers are all in place, then you can totally make sense as well. But that’s one of the first questions I always want folks to consider when they’re asking that question of is it sales ops or [inaudible 00:07:06] ops?

Harry Stebbings:

Can I ask, just on that point, in terms-

Hilary Headlee:

Yeah.

Harry Stebbings:

Of like the … non fragmentation, but kind of the clear silos that one has with those, at what stage do you find they tend to segregate and it’s no longer the quick and dirty, so to speak, where it’s all kind of jumbled in together? Is that 100 people, is that 50 people, is that five million in ARR, 10 million in ARR, I know it’s a hard benchmark to ask for. But in that kind of clear point where it tends to start specializing.

Hilary Headlee:

I personally don’t think so. I think it depends also how many people you have on your operations team. So there’s many times back in the day, Harry, I’ve been in sales ops, what is it, 15 years now, and back in the day we were managing marketing ops, and we were managing customer ops, and it was just called sales ops. So you can … Or at least I found that I was able to do it better at a smaller company and those companies were usually sub 100 million. And there was maybe only a handful of us on a team, I mean, less than five. So I think it just really depends also on company size, and how you want to go to market and support all of those areas.

Hilary Headlee:

So there’s not a magic number for people, there’s not a magic number for ARR. And to me, that’s part of why I try to come up with questions to consider, is I just don’t think there’s a one size fits all, again, of size in either of those to say that’s the time to do it. I think there are dependencies when you look at your people, your process, and other areas that you need to take a look at.

Harry Stebbings:

Totally get it. I think we always all love the kind of clear silver bullet of oh, it’s five million in ARR and then suddenly-

Hilary Headlee:

I know.

Harry Stebbings:

Amazing what happens at these milestones, it’s very funny for me. Tell me, what’s another main consideration thing?

Hilary Headlee:

Yeah, I think you need to take a look at what’s happening with what I call operational debt. So I frameworked out this cheesy sales ops pie, which has six pieces of the pie that I think just in relate and really go through what happens in operations, and the operations part of the pie is your process systems and data. And I think most people would agree that that’s a core part of operations. From data though, you get insights, strategy, and then hopefully some planning, and your planning should drive processes, and those go into your systems, data, and so forth.

Hilary Headlee:

So it works like a circular pie in those areas. But when I think about operational debt and ask that question, I think an easy way to identify that is to, if you want to, remember something like this. Do you have an ocean of data and a desert of insights? And if that’s what you’re dealing with, you might have some operational debt, because your data might be cumbersome based on systems that weren’t maybe architected or put well together, or too many fields, or duplicate fields, which really to me is symptomatic of process. And I think that’s one of the last pieces of the pie that sales ops as you talk about the fragmentation that we might see in operations with other folks jumping in, and IT, and sales FP&A, which are really important, I think, also to consider for rev ops or sales ops. If you look at it, that process can help come in and be that master kind of sweeper and vacuum cleaner, I think it can go a long way.

Hilary Headlee:

So that’s the other one I really want people to consider, is how much operational debt are you carrying, especially if you’re an ops leader coming in. Because there’s only so much that you might be able to clean up, and do, and fix, and still be considered a success at the organization.

Harry Stebbings:

Couple of questions I have to ask there.

Hilary Headlee:

Sure.

Harry Stebbings:

How do you balance between like handling and managing operational debt versus progressing in terms of instilling further rigor in sales ops, and instilling further discipline? How do you kind of balance between like solving the past, but also plowing forward with the future?

Hilary Headlee:

Yeah, it’s hard, I’ll say that. I think I’ve tried to, especially at a place like Zoom, I try to hyper categorize on some of these areas. And so when we look at our key critical success factors and what we need to do to be successful. There’s times that we’ve tried to put them in what do we need to do to be just ready for some of the foundational items, what do we need to do to scale, which is basically clean up some of that operation debt. And then what do we need to grow, and make sure that folks have a buy in on the mix of projects to keep moving forward and making that happen.

Hilary Headlee:

Like you said, I don’t think there’s a silver bullet on how to do it, and I know fast growth companies sometimes you have to trade off scale. And I think scale … This is probably a whole separate topic, I think it’s overused. If you could make it once and use it sometimes just a second time and not 200 times, that can be scale in some areas that you need to do. And so it’s just finding the right balance at the company you’re in, and what their appetite is for continuing to fix some of the things that need to be fixed while also taking on all of the things that will help you grow. Because you can grow even if you have some operational debt, for sure.

Harry Stebbings:

Can I ask, I’m sure you have so many founders and operators come to you with operational debt inherent within their organization. Where do you see it most commonly? Where are you like, ah, this is where I always see it?

Hilary Headlee:

I think you can see it a lot when you’re looking at something around a meeting, and there’s data pulled up, and everyone’s brought their quote, unquote “own data” to the table. Or, “Where did you get your data?” Or, “I don’t trust that data.” Data as defense I think is one of the early signs that I’ve found in companies where people just don’t trust the numbers, and they want to align around facts, but really it’s around feelings. And I think that can be one of those signs that there’s a challenge there that you need to be digging into.

Harry Stebbings:

I totally agree with you there in that challenge. What’s the other one in terms of another major consideration point?

Hilary Headlee:

Yeah, I think one of the other ones to look at is just what is everything happening with your lead management and your onboarding process. So what I mean by that is there are a lot of different ways that you can do lead management. You can do a strict MQL process, and scoring, and attribution, and all kinds of amazing metrics focused items there. Or you can send every lead over the fence like we do at Zoom. And there’s a difference there in how you want to be looking at that and managing that, and making sure that the output is what you needed to have.

Hilary Headlee:

On the flip side, there’s the onboarding process, there are some that you can do a self serve onboarding using tools like WalkMe, and making sure that as you’re onboarding thousands of customers in a week or a month that it’s repeatable and everything’s going. There’s other onboardings where it’s very technical, it takes a clear project plan, project managers to do those. And sometimes those can be another factor to consider if you’re going to have one ops person over all of those very different measures, metrics, margins, and all of those pieces.

Harry Stebbings:

Can I ask, why did you favor the strategy of, in terms of lead management, throwing them over the fence so to speak, versus the intensely rigorous kind of categorized lead management process that we mentioned?

Hilary Headlee:

Well, I didn’t pick it at Zoom, and we also had it at MindBody, and at first it was really odd to me because I was so used to a strict MQL process and scoring and going through it. When I look at the root cause, and you mentioned Eric in the beginning, Eric is a big believer in root cause and doing kind of one thing to solve for it. And what he was trying, I think, to solve for was that it doesn’t matter how you score and maybe what you look like on a website, you deserve to talk to someone at Zoom. And so that’s really how we modeled it, is if you say, “I want to be contacted,” or, “I want to have a demo,” you’re going to talk to someone and have that. And that goes all the way down to various actions you might take as well on the website.

Hilary Headlee:

So for Eric, I think follows the model of customers first and delivering customer happiness, and sometimes waiting until you bubble up or you have the best score. Kind of put that to the side and just go and talk to someone who wants to tell you about Zoom, too.

Harry Stebbings:

I have to say, I do kind of love that perspective. So it’s super nice to hear-

Hilary Headlee:

[crosstalk 00:14:06]

Harry Stebbings:

And it’s unsurprising coming from Eric. I do want to ask, on the lead management and onboarding process, how does your approach here change the question of revenue versus sales ops?

Hilary Headlee:

Yeah, I think the easiest answer is just to look at it in complexities. So I think that is the underlying theme of a lot of the pieces around rev ops or sales ops. If you have a really complex lead management that’s going to take a ton of attribution conversations, and meetings, and what that needs to look like, and you’re looking at different things in onboarding and how that needs to look from the different check ins, and managing those pieces, and the length of time, it may be that in sales ops you don’t want to take that on. You maybe want to look at it as I’m going to own the big eight in sales ops, and when I say the big eight, I mean the revenue plan, head count, territory quota, comp, pipeline, forecasting, and analytics. Just for sales, and not taking on necessarily the kind of lead math that you would want to do on the marketing side, and maybe some of the onboarding and outcomes that you want to have there based on making sure that they get up and running and starting in the renewal side of things.

Hilary Headlee:

So to me it’s a hyper summarized way to say it is complexity, and the more complex it is, the harder it might be as an ops leader to kind of take that on and make the right change that the business needs.

Harry Stebbings:

And speaking of the complexity, it brings in so many different parts of the organization from change, to culture, to communications. I guess my question to you is with such a broad scope of sales ops and engagement, is that kind of scope not just a rebalancing of change, culture, and communications?

Hilary Headlee:

I don’t know if it’s a rebalancing of it, but I do really subscribe to the thought that at the end of the day, if I am to describe my job in sales operations and enablement, it is driving change in the business. And what I mean by that is we’re constantly rolling out different processes, or programs, or products, or positioning that really will make a rep do more or less of something, do it better, and do it faster. And so I kind of joke that at the end of the day, strategies all seem to be around more, better, faster. And I think that’s a lot of what I’m asked to drive and to lead, is just to get those behavior changes across the org, and do that through great change management, make sure that it feels good culturally because there is change fatigue, especially at a company that is growing really fast and trying to meet the demands of the market. And landing the plane on good communication is hard. Making sure that you cut through the noise. There’s so much that goes on between emails, and chats, and other avenues, and making sure that people understand it, and that they get it the first time on what they either need to be aware of, or take action on, or what they maybe need to do to go and like talk with a manager, have those pieces.

Hilary Headlee:

So I think, again, those three really tie together for me, and though I have the sales ops pie to describe it, at the end of the day I think that’s what a lot of a leader is doing over these functions, is focusing on those three things. Change management, culture, and communication.

Harry Stebbings:

I have to ask on the change management element, it is off schedule but I’m too intrigued and it’s like it’s such a challenging thing to do well. What does a kind of great change management look like to you?

Hilary Headlee:

I think great change management looks like when you roll it out, folks don’t feel like it’s a change, because they’ve already been looped in, and they also don’t feel like it’s a new process they need to do, it’s just better. It’s a very idealistic approach to it, but I subscribe a little more to I’m not going to come up with all of the change and process items that need to be improved on my own behind a big curtain, right? Like the Wizard of Oz, I did that early on in my career thinking that would be better and people would be so excited that we rolled out this quote, unquote “great change”, and instead people were like, “What are you doing, Hilary, why didn’t you tell us about this? You missed these 97 different things that could have made it better.”

Hilary Headlee:

So I learned early on and failed that that wasn’t the right way to do things. So I try to do a lot of looping in ahead of time, to the point where I think sometimes by the time I roll things out they’re like, “Yeah, yeah, yeah, we get it, Hilary, just keep moving, we already know that that was coming.” And for me, that might be a little annoying that they already knew on their end, but it also tells me that they weren’t surprised by it. And when people are surprised, it’s tough, and so that’s one of the things I do try to subscribe to, is to not surprise my reps, or surprise my managers with big things that are coming. I do try to give them as much of a heads up as possible without kind of overwhelming them as well.

Harry Stebbings:

Can I ask, sorry, again too interested, in what form does that take in terms of like letting people know and getting ahead of the game there? Is that kind of Slack notifications, emails, is it educational resources around the product that’s coming itself? What does that look like in terms of the right way to communicate it?

Hilary Headlee:

Yeah, it’s a couple things. I try to always make sure that my peers and my colleagues at my level are informed first. I try not to skip level, but very quickly from there we go to our heads of, if you will, to make sure they’re looped in, we talk to sales managers, we talk to sales reps. I have my folks on my team go and do kind of like wiring of the house and make sure that we’ve got the right input and feedback on those pieces. It’s a lot of quick conversations, or quick chats using Zoom chat and making sure that we have what we need to know to move forward.

Hilary Headlee:

And so I think when we formalize it, yeah, I definitely follow and subscribe to doing a formal cascade down, but along the way it’s a lot of looping people in and making sure that they understand it, and then more importantly, that we’re not shortsighted.

Hilary Headlee:

I think that’s what hard sometimes of being in a leadership role, is when I was in, for example, in customer success, I was one step away from the customer and I was one step away from reps. I’m not one step away from customers and reps anymore, I’m a couple steps away. I don’t know their job state today as well as I could with how fast things are changing with our customers, and how we’re doing things. And so for me, getting in touch with the front lines on those is important, and finding those reps that you can trust who will tell you is a really important piece, and I think that’s something that I really try to do at every job I go to, is who are the folks that give good, honest feedback and can help move the business forward, and help you not kind of stumble and fall for the greater good of our customers or our reps.

Harry Stebbings:

I love that, that’s fantastic. But it seems like the alignment between like the different roles within the organizations, and the different players within each company, documentation is always touted as kind of being central to that. And you kind of [inaudible 00:20:08]. And so I’d love to hear your [inaudible 00:20:10] how are you thinking about documentation today as a leader, specifically?

Hilary Headlee:

Yeah, I am … If you talk to anyone on my team today, or in prior lives, you’ll hear that there’s a couple key things that I say, and one of them I know I share a lot is we can get clarity and alignment through documentation. And what I mean by that is it doesn’t have to be a 10 page document, it could be a picture that you draw on a sheet of paper, or a whiteboard, or the three kind of key decisions in a meeting. There’s a lot that people hear and not everyone is hearing the same things, and so I’m a big believer that you do have to document to drive for that.

Hilary Headlee:

I also think, Harry, my gosh, we sent everybody home a couple months ago, at least in the United States, and we sent them home without a clear plan, because it happened really fast. And I think for a lot of us, we were forced to be more formal. And there’s only so many meetings, even Zoom meetings, that a person can have in a day and continue to operate. And so I try to be very keen that we’re forced to formalize, document what you can do, the one who really documents is going to be able to drive for the results that we need, and especially in operations. That’s what we need to do, that’s what we have to be able to do.

Hilary Headlee:

So I think that’s at the core of a lot of what I have, and a key principle of mine, is finding folks that can synthesize, document, communicate it out, and then drive for the results through that inner organization.

Harry Stebbings:

Can I ask, where do you think many people make mistakes when it comes to documentation? Because it is a tough new habit to suddenly just document every part of your life. What do you think about like the mistakes that ones makes in documentation?

Hilary Headlee:

I don’t know about mistakes, I think that there’s one way to document. So I think sometimes when I say documentation, people hear, “I have to do a three page like dictated meeting notes piece,” and I don’t think that’s the case. I’m a big believer in, again, if you talk to anybody who knows me, I love a good matrix, I love a good two by two, things that really hyper simplify and get folks aligned on that. It also can be as easy as for meetings you attend, what are the three decisions that were made, and the three key action items. And I take those in our own Zoom chats, in the meetings, so everyone can see it and frequently people will say, “Hilary, you didn’t get that right. It’s actually three instead of seven,” or whatever it might be. And right there then we’ve sped up, and we’ve course corrected, and we’ve aligned.

Hilary Headlee:

And then I flip those into a regular chat for anybody who couldn’t be there, and again, I’m able to loop people in, get that clarity, get that alignment, and continue to help move the business forward. So I have found it a key skill to be able to have, and so again I think the mistake might be that people think you have to like over document. It can be three quick things that are just keeping people going forward.

Harry Stebbings:

Totally get you in there, I’m very happy to hear that it can be brief. But I do have to ask, in terms of the people there, adding the very best people to your organization is the single most needle moving thing that anyone can do. And you said before that there’s five key things you look for in an employee, and it’s such a good hook, but you kind of left me hanging there. So what are the five key things, Hilary?

Hilary Headlee:

Yeah, they’re probably going to sound really cold and op-sy when I say them. I don’t know that I can always hire for and then find it, but I think there’s five ingredients that I’ve found are important for folks that at least are on my team and I’ve started to really share it because I’ve talked about it enough.

Hilary Headlee:

But time management is the first one, and it sounds really easy to be able to manage your time, but it is really hard, especially working from home, working from home for many of our parents that don’t have childcare to support them and just their usual kind of circumstances. But being able to manage your time I think is an underrated, under valued piece that needs to be there.

Hilary Headlee:

I think along with time management, you have to be able to prioritize. And that is hard, we work at a company where everything is a priority because so much is changing and happening, and we want to connect the whole wide world. But that also means that we have a lot of projects that we have to decide on, and so knowing how to prioritize and not always pick the easy, low value thing to do, and do maybe some of the harder, unwieldy pieces to move the business forward, that’s a key piece. So I tie those two together.

Hilary Headlee:

Documentation, we talked about that. Being able to synthesize complex or multiple meetings, and share that, and capture that, and know how to then communicate that out in a way that people can hear it and drive forward I think is a really … is another kind of really big one. So documentation and communication are three and four.

Hilary Headlee:

The fifth one then is adaptability. And I say this in a lot of interviews of folks who are coming to Zoom of I sometimes feel like I threw 15 years of experience out the window because we just do everything differently at Zoom. And so being able to adapt to such a crazy fast culture, and just a really fun pace, but a lot of priorities and a lot of speed. We have to be adaptable and to have them move forward and make sure that we’re still going to be hopefully a company that can continue to support a lot of folks as we move forward.

Hilary Headlee:

So time management, prioritization, documentation, communication, adaptability are the big five that I think if you can land the plane on those, there can be a lot of success in both an operations and an enablement organization.

Harry Stebbings:

So I couldn’t agree with you more there in terms of those as the big five, but I also am struck by the challenge that now comes through a COVID world and hiring in a COVID world, where you don’t have the face to face time, and you don’t have that sometimes quality of engagement, which just has to happen in person. And I’m interested, how do you think about the hiring process, and how that changes in the world of COVID?

Hilary Headlee:

That’s a tough question. I think for Zoom we’re just hiring a lot more. I think what I’m excited about, and I’ve worked in remote cultures since 2005. So back then when we were all sitting around a conference room talking into one little machine, I’ve worked with remote folks. So for me, working from home and being able to hire more remote is almost going back in time. And I think it’s a really fun opportunity for us to expand who we can hire and how we can hire. I think the tough part is, is there is a piece lost when you’re maybe not interviewing those folks in person that you had before, but that also then gives a leg up to people who maybe weren’t in a high cost area like San Jose and Silicon Valley, that we’re now open to and can be more open to hiring, and having those come in. And for me that’s really I think the exciting part of it.

Hilary Headlee:

I think the other piece is there’s just been a lot that’s changing in the world, and that’s really good. And making sure that our pipelines are different, right, and that we’re not hiring folks that look just like us, that have maybe again been in our same circles that we run in. And I’m really excited about that side of it, too. Haven’t cracked the code on it, but I think that’s another piece that is really exciting about this shift in being able to work from home. And doing it almost anywhere in the world.

Harry Stebbings:

I do want to move though into my favorite element of the show, which is a quick fire round. So I say a short statement, Hilary, and then you give me your immediate thoughts. Are you ready to dive in?

Hilary Headlee:

Ready.

Harry Stebbings:

Okay, so the biggest challenge of your role with Zoom today?

Hilary Headlee:

The pace and speed of business.

Harry Stebbings:

Why is that challenging?

Hilary Headlee:

I have worked at pre-IPO and post IPO startups that were considered fast growth. I’ve never been at something that is the pace of Zoom. And I work fast, think fast, write fast, operate fast. And it’s tough to keep up on good days, it’s really fast.

Harry Stebbings:

I’m sure it’s incredibly fast. But tell me, what makes Eric the incredible leader that he so clearly is?

Hilary Headlee:

He truly cares. It is our core value at Zoom, I’ll give you just a quick story if you don’t mind. We were trying to finalize the revenue plan for FY21, and this was before we were all working from home and I ended up working from home because I’d gotten sick. And he kind of asked like, “Oh, you’re not in the office, Hilary,” and I said, “Oh, I’m just, I’ve got a cold, Eric, I’m not feeling well, I’ll try to be back tomorrow.” And I woke up the next morning and Eric had sent me a chat on Zoom Chat and your heart always kind of leaps up in your chest, like what is this, what did I do wrong, right? And he just wrote a note that said, “Hey, I really hope you’re feeling better, I was sorry to hear you were sick.” And I’m like of all the messages you could be sending to the world, you’re making sure that I feel okay. And I don’t spend a ton of time with Eric, but that was really … He really, truly cares and you can see that in how he still takes all of the questions that we have, and making sure that we’re just healthy, and safe, and good to go, especially during this really crazy time.

Harry Stebbings:

Sign of a really great leader that. Tell me, dirty sales data, what is it, and what’s the best way to rectify it?

Hilary Headlee:

Dirty data to me is just a symptom of your system set up, which typically is a reflection of your process. So I have just a firm belief, and maybe that’s because I hyper summarize that process can fix a lot, but I do really believe that better process can help clean up your data. And I’ve found that especially as Salesforce moves over and has centralized into IT teams that that’s how we can come together on cleaning up our systems and our data, is through really good process that’s going to drive the right things. Could be less fields, different fields, whatever that might be at a very simplistic level around those areas. But process to me is how you best clean your data.

Harry Stebbings:

What’s the biggest surprise for you internally since COVID began? Or externally, actually, let’s give internally or externally.

Hilary Headlee:

I’m obviously very surprised by how fast Zoom picked up speed, and the day my mom said that she joined her church service on Zoom I about fell over. And then when we did family calls on Zoom, that was really neat and overwhelming, and also sad, right, because you couldn’t see them for the time periods.

Hilary Headlee:

I think the other piece though is that there’s just been a real uniting of this is hard for everyone, and so it’s kind of you can see that I think on LinkedIn, and see people really reaching out of it’s hard out there, this is challenging, what can we do to make it better? And there’s been really cool new things that have popped up, and I’m a silver linings, try to look at the positive side, and I think that’s something that I think has really changed. And it hopefully is a good thing.

Hilary Headlee:

Also working from home. I think there’s been a lot of benefits for that for folks, and so I like those two things a lot about COVID.

Harry Stebbings:

Totally with you. My favorite story is when I found this kind of sticky tape by my mother’s laptop and she was using it to block the microphone, not realizing that there was actually a mute button.

Harry Stebbings:

A penultimate one, and it’s kind of a heavy one actually, but it’s like what moment if your life has changed the way you think really meaningfully?

Hilary Headlee:

Professionally or personally.

Harry Stebbings:

Let’s give one of each, if that’s okay with you.

Hilary Headlee:

Yeah. I think professionally there’s been a handful of feedback that I’ve been given that just really stick out. And they stung, and it hurt, but I really needed to hear it. I think those have been probably the biggest ones that have really changed that professionally, is when somebody’s really willing to give you tough, hard feedback but like you need to hear it. And again, those like pop out so clearly in my brain like light bulbs going off of what those are.

Hilary Headlee:

Personally, it’s obviously having … To me, it’s obvious in having kiddos and how much that changed. Especially changing how I operated at work. So I quote, unquote “got ahead” when I was in my 20s because I just outworked people. I would work 80 hours a week and I think once, at least for me, once you have that first kid you just can’t do that, so you have to be really good, and this is maybe where my principles come in, you have to be really good at managing your time. I had to go from 80 to 50 hours a week. And sometimes even less. And so time management, prioritization, moving the ball forward and not stretching out those work days, because something bigger and more important was there I think was a really big change I needed to make as well. And a moment that I went, “Wow, how I’ve been successful and valued what I can maybe bring to a business needs to change and change pretty categorically.” It’s not just working more, it has to be working smarter.

Harry Stebbings:

Yeah, it’s a total reinvention really. I’m glad that’s a couple of years away for me right now, I think. So I can enjoy working super hard and not having to prioritize anything at all, and probably being ruthlessly inefficient. But I do want to finish on what do you know now, Hilary, you wish you’d known when you joined Zoom?

Hilary Headlee:

I used Zoom as a customer and loved it, I had a Zoom room in my office and I loved just being able to see all my employees across the globe. I loved all of that piece. I think I thought it was more maybe simple than it is. The usability really shadows, if you will, the complexity behind it and how much you need to know to be successful at Zoom. I underestimated kind of in a silly way how tough it is to teach on it, learn it, understand it, sell it, and really get the right complex, technical sale for companies that want to change their communication and collaboration. And I wish I would’ve leaned in a little bit more on that piece, because there’s a technical aptitude and appetite that you have to have, I think, to keep up and really enjoy what you’re doing at Zoom.

Harry Stebbings:

Hilary, I already said at the beginning, I heard so many good things from Eric and from Janine, so I was really excited for this, and it’s been so much fun to do, so thank you so much for joining me today.

Hilary Headlee:

Thank you so much for having me, Harry, this was really, really great. I appreciate all your questions and especially being able to talk about operations. So thank you so much.

Harry Stebbings:

Absolutely love that episode with Hilary, and what a special talent. And if you’d like to see more from us behind the scenes you can on Instagram at HStebbings1996 with two Bs. I always love to see you there.

Harry Stebbings:

As always, I so appreciate all your support and I can’t wait to bring you a fantastic episode next week.

 

The post SaaStr Podcast #367 with Zoom Head of Global Sales Operations and Enablement Hilary Headlee appeared first on SaaStr.

Everyone filed to go public Monday


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

We’re back out of sequence, because literally every company you can name (well, almost) dropped an S-1 yesterday so we had to sit down and parse them out a bit. That so many filings dropped during the same two days when we had Y Combinator’s two-day Demo Day at the same time meant that we were all a bit punch drunk, but we rallied.

Natasha and Danny and Chris and myself all piled back onto the mics to dig through all the numbers. Here’s a rundown of the companies we went through:

  • Palantir, which filed its formal S-1 during our recording session. Danny covered most of the news last Friday, but the public doc is now live, so happy sleuthing.
  • Unity’s huge IPO that shows how big gaming is. Natasha connected it to the broader Apple-Epic dust-up, and we all reviled in its growth results.
  • Snowflake had Danny so excited he was conjuring scripted segues, and we were all impressed at its historical growth. Sure, it lost a lot of money last year, but, hey, Snowflake has dialed that back as well.
  • And then there was Asana, a company I’ve covered quite a lot over the years. Our general take is that the company’s growth has been good, if it is losing more money than we anticipated. Still, Asana could set a neat new precedent of raising debt ahead of a direct listing. This is one to watch.
  • And then we spent a little time on JFrog and Sumo Logic (more here), because we are nothing if not completionists.

Got all of that? It was a lot of facts to get through, but we did our best and we hope this helps. More tomorrow as we talk Y Combinator with a special guest host. Chat tomorrow!

Equity drops every Monday at 7:00 a.m. PT and Friday at 6:00 a.m. PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

Equity Monday: YC Demo Day, two funding rounds, and where’s Palantir’s S-1?


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.

This is Equity Monday, our weekly kickoff that tracks the latest big news, chats about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here, and myself here, and don’t forget to check out last Friday’s episode.

What was on the docket this morning? All sorts of good stuff, though the Sumo Logic S-1 did drop just after we wrapped. Here’s today’s rundown:

Whew, with YC and Palantir this week and a chat with Twilio’s CEO it’s going to be an active few days. Ready?

Equity drops every Monday at 7:00 a.m. PT and Friday at 6:00 a.m. PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

SaaStr Podcasts for the Week with Justin Bedecarre, Jen Nguyen, Jason Lemkin, and Aaron Levie


This post is by Amelia Ibarra from SaaStr

Ep. 365: The Office of the Future, How Everything’s Changed and What 2021 Will be Like with Justin Bedecarre, CEO @ HelloOffice and Jen Nguyen, Founding Partner @ TEAMWERC

Centralized HQs with all the perks and amenities “under one roof” have traditionally been used as recruiting tools to attract and retain top talent. In this episode, Justin and Jen discuss what the Office of the Future will be like.

 

This episode is sponsored by Linode.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from a session at SaaStr Summit: Enterprise. You can see the full video here, and read the podcast transcript below.

 

Ep. 366: The buzz that accompanies digital transformation trends is infinite. Cut through the noise with Aaron Levie, CEO of Box and Jason Lemkin, CEO & Co-founder of SaaStr as they share insights on what will make a lasting impact and what may fail to materialize in the future of work.

This episode is sponsored by Guideline.

 

This episode is an excerpt from Jason and Loren’s session at SaaStr Summit: Enterprise. You can see the full video here, and read the podcast transcript below.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Justin Bedecarre
Aaron Levie

We’ve shared the transcript of episode 365 below. You can also jump down to the transcript of episode 366.

Transcript of Episode 365:

Jen Nguyen:

Hi everyone, thank you for joining us today and giving us this platform to share the thoughts on what we love, the office. I’m Jen Nguyen from TEAMWERC. And at TEAMWERC, our mission is to deliver workplace as a service, helping companies navigate the company’s changing working environments. And I’m joined by…

Justin Bedecarre:

Justin Bedecarre, co-founder and CEO of HelloOffice. We’re a full-stack technology-powered brokerage helping usher in the hybrid workplace and the office of the future.

Jen Nguyen:

So Justin, it’s so great to be co-hosting this session with you.

Justin Bedecarre:

Totally.

Jen Nguyen:

It feels like deja vu. Six months ago in January, you and I were nerding out talking all things workplace and how the workplace ecosystem was broken. Everything from how workplace office space is delivered to workplace services end to end, from how workplace tools are often the last adopted tools by companies, often cut out of the annual budget, actually, and how the real estate brokerage industry was antiquated, lost in a century of manual workflow process.

Jen Nguyen:

And I clearly remember back then you told me, “Jen, this isn’t scalable. The future of workplace is going to be hybrid.” And fast-forward, here we are today, the pandemic has woke us all up and has accelerated our need to change our mindset about the workplace and all things workplace. And personally, it’s actually been very scary to think about as what I love to do, building workplaces, will no longer exist. And I’ve had a lot of my peers in the industry who have been impacted and laid off.

Jen Nguyen:

And what I found is this silver lining in that we all want the ability to come back, we want the choice to come back and we actually want hope. And that’s a really big thing. And companies are looking for guidance for us to pave that way.

Justin Bedecarre:

Totally. I mean, I remember that conversation back in January. And what we were planning on five years of that it would take to really usher in the hybrid workplace, well that condensed into what? Five months, judging by the length of my hair and my COVID haircut.

Justin Bedecarre:

It is truly amazing how fast the mindset around the future of office has changed. Pre-pandemic and going into the pandemic has been really tough. We’ve seen a lot of layoffs, a lot of people hurt. But at the same time, there is a silver lining in all of this, that coming out of the pandemic, a lot more people are going to have the choice of how they work, where they work.

Justin Bedecarre:

And yesterday’s workplace is going to get catapulted to the future of office. And so, that’s something to be really excited about. This industry, in many ways, has been broken, right? And there’s things that have worked and there’s things that really need to change. And a lot of our assumptions around yesterday’s workplace are going to be challenged.

Justin Bedecarre:

Some would say that it’s too rigid, that the 9:00 to 5:00, 40 hour workweek, what you were telling me, right? That started in the Ford era.

Jen Nguyen:

A hundred years ago.

Justin Bedecarre:

A century ago. And so, things do need to change. And decisions can be led by employees. And it doesn’t have to be a 100% office-centric. And so, when thinking about yesterday’s workplace, which is really important to touch on before we get into the future workplace, you have built workplaces for some of the most iconic brands in the world; Pinterest, Zynga, Tesla, what has been your experience? What have you learned from building yesterday’s workplace?

Jen Nguyen:

Well, first, I still love yesterday’s workplace, and I truly believe that it’s not going anywhere. But yesterday’s workplace from my previous company is we focus a lot about being a hundred percent HQ-centric, constantly being under one roof. And the purpose, obviously, was to enhance face-to-face collaboration, innovation, and productivity.

Jen Nguyen:

And we create this entire infrastructure to support this 1-to-1 seating model so that everyone under one location could be there at the same time. But it created this huge subset of issues that we’re constantly trying to solve for. For one, there was never enough real estate, given we were in San Francisco and Zynga on Pinterest weren’t the only companies with a real estate strategy of being under one roof. There just wasn’t enough square footage. And there wasn’t enough space to accommodate that.

Jen Nguyen:

We also created this huge commuting congestion problem, driving thousands of employees to the city, which also had an impact on affordable housing. And honestly, we’re limiting ourselves by proximity on recruiting a diverse best-in-class team. And we also had multi-generational issues with people working with different lifestyles, with different obligations, whether it’s childcare, taking care of elderly parents. We just never were able to solve for that. And then there was this great workplace experience of 2020, which we’re still living now. And somehow it unintentionally solved a lot of this friction.

Justin Bedecarre:

Right. I mean, think about, like you said, the infrastructure needed to be a single HQ-centric workplace, right? I mean, thousands of people being shuttled around the Bay Area for hours every day. I remember growing up and my neighbor’s dad would literally read the newspaper on the freeway because it was bumper to bumper to get into the city and not much has changed.

Justin Bedecarre:

And so, the idea that how many people would get shuttled down to Facebook, it was only a couple of years ago that they introduced their first San Francisco office. And so, things are really changing. And we have to think about, you have yesterday’s workplace a hundred percent office-centric, the pendulum is going to be swinging back and forth, right? So now we’re in this, like you call it, the great workplace experiment of 2020, where we’re forced to be a hundred percent remote.

Justin Bedecarre:

And the pendulum has swung the entire other direction. And now, after a few months, the novelty of being 100% remote is wearing off. And so, we’re all starting to realize what works and what doesn’t, right? What we miss out of the office, the serendipity, the collaboration, just being around our colleagues in person. And so, what we have to do to build the office of the future is take the best of the hundred percent office-centric world and the best of remote, where there is more transparency, there could be more productivity, and basically combine those.

Justin Bedecarre:

And it’s a really inspirational thing to add technology and innovation to the workplace, how you find space, how you manage space, and build the office of the future.

Jen Nguyen:

Well, going back to this one-on-one seating and the workplace of yesterday, I actually now miss, after being in back to back Zoom calls, being able to walk between conference rooms and taking that few minutes break to feel normal and bump into a peer of mine. And the other thing that it also reminds me of too is, in this whole one-on-one seating model, what actually didn’t work was that I realized for myself, I was never at my desk.

Jen Nguyen:

I was in conference meetings and back to back, very reflective of what I’m doing now. And so, my desk sat empty almost full time. And so, what it means is we just need to retrofit and recalibrate how we use this space and change the purpose of why we come into work. So, Justin, so now that we know all this, and for everyone listening, what does this mean? How are you and how have you been advising your clients on this hybrid strategy?

Justin Bedecarre:

I think that it’s such an important question, right? And what people have to realize is that it is different for everyone. One of our clients has over 500 employees with offices around the world, right? And in major hubs like San Francisco and New York, what we’re doing is helping create the vision for a more experiential space, almost like a cafe where they can come and go as they want, they can bring clients, they can bring customers.

Justin Bedecarre:

And so, it’s just going to be like, in these major hubs, no one’s going to have assigned seating, but in their Salt Lake City, everyone wants to come into the office five days a week. And so, we’re still positioning that space for a hundred percent office-centric.

Justin Bedecarre:

So, even within some of our clients, they’re thinking about what their employees want in any given market. Another client of ours, most of their employees came from the South Bay and commuted into San Francisco because they just felt like they had to be there. Now that that assumption is being challenged, we’re going to help them find an office in Palo Alto. Their employees are going to be able to come and go. And they’re going to reduce their commute by 45 minutes.

Justin Bedecarre:

And then another client of ours is an international company that has decided that they truly want to scale up in San Francisco. And they’re moving forward with really a significant lease because they get to save so much money because rents have stabilized and there are so many subleases on the market.

Justin Bedecarre:

And so, through all of this, we have so many different client stories about how they’re planning, how they’re figuring out, how they’re getting back into the office. And so, it’s not one-size-fits-all. We’re going to learn so much about ourselves, about how we should and can run our companies, how we run our day-to-day lives. Right? The challenge is that there’s a lot of uncertainty, right? We don’t know when we’re going to be able to get safely back at scale.

Justin Bedecarre:

Some of your clients, I would imagine, are actually going back into the office already. Some of them are like a wait and see approach, right? We have Slack saying, “Hey, we’re not going to consider going back into the office until 2021.” We have Google saying, “Look, we know we’re going to get back into the office, but we’re going to put a hard date at mid-’21 of next year. And so, how do people in the session figure out how to plan? What do we think about?

Jen Nguyen:

I think just like we think about the pendulum of how we think about real estate 100% in-office, 100% remote, it’s not one or the other. And as we hear companies like Google are saying that they’re going to push out the return to office till sometime next year, I think we’re all forgetting that they’re also still planning when that time happens. And they’re taking the time now to create those workplace resilient playbooks as part of their business continuity plan.

Jen Nguyen:

I’ve also heard, “Well, why plan, if things are going to change tomorrow? We’re already in this like a new gen.” But it’s important to plan that it’s flexible enough so that you can pivot those realities of today and tomorrow. And quite honestly, it is a corporate responsibility to start planning now for the well-being of your employees to implement COVID-19 guidelines into your workplace.

Jen Nguyen:

And really, I think companies should really focus on the fact that both current and future employees will be closely tuning in, on how companies navigate through this change and then adopting a hybrid employee choice philosophy. This will be a really strong indicator of retention and recruiting. Whereas before, the old workplace that we know it of yesterday, we built these huge HQ anchor buildings for recruiting purpose, now giving the employees choice, and this hybrid approach is going to be what’s going to make a big difference in terms of recruiting intention.

Justin Bedecarre:

Right. I mean, these decisions have a lot of implications, right? If you are temporarily remote, but you don’t really have a solid strategy for when we can return to the workplace, families are going to be making decisions whether they move or not. Are you going to ask them to move back after the pandemic? People will decide to rent versus buy because they need to decide what their workplace is going to be like.

Justin Bedecarre:

And so, it’s really, really important to plan and understand what your employees want. Going through a few of the points on our slide, it’s not solely based on health and safety, but that is a big issue right now, right? Planning for long-term means a lot of implications for how employees live and work, how they work together, and engagement and collaboration is now a preference. It’s really important, but we all want to choose when we do that versus when we go heads down work and can be flexible.

Justin Bedecarre:

And another really important point that we really believe in is that you have to use data to drive decisions, right? You have to use data on how people are using the space. One of our good friends actually just raised a big brand called Density, where they can track. We’re implementing that in all of our workplaces where you can track how many people are coming and going in conference rooms, and different things.

Justin Bedecarre:

And so, we really need to layer on meaningful and efficient technology into our workplaces to understand how people are using it. What never changes is that the space has to represent your culture. It has to represent what you want to achieve as a company, right? If you’re building automation for trucking or whatever, you need to be in the space, and so you need to figure that out.

Justin Bedecarre:

Whereas if you’re a software company, you can wait until, you don’t have to compel people to come in sooner than they feel safe. And so, there’s a lot of implications for that.

Jen Nguyen:

Yeah. Justin, you actually made a really good point on data. What was really interesting in working with a lot of these clients on the return to office, 60% had workplace tools, 40% didn’t. And in that 60% that actually had workplace tools, we could only use 80% of that data. So, we haven’t done a really good job using analytics, and the time is now to do that, to make the right decisions. How do we unpack this? How do we unpack what hybrid means? What does it look like? What is it and what is it not?

Justin Bedecarre:

Well, let’s start with what it is, right? So, it’s employee-led, which means that we’re really going to need to take a pulse of what employees want and how they work best and help them make decisions on, whether it’s an individual contributor or if you’re on a team and your team has the right cadence. Right?

Justin Bedecarre:

So, it truly has to be employee-led and it emphasizes choice. Something that’s so important right now for everyone to realize is that for most of us, we don’t have a choice right now. Right? And so, once we’re given that choice, what do we actually decide? And it can’t be a rash decision, right? You have to continually take a pulse of your team and how they’re feeling. Right? We’re, what, five months into the pandemic and for many of us it’s been five months since we’d been into an office.

Justin Bedecarre:

And so, the novelty, like I said, is wearing off and now we’re starting to recognize, “Okay, maybe I don’t want to be a hundred percent remote, but I do want to come into the office four days a week, or one to two days a week.” It’s going to differ employee to employee, and so you have to give choice and flexibility. Right? Flexibility is so huge.

Justin Bedecarre:

Aaron Levie just did a poll on Twitter that thousands and thousands of people responded to on what is the future of work, right. Is it, get me back into the office as soon as possible? Is it remote forever for the win, or is it flexibility? And over 70% of people said, just give me the flexibility, from thousands and thousands of people.

Justin Bedecarre:

And so, the data is starting to prove that the hybrid is here to stay and that people really want it. One of the things that you and I talk about a lot is hiring for skill and impact over proximity, right? You don’t have to live in a short drive distance away or a long drive distance away from HQ to contribute and have a big impact.

Justin Bedecarre:

During the pandemic, HelloOffice, my company has promoted engineering manager, [Jaziel 00:17:46] out of Dallas, our first remote engineering manager. And it’s been working out phenomenally. And so, we have to really think about how people can have an impact, not just their proximity. And it has to be purpose-driven, right? You have to go about this with a lot of purpose.

Justin Bedecarre:

So, let’s talk about what it’s not, right? It’s not prescriptive, right? Earlier I gave three examples of all technology companies, all with very dramatically different approaches. And so, it’s not one-size-fits-all. It’s not the death of the office despite the narrative that’s been going around, but it’s also not the death of remote, right?

Justin Bedecarre:

There is the combination, like the sweet spot, where you can have the best of both worlds. That being said, as we know, it is not the easy choice. Hybrid is not the easiest path, right? A hundred percent office-centric, we have playbooks for that. We’ve been doing it for over a decade. Right? And for the playbooks for fully remote, with GitLab and WordPress, those are relatively well-established albeit less companies have done that at scale.

Justin Bedecarre:

And so, the combination of both, you have to be really great at both, and you have to be really intentional. And the final thing that it’s not is, it’s not standard or homogenous. We all know the open office has just taken off over the last decade. And requiring everyone having 1-to-1 seating, like you talked about. The days of homogenous offices are over and every company is going to have to purposely build and design the workplace and how they run their companies that best fits them.

Jen Nguyen:

Mm-hmm (affirmative). Well, the irony that you mentioned how we’re currently in a pandemic and we don’t have choice, this lack of choice actually gave us a taste, just like our first time trying sugar, of what it’s like to work at home and having the flexibility of working anywhere.

Jen Nguyen:

And so, now we can’t untaste it, right? And so, the idea of having that flexibility, and the other thing that you point out is pulse your employees, but it takes courage for a company to ask, really ask, what it is that employees want, because you have to be prepared for what the [crosstalk 00:20:00] are.

Jen Nguyen:

But I think a really, really great example of implementing a hybrid workplace that we’ve seen recently this week is Siemens announcing that they’re allowing 140,000 of their employees globally, across 200 countries to work two to three days, work from anywhere. And their focus is not time spent in the office, but the focus really is on impact, which is so amazing.

Jen Nguyen:

And I think they did two things really, really well, to your point, Justin, is that they took a forward-looking approach, not a wait and see. And second and most important is, they actually pulsed and surveyed their employees, they heard what they asked, and those employees highlighted the preference for greater flexibility in their approach to work.

Justin Bedecarre:

Right. I mean, that is so pivotal. I truly believe that with the hybrid approach, having two to three days of being together, two to three days of work from anywhere, wherever you do your best work, that still could be in the office. It could be at home, it could be at a co-working spot or a coffee shop. But it’s truly like giving people the option, but also like having some structure around when people actually come into the office, right?

Justin Bedecarre:

For the office to be valuable for the things that we’re talking about; serendipity, collaboration, just being around your team in person and having those in between meetings where you can throw out an idea and let it ruminate, that requires people to be in the office too.

Justin Bedecarre:

And so, you can’t just work from anywhere. It doesn’t just mean that you don’t have any kind of structure around it, right? So, you have to intentionally manage through this, which is really important. And Siemens is a great example.

Justin Bedecarre:

Well, that is the presentation for today. We understand this is a confusing time and it’s really hard for a lot of folks. But there is a silver lining in all of this and there is a balance between not having to worry about the office being dead or being forced to be remote forever, right? The hybrid solution, we believe, is the future and a really big opportunity to achieve a lot of things for your companies and your employees. 

 

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Transcript of Episode 366:

Jason Lemkin:

The end of a great day in the enterprise. It’s always fun to be with Aaron, but for this topic, The Real Future of Work, I think it’s especially fun because I can’t think of anyone who we’ve been talking more about digital transformation, future of work, when will things go online, the office 2.0, when will the office finally go on the internet? I mean, I can’t think of anyone. You and me have been talking about this stuff for the better part of two decades, right?

Aaron Levie:

Oh, man, you just brought up like six terms I haven’t heard in 15 years.

Jason Lemkin:

Yeah. But now everyone’s a future of work fan, right? But it’s the same idea, isn’t it? It’s just finally happening.

Aaron Levie:

Well, it helps when the internet is about like 100 times faster and computing and storage is about 100 times cheaper. So, it turns out that that’s really important to be able to enable these technologies.

Jason Lemkin:

But long.

Aaron Levie:

Certainly, for anyone younger in this video than us, nobody will ever have respect for how much work it took back in the day. We would have to go fly around to conferences all throughout the country and stand at our little booth as founders. I literally remember handing out like T-shirts just to try and get signups just to promote where work is going. Those were the days, but I’m a little bit glad that some of those days are over.

Jason Lemkin:

Yeah, so there’s a bunch of things I want to chat about. I grabbed a bunch of your tweets to use as props.

Aaron Levie:

Oh boy.

Jason Lemkin:

I want to talk about, we chatted about a little bit backstage before we started, the almost the different phases we’ve been in through March 15, because you have even a different lens. But to me, this is an interesting chart. This was obviously right after we went into shelter, but this is Box and Zoom, right? So, this is super interesting because this isn’t me using Box in my left monitor and then firing up a Zoom call in the right. This is a new workflow, isn’t it? This is a new use case that looked interesting before we all worked from home but exploded, right? So, what does this mean? What are we doing actually differently now than before March 15, for reals?

Aaron Levie:

Yeah, well, I think first of all, the one dynamic is that I think for probably anybody who would be paying attention to the SaaS universe and joining us today, probably actually less has changed about our daily lives than the vast majority of the world.

Jason Lemkin:

You and I, we’re working the same.

Aaron Levie:

We’re working more or less the same. We’re in Slack channels, we’re in Zoom calls. We’re using digital workflows and storing data in the cloud, but the rest of the world, this was an overnight just shift in how people worked and how they communicated. The easiest way for us to think about it is just if you took eight hours of in-person meetings a day that maybe we previously would have been if we were at a big CPG company or a bank or a retailer or a life sciences company, that whole model has blown up. Now obviously, everything that you’re doing has been virtualized or digitize. Previously, it just wasn’t the case.

Aaron Levie:

So, we thought really early in our data, one of the earliest signals was sort of our change in IP address. So, people moving from their primary work location to a remote location, and obviously, that just sort of became exponential right around the middle part of March to the end of March. And then we saw a bunch of other characteristics that were changing in how people working. I think it’s ones that now we’re all collectively experiencing together. I think it’s really how big of a shift this was for the worker that traditionally was working on analog business processes with in-person settings, how big of a change this was in their world where were all of a sudden, now their job is on a computer all day long interacting with all their colleagues and how big of a shift this is in terms of what that work looks like.

Aaron Levie:

One thing that I’m optimistic about is that even as the health environment hopefully gets better as soon as possible and we’re back in offices, I’m optimistic that this shift in how we work continues forward, even kind of post the pandemic dynamic. Just because I think people are going to see like, “Well, wait a second, I can just get on a video call and talk to my partner in a different country. I don’t need to actually go and get an airplane every time I want to do that type of interaction.”

Jason Lemkin:

Yup. Have you been talking to the customers, especially where you’ve seen acceleration since March? Are there new use cases of Box or an increase of prior use cases where maybe people are using Box a lot more for certain reason than we might have in a traditional office environment or before all this? Has something changed with some of your bigger customers?

Aaron Levie:

Yeah, so we have seen that there has been frankly just a much more accelerated push to, obviously, in our buzzword terms, digital transformation, but for most companies, this is a very real idea, which is I maybe had a roadmap that was two or three or five years of projects I was going to go implement. I have to now both accelerate and reprioritize that list of projects. It’s interesting, when you look at the environment we’re in, it’s actually incredibly clarifying for most IT organizations exactly what they need to go focus on. Compared to a year ago, digital transformation actually had way too many sort of both nuances and sort of vectors you could go down that actually weren’t as strategic.

Jason Lemkin:

Everyone had a pet project, right?

Aaron Levie:

Everybody had their digital team. Five people in the digital team were looking at blockchain projects and three people on that digital team were looking for long term AI transformation. At the exact same time, that company hadn’t moved basic applications to the cloud. So, what this environment is doing is every enterprise is taking inventory of how they work, how their people in their organization can collaborate, how they work across their supply chain. It is, to some extent, a bit of back to basics.

Aaron Levie:

I mean, it’s incredible that the mainstay technologies of this era have been technologies that we’ve had for 20 plus years. It’s just they finally work well, and they have the ability to be ubiquitous all at once, because we all have to use them to survive. So, whether it’s cloud storage or cloud video or messaging. Ray Ozzie somewhere is out there being like, “What the fuck, guys? I came up with all this stuff in the 90s. Why is this now finally happening?”

Jason Lemkin:

Sort of my question, yeah.

Aaron Levie:

So, I think there’s definitely a lot of cognitive dissonance if you’ve been doing this for so long, but the reality is most of the world hasn’t been doing this for more than the past couple of years or the past couple of weeks.

Jason Lemkin:

Yeah. So, let’s talk about the pet project, it’s interesting. I didn’t mean it as a pejorative term, but it’s true, right? Digital transformation has led every stakeholder in the enterprise, every C-level or senior person to throw a chip in the table. What do they want to accelerate this year? There’s a fixed budget. There’s only so much capital out there for these projects. Tell me a little bit about the CIO level conversations you’ve had since March. You don’t hear about the blockchain initiatives anymore. Is it really just like three projects that I need? I need like sales, procurement, collaboration. What are the actual conversations like?

Aaron Levie:

I think the easiest way to think about that we kind of got keyed in on early on was almost like a Maslow’s Hierarchy of Needs for IT, right? Before you get to kind of total enlightenment, what are the fundamentals that you’re going to need? What’s the shelter of IT? That’s your basic cloud infrastructure. That’s being able to do flawless video calls. That’s being able to have a means of communicating in real time. I mean, I literally cannot imagine how we could run our company if we were only on email and we had sort of phone conference calls. I just actually don’t know how you would run a business.

Aaron Levie:

Before you had Slack, before you had Zoom or WebEx or Google Meet or whatever, I don’t know how you could actually get your teams together virtually. But there are literally thousands and tens of thousands and hundred thousands of companies out there where that’s either being implemented right now for the first time or frankly, it hasn’t even been implemented yet. These companies are still trying to coordinate and triage all of their work over email and over legacy ways of working. So, there’s a Maslow’s Hierarchy of Needs, which is like, “I got to get my fundamentals for work. How do I store data? How do I communicate? How do I have core applications, like you said, CRM, being able to work across the supply chain?”, the kind of foundational ERP systems.

Aaron Levie:

I think what’s happening is, is companies are realizing that the really big sort of flip the business model on its head project and we’re going to go and do a distributed ledger technology and all this, that’s going to have to get punted because we’re in core survival mode right now. So, the way I would sort of deduce it is, core productivity, data security, and cost savings have been the three big areas that we’ve seen companies focus on and CIOs focus on. If you don’t have something aligned up to one of those three, it’s going to be really hard to get the attention-

Jason Lemkin:

Slow those down again. Sometimes you’re a little fast, just so I catch up.

Aaron Levie:

Yeah, yeah, I’m sorry with that. I’m trying to pack in like four hours of content right now.

Jason Lemkin:

It’s okay, it’s good.

Aaron Levie:

Productivity, you’ve got to make your business be able to function better and faster, smoother. Security, because now everybody is in this remote and distributed world and data security privacy is only going to get amplified. And then be able to save money, you have to be able to prove that you’re going to save my business money. Those are the only three that are going to get funded in this environment. So, you have to make sure that from a software standpoint, that you’re able to help with those angles.

Jason Lemkin:

So, actually, that’s fun. Let’s dig into those three but let me step back. Let’s talk about content and Box. Boxes are pretty rich application today, which we can chat about. But let’s talk about kind of the nuclear element of content, right? Again, I’m not a CIO, but I’m struggling with content. I mean, the Slack and the Zoom is an obvious, how would we run our companies without Zoom or Google Meet? But I’m even struggling to find content in ways that even though I’ve always been on the web, right? I’ve had people.

Jason Lemkin:

I could ask my friends, ask Brendon or Emilia, “Where is that prospectus?” It’s not really that funny, because we may be stuck at home for years. So, is content in the core? Are people thinking about some of these core pieces of Box a little differently than in March? Are some things going from elective to mandatory that’s different?

Aaron Levie:

That shift is definitely starting. I think, video and kind of core communications was at the lowest level on [crosstalk 00:11:29]-

Jason Lemkin:

Day one.

Aaron Levie:

Because you just couldn’t even get your teams together until you can do a video conference or kind of channel conversation. This idea of content fragmentation and my data is in 3 or 5 or 10 different places is now being absolutely kind of amplified and becoming front and center for a lot of companies. If you go to an average life sciences company or a bank or a health care provider or a global manufacturer and you say, “I want to get the latest financial document,” or “the latest manufacturing file,” or “the latest marketing campaign,” there could be a dozen places where that content could live, which means a dozen different ways where you need to secure that data, a dozen different systems that you have to maintain, a dozen different platforms you have to back up and make sure are redundant.

Aaron Levie:

So what we’re trying to do with Box is basically wipe out all that mess and say, “What if you had one platform that connects to all of your applications, whether it’s Zoom, or WebEx or Teams or GSuite or Office 365 or Slack?” That’s our whole strategy. Fortunately, I think companies are now paying more and more attention to that. I mean, we’ve only been at this 15 years, but I think people are starting to realize that “Oh, wow, there’s actually an unbelievable amount of value in this data. I have to protect it, I have to secure it. I have to drive business process around it.” We’re certainly trying to make sure that we can support our customers as much as possible.

Jason Lemkin:

So, I want to talk about that second piece you had which I think was security, right? The first one was productivity. When you’re having CIO level conversations today, which of those buckets are you from framing Box in?

Aaron Levie:

I would say that security is probably the most impactful that where our differentiation shows up the greatest. This is 15 years of innovation in data security, compliance, and protection of content. That happens to coincide with obviously some of the biggest challenges around cybersecurity, data compliance and privacy, GDPR, CCPA, who has access to your information? All of those issues, those are front and center for every organization.

Aaron Levie:

So, we probably differentiate the greatest on our security and advanced capabilities around that. However, more and more customers are saying, “I want to go and simplify my IT environment, so I can reduce spend and get onto a common platform to manage all my content.” So, I do think we hit all three, but security probably is the biggest driver within our customer base.

Jason Lemkin:

Okay, I do want to dig in on that and ask you some thoughts, but on the third one on saving money, the third factor was saving money, right? How does Box, just as a use case, as a case study… I should know this, but I don’t. How does Box save an enterprise money?

Aaron Levie:

What? You’re not thinking about it all day long?

Jason Lemkin:

Well, there’s some things I can intuit, right? In all seriousness, right? But there’s some subtle elements too here. It’s not just soft costs, it’s hard cost. What’s the pitch to save money?

Aaron Levie:

So, it’s different by company size. But if you go to a company that has 5,000 or 10,000 or more employees and you were to get this perfect sort of bird’s eye view of where information is stored, what you’re going to find is effectively a plethora of SharePoint sites, document management systems, network storage arrays, FTP servers, data rooms, and-

Jason Lemkin:

Twenty systems, 20 systems.

Aaron Levie:

… back-up to all those systems. I blame myself that it’s taken this long, but for whatever reason, when you think CRM, you think, “Okay, there’s one platform for CRM.” When you think ERP, you think, “There’s one platform in the cloud with ERP.” When you think HR, you think, “There’s one platform in the cloud, I’m going to move to Workday or SAP or Oracle.” When you think content, people are totally fine with, “That can be my data center. I’ll have it in my back-office systems. I’ll keep paying these exorbitant rates for managing all that infrastructure.”

Aaron Levie:

We are really ultimately trying to be the platform where you can manage all that content and then connect it up to all of your applications. Just as you would not accept having multiple CRM systems or multiple ERP systems or multiple email systems, we don’t think the future is going to be about having multiple content silos in an enterprise.

Jason Lemkin:

I think it’s terrifying from data leakage and security and a whole bunch of pieces. Do you have to sell it ahead or CIOs and CTOs coming to that conclusion on their own? Where are we in that journey of seeing that?

Aaron Levie:

We’re getting closer. I think part of the challenge has been, most of the focus has been, “Okay I got to protect my network. I got to protect my email. I got to protect my kind of core databases.” And then what’s funny is you’ll spend millions, tens of millions, hundreds of millions of dollars securing all of your network, all of your on-premises systems, and then an employee will just send an email attachment of all of your banking data to a client.

Jason Lemkin:

They will, they will.

Aaron Levie:

So, how do you protect that flow of information? How do you protect the pre-release patent document that you need to be able to share with your partners? How do you protect the marketing asset that is going to turn into the marketing campaign? How do you protect the movie script before it turns into a film? That is what we effectively are enabling for our customers, the ability to ensure all that data is protected even as it gets shared inside and outside the enterprise.

Jason Lemkin:

Yeah, Box in many ways has become a security company in the space and you’re thinking about it more than I have. When I see Evil Corp, literally, Evil Corp taking Garmin down for four days, I thought Evil Corp was just part of whatever that TV show was. I’m so sorry. I didn’t even know there was a real Evil Corp. I mean, Evil Corp took Garmin down, including partially airplanes, for multiple days, right? I mean, cyber ransom, it’s getting crazy out there, right? So how are you thinking about that and the value proposition? Because I think this is going to get crazy the next couple years, it’s going to be much worse than it ever was.

Aaron Levie:

Yeah, it’s pretty crazy. So, the amazing benefit that the cloud offers is, is when you have your data stored in the cloud, you can effectively bring an infinite amount of technology to that data to be able to protect it. So, for instance, just yesterday, we announced a new feature with this product called Box Shield.

Jason Lemkin:

Yup, I saw it.

Aaron Levie:

You can upload a Word document or a PDF or a PowerPoint file into Box. If you turn this feature on, we’ll scan that data and we’ll tell you that there’s a social security number in that file or there’s a credit card number. And then you can classify that data. When you classify that data with whatever classification level you want, you can decide then what types of security controls you want with that content. So, you can prevent that file from being downloaded or for being shared or from being edited on a different computer.

Aaron Levie:

So, when data is stored in a central platform, we can bring to bear all of the malware detection, data scanning technology, IP alerting features that we’re building, that partners are building. And then in one common platform, you can store your file at once and get all that extra security and protection. So, that’s effectively what we’re working on.

Jason Lemkin:

Box Shield has a rule-based hire, I can pick rules. If there’s a social security number and other pieces of AI, then automatically it’s limited to this org or this subset of the org.

Aaron Levie:

Exactly.

Jason Lemkin:

Yeah, I still can’t believe that in 2020, you can just email out anything or you can leave an unencrypted elastic database in the cloud. Every week, it’s like 15 million names are leaked. Someone forgot to turn the security on, the elastic database. You didn’t ask my opinion, I feel like that’s a winner for Box. The next five years are sort of terrifying for security, because I’ll tell you, one of my CTO, one of the early things he said to me back in the day that Adobe Sign/Echo Sign. He said, “You know why we haven’t been hacked?” He says, “Nobody cares,” right? He’s like, “You don’t even want to know. You don’t even want to know back in the days all the issues we have.” He was thinking about them, right? Hopefully, there was no unencrypted data elastic database out there.

Jason Lemkin:

But now that the cloud is becoming the dominant part of our economy, everyone’s picking, right? Everyone’s looking for holes and issues. It’s good for Box but it’s scary because everything’s going to be found. I think all the issues are going to be found.

Aaron Levie:

Yeah, I think this only increases an order of magnitude that we’ve never seen, especially with a distributed workforce that by definition has to share completely digitally. So, now everything’s getting digitized and now the question is, “Do you know where all that stuff is?” That’s what we’re trying to offer our customers.

Jason Lemkin:

All right, I want to get your thoughts on this one and the phases we’re going through. I asked Rob Bernshteyn this morning, who helped kick it off. He had no idea what the world’s going to be looking like. I asked Loren Padelford and in his view in eCommerce, it’s been 10 years since March 15. I actually missed a cycle there, 10 years of digital transformation literally, in whatever, 100 and some odd days. How are you seeing this? Are we ever going back? Are we going back to a hybrid world? What’s the future look like from where you sit?

Aaron Levie:

Yeah, I mean, I think it’s always so hard because the debate is always including this issue of, “Well, has the pandemic been resolved? Do we have a vaccine or not?” So, I can only really imagine a post-pandemic world because anything pre-post-pandemic, you’re making health and social kind of judgments that are so impossible to predict at this stage. So, in a post-pandemic world, I do think we go back, but I think we go back differently. I think what happens is you get much more flexibility in how companies think about the workplace. They think about the hours in the office, and they think about the business travel. They think about which days you have to go to the office.

Aaron Levie:

Certainly, representing Box, but more and more customers that I talked to, I think people imagine a bit of a hybrid future. Where offices are still incredibly important, because you want to be able to see people and be able to work with colleagues, especially if you’re earlier in your career and your company is more of your community and you want mentorship. It’s your place of meeting friends and you don’t want to be kind of holed up in your apartment working all day, then I think an office environment can actually be incredibly important to a company culture and company execution. At the same time, there’s literally no reason why we have to have a classic 9:00 to 5:00. There’s no reason why meetings and teams have to arbitrarily be the number of people that can fit into a conference room.

Aaron Levie:

So, I think you’ll see much more digitization of work that happens in the office. So, that will mean more distributed work, more video calls, less business travel, more hopping on just a quick sync with a partner as opposed to saying, “Hey, can I fly to you next week?” And then you’ve got hundreds of hours of logistics of complexity that surrounds just that one little decision. In many respects, I actually think the world is moving faster, because of this sort of complete virtualization. Because at any given day, I can hop on a call with a customer in Japan and Australia and multiple parts of the US in the same day. So, think about how much business that propels forward and how many decisions that begins to propel.

Aaron Levie:

So, I don’t think people want to go back to the old way of working, where every single thing that we did had to result in an in-person conversation and in-person meeting. At the same time, I think there’s a bit of fatigue of saying, “Okay, I’d like to get out of my house now. It’d be great to be able to go into an office and see people.” So, it feels like okay, total compromised position, but I think the reality is, is that there are mixed modes of how you want to work and what kind of people are inside of your organization. We have to support a future that is hybrid, ultimately. I think what’s at the center of the hybrid future is digital, and digital is the thing that bridges these two worlds together.

Jason Lemkin:

Yup. I want to talk about that, but just a detail, remind me, what’s your current policy? What are you thinking on this point of remote work for Box as a policy?

Aaron Levie:

So, we announced a couple months ago that people don’t have to come back, at a minimum until January of next year. That if people want to move long term, we have a very flexible policy on that and people that want to raise their hand and go do that. We’re basically supporting every request that’s happening. And then obviously, I think there’ll be more remote hiring in this environment.

Jason Lemkin:

Yeah. How are you thinking about that? Is that a strategic hiring initiative yet, or is it still early to figure all that out?

Aaron Levie:

Certainly, as time goes on in this situation, I think it’ll have to become the strategic decision. I’ve tried to not make wholesale changes to how we operate in the midst of this being kind of very temporary crisis mode and really wait to see like, “How do we think settle back in when it’s not the crisis, but it’s actually can be a voluntary way of working as opposed to… Right now, it’s involuntary. So, there’s not really many decisions to make.

Aaron Levie:

But the question is once it becomes voluntary, what kind of corporate culture are you trading off between having a strong office hub versus a fully distributed team? I don’t know that we know the answer to that. Right now, we have the luxury of not having to make any of those decisions because nobody’s going back. So, it almost doesn’t really matter that much.

Jason Lemkin:

At a tactical level going back just for the founders, as you say, obviously, it’s much more efficient for you to talk to existing and new customers over Zoom or Google Meet, right? It’s much more efficient. Back in the day, we all wanted to sell everything remotely on a GoToMeeting or WebEx. No one wanted to get on planes and then we learned it mattered, right? We learned it mattered. I remember I told you the story, you’ll forget because you hear a lot of stories. But you were kind enough to have me be a panel at Box works in 2012 when I was recovering from Adobe.

Jason Lemkin:

One of your customers came up and grabbed me on the arm and she violently disagreed with something I said in the panel, which I thought was very tame. She’s like, “That’s not what Aaron told me.” That was like a magical moment to see. She probably met you for 20 minutes, right? But that magical connection from that face to face, right? Is this sufficient? We’re going to go back, what’s your gut on this now that you become very enterprise? More importantly, are buyers okay taking more risk? Has the rules change? Does this count as meeting for a seven-figure deal?

Aaron Levie:

Yeah, it’s a great question. I mean, a couple things to consider. I’ll give you one example. We are one of the larger SaaS providers that leverages public cloud. So, we spend a healthy amount of capital on the public cloud. I have never met in person the sales rep of… Maybe I have in passing or whatever. I don’t think I’ve ever met the sales rep of those public cloud deals, but I’m on video calls with them or conference calls.

Aaron Levie:

You just know, okay, Google or Amazon or IBM, whatever, these are going to be substantial platforms that you can trust, and you care way more about, “Are they there for you when there’s a problem? Are they able to hop on a call? Are they able to go solve one of your core issues?” Not “Did they take the time to drive to your office and deal with all the kind of perfunctory stuff that kind of goes into that?” I would flip it a little bit.

Aaron Levie:

I think that we as a selling ecosystem think of in-person interaction as being very customer centric, which is very intuitive for a long list of reasons I don’t need to get into. However, what I would posit is, is that that’s maybe customer centric for that one customer you’re meeting that day, but what about all the other customers that you could have been helping to support that day that now you had not been able to?

Jason Lemkin:

Because that’s the question, right?

Aaron Levie:

Right. So, the question is can I trade five video calls with customers for one or two in-person meetings, and overall, actually building much more customer centric organization, because now I can be supporting many more of our customers in a single day? So, in the past couple of months in this environment, I’ve spoken with more customers than I ever have certainly in an equivalent time period, in a kind of pre-pandemic world. It’s because it’s trivially easy for both sides to say, “Hey, let’s just jump on a video call tomorrow to hash this out for 30 minutes.” That’s actually more customer centric than me getting on an airplane and coming in and doing a one-hour sort of full presentation that, again, a day later, everybody kind of forgets anyway.

Aaron Levie:

This is actually to me a much better way to be able to serve our customers at scale, but I don’t think it fully replaces the in-person dynamic. I think we will be on airplanes at some point, we will be going to meetings, but I think that the question will be like “What really is the value of that dynamic versus being able to serve your customers virtually?” I think that that remains missing.

Jason Lemkin:

Yeah, we did a little event right after we went into shelter when things were crazy, right? Stewart Butterfield came, and he said he’d spoken to more customers already in the first three weeks than he had in years. So, he said, “One of his customers said, ‘Oh, Slack must be really struggling.’” He said, “Why?” “The CEO’s on the Zoom. That’s a really bad sign when the CEO has to get on the Zoom and sell me the product.”

Aaron Levie:

That’s funny. I imagine even at $1.6 trillion, Satya is on many, many video calls with top accounts.

Jason Lemkin:

Yeah, I mean, who knew that would be such a competitive space? It’s fascinating, isn’t it? That the way Microsoft, Google, and Amazon compete, it’s bare knuckles in the trillions. We didn’t know that that you could compete that way.

Aaron Levie:

Yeah, no, I’ve talked with customers and it’s like, “Yeah, last week, I talked to Satya and I talked to Thomas Green. It’s like, “Wow, we are all trying to grow.”

Jason Lemkin:

Yeah, I remember when Diane Green went, I’m like, “I guess, cloud’s going to be pretty big. It must be worth her time to kind of get this Google Cloud thing really going.” But yeah, it was all bigger than we thought, I think. Just a couple things I want to make sure, so we have a few minutes for time. Also, go ahead.

Aaron Levie:

I want to underscore that point though, it’s all bigger than we thought. I think that anytime that we thought about cloud and this is always a tricky thing with analysts is like, well, you have to take some baseline to then imagine how big this thing is. I think the baseline we took was like, “Okay, well, how big is the software industry today? How many servers are sold today? Well, let’s say data centers move to the cloud at this rate or whatever.” That all makes sense. I don’t think what we imagined though is like flip it and you basically say imagine a world where everything that could become digital became digital, how big would the internet need to get and how many use cases would there be for the internet? Not “What do we have today?”, and then that moves to the cloud.

Aaron Levie:

But what could the world do with unlimited computing? You’re just now seeing that play out. I think that there is probably another couple orders of magnitude of growth in these markets, which is why I don’t get that energized by like, “Okay, is Azure in the lead? Is AWS in the lead? Is the Google in the lead?” I don’t think it actually matters to any of these players. They could all grow 10 times the current size, and they’re probably still be growth left.

Jason Lemkin:

Yeah, I mean, we didn’t realize that every process that could run in the cloud would run, right? That’s why I almost teased out in the first slide like Box and Zoom. Maybe there’s no magic combination with Box and Zoom, but there could be next year that could create a workflow that didn’t really make sense before as standalone apps. That’s what I’m looking for, these interesting combinations that before everything was in the cloud, we couldn’t even predict that these combinations would happen.

Aaron Levie:

Yeah, totally.

Jason Lemkin:

Right. We might have hit this one before. I put a lot of slides, but I want to make sure at least we hit this one in terms of unexpected change. This is a tweet from a little while ago, but it’s interesting because it’s across industries, right? So, when we had Rob Bernshteyn this morning, we looked at the spend index for Coupa, which if you haven’t seen in a while, it’s rather depressing when you see how deeply impacted industries are, right? When we look at the cloud index, we’re like, “Wow, that index was up 11% yesterday.”

Jason Lemkin:

You pop into a Coupa scene underline, and I mean, the impact of 33% unemployment, which is like a different galaxy than what we’re living in the cloud, isn’t it? It wasn’t even the point I meant to make, which we could chat about. We could talk about that. but let’s talk about this one first and maybe that one, if you want, because I’d love to get your thoughts. But what are you seeing across industries that’s maybe different than people see or would expect? You see any special insights here?

Aaron Levie:

I think mostly, it’s been intuitive but in a surprising way. So, it’s like not at the full level of counterintuitive, but it’s kind of fun and intuitive, which is the least digitized industries, we saw the fastest growth from a collaboration standpoint. You would sort of think that “Okay, the laggards are going to really take a long time to come into the cloud and get digitized.” Where we saw some of the fastest pops were from the laggards, because all of a sudden you had government agencies that quite literally couldn’t run their functions. They couldn’t go and process loans or they couldn’t go in and work with… We did a deal in Q1 with the US Department of Agriculture. They couldn’t work with their farmers because they didn’t have cloud technology. So, that was actually where we saw these immediate bursts of–

Jason Lemkin:

That’s interesting on the left that the some of the slowest moving organizations traditionally became the fastest.

Aaron Levie:

Exactly. So, you kind of had this massive reversal, which is why in tech, largely we’re not working that differently. I think this is consistent with this other… It’s deeply unfair on every dimension. I think it’s worth acknowledging the tech industry is dealing with a complete bizarre world environment right now, which is the companies are able to operate smoothly because we’ve been working this way for a decade and a half. That business models are holding up better than almost every other industry, because most of the time, the customer are already on credit card and already all the information. It’s easy to buy more and it’s easy to have recurring subscriptions. The services are obviously entirely digital, so you don’t have to usually go into a physical area to get them.

Aaron Levie:

So, it truly is unfair, but it does, unfortunately, again, kind of correlate to why we’re seeing this divide in business performance and market caps in the digital industry versus the non-digital industry. That is why in the tech industry, the way we work is not changing dramatically, because this is already again-

Jason Lemkin:

[crosstalk 00:35:08].

Aaron Levie:

… a part of how we operate.

Jason Lemkin:

We’re a cloud of privilege. That’s the strangest thing. It is so privileged. We were privileged before and we didn’t appreciate it. I don’t know that we appreciate it today, because our lives have been changing. But the privilege in the cloud, it’s unprecedented I think in our lifetimes, the privilege we have working in the cloud, having a business from the cloud in a country with 33% effective unemployment and everyone’s hiring, not everyone. Maybe there’s a few Eventbrites and TripActions, but there’s open reqs in the Box site, I’m sure, right? The privilege is crazy.

Jason Lemkin:

I do want to at least finish this tiny bit of thread on the state and local governments because it’s interesting, but is this going to solve itself? Can the cloud grow when the country doesn’t work, when Boeing’s losing a billion dollars a week or whatever it’s losing, when our airlines are shut down? I mean, how long can this split, this dichotomy exist?

Aaron Levie:

Well, that’s like 100 times above my paygrade as a question.

Jason Lemkin:

Well, you’re above my paygrade.

Aaron Levie:

[inaudible 00:36:16] be above everybody’s paygrade.

Jason Lemkin:

It might be, right?

Aaron Levie:

I watched some of these New York Economic Council talks, and they’ll have Stanley Druckenmiller. When he’s confused about how the economy is playing out, I’m like, “Oh, God. I don’t know who has this thing figured out.” I think the answer has to be no, this can’t continue. Unless you have just some economic recovery. I do think it’s incredibly important that the government find ways of making sure that the individual employees are protected. I have no real opinion about kind of the business stimulus side, but at least, people’s paychecks are covered. And then frankly, obviously, the bigger issue is our country needs to grow up and fucking deal with the health crisis and wear masks and do social distancing and not do stupid stuff and start to actually take this thing seriously.

Aaron Levie:

It’s been this really unfortunate thing to have this dimension of people being like, “Well, the health safety measures are what’s going to impact our economy. So, we’re not going to do those things,” and then we kind of open up. And then our economy is impacted even worse because of the health issue blowing up on us. So, it’s like we have to address the health issue first, and then hopefully, the economy will follow. But yeah, it seems unsustainable, certainly. But again, I think the Shopify numbers are a great example, which are 100% growth, massive scale, which has just continued evidence that some of these markets, they’re way bigger than we realized. These companies are way smaller than the market size than we realized. That’s sort of what’s playing out in some of these categories.

Jason Lemkin:

Yeah. Essentially Rob said this morning from Coupa, they’re coming up on $500 million ARR. He said, “That’s already larger than the market was, first of all, category.” So, he’s like, “It just changes,” right? That’s a very tactical, but it’s the exact same point.

Aaron Levie:

Totally.

Jason Lemkin:

Yeah. So, two quick bits of advice, and then I want to open up to questions more tactical. So, state local governments, I imagine some of this is like the Jedi contract. It takes 10 years to wrangle out a decision in some cases, right? When I was briefly at Adobe, this was like their secret sauce. They could drive alignment with these governments. Just for folks struggling with this, what did you see? What did you learn? How do they drive internal alignment? How do these old companies make a decision in 30 days? Yes, you need to, of course, but it doesn’t mean you will.

Aaron Levie:

Yeah. I think the advice here is probably what any entrepreneur should always be kind of thinking about is, “Are you solving a problem that is urgent and painful for the customer?” If they don’t solve this problem and if they don’t get it immediately solved. In some customers, we are fortunate enough to line up to an urgent pain point. In other customers, we aren’t. A lot of the growth that we saw in Q1 from our enterprise segment was situations where we happen to line up with an urgent need. When you do that, companies have a funny way of aligning behind those needs very quickly.

Aaron Levie:

It’s our job to make sure that we’re as customer centric as possible. We’re having all the conversations with line of business, with security, with the CIO, with legal. The sales process has looked exactly the same. It’s just been in some cases accelerated and other cases completely on pause. The good news about this environment from a selling standpoint is you kind of figure out which mode you’re in really early in sales.

Jason Lemkin:

The discovery process has been shortened.

Aaron Levie:

The buyer doesn’t have enough time to waste your time. So, you really quickly can qualify in or out, whether this is a real opportunity and whether you’re going to be able to be helpful for that customer.

Jason Lemkin:

Yeah, last one I want to hit and then make sure we can just do one or two questions, because this will be interesting to founders and others about of products changing. So, I don’t exactly know what you mean by this, but it’s super interesting. In the middle of March, you pivoted the Box roadmap to just two features that would transform work while being remote. That sort of makes sense, but what do you mean by totally changing your roadmap? Are you building software differently than you have for the last 15 years? Is there some insights here that other folks can take away?

Aaron Levie:

I would say that not our software development process, but just the product roadmap. So what we did was we looked at what we wanted to build in coming into the year versus in March, April, once we knew that people were going to be doing remote work. We basically said, “Anything that doesn’t relate to sort of remote and distributed collaboration and data security, we’re not going to focus on.”

Jason Lemkin:

You dropped it, you dropped it.

Aaron Levie:

We’re going to put all of our chips on things that only help people while they’re in this work from home, collaborate anywhere type of dynamic. That was the bet that we made, it was highly focusing of the product strategy. What we saw was lo and behold, we actually were shipping software faster in some cases than we even anticipated, because we just had this hyper focused approach of “What do we have to build? What are customers going to need right now? How do we make sure we’re going and solving those problems?”

Jason Lemkin:

Yeah, that’s interesting. Yeah, that focus really does accelerate the roadmap, doesn’t it? Because everyone’s got a pet feature. It’s like a pet IT project, pet CIO project, right?

Aaron Levie:

This is definitely-

Jason Lemkin:

They’re all right. They’re all correct that you want to build all these things.

Aaron Levie:

They’re all correct but for different timescales. What became very clarifying was the stuff that was needed right now based on the urgency of our customers’ problems. So, that helped us prioritize very, very efficiently.

Jason Lemkin:

Yup. All right, just a couple and then I’ll let you go because you’re so kind to give us the time. One sort of fun one, but I think you’ll find it interesting. When Loren was on just before from Shopify, do you know how much revenue his enterprise at Shopify? Do you know what much your Shopify Plus?

Aaron Levie:

Just to break this out, what’s the distinction of the revenue groupings?

Jason Lemkin:

Well, Shopify Plus is the enterprise group. The line might be like $10 million of revenue, I forget what, but it’s clearly enterprise. It’s selling to big brands, big names.

Aaron Levie:

Knowing Shopify, I’m going to say 20%.

Jason Lemkin:

It’s gone from 20 to 29. Anyhow, we had a little fun, because if you go that fast, you’re going to be like Slack. You’re going to be all enterprise before you know it, right? Even if the product doesn’t feel like… I mean, Slack is enterprise today, right? Now, Loren’s point, he said, “Don’t do SLAs, don’t do RFPs. Build a safe and secure product. Resist doing SOC 2, push all of it off, because most of it doesn’t matter.” He says, “Don’t even do contracts.” I actually believe SLAs and contracts are stupid. Because if the customer wants to leave, let them go, right? An SLA doesn’t bring the site back up, does it? It does nothing.

Aaron Levie:

[inaudible 00:43:27].

Jason Lemkin:

It does nothing, but what do you think? Do we need RFPs and SLAs and all these things in 2020? Do you still do them? Does your team still do all this?

Aaron Levie:

We do all those. When I was [inaudible 00:43:41], if we can kill RFPs, I would donate anything to anybody.

Jason Lemkin:

That was his point is don’t fill them out. But I said, “I’m going to ask Aaron because I think we’re not past those yet.”

Aaron Levie:

Unfortunately, there’s too many things you just lumped in. So, RFPs, we should kill as an industry and we should end [inaudible 00:44:01]. There’s no way to compare two software products from two different vendors using any kind of classic RFP that I’ve ever seen. The biggest thing with RFPs is they don’t ever track trajectory of the vendor, they always track point in time feature requirements. It’s hilarious the amount of times when a customer will buy a solution, because on that day of that month of that year, one feature existed in one product and didn’t from another. But then literally, three months later, the other product just blew past that other company, because you don’t get a sense of the momentum of the vendor from a typical RFP process, so I hate RFPs.

Aaron Levie:

SLA is very different. I am very pro-SLAs. So, I’m going to take the other side of this one, Jason. We would not be comfortable relying on an infrastructure provider behind the scenes in our setup that wasn’t going to sign up for very significant SLAs. We can debate the kind of recourse of an SLA, should you just leave, should you sue the vendor, whatever different debate there, but I do think having a shared agreement of “What is my service level going to be of your product?” is actually really important. I think there’s a big difference between 99.8, 99.9 and 99.9999999. [crosstalk 00:45:29]-

Jason Lemkin:

It could be epic.

Aaron Levie:

… SLA really matters no matter what so.

Jason Lemkin:

I’m with you. It was a good challenge, your thought. I also think it’s something you should just give, right?

Aaron Levie:

Yeah.

Jason Lemkin:

You should stand behind it, right? It’s not even that complicated. You put it on your website, you put it in the contract. It’s not nearly as complicated as infrastructure changes and a whole bunch of other things that are part of it. So, last question before we run out of time, I want to get some [inaudible 00:45:58]. There’s a whole bunch of things in this question about Box infrastructure and bare metal and hybrid and cloud but let me simplify them. You’ve gone from all of your own infrastructure.

Jason Lemkin:

Maybe because in the old days, we had no choice to be running on multiple clouds to thinking through this piece to move into security and performance changing. Just give us your insights on all these pieces, on all the clouds, on hybrid clouds, on multiple clouds, on your own infrastructure. What have you learned? Maybe the more interesting question is, what have you learned circa 2020 to 2022?

Aaron Levie:

Yeah, I think certainly, we started the company in 2005. So, we had to build our own infrastructure. You fast forward 15 years and you just do the math. You realize that a Google or an Amazon or somebody else is going to put 100 times the capital or 1,000 times the capital into their infrastructure strategy, than you’re going to be able to do. And then you really have a decision point, which is am I going to be able to shave out those margins, the 5% or 10% extra margin, that you might be giving up that that vendor is going to be extracting from just your infrastructure expense? It’s not your company margins, just on your infrastructure margin. Would you want to trade that for possibly the uptime benefits, the scalability, the additional features that that cloud provider has?

Aaron Levie:

I think more and more the argument is going in favor of leveraging the cloud more and more, certainly, for us it is and lets us focus more of our attention and energy on software. We want to be a software company. We want to have the behind the scenes parts of what’s running Box be obviously incredibly robust and performant and secure. But whether that’s something in our data center, something in another major very large company’s data centers, as long as we’re securing, protecting that data, I think we’ve got a level of flexibility in how we do that.

Jason Lemkin:

And then just last follow-up question and then I will let you up, because you’re right in the center what’s your practical learning on multi-clouds, the practical learning on running on Amazon and Azure? I mean, it’s a lot of work.

Aaron Levie:

It’s a lot of work.

Jason Lemkin:

It’s so much work. They’re not the same. It’s so much work, right?

Aaron Levie:

It’s funny, they really wanted to differentiate from each other and not make it easy to be portable between systems.

Jason Lemkin:

Yeah. Does this get us anything? Is it just the world we’re in, is just a crazy tax of the cloud? Does it make any sense? What have you learned from this multi cloud world? But a lot of CIOs want it. They want to pitch the vendors again. They want security, they want trust. But it’s like an SLA, I get it, but I don’t get all of it.

Aaron Levie:

Yeah, I think there should be a limit. You should never do it because of some academic reason. We want competition between the vendors or whatever. I mean, that’s probably not academic, but that’s a very expensive price to pay for managing a multicloud environment. I think the only main argument is that there’s different features of different cloud providers and that there are sometimes a reason why you want to be able to leverage a unique feature of one major service. Then you have to decide, “Is that unique feature worth a split architecture?”, then your software team is going to have to go in and figure out a way to abstract.

Aaron Levie:

Sometimes it’s worth it, and sometimes it’s not. But I would generally say simplicity in architecture is always a good North Star to have, because it’s just going to free up your time and energy in the company. And I think we need more simplicity in architecture in most environments that we see.

Jason Lemkin:

All right, that’s helpful. All right, everybody, we’re out of time. Everyone in the enterprise, check out Box Shield. I’m terrified of security. I’m terrified of Evil Corp. I am terrified of content being everywhere. I’ve just lived in the content world, right? The signatures actually, we had a single unified place for your contracts. We actually had all these benefits early because of the nature of the service. I’ve seen all the issues, right? So, check out Box Shield, it’s a great choice. Sign up, sign the contract this quarter. Aaron, thank you for your time. It’s always wonderful that you’re here with us.

Aaron Levie:

Thank you. Appreciate it.

Jason Lemkin:

All right, talk to you soon.

Aaron Levie:

[inaudible 00:50:27]

 

The post SaaStr Podcasts for the Week with Justin Bedecarre, Jen Nguyen, Jason Lemkin, and Aaron Levie appeared first on SaaStr.

SaaStr Podcast #364 with Figma Head of Sales Kyle Parrish


This post is curated by Keith Teare. It was written by Amelia Ibarra. The original is [linked here]

Ep. 343: Kyle Parrish is the Head of Sales @ Figma, the company that helps teams create, test and ship better designs from start to finish. To date the company has raised over $132M in financing from some of the best in the business including Sequoia, a16z, Index, Greylock and Kleiner Perkins to name a few. As for Kyle, prior to Figma he spent over 5 years at Dropbox achieving some incredible milestones including launching and scaling the Austin, Texas office from 3 to 80 people and being responsible for growing Dropbox’s leading partner ecosystem. Before Figma, Kyle spent close to 3 years as an Account Executive at ADP.

In Today’s Episode We Discuss:

* How Kyle made his way into the world of SaaS and sales and came to be Head of Sales at one of the fastest-growing companies in Figma.
* Kyle was in charge of creating the Austin, Texas sales team @ Dropbox, what were some of his biggest lessons when it comes to moving sales outside of HQ? What worked? What did not work? At what stage does culture and process really start to break?
* Why is it so hard moving from 0-1 in sales? How does Kyle advise founders when it comes to making your first sales hire? Does Kyle agree that it has to be the founder who develops the sales playbook? How does one create sales targets that are both ambitious but also achievable? What is the balance?
* What does it take to create a performance led sales culture? Where do many people go wrong here? How is the best way for sales and product to work together? What can one do to proactively make those discussions with sales and product both frequent and productive?

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
Kyle Parrish

Below, we’ve shared the transcript of Harry’s interview with Kyle.

Harry Stebbings:

We are back, and what a show we have in store for you today here on SaaStr. One of the hottest and fastest-growing companies in the last few years is undoubtedly Figma, and today I’m so excited to be joined by their head of sales, Kyle Parrish. For those that do not know, Figma helps teams create, test, and ship better designs from start to finish. To date, the company’s raised over $132 million in financing from some of the very best in the business, including Sequoia, Andreessen, Index, Greylock, and Kleiner Perkins, to name a few. As for Kyle, prior to Figma, he spent over five years at Dropbox achieving some incredible milestones including launching and scaling the Austin, Texas office from 3 to 80 people and being responsible for growing Dropbox’s leading partner ecosystem. Before Figma, Kyle spent close to three years in AE at ADP. And I’d also want to say a huge thank you to Mark Goldberg at Index Ventures and Praveer Melwani at Figma for some fantastic questions, suggestions today. I really do so appreciate those.

Harry Stebbings:

But now I’m very, very excited to hand over to Kyle Parrish, head of sales at Figma. Kyle, it is so great to have you on the show today. I’ve heard so many good things from Dylan Field, from Mark Goldberg, from Praveer on your team, so thank you so much for joining me today, Kyle.

Kyle Parrish:

Thank you for having me. I’ve been really looking forward to this.

Harry Stebbings:

Not at all. As I said, I’m incredibly envious of that voice. Those dulcet tones are wonderful. But I do want to start today with a little bit on you. So tell me, how did you make your way into what I call the wonderful world of SaaS and come to be kind of the killer head of sales that you are at Figma today?

Kyle Parrish:

Yeah, so I think there’s always a lot of luck involved, but I had a really fortunate journey at Dropbox early on in my career. I joined the company in 2011 when they had around 50 people as the third salesperson and shortly thereafter, within that first six months, raised almost a quarter billion dollars and the company started just growing exponentially. So I was the first person on the sales team to actually get promoted to becoming a manager, started getting into building teams, opening up our sales and operations hub in Austin, Texas, and doing a bunch of roles over my almost six years there.

Kyle Parrish:

In that time, before I was even really focused on the impact of UI/UX or the design world at large, I started to realize we were selling against companies like Google and Microsoft and Box, and a lot of our sales pitch was around how intuitive the product was. Harry, your uncle could use it because it looked like your My Documents folder, and they may already be using it in the workplace today. So we were really selling on the intuitiveness of the design, and in tandem with that, we were hiring these kind of rockstar designers. They were making headline news and Forbes and Business Insider, and we started to realize that the shift was, not only was design critical, they were actually kind of leading the charge and being seen in Silicon Valley as the leaders of the company in so many ways.

Kyle Parrish:

So that was my first opening. I started seeing some people from Dropbox go to be founding engineers over at Figma, the collaborative space design, still working in desktop apps. That made a ton of sense to me. I actually reached out to the team before I took a sabbatical after Dropbox and never heard back, but then followed up through Mark. When I got back, he connected me with Dylan and the team over there, and after first thinking that self-serve was the only path for them, they realized they were starting to get some serious traction with large enterprise companies and wanted to build a sales org, and asked me to take the role. The rest is played out from there.

Harry Stebbings:

And what an incredible journey it has been, especially when you look at the trajectory over the last kind of 18 months at Figma. It’s incredible to see. I do want to ask, though, because it’s such an incredible experience to see a company like Dropbox in the hypergrowth mode that you saw it in. I spoke to Mark Goldberg before the show, and he said about your opening the Austin, Texas office to Dropbox, and obviously that scale today into a pretty huge office. So I want to ask, in terms of kind of moving sales outside of HQs, which a lot of people are thinking about, what worked and what didn’t work in that process now with the benefit of hindsight?

Kyle Parrish:

Yeah, that’s a great question. I think you come in with some perceptions, like in San Francisco at that time, it was 2013 when we moved, Dropbox was a household name. We had so many inbound referrals, and in terms of recruiting and hiring, people knew that there were a lot more roles on the go-to-market and business side. It wasn’t just engineering, product, and design roles. But when you land in Austin, Texas, it’s a very different tech ecosystem. It’s a very different place in the country, and that same reputation just didn’t translate. People knew Dropbox, the product, they knew about the company, but a lot of the market in Austin assumed there was only engineering and kind of product roles. So a lot of what we had to do is understand that local tech ecosystem, understand the big companies that were hiring some of the top talent, and just the local market as a whole.

Kyle Parrish:

The second was we had to start working really hard to establish our brand, doing a bunch of events, playing into kind of the Austin culture as a city, the tech scene there, and really establishing that, hey, Dropbox is this amazing business and we’re hiring sales roles. We’re hiring customer experience and support roles, and this is going to be a 150- to 200-person office in very short time.

Kyle Parrish:

I think the last thing that was one of the most successful moves that we made is like a leadership team out there, we started realizing that back in 2013, I think it’s very different today, the hiring market wasn’t as mature for some of the talent, the caliber of talent that Dropbox was looking for at that time. So what we started to do was hire from other markets, Seattle, Boston, New York, LA, San Francisco, even internationally. We had some people move from London. We started playing the allure of living in Austin, as Austin was kind of this hot, cool place. South by Southwest, of course, was almost doubling year over year, it felt like. So we were really successful in getting almost 65% to 70% of our talent coming from these other markets, and actually moving their entire lives to Austin to join Dropbox.

Harry Stebbings:

I love that in terms of kind of the migration of talent there. If that’s what you did well, and kind of realizing, we’ll say, kind of the importance of really embracing local culture as well, I liked that as the first point, what didn’t you do well? Where were the mistakes made where you were like, actually, with the benefit of hindsight, I would have done that differently?

Kyle Parrish:

Yeah. I think we would have come in with a better understanding for the market. We landed on Austin. It was between Brooklyn and Austin at the time, and Austin seemed like a great place. I think companies like Facebook and Google and of course Dell is headquartered out there had some pretty established large teams, but the startup scene of startups coming out of Austin wasn’t comparable to a lot of the Silicon Valley-headquartered companies, and so Dropbox was actually a pioneer in opening up the office. But I think we’d thought that we were bringing that same hiring brand and reputation and would hit the ground running in terms of hiring a ton the people.

Kyle Parrish:

I mean, we were successful ultimately in hiring over a hundred people in just under two years, but it was a really slow start to gain that hiring market off the ground, and realizing that we had to have local recruiters that knew the companies that people were coming from and knew how to kind of read between the lines. I think in every new market that you go to, it’s going to be different hiring, especially if you’ve spent a lot of your career in San Francisco. It doesn’t mean that the caliber of people are any less. It’s just the backgrounds that they have may look a little bit differently.

Harry Stebbings:

Can I ask, and this is off schedule so forgive me for it, but a hundred people over two years is essentially one every single week for two years. It’s incredibly challenging to manage morale, to manage culture. I guess my question to you is, when you look back at that and scaling that team to a hundred over two years, what breaks and when in a major way?

Kyle Parrish:

Yeah. I think starting out, it was funny. I recruited a couple of people from San Francisco and so I think myself and some of the other leaders on that support and operations side, we all recruited one to two people from San Francisco so we could kind of bring some of that nucleus of culture out to Austin. That helped, but in the beginning, I always joke around, when you open up these offices, you’re in kind of all the crappy offices along the way, and then we eventually built this huge office on Fifth and Congress in the middle of downtown with the sign on the building. But we started out in what felt like a bunker room, and there was three of us and we’re setting up calls and starting to bring the inbound sales team out to Austin, Texas, which made sense in so many ways strategically.

Kyle Parrish:

I think once you get to 25 and 30 in that office, you start to have your own little subculture. I think when we were still small below that, we were really connected to HQ and would travel back often, and we’re trying to bang on doors and meeting rooms just to get remembered because it was a pretty Zoom culture. Once we hit that point, somewhere in the 30 to, let’s call it 40 range, you start to establish your own subculture and you have to really invest in not only making sure that there’s a dotted line to the culture at Dropbox in San Francisco and the other offices around the globe, but also that you’re kind of making your own culture as well.

Kyle Parrish:

And so one thing, instead of all-hands that we would do every Friday, we would have y’all-hands to kind of play into the Texas scene. I think one of the biggest compliments was Drew Houston, our CEO and co-founder, came out and he just had rave reviews, not only of the caliber of people we had hired and recruited, but the culture. It was authentic. It was real. It felt like Dropbox, but with a little bit of a Texas twang to it.

Harry Stebbings:

I love that, in terms of the Texas twang to it and y’all-hands is a different one, especially for me as a Brit to hear. I do want to ask though, because you mentioned kind of the subculture being created there, I want to start actually a little bit before that in terms of actually specifically scaling the early-stage sales team. When we chatted before, you mentioned building a sales org from zero to one, it’s just really, really hard. So I wanted to start on that. Why is it so hard moving from zero to one in sales, Kyle?

Kyle Parrish:

Yeah, I think it depends on every type of company that you join and the culture that they have established before you get there. But in the early days, it’s just not glamorous. I mean, it’s a ton of fun if you like building and you like getting in and being scrappy and having kind of this peripheral view to all these other teams across the business. But there’s a lot of preconceived notions of what sales may look like at that company, and if you’re the first or the first few people to kind of establish it, it usually means a lot of different things.

Kyle Parrish:

So I think my point of view is that you need to build a process hub that allows you to scale to where you want to be two years from now. If you don’t, and I’ve seen this in the past, if you’re fortunate to grow your business rapidly, you’re going to catch up a lot quicker to where things start to break and fall down.

Kyle Parrish:

So you’ve got to get your first customers, understand the value prop, how to position the product, where they’re using it, where things are falling down, keeping that feedback loop really tight with product and engineering and marketing and all of the different teams, while also thinking, if I’m going to hire 20 sales reps in the next six months to a year, what are we not thinking about?

Kyle Parrish:

I love it. It’s crazy. It’s fun. It’s wild, and I’ve been fortunate to join some pretty amazing companies that have phenomenal products to bring to the market. But early stages it’s hectic and can be stressful, so you have to have a ton of conviction for your plan, executing and also understanding that you don’t know what you don’t know, and you need to iterate and work with your team closely.

Harry Stebbings:

You said the words process hub there, and I’m really interested. What does that implementation and process look like in terms of what you actually do structurally to build it?

Kyle Parrish:

Yeah. It’s a great question. I was fortunate to have a good partner at Figma in Praveer, and we both spent some time at Dropbox before this. What I think we saw in a bottoms-up business like Figma where you have a free offering, you have a paid consumer offering, and then the happy path is moving customers to enterprise, what you have is a ton of product data across the domains in which your customers are using Figma in some capacity.

Kyle Parrish:

So what we built early on is… In my opinion, Salesforce is the only CRM that really makes sense if you think that you’re going to get to hyper scale and growth. So we started structuring our CRM instance around the product data that we had. So our model was saying that if there are these companies like Uber and Airbnb and Goldman Sachs and Microsoft that have a bunch of usage across their domain, we want salespeople to see that in the CRM. I want to limit the number of tools, apps, BI tools that you have to visit to find that information. Whether you’re getting a ton of inbound inquiries or you want to proactively reach out to these accounts, you have that aggregate data and hopefully the email and decision-maker champion emails that you need so that you can start to triangulate who makes decisions, is there any momentum, and how do I leverage that into a conversation and turn it into some actual sales pipeline.

Harry Stebbings:

Can I ask, when you look back, especially at your joining Figma more recently, the question that I have always and every founder always asks me is, how do I know fundamentally when is the right time to hire my first sales role? It could be head of sales, it could be rep, it could be AE… It varies obviously largely by business, but when you get asked this, which I’m sure you do, how do you think about it, and how do you advise founders who are contemplating adding that first sales role?

Kyle Parrish:

Yeah, that is a question that I hear fairly often. There’s actually an article. It’s a Harvard Business Review article that’s pretty outdated at this point, but still rings true for me. It’s called the sales learning curve, and they basically talk about, in your different phases of business growth, what kind of sales reps do you want to bring in.

Kyle Parrish:

I think in that early stage, that zero to one, they talk about bringing in Renaissance reps, and what that really means to me is you can take risks and hire people with backgrounds that are smart, are proven, are hungry, understand the product, the technical ins and outs, and want to jump in and help build the business, because once you start to get to scale, the profile of sales rep, the tried-and-true, proven, hitting quota, exceeding targets, all of those things, is a lot more critical. Not to say that you shouldn’t hire salespeople early, but you can start to get people with backgrounds of like, maybe worked in consulting before, a year or so in sales. You don’t have to find your perfect rep profile right out of the gates, and that’s something that I’ve seen work really well.

Harry Stebbings:

The question that I always have is, and I strongly believe this, but I actually got a big pushback from Michael Katz at mParticle. He was the CEO and founder of mParticle when I put this on Twitter. I said, fundamentally, the founder has to develop the sales playbook before bringing in reps and you can’t expect them to develop it willy-nilly in their own creativity. Would you agree with me here, and the accountability does lie with the founder for creating the playbook, or would you think actually that there is alternative paths?

Kyle Parrish:

I don’t think it necessarily relies on the founder, and to come back to your previous question, whether you hire a first sales rep or head of sales, I think if you’re really starting to see a ton of momentum and you know that this is going to be a decent-sized team, pretty soon you can go ahead and kind of do what Figma did it in my case, and brought me in as a head of sales to start hiring and building right out of the gates. I think if you’re still trying to find product market fit, and there’s still a lot of work to do to understand where it resonates with customers, what is the value, what is the kind of marketing narrative behind it, you might want to have a founder just hire a somewhat-experienced sales rep to start having those conversations, bringing back that feedback back to product.

Kyle Parrish:

But I do think that, ideally, that initial sales leader, if not, maybe a founder, needs to kind of have a strong gut sense on what the playbook is and what the motion looks like, because if you start hiring anywhere near five people into a sales org, and everyone’s doing a little bit of something different, it’s not going to work out well. I think you need to have consistency. You want to have a unified front. That being said, you always encourage creative thinking and coming up with your own workflow in sales, but I do think that early sales leader, and in absence of that person, a founder, needs to establish some sense in their network from conversations they’ve had, if they don’t have a lot of sales exposure, as to what it looks like to do sales at their company.

Harry Stebbings:

Can I ask, you mentioned plans earlier in the process element and how to think about structuring plans. The question that I have today is, when you think about early-stage sales teams, in terms of setting and structuring those plans for your teams, how do you think about that today, given just the state of flux that we’re in? So my question is, how does one accurately plan sales plans today in such a state of flux?

Kyle Parrish:

In the really early days, I’m a big proponent of performance-driven culture, and I’ve seen different ways, and there’s so much building. For example, it’s like, we can talk about all the process stuff you do early on to establish that the team can grow and scale in a healthy way, but I think if you don’t set the line of, we’re going to put out aggressive targets, we’re going to work together as a collective unit, sales and all of the cross-functional teams that support sales, and we’re going to go out and try and exceed those goals, you’re just delaying the inevitable. Then eventually you’ll have people working on marketing projects or a Salesforce implementation rollout. Sales is not a part-time job. You have to be fully committed and you have to be driving towards a goal every day, every week, every month.

Kyle Parrish:

I do think that in setting targets, you need to take into account a lot of things. So I think for us, we at Figma still review sales quotas each quarter. They keep going up each quarter, and we’re fortunate to see our business growth during these times. But when we look at the data, we strip everything away. We look at where things are going, what the product roadmap says, and what we think is both aggressive, but also attainable, and we want to build a culture of positivity and enablement for the teams so that they feel every day they can come in and do their job and not threaten that potential of burnout.

Harry Stebbings:

Yeah, no, I totally agree with you in terms of threatening that potential burnout. The question I always have is, how do you find that balance? Because you want to set the stretch goals and, you know, you look at a business like Figma, which is growing so fast, and you want to set those stretch goals, but you also don’t want to set unwaveringly high goals which bluntly are so challenging to achieve, which then obviously create dejection and disincentive in the team. For you, when thinking about the plans, how do you think about hitting that balance? Then, and this is really unfair of me, subsequent question, if plans aren’t hit, how do you corral the team but also ensure that they haven’t done the work? Do you know what I mean? How do you discipline but not disincentivize?

Kyle Parrish:

For us, it starts with a really strong, balanced relationship with finance and operations. So for us, we’re looking at a lot of things. We’re looking at the entire funnel. What is the lead source? Where’s pipeline being created? What kind of activities can we see on a rep-per-rep basis? What progression of deals are happening? So there’s always a way to vet, are they doing the work, are we putting in the investment of time that we think is fair, and of course is the quality of the salesmanship across the team there? And when it’s not, what is leadership doing to improve that?

Kyle Parrish:

I think one thing that we have reserved in being an early-stage company… Sales at Figma is just over two years old, and so it’s a very new discipline at the company. We also reserve the right to say, “Hey, we were completely off. We estimated and took into a couple account these variables being maybe 5X growth or 10X growth, or this thing around the product shipping at this time.” If those things don’t happen as a leadership team, we’re not stuck in sand and saying that’s the only way it has to be.

Kyle Parrish:

So I think there is certain scenarios where you always hold the team accountable, and you try and build morale if, for whatever reason, people aren’t achieving the goal, and try and dig in and understand why. But I think early on, it’s just so hard to draw a line that’s accurate, aggressive, and appeases the board and all of the corporate-level revenue targets that you’re trying to exceed. So if for any reason we feel that it was unjust and just miscalculated, we reserve the right to make the situation right after the fact.

Harry Stebbings:

Totally get you there in terms of being plastic enough mentally to move with realizing that something may have been out of whack. Again, totally unfair of me and off schedule, but when you think about the sales motion today with Figma, you have the bottoms-up adoption, which has been so prevalent and so successful for you, and then you also have the top-down, which is the much larger ACVs and much more enterprise-heavy sales. How do you think about, bluntly, how big an ACV it requires to have that heavy sales touch, and is that purely an ABM process? I’m really intrigued how sales works with marketing on the high ACV, heavy enterprise deals.

Kyle Parrish:

For us, I think we have such a healthy land-and-expand business that we don’t have to reserve sales resources for such a large contract out of the gates. That being said, we have seen consistent growth in our initial deal size quarter over quarter, which is a healthy metric that we’re continuing to drive on, but we’re not saying, “Hey, you have to spend $500K with Figma out of the gates.” We fundamentally believe, and we see this in the data both when you trial the enterprise product and when customers convert and ended up becoming Figma organization clients, that once you get on the platform and you start seeing the power of true design platform, which really didn’t exist before Figma, you start collaborating, bringing others, designers, engineers, product managers, marketing, brand, et cetera, into the design process earlier. It’s an experience that really fundamentally changes the product development process, and people can’t go back typically to what they did before, because it’s fundamentally so different. You were using anywhere from four to ten tools to now one.

Kyle Parrish:

So our job on the sales team is to take interests that may be specific to a business unit or a small team, and try and widen the scope of that interest and get large enterprises to think is, “I understand that Harry the junior designer is really excited about Figma, follows us on Twitter, has been using the product for side projects, but we want to tell you why Amazon should be using Figma and why we’re the design platform of the future.”

Harry Stebbings:

Can I ask you terribly then, and I don’t mean this rudely… With such a product-like growth strategy, and then the expand strategy post initial insertion for the client, one would think it’s like, okay, heavy investment in the product-like growth strategy and then super heavy investment in the customer success segment. I guess my question to you, and it sounds so rude, but it’s like, in a model like this, is sales not just customer success?

Kyle Parrish:

No, it really isn’t. I think what people don’t realize is regardless of the product you’re selling in today’s landscape of enterprise SaaS, there’s so much work in these multi-threaded conversations. I always talk about working deals in parallel. You’ve got the infosec process. You’ve got the legal process, which can have MSAs and DPAs and all of these things. You’ve got the business unit. You’ve got the senior leader on the team. And in our case, you have design systems, which, if not all those people are aligned on what you’re trying to do, and this change management that you’re trying to drive forward, the deal’s either not going to happen or not going to happen in the timeline that you’re hoping for and that really makes sense for your business.

Kyle Parrish:

So I think what we’re doing is taking a lot of this bottoms-up energy and excitement and turning it into this enterprise-wide sales adoption. That’s what we’re seeing being really successful. At Figma, for example, we actually don’t have a customer success team. Everyone in the sales org owns a quota, and so if you’re post-sales on the account management team, you have an expansion target as well as a churning contraction allowance that you’re working towards. On the pre-sale side, everyone has a quota. It’s held quarterly, and so we feel strongly that at any given point, our customers only have one point of contact. So if you’re post-sales and you’ve been on the platform for over a year, you’re working with one of our account managers, and they have a slightly different approach into how they approach the customer relationship, but they’re still there for education, growth, and support.

Kyle Parrish:

I think specific to Figma, our audience loves to self-educate and we have such amazing resources on product education, our help center, and we do do a lot of individual as well as scaled workshops to drive support around not only what’s coming out, what we’ve recently shipped, but also some of these non-used cases, like why would a developer have edit access in Figma and what’s the value there. So I really think that the sales motion is critical to what we’re doing, because we’ve got a lot of energy. We’ve got a lot of love around the product. But if you weren’t having a good experience working with someone on the sales side, it’s really easy just to buy the minimal amount of product and see if that level of virality is really going to spread these large companies, but I fundamentally don’t think it would, or at least not as fast.

Harry Stebbings:

I totally agree with you in terms of it not being as fast. Can I ask, in terms of the upsell quota versus the new sale quota, how do you think about the right ratio that… And I know it’s very company-specific, but I’m just intrigued, in your mind, what that looks like.

Kyle Parrish:

So it’s something we’re always keeping a close eye on. I think ideally you want to be at least 60% net new. I think we try to aim closer to 70% net new, but it’s a little bit of a juggling act. As you’re fortunate to acquire more and more customers, you have a much larger base of what account management is working with, and so when we look at expansion versus new revenue, we’re really excited to see how rapidly our customers grow. Any given customer, we see them more than doubling in their first year on the platform, but at the same time, there’s so much opportunity and there’s so many conversations we’re having, and we’re starting to go through that evolution of solely living off the community that Figma has built, and the inbound energy and opportunity versus being more proactive, going outbound, working alongside a really strong marketing arm, and seeing some of those ABM fruits that have been planted and recently started to bear fruit.

Harry Stebbings:

Totally get you in terms of them starting to bear fruit. I do want to ask you, and I spoke to Praveer before the show and I spoke to Mark, and they both mentioned in terms of the sales team that you’ve constructed, this incredible kind of alignment in terms of the mindsets that the people have for the product-like growth, but also the fundamental product itself, which isn’t always the case actually in a lot of sales teams, as obvious as it sounds. I guess my question to you is, when you try to uncover this talent, how do you detect it in interviews, and what are the most high-signal questions which to you suggest that kind of product love and alignment?

Kyle Parrish:

To reference that sales learning curve article that I mentioned earlier, I think for me early on, especially with our product, we’re selling to a technical audience. You’ve got to have a technical aptitude and excitement for the product. If you’re joining any company to do sales and you don’t care about what the company does or the customer that they serve, you’re setting yourself up for a real slog. So excitement about the product, being able to understand it at a technical aspect.

Kyle Parrish:

I think the other thing is we’re just looking for really high-horsepower, intelligent people that want to come in, understand our customer’s challenges, think like the mind of a designer, a product manager, developers, and start to really understand the landscape of companies like Adobe and Sketch and InVision. You really have to invest, because early on, the enablement resources aren’t as strong. As of late, we’re starting to build those things out. Those teams are coming online and really starting to have an impact, but early on, you need people that are scrappy and can understand, hey, we’re the upstart. We don’t have a lot of customers early on to note. We’ve got this amazing product and even stronger roadmap, and the people that are using it are screaming how great Figma is from the rooftops. So how do we use those social proof points in going in that and taking that to customers that are saying, “Hey, I heard about Figma. Tell me a little bit more.” That is a challenge early on.

Kyle Parrish:

So I think some of the questions that I ask people are, how do they handle adversity? What are they thinking about in their career? What are the key pillars of what you’re looking for in the next opportunity? If they’re not being thoughtful about their next career move, then that’s usually a red flag for me, especially when you’re early on. The first couple of people that you hire are really going to establish the sales culture for the next couple of years.

Harry Stebbings:

Totally agree with you in terms of, what is it, A players hire A players, and B players hire C players. I love that as a statement. It’s a great one. So that was one thing that Mark told me I had to ask you. Then also Praveer told me about pricing mindsets, and it’s been a test-and-iterate approach for you, he said. So I’m intrigued in terms of lessons and takeaways from that, what have been some of the biggest takeaways and lessons from the test-and-iteration process within the pricing structure itself?

Kyle Parrish:

Yeah. We were able to set our price for Figma’s enterprise product at a point that signaled that this was a premium product, but at the same time, given the consolidation of a number of tools and moving to Figma, still had a very compelling ROI story for our customer. So one thing that’s really allowed us to kind of grow and scale our business is that with Figma, you only pay for editors, which is different from a lot of the competitive tools. So, let’s say if Uber has 1500 people using the product and only 500 of them are editing on a consistent basis, those 500 people is what procurement and their team is paying for. So that’s one thing that’s allowed us to sell into the opportunity.

Kyle Parrish:

One of the bigger sticking points and learnings, and I think this is something that is also boding well for us today, is we don’t discount the price on a per-unit basis, and we never have. This is something that Dylan, Praveer, and myself have talked about early on, and it’s something that we haven’t changed even for our largest customers and our largest contracts. You realize that not one company is going to change how procurement measures themselves and what they take to their leadership team on what was success and what wasn’t. So even though I think we do have a lot of leverage in our pricing model, how we treat true-ups on the platform, many times procurement is hyperfocused on what is the unit price, and can I get some kind of tier discount as we continue to invest, scale, and add exponential amount of people in the platform.

Harry Stebbings:

Discounting is such an interesting one, and it’s one that I’m always oscillating on. It is company-dependent, but I am intrigued on your thoughts on this one. How do you think about when to offer versus when to remain true to your value mechanism in place, and give discounts versus not? What do you advise founders who are like, “It’s the early days, do I just give discounts?” How do you advise them and what does that look like?

Kyle Parrish:

Yeah, I think discounts are a hot topic right now, I’d say, in 2020 in SaaS, because I think when you have a discounting policy, there’s always room for it to get a little bit unruly. Especially as the team starts to grow from 5 to 15 to 1500 sales reps, it can be a lot to manage. So I think early on, you’re almost better off setting a pricing strategy that avoids discounting or minimizes it heavily so that you don’t have to get in that conversation.

Kyle Parrish:

Whether it’s founder-led sales, those Renaissance sales reps that you’ve hired, you really don’t want it to get into a bad habit of setting precedence in creating discounts, doing one-offs, having pricing schedules that don’t make any sense, because as you start to grow and scale your business, you’re going to bring on finance, you’re going to bring on these other partners, and everybody is going to want to have consistency, cleanliness, and some kind of rhyme or reason as to how you’re doing things. So I really tell people, focus more on the right pricing strategy, less on the right discounting strategy. I think if you solve the first, the second will be less of a problem.

Harry Stebbings:

Final one, I promise you, and then the quick-fire, but I can talk to you all day. In terms of the pricing strategy itself, you have a really hard thing. It’s like, you have to have enough data to determine whether it’s working, but you also don’t want to have too much data when it’s not working that you’re leaving dollars on the table, or actually suboptimal in terms of your pricing and your conversions. How do you think about giving it enough time to be in the wilderness, but also not too much time that you’re leaving dollars on the table? How much data does one need?

Kyle Parrish:

I think if you have early beta customers that you can trust and you can have these open and transparent conversation, this is something we were able to do at Figma, you can really talk about, what kind of budget do you have for tools like this? How do you think about things on the spend side? What is the value our product brings and how, if any, do we consolidate your spend with other tools and other vendors? From having those conversations, you start to… Hopefully you have some marquee-type customers that really are proof points that resonate elsewhere. You can start to vet that the price point seems pretty right and fair.

Kyle Parrish:

Then once you’re starting to get it out in the wild and you’re pushing it through one sales rep or multiple, I think the biggest thing you want to keep an eye on are, are you losing often and frequently because of your price point? If occasionally customers can’t afford it, does it make sense? You’re not sure about the discounting strategy. That will come from time to time, but if you’re losing a significant amount of customers and the largest reason is your price point, you’ve clearly done something wrong, assuming you’ve got a great sales team, you’ve got a great product, and your marketing team is doing everything to get the good word out. That’s the north star metric that I think about. Is the sales team losing because our price is unreasonable to our buyer?

Harry Stebbings:

Yeah, no, listen, I totally agree in terms of those lost or churned accounts because of cheaper alternatives elsewhere, continuously happening. I do want to ask though, Kyle, I’d love to move into my favorite, which is the quick-fire round. So I say a short statement and then you hit me with your immediate thoughts. Does that sound okay?

Kyle Parrish:

Sounds great.

Harry Stebbings:

Okay. So this is a very kind of Peter Thiel, Founders Fund one. What do you believe that most around you disbelieve?

Kyle Parrish:

There’s such a thing as inbound sales reps versus outbound sales reps. I think there’s great sales reps, and as your business grows and evolves, finding a way to be successful and hit your number and be a builder is really the most critical piece. I really don’t think that there’s a such thing as only an inbound sales reps, at least in SaaS.

Harry Stebbings:

Zoom happy hours. Great or actually a pile of shit?

Kyle Parrish:

I would say, for my leadership style, I’ve kind of held back on adding more Zoom happy hours and socials. For me, they don’t serve the purpose that an actual happy hour does. I mean, there’s a lot of really creative ways with Airbnb experiences, MasterClass, all these other things, social distance hanging, to meet up and keep your team connected. But after an eight hour day of Zoom calls, who wants to get on a Zoom call and have a drink with their boss? Not me.

Harry Stebbings:

Totally with you. I find them incredibly annoying. Tell me, what single trait do you most want to see when you’re meeting investors when you’re already kind of engaging in that process?

Kyle Parrish:

I think if I had to boil it down to one thing, it’s willing to challenge your leadership alongside open to leveraging their network to helping grow the business. You want people that are not only going to challenge the CEO, the cofounders, but also their surrounding leadership, and I think at Figma, we’re really lucky to have this all-star board on our side.

Harry Stebbings:

What is good sales rep productivity to you? That’s a tough one.

Kyle Parrish:

Ultimately for me, it’s healthy deal progression and execution. It’s assumed that you’re working hard, you’re putting in the hours, but if you can progress deals forward and execute against them and maintain a high conversion rate, you’re going to be successful in this line of work.

Harry Stebbings:

If you could change one thing about the world of SaaS today, what would it be and why?

Kyle Parrish:

Honestly, I think going back to the discounting process, I think we could all save a lot of man hours in our lives if we could really change the stigma around pricing, procurement fighting back, where do we land, setting a high price point only to discount it down. So I think if we could all build some kind of pricing strategy that was a little bit more aligned on discounting not be a thing, that would be a positive move forward for the industry.

Harry Stebbings:

You said to me before, manage your reputation like a bonsai tree. That happens to be one of my favorite quotes of the week, so I have to ask, what did you mean by this?

Kyle Parrish:

When I talk to a lot of people and they want to kind of get career advice, the one thing I say is that at my time at Dropbox, I think I worked really hard, I made a lot of great relationships and had a pretty good reputation, but if I would have known how much it would continue to follow me and open doors for me and really change the course of my life and career, I would have treated it like a bonsai tree. So when I talk to people, I tell them it’s not just the job you’re in today. It’s not just the company you’re working for today. The tech community is small and you’re building relationships that are going to follow you for the next 30, 40, 50 years, and so you should really think that way.

Harry Stebbings:

Yeah, no, totally with you. I always say life is long. Make friends. And then I want to finish on probably a challenging one, actually, which is like, what’s the hardest element of your role with Figma today?

Kyle Parrish:

I think the hardest role is the environment we’re in today, which we’ve adjusted very well to, but I think that alongside of being at this rapid growth company that’s looking to continue to double and then some. So I think for us, it’s continuing to hold on to this really healthy and awesome culture that we’ve built as a company, as a sales organization, and with a lot of growth. We’ve hired over 10 people on the sales team and I’ve never met any of them in person, and so these challenges are evident for anyone in any industry. It’s just something that I’m thinking about a lot, keeping me up a lot at night, because I’m really proud of the team we’ve built, the culture of Figma, and evolving it with the sales team. But I think moving forward, it’s always a moving target, and we need to see, as this company gets bigger, what does that look like, and what are we doing to maintain it?

Harry Stebbings:

Kyle, as I said before the show, I heard so many good things, both from Mark and Dylan, so I wanted to do this one for a while, but thank you so much for joining me today.

Kyle Parrish:

Thank you, Harry. This was awesome.

Harry Stebbings:

I have to say, I really did so love having Kyle on the show. Such a fantastic individual and just such exciting times ahead for him at Figma. If you’d like to see more from us behind the scenes, you can on Instagram at @hstebbings1996 with two Bs. I always love to see you there.

Harry Stebbings:

As always, I so appreciate all your support, and I can’t wait to bring you an incredible episode next week with Hilary Headlee, head of sales ops at Zoom.

 

The post SaaStr Podcast #364 with Figma Head of Sales Kyle Parrish appeared first on SaaStr.

SaaStr Podcast #364 with Figma Head of Sales Kyle Parrish


This post is by Amelia Ibarra from SaaStr

Ep. 343: Kyle Parrish is the Head of Sales @ Figma, the company that helps teams create, test and ship better designs from start to finish. To date the company has raised over $132M in financing from some of the best in the business including Sequoia, a16z, Index, Greylock and Kleiner Perkins to name a few. As for Kyle, prior to Figma he spent over 5 years at Dropbox achieving some incredible milestones including launching and scaling the Austin, Texas office from 3 to 80 people and being responsible for growing Dropbox’s leading partner ecosystem. Before Figma, Kyle spent close to 3 years as an Account Executive at ADP.

In Today’s Episode We Discuss:

* How Kyle made his way into the world of SaaS and sales and came to be Head of Sales at one of the fastest-growing companies in Figma.
* Kyle was in charge of creating the Austin, Texas sales team @ Dropbox, what were some of his biggest lessons when it comes to moving sales outside of HQ? What worked? What did not work? At what stage does culture and process really start to break?
* Why is it so hard moving from 0-1 in sales? How does Kyle advise founders when it comes to making your first sales hire? Does Kyle agree that it has to be the founder who develops the sales playbook? How does one create sales targets that are both ambitious but also achievable? What is the balance?
* What does it take to create a performance led sales culture? Where do many people go wrong here? How is the best way for sales and product to work together? What can one do to proactively make those discussions with sales and product both frequent and productive?

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
Kyle Parrish

Below, we’ve shared the transcript of Harry’s interview with Kyle.

Harry Stebbings:

We are back, and what a show we have in store for you today here on SaaStr. One of the hottest and fastest-growing companies in the last few years is undoubtedly Figma, and today I’m so excited to be joined by their head of sales, Kyle Parrish. For those that do not know, Figma helps teams create, test, and ship better designs from start to finish. To date, the company’s raised over $132 million in financing from some of the very best in the business, including Sequoia, Andreessen, Index, Greylock, and Kleiner Perkins, to name a few. As for Kyle, prior to Figma, he spent over five years at Dropbox achieving some incredible milestones including launching and scaling the Austin, Texas office from 3 to 80 people and being responsible for growing Dropbox’s leading partner ecosystem. Before Figma, Kyle spent close to three years in AE at ADP. And I’d also want to say a huge thank you to Mark Goldberg at Index Ventures and Praveer Melwani at Figma for some fantastic questions, suggestions today. I really do so appreciate those.

Harry Stebbings:

But now I’m very, very excited to hand over to Kyle Parrish, head of sales at Figma. Kyle, it is so great to have you on the show today. I’ve heard so many good things from Dylan Field, from Mark Goldberg, from Praveer on your team, so thank you so much for joining me today, Kyle.

Kyle Parrish:

Thank you for having me. I’ve been really looking forward to this.

Harry Stebbings:

Not at all. As I said, I’m incredibly envious of that voice. Those dulcet tones are wonderful. But I do want to start today with a little bit on you. So tell me, how did you make your way into what I call the wonderful world of SaaS and come to be kind of the killer head of sales that you are at Figma today?

Kyle Parrish:

Yeah, so I think there’s always a lot of luck involved, but I had a really fortunate journey at Dropbox early on in my career. I joined the company in 2011 when they had around 50 people as the third salesperson and shortly thereafter, within that first six months, raised almost a quarter billion dollars and the company started just growing exponentially. So I was the first person on the sales team to actually get promoted to becoming a manager, started getting into building teams, opening up our sales and operations hub in Austin, Texas, and doing a bunch of roles over my almost six years there.

Kyle Parrish:

In that time, before I was even really focused on the impact of UI/UX or the design world at large, I started to realize we were selling against companies like Google and Microsoft and Box, and a lot of our sales pitch was around how intuitive the product was. Harry, your uncle could use it because it looked like your My Documents folder, and they may already be using it in the workplace today. So we were really selling on the intuitiveness of the design, and in tandem with that, we were hiring these kind of rockstar designers. They were making headline news and Forbes and Business Insider, and we started to realize that the shift was, not only was design critical, they were actually kind of leading the charge and being seen in Silicon Valley as the leaders of the company in so many ways.

Kyle Parrish:

So that was my first opening. I started seeing some people from Dropbox go to be founding engineers over at Figma, the collaborative space design, still working in desktop apps. That made a ton of sense to me. I actually reached out to the team before I took a sabbatical after Dropbox and never heard back, but then followed up through Mark. When I got back, he connected me with Dylan and the team over there, and after first thinking that self-serve was the only path for them, they realized they were starting to get some serious traction with large enterprise companies and wanted to build a sales org, and asked me to take the role. The rest is played out from there.

Harry Stebbings:

And what an incredible journey it has been, especially when you look at the trajectory over the last kind of 18 months at Figma. It’s incredible to see. I do want to ask, though, because it’s such an incredible experience to see a company like Dropbox in the hypergrowth mode that you saw it in. I spoke to Mark Goldberg before the show, and he said about your opening the Austin, Texas office to Dropbox, and obviously that scale today into a pretty huge office. So I want to ask, in terms of kind of moving sales outside of HQs, which a lot of people are thinking about, what worked and what didn’t work in that process now with the benefit of hindsight?

Kyle Parrish:

Yeah, that’s a great question. I think you come in with some perceptions, like in San Francisco at that time, it was 2013 when we moved, Dropbox was a household name. We had so many inbound referrals, and in terms of recruiting and hiring, people knew that there were a lot more roles on the go-to-market and business side. It wasn’t just engineering, product, and design roles. But when you land in Austin, Texas, it’s a very different tech ecosystem. It’s a very different place in the country, and that same reputation just didn’t translate. People knew Dropbox, the product, they knew about the company, but a lot of the market in Austin assumed there was only engineering and kind of product roles. So a lot of what we had to do is understand that local tech ecosystem, understand the big companies that were hiring some of the top talent, and just the local market as a whole.

Kyle Parrish:

The second was we had to start working really hard to establish our brand, doing a bunch of events, playing into kind of the Austin culture as a city, the tech scene there, and really establishing that, hey, Dropbox is this amazing business and we’re hiring sales roles. We’re hiring customer experience and support roles, and this is going to be a 150- to 200-person office in very short time.

Kyle Parrish:

I think the last thing that was one of the most successful moves that we made is like a leadership team out there, we started realizing that back in 2013, I think it’s very different today, the hiring market wasn’t as mature for some of the talent, the caliber of talent that Dropbox was looking for at that time. So what we started to do was hire from other markets, Seattle, Boston, New York, LA, San Francisco, even internationally. We had some people move from London. We started playing the allure of living in Austin, as Austin was kind of this hot, cool place. South by Southwest, of course, was almost doubling year over year, it felt like. So we were really successful in getting almost 65% to 70% of our talent coming from these other markets, and actually moving their entire lives to Austin to join Dropbox.

Harry Stebbings:

I love that in terms of kind of the migration of talent there. If that’s what you did well, and kind of realizing, we’ll say, kind of the importance of really embracing local culture as well, I liked that as the first point, what didn’t you do well? Where were the mistakes made where you were like, actually, with the benefit of hindsight, I would have done that differently?

Kyle Parrish:

Yeah. I think we would have come in with a better understanding for the market. We landed on Austin. It was between Brooklyn and Austin at the time, and Austin seemed like a great place. I think companies like Facebook and Google and of course Dell is headquartered out there had some pretty established large teams, but the startup scene of startups coming out of Austin wasn’t comparable to a lot of the Silicon Valley-headquartered companies, and so Dropbox was actually a pioneer in opening up the office. But I think we’d thought that we were bringing that same hiring brand and reputation and would hit the ground running in terms of hiring a ton the people.

Kyle Parrish:

I mean, we were successful ultimately in hiring over a hundred people in just under two years, but it was a really slow start to gain that hiring market off the ground, and realizing that we had to have local recruiters that knew the companies that people were coming from and knew how to kind of read between the lines. I think in every new market that you go to, it’s going to be different hiring, especially if you’ve spent a lot of your career in San Francisco. It doesn’t mean that the caliber of people are any less. It’s just the backgrounds that they have may look a little bit differently.

Harry Stebbings:

Can I ask, and this is off schedule so forgive me for it, but a hundred people over two years is essentially one every single week for two years. It’s incredibly challenging to manage morale, to manage culture. I guess my question to you is, when you look back at that and scaling that team to a hundred over two years, what breaks and when in a major way?

Kyle Parrish:

Yeah. I think starting out, it was funny. I recruited a couple of people from San Francisco and so I think myself and some of the other leaders on that support and operations side, we all recruited one to two people from San Francisco so we could kind of bring some of that nucleus of culture out to Austin. That helped, but in the beginning, I always joke around, when you open up these offices, you’re in kind of all the crappy offices along the way, and then we eventually built this huge office on Fifth and Congress in the middle of downtown with the sign on the building. But we started out in what felt like a bunker room, and there was three of us and we’re setting up calls and starting to bring the inbound sales team out to Austin, Texas, which made sense in so many ways strategically.

Kyle Parrish:

I think once you get to 25 and 30 in that office, you start to have your own little subculture. I think when we were still small below that, we were really connected to HQ and would travel back often, and we’re trying to bang on doors and meeting rooms just to get remembered because it was a pretty Zoom culture. Once we hit that point, somewhere in the 30 to, let’s call it 40 range, you start to establish your own subculture and you have to really invest in not only making sure that there’s a dotted line to the culture at Dropbox in San Francisco and the other offices around the globe, but also that you’re kind of making your own culture as well.

Kyle Parrish:

And so one thing, instead of all-hands that we would do every Friday, we would have y’all-hands to kind of play into the Texas scene. I think one of the biggest compliments was Drew Houston, our CEO and co-founder, came out and he just had rave reviews, not only of the caliber of people we had hired and recruited, but the culture. It was authentic. It was real. It felt like Dropbox, but with a little bit of a Texas twang to it.

Harry Stebbings:

I love that, in terms of the Texas twang to it and y’all-hands is a different one, especially for me as a Brit to hear. I do want to ask though, because you mentioned kind of the subculture being created there, I want to start actually a little bit before that in terms of actually specifically scaling the early-stage sales team. When we chatted before, you mentioned building a sales org from zero to one, it’s just really, really hard. So I wanted to start on that. Why is it so hard moving from zero to one in sales, Kyle?

Kyle Parrish:

Yeah, I think it depends on every type of company that you join and the culture that they have established before you get there. But in the early days, it’s just not glamorous. I mean, it’s a ton of fun if you like building and you like getting in and being scrappy and having kind of this peripheral view to all these other teams across the business. But there’s a lot of preconceived notions of what sales may look like at that company, and if you’re the first or the first few people to kind of establish it, it usually means a lot of different things.

Kyle Parrish:

So I think my point of view is that you need to build a process hub that allows you to scale to where you want to be two years from now. If you don’t, and I’ve seen this in the past, if you’re fortunate to grow your business rapidly, you’re going to catch up a lot quicker to where things start to break and fall down.

Kyle Parrish:

So you’ve got to get your first customers, understand the value prop, how to position the product, where they’re using it, where things are falling down, keeping that feedback loop really tight with product and engineering and marketing and all of the different teams, while also thinking, if I’m going to hire 20 sales reps in the next six months to a year, what are we not thinking about?

Kyle Parrish:

I love it. It’s crazy. It’s fun. It’s wild, and I’ve been fortunate to join some pretty amazing companies that have phenomenal products to bring to the market. But early stages it’s hectic and can be stressful, so you have to have a ton of conviction for your plan, executing and also understanding that you don’t know what you don’t know, and you need to iterate and work with your team closely.

Harry Stebbings:

You said the words process hub there, and I’m really interested. What does that implementation and process look like in terms of what you actually do structurally to build it?

Kyle Parrish:

Yeah. It’s a great question. I was fortunate to have a good partner at Figma in Praveer, and we both spent some time at Dropbox before this. What I think we saw in a bottoms-up business like Figma where you have a free offering, you have a paid consumer offering, and then the happy path is moving customers to enterprise, what you have is a ton of product data across the domains in which your customers are using Figma in some capacity.

Kyle Parrish:

So what we built early on is… In my opinion, Salesforce is the only CRM that really makes sense if you think that you’re going to get to hyper scale and growth. So we started structuring our CRM instance around the product data that we had. So our model was saying that if there are these companies like Uber and Airbnb and Goldman Sachs and Microsoft that have a bunch of usage across their domain, we want salespeople to see that in the CRM. I want to limit the number of tools, apps, BI tools that you have to visit to find that information. Whether you’re getting a ton of inbound inquiries or you want to proactively reach out to these accounts, you have that aggregate data and hopefully the email and decision-maker champion emails that you need so that you can start to triangulate who makes decisions, is there any momentum, and how do I leverage that into a conversation and turn it into some actual sales pipeline.

Harry Stebbings:

Can I ask, when you look back, especially at your joining Figma more recently, the question that I have always and every founder always asks me is, how do I know fundamentally when is the right time to hire my first sales role? It could be head of sales, it could be rep, it could be AE… It varies obviously largely by business, but when you get asked this, which I’m sure you do, how do you think about it, and how do you advise founders who are contemplating adding that first sales role?

Kyle Parrish:

Yeah, that is a question that I hear fairly often. There’s actually an article. It’s a Harvard Business Review article that’s pretty outdated at this point, but still rings true for me. It’s called the sales learning curve, and they basically talk about, in your different phases of business growth, what kind of sales reps do you want to bring in.

Kyle Parrish:

I think in that early stage, that zero to one, they talk about bringing in Renaissance reps, and what that really means to me is you can take risks and hire people with backgrounds that are smart, are proven, are hungry, understand the product, the technical ins and outs, and want to jump in and help build the business, because once you start to get to scale, the profile of sales rep, the tried-and-true, proven, hitting quota, exceeding targets, all of those things, is a lot more critical. Not to say that you shouldn’t hire salespeople early, but you can start to get people with backgrounds of like, maybe worked in consulting before, a year or so in sales. You don’t have to find your perfect rep profile right out of the gates, and that’s something that I’ve seen work really well.

Harry Stebbings:

The question that I always have is, and I strongly believe this, but I actually got a big pushback from Michael Katz at mParticle. He was the CEO and founder of mParticle when I put this on Twitter. I said, fundamentally, the founder has to develop the sales playbook before bringing in reps and you can’t expect them to develop it willy-nilly in their own creativity. Would you agree with me here, and the accountability does lie with the founder for creating the playbook, or would you think actually that there is alternative paths?

Kyle Parrish:

I don’t think it necessarily relies on the founder, and to come back to your previous question, whether you hire a first sales rep or head of sales, I think if you’re really starting to see a ton of momentum and you know that this is going to be a decent-sized team, pretty soon you can go ahead and kind of do what Figma did it in my case, and brought me in as a head of sales to start hiring and building right out of the gates. I think if you’re still trying to find product market fit, and there’s still a lot of work to do to understand where it resonates with customers, what is the value, what is the kind of marketing narrative behind it, you might want to have a founder just hire a somewhat-experienced sales rep to start having those conversations, bringing back that feedback back to product.

Kyle Parrish:

But I do think that, ideally, that initial sales leader, if not, maybe a founder, needs to kind of have a strong gut sense on what the playbook is and what the motion looks like, because if you start hiring anywhere near five people into a sales org, and everyone’s doing a little bit of something different, it’s not going to work out well. I think you need to have consistency. You want to have a unified front. That being said, you always encourage creative thinking and coming up with your own workflow in sales, but I do think that early sales leader, and in absence of that person, a founder, needs to establish some sense in their network from conversations they’ve had, if they don’t have a lot of sales exposure, as to what it looks like to do sales at their company.

Harry Stebbings:

Can I ask, you mentioned plans earlier in the process element and how to think about structuring plans. The question that I have today is, when you think about early-stage sales teams, in terms of setting and structuring those plans for your teams, how do you think about that today, given just the state of flux that we’re in? So my question is, how does one accurately plan sales plans today in such a state of flux?

Kyle Parrish:

In the really early days, I’m a big proponent of performance-driven culture, and I’ve seen different ways, and there’s so much building. For example, it’s like, we can talk about all the process stuff you do early on to establish that the team can grow and scale in a healthy way, but I think if you don’t set the line of, we’re going to put out aggressive targets, we’re going to work together as a collective unit, sales and all of the cross-functional teams that support sales, and we’re going to go out and try and exceed those goals, you’re just delaying the inevitable. Then eventually you’ll have people working on marketing projects or a Salesforce implementation rollout. Sales is not a part-time job. You have to be fully committed and you have to be driving towards a goal every day, every week, every month.

Kyle Parrish:

I do think that in setting targets, you need to take into account a lot of things. So I think for us, we at Figma still review sales quotas each quarter. They keep going up each quarter, and we’re fortunate to see our business growth during these times. But when we look at the data, we strip everything away. We look at where things are going, what the product roadmap says, and what we think is both aggressive, but also attainable, and we want to build a culture of positivity and enablement for the teams so that they feel every day they can come in and do their job and not threaten that potential of burnout.

Harry Stebbings:

Yeah, no, I totally agree with you in terms of threatening that potential burnout. The question I always have is, how do you find that balance? Because you want to set the stretch goals and, you know, you look at a business like Figma, which is growing so fast, and you want to set those stretch goals, but you also don’t want to set unwaveringly high goals which bluntly are so challenging to achieve, which then obviously create dejection and disincentive in the team. For you, when thinking about the plans, how do you think about hitting that balance? Then, and this is really unfair of me, subsequent question, if plans aren’t hit, how do you corral the team but also ensure that they haven’t done the work? Do you know what I mean? How do you discipline but not disincentivize?

Kyle Parrish:

For us, it starts with a really strong, balanced relationship with finance and operations. So for us, we’re looking at a lot of things. We’re looking at the entire funnel. What is the lead source? Where’s pipeline being created? What kind of activities can we see on a rep-per-rep basis? What progression of deals are happening? So there’s always a way to vet, are they doing the work, are we putting in the investment of time that we think is fair, and of course is the quality of the salesmanship across the team there? And when it’s not, what is leadership doing to improve that?

Kyle Parrish:

I think one thing that we have reserved in being an early-stage company… Sales at Figma is just over two years old, and so it’s a very new discipline at the company. We also reserve the right to say, “Hey, we were completely off. We estimated and took into a couple account these variables being maybe 5X growth or 10X growth, or this thing around the product shipping at this time.” If those things don’t happen as a leadership team, we’re not stuck in sand and saying that’s the only way it has to be.

Kyle Parrish:

So I think there is certain scenarios where you always hold the team accountable, and you try and build morale if, for whatever reason, people aren’t achieving the goal, and try and dig in and understand why. But I think early on, it’s just so hard to draw a line that’s accurate, aggressive, and appeases the board and all of the corporate-level revenue targets that you’re trying to exceed. So if for any reason we feel that it was unjust and just miscalculated, we reserve the right to make the situation right after the fact.

Harry Stebbings:

Totally get you there in terms of being plastic enough mentally to move with realizing that something may have been out of whack. Again, totally unfair of me and off schedule, but when you think about the sales motion today with Figma, you have the bottoms-up adoption, which has been so prevalent and so successful for you, and then you also have the top-down, which is the much larger ACVs and much more enterprise-heavy sales. How do you think about, bluntly, how big an ACV it requires to have that heavy sales touch, and is that purely an ABM process? I’m really intrigued how sales works with marketing on the high ACV, heavy enterprise deals.

Kyle Parrish:

For us, I think we have such a healthy land-and-expand business that we don’t have to reserve sales resources for such a large contract out of the gates. That being said, we have seen consistent growth in our initial deal size quarter over quarter, which is a healthy metric that we’re continuing to drive on, but we’re not saying, “Hey, you have to spend $500K with Figma out of the gates.” We fundamentally believe, and we see this in the data both when you trial the enterprise product and when customers convert and ended up becoming Figma organization clients, that once you get on the platform and you start seeing the power of true design platform, which really didn’t exist before Figma, you start collaborating, bringing others, designers, engineers, product managers, marketing, brand, et cetera, into the design process earlier. It’s an experience that really fundamentally changes the product development process, and people can’t go back typically to what they did before, because it’s fundamentally so different. You were using anywhere from four to ten tools to now one.

Kyle Parrish:

So our job on the sales team is to take interests that may be specific to a business unit or a small team, and try and widen the scope of that interest and get large enterprises to think is, “I understand that Harry the junior designer is really excited about Figma, follows us on Twitter, has been using the product for side projects, but we want to tell you why Amazon should be using Figma and why we’re the design platform of the future.”

Harry Stebbings:

Can I ask you terribly then, and I don’t mean this rudely… With such a product-like growth strategy, and then the expand strategy post initial insertion for the client, one would think it’s like, okay, heavy investment in the product-like growth strategy and then super heavy investment in the customer success segment. I guess my question to you, and it sounds so rude, but it’s like, in a model like this, is sales not just customer success?

Kyle Parrish:

No, it really isn’t. I think what people don’t realize is regardless of the product you’re selling in today’s landscape of enterprise SaaS, there’s so much work in these multi-threaded conversations. I always talk about working deals in parallel. You’ve got the infosec process. You’ve got the legal process, which can have MSAs and DPAs and all of these things. You’ve got the business unit. You’ve got the senior leader on the team. And in our case, you have design systems, which, if not all those people are aligned on what you’re trying to do, and this change management that you’re trying to drive forward, the deal’s either not going to happen or not going to happen in the timeline that you’re hoping for and that really makes sense for your business.

Kyle Parrish:

So I think what we’re doing is taking a lot of this bottoms-up energy and excitement and turning it into this enterprise-wide sales adoption. That’s what we’re seeing being really successful. At Figma, for example, we actually don’t have a customer success team. Everyone in the sales org owns a quota, and so if you’re post-sales on the account management team, you have an expansion target as well as a churning contraction allowance that you’re working towards. On the pre-sale side, everyone has a quota. It’s held quarterly, and so we feel strongly that at any given point, our customers only have one point of contact. So if you’re post-sales and you’ve been on the platform for over a year, you’re working with one of our account managers, and they have a slightly different approach into how they approach the customer relationship, but they’re still there for education, growth, and support.

Kyle Parrish:

I think specific to Figma, our audience loves to self-educate and we have such amazing resources on product education, our help center, and we do do a lot of individual as well as scaled workshops to drive support around not only what’s coming out, what we’ve recently shipped, but also some of these non-used cases, like why would a developer have edit access in Figma and what’s the value there. So I really think that the sales motion is critical to what we’re doing, because we’ve got a lot of energy. We’ve got a lot of love around the product. But if you weren’t having a good experience working with someone on the sales side, it’s really easy just to buy the minimal amount of product and see if that level of virality is really going to spread these large companies, but I fundamentally don’t think it would, or at least not as fast.

Harry Stebbings:

I totally agree with you in terms of it not being as fast. Can I ask, in terms of the upsell quota versus the new sale quota, how do you think about the right ratio that… And I know it’s very company-specific, but I’m just intrigued, in your mind, what that looks like.

Kyle Parrish:

So it’s something we’re always keeping a close eye on. I think ideally you want to be at least 60% net new. I think we try to aim closer to 70% net new, but it’s a little bit of a juggling act. As you’re fortunate to acquire more and more customers, you have a much larger base of what account management is working with, and so when we look at expansion versus new revenue, we’re really excited to see how rapidly our customers grow. Any given customer, we see them more than doubling in their first year on the platform, but at the same time, there’s so much opportunity and there’s so many conversations we’re having, and we’re starting to go through that evolution of solely living off the community that Figma has built, and the inbound energy and opportunity versus being more proactive, going outbound, working alongside a really strong marketing arm, and seeing some of those ABM fruits that have been planted and recently started to bear fruit.

Harry Stebbings:

Totally get you in terms of them starting to bear fruit. I do want to ask you, and I spoke to Praveer before the show and I spoke to Mark, and they both mentioned in terms of the sales team that you’ve constructed, this incredible kind of alignment in terms of the mindsets that the people have for the product-like growth, but also the fundamental product itself, which isn’t always the case actually in a lot of sales teams, as obvious as it sounds. I guess my question to you is, when you try to uncover this talent, how do you detect it in interviews, and what are the most high-signal questions which to you suggest that kind of product love and alignment?

Kyle Parrish:

To reference that sales learning curve article that I mentioned earlier, I think for me early on, especially with our product, we’re selling to a technical audience. You’ve got to have a technical aptitude and excitement for the product. If you’re joining any company to do sales and you don’t care about what the company does or the customer that they serve, you’re setting yourself up for a real slog. So excitement about the product, being able to understand it at a technical aspect.

Kyle Parrish:

I think the other thing is we’re just looking for really high-horsepower, intelligent people that want to come in, understand our customer’s challenges, think like the mind of a designer, a product manager, developers, and start to really understand the landscape of companies like Adobe and Sketch and InVision. You really have to invest, because early on, the enablement resources aren’t as strong. As of late, we’re starting to build those things out. Those teams are coming online and really starting to have an impact, but early on, you need people that are scrappy and can understand, hey, we’re the upstart. We don’t have a lot of customers early on to note. We’ve got this amazing product and even stronger roadmap, and the people that are using it are screaming how great Figma is from the rooftops. So how do we use those social proof points in going in that and taking that to customers that are saying, “Hey, I heard about Figma. Tell me a little bit more.” That is a challenge early on.

Kyle Parrish:

So I think some of the questions that I ask people are, how do they handle adversity? What are they thinking about in their career? What are the key pillars of what you’re looking for in the next opportunity? If they’re not being thoughtful about their next career move, then that’s usually a red flag for me, especially when you’re early on. The first couple of people that you hire are really going to establish the sales culture for the next couple of years.

Harry Stebbings:

Totally agree with you in terms of, what is it, A players hire A players, and B players hire C players. I love that as a statement. It’s a great one. So that was one thing that Mark told me I had to ask you. Then also Praveer told me about pricing mindsets, and it’s been a test-and-iterate approach for you, he said. So I’m intrigued in terms of lessons and takeaways from that, what have been some of the biggest takeaways and lessons from the test-and-iteration process within the pricing structure itself?

Kyle Parrish:

Yeah. We were able to set our price for Figma’s enterprise product at a point that signaled that this was a premium product, but at the same time, given the consolidation of a number of tools and moving to Figma, still had a very compelling ROI story for our customer. So one thing that’s really allowed us to kind of grow and scale our business is that with Figma, you only pay for editors, which is different from a lot of the competitive tools. So, let’s say if Uber has 1500 people using the product and only 500 of them are editing on a consistent basis, those 500 people is what procurement and their team is paying for. So that’s one thing that’s allowed us to sell into the opportunity.

Kyle Parrish:

One of the bigger sticking points and learnings, and I think this is something that is also boding well for us today, is we don’t discount the price on a per-unit basis, and we never have. This is something that Dylan, Praveer, and myself have talked about early on, and it’s something that we haven’t changed even for our largest customers and our largest contracts. You realize that not one company is going to change how procurement measures themselves and what they take to their leadership team on what was success and what wasn’t. So even though I think we do have a lot of leverage in our pricing model, how we treat true-ups on the platform, many times procurement is hyperfocused on what is the unit price, and can I get some kind of tier discount as we continue to invest, scale, and add exponential amount of people in the platform.

Harry Stebbings:

Discounting is such an interesting one, and it’s one that I’m always oscillating on. It is company-dependent, but I am intrigued on your thoughts on this one. How do you think about when to offer versus when to remain true to your value mechanism in place, and give discounts versus not? What do you advise founders who are like, “It’s the early days, do I just give discounts?” How do you advise them and what does that look like?

Kyle Parrish:

Yeah, I think discounts are a hot topic right now, I’d say, in 2020 in SaaS, because I think when you have a discounting policy, there’s always room for it to get a little bit unruly. Especially as the team starts to grow from 5 to 15 to 1500 sales reps, it can be a lot to manage. So I think early on, you’re almost better off setting a pricing strategy that avoids discounting or minimizes it heavily so that you don’t have to get in that conversation.

Kyle Parrish:

Whether it’s founder-led sales, those Renaissance sales reps that you’ve hired, you really don’t want it to get into a bad habit of setting precedence in creating discounts, doing one-offs, having pricing schedules that don’t make any sense, because as you start to grow and scale your business, you’re going to bring on finance, you’re going to bring on these other partners, and everybody is going to want to have consistency, cleanliness, and some kind of rhyme or reason as to how you’re doing things. So I really tell people, focus more on the right pricing strategy, less on the right discounting strategy. I think if you solve the first, the second will be less of a problem.

Harry Stebbings:

Final one, I promise you, and then the quick-fire, but I can talk to you all day. In terms of the pricing strategy itself, you have a really hard thing. It’s like, you have to have enough data to determine whether it’s working, but you also don’t want to have too much data when it’s not working that you’re leaving dollars on the table, or actually suboptimal in terms of your pricing and your conversions. How do you think about giving it enough time to be in the wilderness, but also not too much time that you’re leaving dollars on the table? How much data does one need?

Kyle Parrish:

I think if you have early beta customers that you can trust and you can have these open and transparent conversation, this is something we were able to do at Figma, you can really talk about, what kind of budget do you have for tools like this? How do you think about things on the spend side? What is the value our product brings and how, if any, do we consolidate your spend with other tools and other vendors? From having those conversations, you start to… Hopefully you have some marquee-type customers that really are proof points that resonate elsewhere. You can start to vet that the price point seems pretty right and fair.

Kyle Parrish:

Then once you’re starting to get it out in the wild and you’re pushing it through one sales rep or multiple, I think the biggest thing you want to keep an eye on are, are you losing often and frequently because of your price point? If occasionally customers can’t afford it, does it make sense? You’re not sure about the discounting strategy. That will come from time to time, but if you’re losing a significant amount of customers and the largest reason is your price point, you’ve clearly done something wrong, assuming you’ve got a great sales team, you’ve got a great product, and your marketing team is doing everything to get the good word out. That’s the north star metric that I think about. Is the sales team losing because our price is unreasonable to our buyer?

Harry Stebbings:

Yeah, no, listen, I totally agree in terms of those lost or churned accounts because of cheaper alternatives elsewhere, continuously happening. I do want to ask though, Kyle, I’d love to move into my favorite, which is the quick-fire round. So I say a short statement and then you hit me with your immediate thoughts. Does that sound okay?

Kyle Parrish:

Sounds great.

Harry Stebbings:

Okay. So this is a very kind of Peter Thiel, Founders Fund one. What do you believe that most around you disbelieve?

Kyle Parrish:

There’s such a thing as inbound sales reps versus outbound sales reps. I think there’s great sales reps, and as your business grows and evolves, finding a way to be successful and hit your number and be a builder is really the most critical piece. I really don’t think that there’s a such thing as only an inbound sales reps, at least in SaaS.

Harry Stebbings:

Zoom happy hours. Great or actually a pile of shit?

Kyle Parrish:

I would say, for my leadership style, I’ve kind of held back on adding more Zoom happy hours and socials. For me, they don’t serve the purpose that an actual happy hour does. I mean, there’s a lot of really creative ways with Airbnb experiences, MasterClass, all these other things, social distance hanging, to meet up and keep your team connected. But after an eight hour day of Zoom calls, who wants to get on a Zoom call and have a drink with their boss? Not me.

Harry Stebbings:

Totally with you. I find them incredibly annoying. Tell me, what single trait do you most want to see when you’re meeting investors when you’re already kind of engaging in that process?

Kyle Parrish:

I think if I had to boil it down to one thing, it’s willing to challenge your leadership alongside open to leveraging their network to helping grow the business. You want people that are not only going to challenge the CEO, the cofounders, but also their surrounding leadership, and I think at Figma, we’re really lucky to have this all-star board on our side.

Harry Stebbings:

What is good sales rep productivity to you? That’s a tough one.

Kyle Parrish:

Ultimately for me, it’s healthy deal progression and execution. It’s assumed that you’re working hard, you’re putting in the hours, but if you can progress deals forward and execute against them and maintain a high conversion rate, you’re going to be successful in this line of work.

Harry Stebbings:

If you could change one thing about the world of SaaS today, what would it be and why?

Kyle Parrish:

Honestly, I think going back to the discounting process, I think we could all save a lot of man hours in our lives if we could really change the stigma around pricing, procurement fighting back, where do we land, setting a high price point only to discount it down. So I think if we could all build some kind of pricing strategy that was a little bit more aligned on discounting not be a thing, that would be a positive move forward for the industry.

Harry Stebbings:

You said to me before, manage your reputation like a bonsai tree. That happens to be one of my favorite quotes of the week, so I have to ask, what did you mean by this?

Kyle Parrish:

When I talk to a lot of people and they want to kind of get career advice, the one thing I say is that at my time at Dropbox, I think I worked really hard, I made a lot of great relationships and had a pretty good reputation, but if I would have known how much it would continue to follow me and open doors for me and really change the course of my life and career, I would have treated it like a bonsai tree. So when I talk to people, I tell them it’s not just the job you’re in today. It’s not just the company you’re working for today. The tech community is small and you’re building relationships that are going to follow you for the next 30, 40, 50 years, and so you should really think that way.

Harry Stebbings:

Yeah, no, totally with you. I always say life is long. Make friends. And then I want to finish on probably a challenging one, actually, which is like, what’s the hardest element of your role with Figma today?

Kyle Parrish:

I think the hardest role is the environment we’re in today, which we’ve adjusted very well to, but I think that alongside of being at this rapid growth company that’s looking to continue to double and then some. So I think for us, it’s continuing to hold on to this really healthy and awesome culture that we’ve built as a company, as a sales organization, and with a lot of growth. We’ve hired over 10 people on the sales team and I’ve never met any of them in person, and so these challenges are evident for anyone in any industry. It’s just something that I’m thinking about a lot, keeping me up a lot at night, because I’m really proud of the team we’ve built, the culture of Figma, and evolving it with the sales team. But I think moving forward, it’s always a moving target, and we need to see, as this company gets bigger, what does that look like, and what are we doing to maintain it?

Harry Stebbings:

Kyle, as I said before the show, I heard so many good things, both from Mark and Dylan, so I wanted to do this one for a while, but thank you so much for joining me today.

Kyle Parrish:

Thank you, Harry. This was awesome.

Harry Stebbings:

I have to say, I really did so love having Kyle on the show. Such a fantastic individual and just such exciting times ahead for him at Figma. If you’d like to see more from us behind the scenes, you can on Instagram at @hstebbings1996 with two Bs. I always love to see you there.

Harry Stebbings:

As always, I so appreciate all your support, and I can’t wait to bring you an incredible episode next week with Hilary Headlee, head of sales ops at Zoom.

 

The post SaaStr Podcast #364 with Figma Head of Sales Kyle Parrish appeared first on SaaStr.

SaaStr Podcasts for the Week with Bernadette Nixon, Jay Snyder, Nick Mehta, Loren Padelford, and Jason Lemkin


This post is by Amelia Ibarra from SaaStr

Ep. 362: The Future of the Customer with Bernadette Nixon, CEO @ Algolia, Jay Snyder, Chief Customer Officer @ New Relic, and Nick Mehta, CEO @ Gainsight. Customers’ expectations are higher than ever with more access to information and options. This dynamic trio of SaaS experts share how to stay customer-centric and set yourself apart in today’s rapidly changing environment.

 

This episode is sponsored by Linode.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from a session at SaaStr Summit: Enterprise. You can see the full video here, and read the podcast transcript below.

 

Ep. 363: Small, Medium, or Enterprise, SaaStr CEO Jason Lemkin sits down with Shopify Plus GM, Loren Padelford, to discuss how to keep your customers happy at all stages.

This episode is sponsored by Guideline.

 

This episode is an excerpt from Jason and Loren’s session at SaaStr Summit: Enterprise. You can see the full video here, and read the podcast transcript below.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Bernadette Nixon
Jay Snyder
Nick Mehta
Loren Padelford

We’ve shared the transcript of episode 362 below. You can also jump down to the transcript of episode 363.

Transcript of Episode 362:

Nick Mehta:

Thank you so much and welcome, everyone. Really excited for engaging discussion on something I’m passionate about, the future of the customer. So I’m Nick Mehta, CEO of Gainsight and you probably have heard of Gainsight in the world of customer success and really excited to have two different voices in the world of how companies think about their customers. So Bernadette Nixon recently joined Algolia as CEO. Has been CEO before, was CEO of Alfresco Software and long career in software and comes in, I think, with a lot of passion for customers and customer success, which I’m excited to hear about and also comes in live streaming, my understanding is from a boat right now, right Bernadette? You’re on a boat.

Bernadette Nixon:

That’s right. I’m on a boat in Rhode Island.

Nick Mehta:

On a boat in Rhode Island and then our second guest Jay Snyder, who just recently took over as Chief Customer Officer of New Relic, publicly traded SaaS company. I’m sure many of you use New Relic. Comes out of a long background in EMC and Dell and has worked in the world of customers for very long time. And today is potentially broadcasting from the Italian Alps or maybe…

Jay Snyder:

I am. I actually just got off the boat, Nick, and scurried up to make sure that I was ready to go for the presentation.

Nick Mehta:

I got to say pretty good internet up there on the Italian Alps, so I’m impressed.

Jay Snyder:

Got hotspot on my phone, so hopefully we’ll hold still.

Nick Mehta:

So we have got a good group and we’ve got some good stories to tell as well.

Nick Mehta:

So let’s dive into the future. So we talked about where things are today. A lot of these themes probably resonate with what people are seeing. We’re going to next talk about what’s the near future. So what’s happening right now and trends, and then we’ll do a little speculation about the far future and where to those trends go over time. Near future, I think it’s pretty obvious. There is a big set of trends happening right now, which is with the downturn and I tweeted this a while back like at the beginning of the downturn that like every customer is scrutinizing, do they really need this technology or not? It’s not just about it being cool, it’s about what Jay said, is it delivering value, right? And whether it’s Algolia, Gainsight, New Relic or anything else, you’re being measured on value, not just adoption and at the same time, even outside of COVID, there’s all these other trends happening.

Nick Mehta:

Power of the developer, or the API economy, both of you play very much in both those trends. So let’s talk a little bit about the near term trends you’re seeing.I’m going to start with Jay, because Jay, you described it in the prep call this proliferation of technology. This sprawl that’s happened and you’re in the middle of it. A lot of your clients use New Relic heavily. Talk about what the near term trends are.

Jay Snyder:

Yeah. So, you teed it up really well. Quite simply, and I guess no pun intended, things are too complex. I mean, they’re just too complex. And so I’m speaking specifically about the space that I’m operating in within New Relic. Customers live in a world of tools, and for everybody listening in here, I’m sure this isn’t shocking to you, but mass proliferation and sprawl has become a real problem and it’s created mass complexity, not just at the technical level, but at the business level, because that sprawl is expensive and worse, this fragmentation minimizes the ability to deliver value at scale, right? If everybody’s just doing a little sliver of the work, how do you roll it up into a meaningful business case? I don’t know anyone right now. I mean, maybe you do, but I don’t know anyone right now with extra money, time, or people, right?

Jay Snyder:

So the pressure is to simplify. Provide a platform, not a tool, that can be a consolidator and something that can drive costs, but still have all the features necessary to get the business results. And I’m not saying this is easy, but that’s what we’re striving to do. I always say, companies are trying to do three things when they buy something. It comes down to, they’re trying to make money, they’re trying to save money, or they’re trying to reduce risk. And the good news at New Relic is we can do all three, but only if we align to the business drivers and keep in mind just how dynamic those are. So we ensure that we are constantly measuring and refreshing. Our challenge and our opportunity in customer engagement is staying tightly aligned with the business drivers, having the discipline to manage long term customer journey even when the short term options might be easier.

Jay Snyder:

So I guess I’d say it’s forcing us to both challenge our customers more than ever, and by extension us to be educated and in tune with the customer’s business, more than ever. I know it’s something we’ve always aspired to do, but I’ve never seen it be pushed to the brink like it is right now. Generic business or customer success plans, they don’t work for me, but more importantly, they don’t work for our customers. Right? And for some folks that’s a lot of pressure and they have to dig deeper. They have to work smarter and they have to do more. So I think that’s what’s happening and that’s what we’re seeing on a day in and day out basis.

Nick Mehta:

I’ll just ask a follow up on that, Jay, because it’s such an important point. I see it all the time, which is, you said it super well, make money, save money, reduce risk. It’s hard to find any other uber categories than that, but then for CS people sometimes, it’s challenging for them to make that connection from using a feature of New Relic to driving business value. They don’t know enough about their client, they don’t understand the business. Maybe they’re early in their career. How do you help your team make that link to value?

Jay Snyder:

I mean, that is the, what would you say? The $24,000 question that I’m actually going through right now. And it’s a combination of things. One, it starts high up in the sales process, right? Because you need to start to deliver, deliver is the wrong word. You need to discover in the sales process. You need to do a lot more asking and listening than talking, right? So we need to create a template which I’m working on right now, which is what are the foundational elements that would drive a business case. And again, this would be somewhat generic to get the basic discovery done. Then it’s about really understanding the customer’s business and using the levers within that business case to determine is the goal, make money, save money and reduce risk. So it’s about operational efficiencies, productivity gains, digital experiences and making sure we’ve captured those.

Jay Snyder:

That’s an enablement exercise that is not to be minimized, right? We’ve got a lot of training to do with our sales teams to get them to start to speak in these types of terms versus feature function. And we’re going through that evolution right now within the company. And then your question really is how does CS do that? I mean, what do they do? And again, if it’s not teed up correctly in sales, CS is already at a disadvantage. So it starts there. But then instead of a success plan, it’s a business plan. That business case becomes the success plan, right? And we’re constantly aligning the metrics in that business plan back to the technology and understanding which dials we need to turn, which types of implementational product feature functions do we need to use that will directly equate to these types of things.

Jay Snyder:

I think the thing we’re doing Nick, to be able to force that is we’re getting a little bit more intelligent around account management. So today we do a good job there, but at the technical level, the deeply integrated technologists, that’s the piece that’s going to play a critical role in connecting those dots for our customers. And I’ll talk more about this later too, but I mean, the handoff from pre-sales to post-sales has to be crisp. Otherwise you’re going to lose that momentum and lose that connective tissue back to that business case and then the thing starts to fall apart. I mean, we can talk a lot about this, but that’s a little bit about where we’re headed on that, but it’s definitely a change in selling process, and then it’s definitely a change in the journey.

Nick Mehta:

Yeah, I think you said it really well and we’ll come back to it. But so much is discovered in sales that’s lost often in that process. So really well said. Bernadette, you came into a company that’s very well respected for the technology built in the search world. What trends are affecting the way you think about your customers near-term?

Bernadette Nixon:

So I think there’s a couple of things. There’s a macro point that I’ll make and then I’ll give a specific Algolia example of how we’re seeing it manifest. So, I think every organization right now can get constrained within their silos and in order to truly respond to your customers, you really need to be a nimble organization now. That doesn’t mean to say, you’re going to do away with the functions. You’re not, but you need to find a way of getting outside of those, come together as teams, squads, whatever you call them in order to be able to drive value for your customers. And it’s particularly poignant for us right now because we’ve made our bread and butter selling to the tech visionaries, the early adopters and now increasingly that early majority.

Bernadette Nixon:

And so there are different things we need to do to bring to the table in crossing that chasm for our market. But as we look at our market, it’s not all created equal. We’ve got everything from self-service all the way up to the enterprise. So how we accomplish something at the enterprise level in a one to few or a one-to-one or a one to few is very different to how you would accomplish it in a self service model. And so I think when we start to look at some of the frictionless models at the lower end of that spectrum, I mean, we’ve got nine and a half thousand customers. So at the lower end of that spectrum, what we’re finding is your product has to be intuitive enough for the customers to be able to self direct their own journey.

Bernadette Nixon:

And so it’s another spin, I guess, on the notion that you mentioned Jay, which is simplicity. But that simplicity is multifaceted. You’ve got to have it in the product, you’ve got to have it in how your customers can realize that value. And then you’ve also got to have it so that you can have it in a one-to-one or a one to few framework for your enterprise customers. So, there’s a lot of change going on right now. That’s the only thing that’s constant, frankly. And so trying to keep pace with it across all of those different sectors really requires you thinking deeply about how to deliver that value to your customer.

Nick Mehta:

That’s great. Yeah. And well, that simplicity theme obviously is so massive and also just doing more in the product when you have that massive scale that you all have at Algolia and New Relic has as well. So that’s a good way to say, what are the things that are trends that you think over the next five years, you think are here to stay. Some of you probably know that… There’s that great Jeff Bezos quote that says, “Don’t focus on the things that are going to change, focus on the things that aren’t going to change.” Right? And that’s why you predict the future. What are some of the things, when you look at the next few years, that feel like this is just an unstoppable trend. And then we’ll go to the other side and talk about things that we think are going to be radically different in the future. Bernadette, I’ll go with you first.

Bernadette Nixon:

Sure. So the thing that is here to stay is the maniacal obsession with adoption, adoption, adoption. So real estate is location, location, location. I think for anybody in the SaaS business, it’s obvious, but it’s adoption, adoption, adoption. And there’s no one key holy grail metric that’s out there in the market right now. So I think there’s a lot of experimentation going on here. I think that simplicity in the product is a key driver. I think in product telemetry, in product training are absolutely key.

Bernadette Nixon:

Your goal, no matter where you are on that spectrum in terms of customer segment, the goal is the same. The question is how do you help and encourage and enable your customers to get to that maximum adoption point so they are really getting the value that they were hoping in the pre-sale cycle. How you deliver it will just be different depending on the segment. That’s here to stay.

Nick Mehta:

Great. And Jay, what from your perspective?

Jay Snyder:

Yeah, so I’m terrible at predicting the future. I turned down an executive role at ServiceNow six years ago, Nick so this is not my sweet spot. But Bernadette just said it incredibly well. I mean, I think she stole some of my thunder and she should have, because I agree with her 100%. It’s about adoption. I’ll say the same thing, but I’ll say it maybe a little bit differently. So if I had to say, what’s going to definitely be here five years from now, it’s this whole concept of customer success where customer success truly owns the customer. And sales would be just that at initial sale only. Customers want to know that someone is responsible and not just there to do the sale or the expansion, but there to get them to, as Bernadette said to adopt, consume and drive value from the platform, right?

Jay Snyder:

We talked about needing to have an understanding of a customer’s business, their drivers, and also ensuring adoption or the business case breaks. So I’m not saying the role of a salesperson will disappear. I just think that definition of responsibility will change where they may simply be a sales and marketing person who’s focused on new logos, but immediately is handed to success from that point forward. And if I’m a customer and I’m asked to pick who I’m going to bet on for my future, when I signed the check, is it going to be that salesperson or that success person? And I think we’re already starting to see that lockstep with customer success is customer adoption, which means you have true engagement, which means you’re delivering true value. It’s one plus one equals three, it’s a simple math equation to me.

Nick Mehta:

That’s great. Awesome. And if you flipped it around on its head and said, what are some of the things that as we go forward are going to seem almost dated? I showed my kids Back to the Future II last weekend, and if you remember that predicts the future, but they predict in the future that there would be fax machines everywhere. So they kind of got that wrong, right? What are the things, the concepts that we take for granted today that will seem dated five, seven years from now in the world of software. I’ll go to Jay first.

Jay Snyder:

Well honestly, I’m going to come back to something we just talked about. I think in the future, we’re going to see a lot about low friction models and I’m going to be a little bit repetitive here, but I do think that we’re going to see a lot more intelligence built into the product as Bernadette said, that gives you… and not just intelligence from being able to extract metrics, but also enablement, right? I think that you’ll be able to self enable to a degree that we have never seen before. And you’ll have the applied intelligence, the AI in the product itself that will, they’ll make you smarter, right? It’ll be watching what you do, guiding you how to do it.

Jay Snyder:

Today I have to manage and track health and my customer success, right? This will be built into the product. I believe that technology will become more and more intelligent to throw off these health metrics and it’ll put the CS team really in the driver’s seat to engage in a much more meaningful and prescriptive manner. One that is completely, almost custom for each account and very low touch. So I think you’re going to have this combination of low friction, but high impact, which is a real difference from where we are today, right?

Jay Snyder:

We think about low touch to some degree as low impact and I think that paradigm shift can change. I mean, if you think about, if we can build more intelligent products and leverage the AI, you’re literally going to have the answer to the tests from the technology itself. I mean, wouldn’t it be something, if you could show up with a script of exactly what the customer needed and wanted based on the data in the technology to help them do better, go farther, move faster, right? Or better yet, you don’t even have to show up. You could just send them a Slack with the details and the enablements right there, and they can run. So I see our future allowing for a much more low friction, high impact way to leverage the technology and to involve change.

Nick Mehta:

Yeah. I see. I think one thread I want to make sure people take away from that, Jay, is that low touch or low friction doesn’t mean a poor quality of service or not focused on the customer [crosstalk 00:32:52].

Jay Snyder:

100%. And I think it does today, right? That the nomenclature today implies you’re not as valuable a customer. So you get a digital touch where somebody else gets hugged and visited by a real life human being. That’s true, but I think that shift is going to happen and we’ll see it in the next five years where the opposite becomes the value add.

Nick Mehta:

That’s great. And Bernadette, from your perspective, what’s going to seem dated years from now?

Bernadette Nixon:

Sure. I would actually just add onto what Jay was saying there just for a moment and say, it also depends upon the market you’re in. I mean, New Relic and Algolia, we’re very focused on the developer. So honestly, a lot of developers don’t want to speak to a human. They want to be on the self serve. They want to have a tech touch and that is a better solution for them than a high touch. So I completely agree with your point Nick, but what will seem dated in five years, hopefully clicking, okay to accept cookies on every freaking website you are going to have to go visit.

Nick Mehta:

That’s the [crosstalk 00:33:50]. Well said.

Bernadette Nixon:

But on a more serious note and perhaps a controversial one, I think a thing that will be a thing of the past will be concierge CSMs, because I think that there is a portion of the population out there that have come up and the relationship aspect and the soft aspect has been so important because it needed to counter balance. Sometimes the hard charging sales approach. There was a very high value placed purely on the soft skills. So to me though, the days of the concierge CSMs are numbered and there has to be value that the CSMs deliver beyond just the relationship. So I’m not saying that the soft skills aren’t important, they absolutely are. High EQ is always going to be critical, I think for that role, but they also need to be able to deliver value beyond that and what that form that takes will depend upon your business. But I think that connected to the in product telemetry and some of the stuff we talked about already will provide a powerful combination.

Nick Mehta:

That’s so well said. It’s interesting. I did an event with CIOs recently. So probably some of your customers, I asked them what they thought of CSMs and they gave some of that feedback, Bernadette that they felt like some CSMs are super nice people that respond to emails, but don’t add a lot of value in the process. And I think for CSMs that are watching you do have to plot a course to having value either in the product knowledge or domain knowledge or being consultative or whatever. You can’t just be a nice person that responds to emails.

Jay Snyder:

I completely agree that this is what we… I think we’re all talking about the exact same thing here, right? They’ve got to be able to bring a business case to the table and make sure it aligns to those drivers and when things start to stray, they’ve got to get everything back on track. Their success managers/program managers, they got to run that customer journey like a program and understand what that means. And they’ve got to be able to use all the data available to them, to be able to understand when the customer is going off their journey. And it’s not just about showing up to run the QBR, it’s driving the entire experience to get to the QBR. And that is a shift in mindset for a lot of folks.

Nick Mehta:

One of the last questions we had talked about in prep was the org that’s most impacted in changes outside of CS in the future and Jay and Bernadette, you both said some thoughts on that. Jay, I’ll go to you first.

Jay Snyder:

Which orgs are changing the most?

Nick Mehta:

Yeah, which orgs change the most outside of customer success. What orgs have to evolve and change in this new world.

Jay Snyder:

Yeah, I think if I was going to pinpoint this I would go to pre-sales and the reason I would go to pre-sales is I talked about the fact that a customer would like to be owned soup to nuts by somebody who is going to be responsible and look after their entire experience. And if you think about what pre-sales does, they build that connective tissue at a technical level with that customer early on, and that’s the mind meld, right? That’s incredible value. I’m not diminishing what a salesperson does. I’ve been in sales a long time, but ultimately that technical connection and a lot of times when you’re selling a harder technology product wins the day, right? But yet if you’ve created this model where that pre-sales person does the sale and then disappears, where’s that connective tissue and what happens beyond that?

Jay Snyder:

So I think that we’re going to see an evolution in how pre-sales works with post-sales and maybe becomes one and the same so that you can have that long standing, truly intimate, technical engagement that our customers are looking for. Someone that spends the time upfront and then stays long term after to be with that customer based on that relationship, that mindset and that experience they already have. So I do see that getting upended, and it’s impacting them now because where isn’t formal, Nick, they’re doing it anyway. So I’m seeing pre-sales being heavily impacted by the fact that while their job is to be on pre-sales, they’re spending half their time in post-sales. So whether it’s formalized or not, it’s bleeding across that impact sales productivity, it has other ramifications to the business. And so we need to solve for that. I don’t know if the word is impact. I think there’s an opportunity to do something more intelligent around the pre-sales, post sales hand off.

Nick Mehta:

I think it’s really well said and I think that what I’m seeing, actually, in some cases as chief customer officers getting value engineering, like you have in pre-sales, underneath them as well to tie that altogether. Bernadette, how about from your perspective, what org do you think is going to evolve the most in this new world?

Bernadette Nixon:

I don’t think I could have said it better than Jay. I think he’s got it. There’s a lot of value to what he said and I think generally the sales org will face a lot of change coming out. But I’m going to pivot if I may, to one of the other questions that we talked about in prep, which was, in a downturn, what’s going to be the most important? A lot of people are saying that, “We’ve seen the worst of the downtown,” and you’ve got the other side of that saying, “There’s still more to come when furloughs and everything are no longer funded by governments and what have you throughout the globe.”

Bernadette Nixon:

And I would say on that topic that the thing that is going to be most important is having the human touch, or should I say the humane touch and customers that you do the right thing by when they’re in a bind, not that you’ll be able to say yes to everything that they want. That’s not what I’m saying, but when you do the right thing, it’ll be recognized and those customers will remember that in the good times.

Nick Mehta:

So well said. I think it’s a great segue to [crosstalk 00:39:28].

Jay Snyder:

Yeah, I was just going to say, I literally had almost the same answer for that. I said the one thing that I’m telling my team all the time you need to have in this downturn and what’s the biggest impact to CS at the same time is you need to lead with empathy, right? You really do. I mean, because the people we’re talking to, their jobs are at risk, their companies are at risks, they’re being put in very difficult positions and we’ve got to really embrace and understand that. And that’s a difficult thing for a lot of folks because we’ve got a company to run, right? But if you really want to build customers for life, this is the time where empathy will shine and doing the right thing long term versus short term is going to make that customer either be a customer for life or not.

Nick Mehta:

That’s well said, that’s a good way to close out. Well, a couple of key takeaways for folks, I do believe in this concept of human first leadership, which is really what customer success is all about and what the future of the customer. Wrote some thoughts about that online that you can find on our website and then for people who want to dig into future of the customer more, we just published our book, The Customer Success Economy, which is all about this concept and where we’re going in the future and actually just in partnership with SaaStr, we made this available for folks listening actually for free go to gainsight.com/freebook, and you fill the form, you’ll get a copy of it. And thanks so much to Jay and Bernadette. This has been phenomenal. Really appreciate it and next time I think we’ll have to do this with some karaoke as well. So think of your song selection.

Jay Snyder:

Oh, boy. Be careful what you ask for my friend.

Bernadette Nixon:

Hey, come and do it on the boat.

Nick Mehta:

Yeah, that sounds good. 

*****

Transcript of Episode 363:

Jason Lemkin:

Welcome, everybody. Super excited today to have one of my favorite thought leaders, in general, and enterprise, Loren Padelford from Shopify. It’s especially insightful conversation today now because we can talk about the intersection of two interesting things. Loren, among other things, has spearheaded Shopify Plus, which is Shopify’s enterprise platform from the early days, to now announced today almost 30% of the revenue. So that’s like a Slack-esque going up market, which is fascinating. Loren’s also, like many of us that are here, a longtime scholar and student of enterprise sales and what works and the tactics, and came in and has applied that at Shopify. And so every conversation, we did an incredible podcast, you should listen, that was one of our highest rated ones. But talking about how to become more enterprise, what trade-offs to make when you can’t do it all. When you don’t necessarily have a startup there. When you start out… always one of my favorite thought leaders. And I wanted to thank Loren for coming. And talk about this and leverage us to talk about a million customers at Shopify. A million right? I don’t know it was announced today maybe 1.1 million. It really doesn’t matter, does it? It’s a lot.

Loren Padelford:

It’s a lot. We didn’t announce any new customer numbers today.

Jason Lemkin:

It’s probably gone up.

Loren Padelford:

Thanks for having me. It probably has gone up. So yeah.

Jason Lemkin:

So Shopify today–we’ll touch into it, announced just kind of the jaw dropping numbers, it is the archetype of the COVID beneficiary. Shopify was on fire before, which is one of the first things I want to talk about. But just today announced essentially 100% year over year growth that essentially a $3 billion run rate. And we just have never seen this in the cloud before. So I want to talk about that and I want to talk about what we can all learn about going up market and serving customers of all different sizes. And please again, if you haven’t before, click into the Q&A, ask questions. We’re lucky to have Loren and we will get to a bunch of them toward the end of this session.

Jason Lemkin:

But Loren, I wanted to tease on a couple things. This was a tweet you made the other day. Aaron who’s the next and final speaker, “Amazon’s a $1.6 trillion company. We’re living in Amazon. Not if we can help it.” I want to talk about that exactly in the third point but before we talk about everything that’s changed in March 15th. Step back for a minute, I want to talk about one thing, why is eCommerce exploded? I almost get it. But my first job in internet was in eCommerce and I get why that was terrible, back in the day. But what’s changed in the last two years? What really has gotten better in terms of tools, technology, software? Why have we finally reached the age of eCommerce? I don’t totally get it. What’s changed? What’s the tech stack or awareness that’s gotten us to this next level finally?

Loren Padelford:

So I think that’s a really good question. And I think it’s part of the reason why the enterprise is changing so fast, which we’ll get to. If you go back to when we started Shopify, Tobi didn’t want to build a software platform, he wanted to sell snowboards. The problem was he couldn’t find a platform to use. There wasn’t something for entrepreneurs to just start an online store and then go sell things. You had to spend a million dollars, you had to have developer experience. You needed all this infrastructure to just get yourself online. That became a gargantuan barrier to entry, which meant the sheer amount of choice we as consumer had was very limited. So when you went online to buy there wasn’t that many options. Well, technology comes along, SaaS comes along, Tobi comes along. Starts building a next generation of online platform, Shopify in this case. Built on a newer stack, built in SaaS and built for entrepreneurs to rapidly start up.

Loren Padelford:

So the whole game here for us is, lower the barrier of entry to bend the proverbial curve down, so that starting something is very, very easy. As we’ve done that, as you alluded to, a million entrepreneurs jumped on that bandwagon and started to launch online stores. Well, these two things of, consumers got more choice, entrepreneurs launch more things, hit each other and boom, eCommerce became what it is today is, I can go online now as a consumer and find a huge variety of options to buy, for products that I want. And if I have a good idea, I can start it overnight. These two things drove both aspects, entrepreneurism and the proliferation of online stores, and consumers getting more and more comfortable purchasing online. I think that’s what you have the last two years is just, both are spinning together to create a more accessible market.

Jason Lemkin:

And we probably won’t talk too much about Amazon through this discussion. Although your tweet is very interesting. Is some of the acceleration last two years, is it a reaction from vendors to Amazon’s monopoly? Is it wanting to control their brand? There’s something in here that as an outsider, it’s a little bit hard to see. It seemed like Amazon might crush everybody. Not from a Shopify perspective, from an outside perspective but a thousand blossoms bloomed out of this Amazon growth. What’s the interaction here with owning your brand and owning your channel versus a third party?

Loren Padelford:

Yeah. So I think as an entrepreneur, you start a business because you want to interact with customers, you want to provide value. And so this idea of having a one-to-one relationship with your customer is very attractive. And it’s what we’re trying to support. And it’s bi-directional. Consumers, I want to know who I’m buying from. We as human beings love stories. We love underdogs. We love the little guys. We love Main Street. We love this entire idea of entrepreneurs and our economy is driven by entrepreneurs. So there’s this innate desire as a society to have more and more choice. And entrepreneurs have this innate desire to have a one-to-one relationship. These two things meet in the middle, and so it isn’t about a competitor, it is about satisfying what is our natural desire as a society and as humans. And as entrepreneurs is to create one-to-one relationships and one-to-one stories. And you can’t do that on central marketplaces and these kind of central clearing houses. That’s not what they’re designed for.

Loren Padelford:

They might be seemingly cost effective or time effective, but they erode at the fabric of what is human nature. And so, my tweet there is kind of like, society can’t let our choices be consolidated into a single option. That has never worked, historically. It cannot work in the future because that isn’t how society functions. We need more voices and more choice. And so Shopify is on the side of entrepreneurs, trying to support their one-to-one relationships with merchants–or with their consumers. And I think that’s an attractive proposition and why you see this proliferation and this move towards more entrepreneurs and platforms like Shopify. Because it is that you and I can talk as a consumer and the brand, without this middle in the way, right? Taking the money, taking the relationship, taking the leverage. And I think that’s a valuable proposition for a merchant and for the consumer on the other side.

Jason Lemkin:

Yep. And I want to talk about digital transformation and then enterprise, but let me hit the second point on traditional retail because you and I are having a backstage conversation, before we talked. Let me skip, this was a bit of data that we need a few more weeks on, but this was one that circulated across the internet on the right, right? Which our jaws dropped and then showed up in Shopify’s public announcements today. And you see it on those data and eCommerce, our jaws dropped, right? It’s literally almost one-to-one with Shopify giving its market position. I want to talk about, is it a bump or permanent in a second? But let’s talk before about, will retail recover?

Jason Lemkin:

And when I look back, maybe the fourth SaaStr post I wrote in 2012, I was walking, bumming around downtown Palo Alto and the last boarded up retail reopened. It’s now West Elm. But so it was four years, the last time when the cloud was smaller, right? When commerce was different, it took four years for retail in Palo Alto, which is pretty bougie, right? It’s pretty upscale. It took four years for the last retail. Will those boards come down? What are downtowns going to look like? What’s retail going to look like? We’ve seen five years pulled ahead and will retail recover?

Loren Padelford:

Yeah. So I think that, I think I’ve said this on the podcast, and I’ve said this before. I’d actually go as far say it pulled 10 years forward. COVID is a time machine to pull 10 years ahead.

Jason Lemkin:

10 years. That’s the insight right there. 10 years.

Loren Padelford:

But if you go back before COVID, we were in digital transformation already. There were headlines constantly about how shitty, pardon me for swearing on a live broadcast. About how shitty retail was over. It was just done. No one wanted to go to a crappy retail experience again. So people were going to have to focus on the experience and customer behavior and all that kind of stuff. There was a lot of talk about physical retail being consolidated. We just had too many. I heard a great quote, I can never remember who said it. That basically said, “There are 300 great malls in the United States. The problem is, is there 1400 malls.” And so you had this… this was already happening.

Loren Padelford:

And so this consolidation, this refactoring of what retail and commerce was going to be was already underway. COVID hit and just dragged 10 years forward. So everyone thought they had another five, six years to sort themselves out. Now they realize they don’t and they’re all trying to refactor now. Physical won’t go away. So, let’s just be clear, it was never going to die in the sense of just disappear. eCommerce was never going to be the only way you’re going to shop. Humans still value tactile interaction. And so that will still exist, it will just be less so. So you can look at brands now, who even as we open back up, are saying, “I’m not going to open all the stores. I’m going to open some of the stores because I don’t need them all.” You’re going to see that. You’re going to see a real focus on that optimization of location and optimization of experience.

Loren Padelford:

And because of this chart, and there is an updated version by McKinsey just a couple days ago, which shows it over three months and it’s even more stark. Because of the acceleration online, you’ve seen a whole lot of brands–the ones that will survive and thrive in this market–really refocus on how to create that digital experience, the way that consumers wanted. And that’s going to become a more dominant channel. So where it used to be physical retail was number one by material level and eCommerce came in under it. We’re seeing this equal itself and then it’s going to tip the other direction, right? Which will be eCommerce and online, the digital. Whether that’s mobile on your online store, whatever it happens to be, will become your dominant interaction style with your consumer, and your physical locations will be that tactile, real world experience that a consumer may encounter once in a while.

Loren Padelford:

But it won’t be for most retailers. It won’t be their dominant anymore. Because we’re getting too used to the phones, our computers, our tablets, being isolated inside has kind of pushed us back there. But also the technology gets easier and better and so those experiences can be great. But I want to stress again, it’s not that physical goes away, it doesn’t go away. It’s just the change that was already happening, is now just going to happen a lot faster. And going to force a lot of physical first retailers, to become digital first retailers that have physical components. And that’s going to be a hard choice.

Jason Lemkin:

That’s interesting. The 10 years. I mean, you have the most… but the date is there, right? As is the Goldman aid and the others, but 10 years pulled forward. Right?

Loren Padelford:

Yeah.

Jason Lemkin:

So it’s just inverting that ratio, and I think that means overall, when we talk with other cloud leaders and executives and CEOs today, the answers are more guarded. They’re like, “It’s faster.” But we’re not sure but eCommerce is at the… because of the nature of this little global pandemic, it’s at the cutting edge, right? And this 10 years is, it’s crazy. It’s unprecedented rate of change.

Loren Padelford:

And it is. And it has been challenging for some folks because they were not prepared. They thought they had 10 more years. And so you saw major retailers go from hundreds of millions of dollars to zero in a day. Because they had to close the stores and that was their only line. There are still major retailers who have no online presence today. They are still transacting at zero. This is not a winnable solution. Right? You’re going to have to either innovate or the other option. And the other option is not existence.

Jason Lemkin:

And let’s talk about that. It’s interesting, this next slide on pull forward customers and what you’ve learned. Because if Shopify Plus, which is the enterprise segment, the largest segment, already grew to 29% already. As announced today, that’s a public metric. Right? And it’s increasing. It was 20 something percent when we did the podcast, right? So that’s huge change. That means customers deploy much faster. I mean, they deployed overnight, Shopify Plus. And they had no choice because their revenue went to zero. But what did you learn? What trade offs that folks were willing to let go? Or how did they change their teams? How do they actually implement this level of change? Right? Because business process change, even using Shopify, it’s not easy for big companies.

Loren Padelford:

Yeah. I think if we go back, so Plus has been existence now for about five and a half years. So it started at five and a half years ago. And we started it because Shopify customers who were growing up, and we wanted them to stay. We couldn’t understand why you’d have to keep re-platforming just because you got bigger. Why can’t you just start on one platform and stay on it forever? So we created Plus for that. And so the whole premise was, what do customers actually want to do versus what the market has created for them? And so I mean that in, I’m not a huge fan of legacy enterprise software, because I think it created a set of realities that is not true anymore, but everyone believes is true. And so one of them is, it takes a long time and lots of money to deploy software. It is fundamentally false in a world of SaaS; it is just not true.

Loren Padelford:

And so what we started to go to customers and say was, “Why? If you want to launch, let’s just launch the store. You don’t need to have this 12 month engagement with some consulting firm and all this work. You don’t have time for that, don’t you just want to be a brand?” That I think was our fundamental question. “Do you want to be an IT company or do you want to be a brand?” And if you-

Jason Lemkin:

When we chatted before on the podcast, we had a fun conversation about the high end of the customer. And some of them might want a lot of custom functionality and maybe even things Shopify didn’t do today. And you were okay for now letting them go. Right? We may hit that in the next slide. I suspect things have been different since March 15th because your priorities have changed.

Loren Padelford:

They have.

Jason Lemkin:

I’m willing to let an esoteric integration with SAPR four go, because I need my business to run.

Loren Padelford:

Right. And so these-

Jason Lemkin:

Were there examples like that? Where customer priorities just changed. Literally examples that you can think of?

Loren Padelford:

Yeah. So I mean, I think I’ll give you three kind of real world examples of things we saw move very, very quickly that we wouldn’t have seen before. So Impossible Foods is a good one but like the CPG spaces, all these folks who were selling food and selling things traditionally through grocery stores and stuff, suddenly realized these channels were not available to them or were competing directly against them. And so they said, “Okay. We want to go direct to consumer but like… Oh, I guess it’s going to take us two years and look at all the systems we have.” And we’re like, “What if it takes you seven days?” Right? Because you just want to sell stuff, right? It’s not that hard. It’s like we’re going to put pictures online with a price and you’re going to start marketing it and that’s the thing.

Loren Padelford:

And what the trade off was, was almost philosophical. It’s like they couldn’t understand how you could move that quickly. And so we showed them and so we have a whole bunch of examples of these massive CPGs launching in under a week, right? From contract signature to launch. Right? And that transformed their ability to innovate. They could just now start experimenting. So then you go and you take a much more, traditional retailer, like Staples, as an example. They had foresight, right? They came to us before COVID and they said, “Hey, we want to transform the business but this thing makes us nervous. We don’t know you. We don’t know this thing. It sounds too good to be true. But we’re willing to make trades,” and what we focused on was outcomes. What do you really want to here? You want it to be fast? Do you want it to be nimble? You want people to change it. You don’t want to have a big team supporting it. Okay, great. If that’s what you’re into, that’s what we are.

Loren Padelford:

So we’re going to give control to the business. This isn’t an IT driven process. We’re focused on outcomes. And most importantly, your consumers don’t want all this crazy customization. It’s not a thing anymore. Hyper bespoke environments no longer convert, they just annoy everybody because we’re too lazy to go through it. Right? I just want to get to a store, see what I want to see, be able to buy it fast, not have to type in a bunch of stuff, right? Not have to go through 15 screens to do it. And big enterprises were so stuck in that model. Before COVID, we were like, “Okay. Fine, we can’t help you. If that’s what you want to do, call one of the legacies. They’ll gladly take your money.”

Loren Padelford:

But when COVID hit they all came to us and like, “Okay, we give up. We don’t even know what to do anymore. But we’ve got to get off of this thing that costs $100 million. We’ve got to get back to talking to our customers. I don’t have an online store that can transact.” You saw on COVID so many of the legacies just go down. They just broke. You’d go to their websites and it was like, “We can’t help you right now. We’re busy.” And it’s just like what is happening? I saw one retailer, literally tell you to call them to place order. They gave you a phone number. Yeah, I was like we’re going backwards in time. And so I think what we said is, let’s get back to basics. You got to sell. You got to sell fast. It’s got to be fast. It’s got to be extensible. It’s got to be scalable because you are big, so you have to do a lot of volume.

Loren Padelford:

But you can do this much faster. You just got to give up a lot of this like stuff that doesn’t matter anyways, and COVID forced their hand. Even if they didn’t want to, they didn’t really have a choice. And what they all learned very rapidly was, “Oh wow, It actually does work, you actually can do that. And you’re going to end up getting what you want. It doesn’t take the massive amounts of infrastructure investment that it required before. It doesn’t take a huge IT process to drive. You can move a lot faster and still get the outcomes that you want. You just have to think about it differently.”

Jason Lemkin:

Yeah. When we chatted before COVID on the podcast, I may be misrepresenting it or or misquoting a little bit, but we definitely talked about how even in the high end of Shopify Plus, a lot of your buyers were lying buyers. They own the business model and they were going… whether they were literally going around IT, they were making their own decision. I suspect since March 15th, your relationship with the CIO and IT has changed radically. And they’ve become your ally or much more of a stakeholder, in outcomes than before March 15. Maybe that’s wrong, but I suspect-

Loren Padelford:

[crosstalk 00:20:01].

Jason Lemkin:

… you’ve had different conversations.

Loren Padelford:

It’s totally true. So before COVID, we were heavily in the marketing department, right? We were talking to the brand owners.

Jason Lemkin:

Yep. Empowering.

Loren Padelford:

They were the side stepping in the business and they were taken over and that was great. Post COVID, it’s still happening. It’s still brands are important, obviously. But the CIOs are definitely at the table and the CTOs. And I think, in large part, this is an opportunity for that organization to help their companies transform. Where before they thought they saw it as potentially a threat. It’s like, “Oh, the size of the organization is going to get smaller. You don’t have to own the infrastructure or the security or all that kind of stuff.” And they saw that as like, “Oh, you’re encroaching on the area I’m responsible for.” I think they see this digital transformation now as their next opportunity to support and lead a transformation of their companies. And that has changed dramatically and to the better, and I think the CIOs and CTOs have become huge partners in this. And can play that role for their companies. They just have to kind of… It’s not the same, right?

Loren Padelford:

I think that’s still the thing is like it feels so different that they’re a little hesitant. But you’re not alone like… Now Plus, there are 7000 Plus customers, are now enrolled. And a number of them are a billion dollars or more online. These are big businesses. This is no longer bleeding edge. It’s the other way. It’s like if you’re still on the other system, you’re in trouble. I don’t know what to tell you.

Jason Lemkin:

And let’s tease on the second point. Folks like you and me and others, we’ve been talking about consumerification the enterprise or whatever version of that malapropism you want, for more than a decade, right? We like the idea of ease of use products with great design, that would consumerify the enterprise. And it’s true, but it hasn’t been totally true, right? There are other issues in the enterprise, right? There’s workflows, there’s integrations, there’s dashboards and analytics. And just because some app we can find on Product Hunt is easy to use, it’s not enough in the enterprise. But maybe this is the era when you… are the CIOs you’re talking to, are they using Shopify themselves? Touching it, playing with it in a way a CIO or CTO might not before? And does that kind of validate how we think about user experiences?

Loren Padelford:

So yes, so they are using it themselves. What was always interesting before, COVID as an example, is you would talk to the CIOs and they’d be like, “Yeah. My cousin uses this for their sweater store, right? I know who you are, but you weren’t built for us.” There was the stigma associated with size. And what we’ve seen now is now when they get into it, they usually call after building a store. And they’ve built-

Jason Lemkin:

After?

Loren Padelford:

Yeah.

Jason Lemkin:

Even the CIO is after even the enterprise. Yeah.

Loren Padelford:

They’ve quietly built it in the background. And then they’ve been so stunned they thought they did it wrong. And so they call us and they’d be like, “So I built this thing. Is that it? Do you just turn this on?” And we’re like, “Yeah. It’s been… sure turn it on.” When I talk to them, they’re like, “Well, how can we test and play with it?” I’m like Shopify.com, enter your email address, build yourself a store. And that is so hard for them to understand. You can have this easy to interact with tool that also scales to this level and supports this complexity, That you end up in a lot of conversations, just trying to explain to them how that’s possible.

Loren Padelford:

And it’s possible because we built a platform to manage the scale of millions of merchants. So by default, it can manage the scale of any individual large merchant. And we built a platform that was API first. And so this idea of headless which is brilliant marketing but total misdirection of reality, is just you want to plug it into other things in your ecosystem. Guess what, we built an ecosystem and so you can do that with Shopify. And it’s like that’s the thing that ratchets them down to like… and it’s SOC 2 compliant. And it’s all this saying, it’s like security, check. Size, check. Integration, check. And they start running out of the check boxes and then they’re like “Holy crap. This thing is so much more usable,” right? “I can now move faster. I can actually innovate rapidly in the system,” right? Which allows them to showcase the capability of their organizations. Instead of being an anchor, they now get to be an accelerant to the business.

Jason Lemkin:

Yep.

Loren Padelford:

And they start grappling onto that and are like, “Oh, man, we could do this, and this and this, and this and this.” Because retail is experimentation and their CEOs are saying, you gotta experiment. I want to try this. I want to try that. And Shopify becomes that thing that allows them to go experiment. And so it becomes, what feels like a consumer app, right? And an enterprise experience. Right? And that’s such a powerful tool for these businesses.

Jason Lemkin:

Now as the CEOs are deploying themselves, like literally, I mean, that’s sort of every founder’s… that’s what they want to build in the beginning. Right? Is the CIO, any customer goes and builds and then they inbound, right? That’s the original dream. Are you finding maybe quietly in the background, you need a little bit more services, a little bit more onboarding, a little bit more things that maybe weren’t anathema a couple years ago. But as this torrent has happened, you do want to make this even easier for folks that maybe are still firing up IE or are struggling a little bit, or have other systems, right?

Loren Padelford:

Firing up IE…that’s amazing. Yes. So I think for us, there’s some core… as we stretched up market, and I use that term intentionally. Shopify has never moved up market. We stretched up market. We took our current platform and pulled it up market. We have not moved Shopify in that sense. We are still heavily oriented to SMB and to entrepreneurs. The large ones are just a unique kind of entrepreneur. But as we’ve gone up, as we’ve gotten bigger, and so like when I started Plus, the largest merchant on Shopify was 10 million annually.

Jason Lemkin:

Yes.

Loren Padelford:

Largest merchant today is over a billion annually. So this is a materially different customers, much more employees, much more breadth, global, all this kind of stuff. So as we’ve gone up, we tried to help hold a few principles. One, we don’t custom build software. So I don’t care how much money you have. You can’t get us to custom build you anything, right? Because that doesn’t scale. And this is a trap companies fall into all the time, is a big company with a big brand shows up and says, “I got $10 million, just build me this thing.” You build it. And now you’re their software company instead of your own software company. So we’ve really held on to that. We’ve held on to the idea of not everyone’s a fit. I’m not good for everybody. We still say no to a huge number of customers every year, because we just can’t do what they want us to do. And we’re okay with that. We’re here for a long time. We’ll get them back later.

Loren Padelford:

Also intentionally said, “I never want to be a services shop. I don’t want to be $10 in services for every $1 in software.” However, as we have gone up market, we have had to think about services more and more in a, where do we provide ultimate value that moves a customer from pre sale to launch as fast as we can? Versus consult with them on BPO and process optimization and all that kind of stuff. And we’ve just keep drawing the line, it keeps shifting slightly. But we have an amazing ecosystem where we push most of the services to and say, “You want to build the store. That’s the ecosystem for that. We don’t build stores. You want to customize an app? That’s the ecosystem for that. We don’t do that.” What we do is help you pick the right partners, help manage those partners with you. We will do some support work, some aggregate benchmarking, things like that, that we can provide.

Loren Padelford:

And that gets more and more as we get higher and higher because expectations get more. But we are still constantly trying to hold this line, saying, “Do not become a consulting shop. We want to be a software company.” But it has expanded as we’ve gone up market just because we see things we have the data, so we’re the best position to support the merchant in that space. But I ultimately am trying to build an ecosystem that does it, instead of having Shopify do it.

Jason Lemkin:

I mean, even Salesforce which is obviously a very powerful software, but much more Byzantine than Shopify. I mean, they’ve struggled with this from the early days, as we know, right? They needed services much more but to outsource it, right? To build the Piraeus and PWCs and train them. So it sounds like it’s the same process. You don’t want to own it, you want to have best of breed partners. But there’s more and more to do. You say that Shopify is an SMB customer when I see 29%. I think Slack the majority of their revenue is enterprise even though their roots is SMB. I think it could happen to Shopify. Shopify could have the majority of its revenue be enterprise even though its roots are Slack-like.

Loren Padelford:

And so, that’s true. I would say revenue is a terrible proxy for what a company’s trying to do. It just happens to be the thing that everyone wants to talk about. I’ve always thought employee base is a terrible proxy for success. Right? Having lots of employees doesn’t mean you’re actually successful, it just means you have lots of employees. So there are very large companies in the world with tons of revenue who have no customer value. And so I just don’t see this… I’m not arguing your point, I think our perspective would be the merchant mix is a better indication of our interests and what we’re doing, than where our revenue comes from. Because revenue is mathematics in our space. There’s monthly fees, payment fees, that kind of stuff. By mathematics, the large ones will overshadow the small ones but when you have a million small ones and 7000 large ones, ask me what the company’s doing, right? We’re doing both but no one could claim we’re not doing the small market just because of where revenue comes from.

Loren Padelford:

So I think that’s a nuance I’d suggest is, your revenue is an interesting indicator of where some of your cash comes from, but it doesn’t tell you necessarily what the company cares most about.

Jason Lemkin:

Yeah, it’s a good insight. And it’s a fun, as all of us who have been doing this and this founders too, it’s a fun tension to watch right? And watching Stewart Butterfield start wearing a tie more often. I haven’t seen Tobi wear a lot of ties yet and suits. I am going to tweet at you if I see one. If I see the Kangol hat come off and the tie. Just one Bloomberg interview, at 10 billion run rate and then we’ll have a laugh about it. I’m not saying it’s going to happen, but-

Loren Padelford:

I’ll tell you that, I would be more shocked than you if that were to happen because I think he’d get more internal chirping than he would external. But this is the, we are okay to say no to things. This is who we are, we say no constantly. And so I’ve said to my team, we say to Shopfiles, “Hi. We’re not trying to become the market. We’re trying to get the market to become Shopify.” And so it manifests itself in that kind of way. It’s like, yeah. If us showing up in a suit, is the reason you will or won’t talk to us, let me help you with this conversation. We’re out. Right? Because it’s just not like that, if that’s the thing you value, we’re having the wrong conversation. And it’s not about disrespect or anything. I’m sure there’s a scenario under which he would wear a suit, or I would wear a suit.

Loren Padelford:

But when you think about it from a market perspective, this is the same as the CIOs. Is when the CIOs are like, “Well, we have to have all these things are we’re not doing business with you.” “Okay, great. Don’t do business with us then.” I’m sure there’s a bunch of software companies who will comply with this ancient way of doing things. We aren’t one of them. So when you figure out a different way or want to talk about a different way, we’ll still be here. And I think that’s been one of the keys to our success as we’ve stretched up market, is not falling for the brands or falling for the money and just saying, “Look, we’re trying to build something that not everyone’s going to believe in. And a lot of people will say no to us. But we’re here for a long time. And we’re going to do this and we think this is the right way.”

Loren Padelford:

And it is a bit philosophical more than it is logical. But if you’re going to try and do something no one’s tried to do before, it is a little bit philosophy more than it is standard business. And I don’t know, I mean, Tobi’s tweet this morning was, I think indicative of, if you’re into this kind of thing, I think we’re doing okay.

Jason Lemkin:

All right. Just one follow up of that and then talk about boomerangs. We talked about it before, but then I want to make sure we have time for questions. So, because there’s usually at least a couple good ones. But just this, it’s a super interesting idea of 29% of the revenues from Plus, from enterprise. But you can’t let that be your North Star. It has to be the corpus of customers, right? The million and what they want. But at some level, when you’re doing resource planning, and Shopify is a big company now. It’s a tiny company. It’s a rebel but it is a big company. Do you have to do some of it that way? Do you have to allocate 29% of engineers and 29% of the team meeting? Because I find that a useful exercise even if you don’t follow it, it’s a useful paradigm to think about. Because if you don’t, the distribution can be based on passion or emotion and not data. So do you divide anything up based on that 29 versus 31 or 71 rather?

Loren Padelford:

No.

Jason Lemkin:

No?

Loren Padelford:

I think that the better way to think about how we make those kind of trade offs is, the mental model I have is Shopify is a flotilla.

Jason Lemkin:

Yeah.

Loren Padelford:

And the big central cruise ship in the middle is that core merchant. And what you have outside of it are all the other ships in the flotilla. Plus is one of the ships. Retail is a ship. Shopify Money is a ship. We’re all ships. We’re all tethered to that middle and we’re all building along a continuum of merchants. It’s like there are small Plus merchants that are doing half a million dollars in revenue that are still on Plus, because they need some of the features. And then there are big Shopify merchants that are on a Shopify plan, and not on Plus because they don’t need some of the Plus features. So we’re building on this continuum. And the flotilla is pulling all the time. We’re each pulling in slight directions, and there’s this near constant discussion about resource allocation based on opportunity, but isn’t financial opportunity. It’s how do we make eCommerce better? How do we support more merchants? How do we give more flexibility and more extensibility?

Loren Padelford:

It’s never a financial discussion where, “Hey, I can make you a whole lot of money if you just give me all the resources.” Because again, money is a bad proxy for success. And so we are in a constant discussion as a flotilla, about course alteration, right? It’s like, “Oh, we’re going to nudge it a bit this way this time and nudge it a bit this way this time.” But it’s not nearly as pragmatic as, “Oh well, X amount of the revenue comes from over here. So we’ll dedicate X amount to the resources.” And to give you the example of that. Plus is about 700 people worldwide. Against a 6000 person company, and is 29% of [inaudible 00:35:42].

Jason Lemkin:

That’s sort of the question. Yeah.

Loren Padelford:

Right? And so it’s just like it’s disproportionately small. But it is amazing what you can do with small teams.

Jason Lemkin:

With just 700.

Loren Padelford:

With just 700. Imagine.

Jason Lemkin:

All right. One more I want to do and then I want to make sure I get a couple questions offline and a couple questions online I wanted to get. But when we chatted before, you chatted about letting customers go or you weren’t the right vendor, having the confidence to do that, having the confidence about your mission, and that they might boomerang back later and that’s great, right? I assume there’s been a lot of boomerang since March 15th. Maybe not. Maybe it’s all actually been folks that had different solutions or different… but has boomeranging changed since March 15th? Have you learned about any lessons on how to handle boomerangs? Because if you go along, they will come back if you have a great solution.

Loren Padelford:

Yeah. So this is a core belief of mine is, you have to be able to say no to customers. They’re not all good. Right? I mean, statistically impossible that every customer we talk to is going to be a good one. So you have to know what you’re good at. We’re optimized for success, not money. So I need customers to be ridiculously happy. So they go out and tell all their friends and all their friends come to us. And so we say no a lot and we still say no. But the premise is gracefulness. Say no gracefully. Right? It’s not you, it’s me conversation. Like, “You’re a great business. If you want to change… here’s the things we don’t think we can complete.” Either it’s you want to do the thing this way, and we want to do it this way. But you always leave the door open. Never close the door, never burn a bridge. You leave it open. “Hey, if you want to keep talking, we’re here. We’ll keep talking.”

Loren Padelford:

So when they come back round again, you’re gracious. It’s not, “We told you so.” It’s not, “Oh, look at us. We were the right, you were…” It’s, “Hey, great. What would you like to do?” It’s the same discussion. “We’re still here to make you successful. If things have changed, let’s talk about it again.” But I see so many companies who just say yes to everybody, under the auspices of any money’s good money. And the problem is, it’s not because it’s a resource distraction. And ultimately, what you need is happy customers more than you need the money, because happy customers will lead you to the money.

Jason Lemkin:

Well, that’s the real answer.

Loren Padelford:

You get both.

Jason Lemkin:

Right.

Loren Padelford:

Right.

Jason Lemkin:

Sometimes I think you should take the customer if you could make them happy, if you don’t want to do it. But it’s the happy customers that matter more than the money. The money usually [crosstalk 00:38:06]-

Loren Padelford:

Totally. Totally.

Jason Lemkin:

Yeah.

Loren Padelford:

And so I think that’s we’ve done. So your Boomerang question is 100%. Right? 100% we’ve had boomerangs that three years ago were like, “We’re never talking to Shopify. You can’t do what we want.” Who are back in our pipelines. And I think that’s great. We’ve developed a lot. The market’s developed a lot. They’ve developed a lot. Tobi has a great saying. He says, “We can all wake up tomorrow smarter.” Right? And so if we woke up the next day-

Jason Lemkin:

Indeed.

Loren Padelford:

… and we were smarter, great. We get to make new choices. Right? And so those boomerangs I think are just, we all woke up smarter, new choices to be had, let’s move on and figure out how to make people successful.

Jason Lemkin:

One question because I think this is interesting to founders, even though it’s going back in time. But Adam asked, “What customer number or revenue?” But it may be more milestone based for you. Did you take the steps to do the SOC 2 that you reference to? To do more enterprise grade security and compliance? How did you think about that and sequence it, as you grew Plus?

Loren Padelford:

I don’t think we did SOC 2 until last year.

Jason Lemkin:

Yeah. I’ve seen it. So that’s late. Stop fighting a lot of things late.

Loren Padelford:

Well, and here’s the reason.

Jason Lemkin:

And it’s done pretty well.

Loren Padelford:

So I don’t have an SLA. Okay. We have no SLA’s, at Shopify. Right?

Jason Lemkin:

Yes. The CIOs I bet asks since [crosstalk 00:39:21]-

Loren Padelford:

Every time they ask.

Jason Lemkin:

Every time. Where’s your SLA?

Loren Padelford:

And so, when we first got asked that everyone was like, “Oh my God. You’re going to have to SLAs.” The number of times I got told, “When you get to the real world, and sell to real customers, you’re going to have to change all these behaviors because no one will buy it.” That real world place sounded like a terrible place to live, so I just refused to go there. And so SLAs as an example of “enterprisey” things that we just avoided. When they showed up I was like, “Why do you want one? What do you think is going to happen if we go down?”

Jason Lemkin:

Well, nothing. SLA in some ways is the stupidest thing if you think about it, right? It accomplishes nothing. Even if you got $6, there’s nothing to do with it and it doesn’t make the app better. But they want it.

Loren Padelford:

Okay. And so I had that exact conversation over and over again. And so I can count on one hand, the number of deals we lost because we didn’t have an SLA.

Jason Lemkin:

Yeah. I would have made one in a Google Doc, but I’m with you. I’m with you.

Loren Padelford:

No one has time for that, I don’t have time to make you an SLA. Right? So I think we have avoided a lot of the “enterprisey” standards, by just questioning the standard. By being like, “Why? Why is that important to you? What is the thing you think you need here?” And then what we found is no one actually had good answers. What they were used to, is just like the big five legacy software companies would show up with the standard package, it became the norm. They asked everybody else in the world to comply to it. No one ever pushed back because they were big companies. And so all small companies adopted what those five legacy platforms created. And we just refused to adopt it. We just kept asking, “Why? Why do you want that? Why do you need this thing? Why do you need that thing?”

Loren Padelford:

And so I’d applied for contracts. I have a one year contract. I mean, I don’t actually care if you sign it or not. I mean, I kind of care. Right? But if you sign that-

Jason Lemkin:

Yeah. In many ways contracts are just as stupid. Let them go.

Loren Padelford:

Let them go. I want you to be here because-

Jason Lemkin:

Let them go. Let them go.

Loren Padelford:

… this is the greatest platform in the world, not because I have you locked into some five year agreement you can’t escape from.

Jason Lemkin:

Yes.

Loren Padelford:

Right? It’s backwards. I’m here to make merchants better, not to lock them into things. And so there’s so many parts of enterprise, which are fiction. They don’t actually exist in reality, it’s just been created by organizations to make themselves more money. Right? Which, “Okay. I mean, you want to make more money. It’s fine, but there’s better ways to do it.” To lock in customers to platforms with crappy outcomes, so they couldn’t escape. Right? Once you’re there and it didn’t work, you can’t leave anyways.

Jason Lemkin:

A three year contract  is powerful.

Loren Padelford:

Yeah. And so my advice to everyone is, hold off longer than you think. Just keep asking your customers what they expect to get from you and those things. What do you want? And you’d be surprised most of them, they don’t really want that stuff. Right? What they want is the outcomes. They want to sell more stuff. They want to use your platform to get to some end goal of theirs. There’s a lot of lawyers, maybe they ask for things, but I don’t know. Don’t be-

Jason Lemkin:

It’s a good challenge.

Loren Padelford:

… the enterprise.

Jason Lemkin:

No one agrees with you more that an SLA and a contract are stupid. They’re literally stupid if you think about them. They’re stupid. And they’re even antithetical to building a great product because you want to be held accountable every nanosecond right? Having said that, it is interesting that you say you lost some deals to it right? And so in the end, you want happy customers, it’s okay. But it’s an interesting comment on both sides. There is a trade off right? And that trade off doesn’t necessarily work for everybody at every stage of their life.

Loren Padelford:

Sure, but let me clarify. I lost less than five, in six years.

Jason Lemkin:

Okay. Fair enough.

Loren Padelford:

I did not lose customers over this, right? And the amount of time and effort it would have taken to comply with that, would have far exceeded any money I was going to make on those six customers. Right?

Jason Lemkin:

Well, that’s the more analytical than the ethical or moral example. The juice wasn’t worth the squeeze at the time.

Loren Padelford:

Right. Totally. And it still isn’t. And so SOC 2, look, great thing to have. I’m glad we have it. We avoided it for a long time. And again, we never lost deals because of it. It’s one of those questions. Security shows up and ask, well, look we built this giant platform. We have an amazing security team. They talk to merchants all the time. They convince them that we are doing it and they get off this idea of needing this certification. That is 99% of customers. Now we did it because we’re also at scale. And we have some government customers and stuff like that. It’s like there was a good reason to do it. But we avoided it for a long time. The vast majority of our customers never ask if we have that kind of stuff. You’re talking about super outlier scenarios. So I think enterprise startups, and I really hate that term. We’ve got to come up with a better term.

Loren Padelford:

Startups who serve large, complex customers, get convinced they need all these things in order to win. And what I’d suggest is that’s not true. Sit down with your customer, ask them what they’re really trying to do, what they care most about, right? What the outcome is and then walk them through how you operate. When we were early it was like, “Well, you need all this stuff because what if you go down?” “Mr. Customer look, my entire business is SaaS. My entire business is about being online. If I go down, I have much bigger problems than talking to you.”

Jason Lemkin:

It’s what I think about every moment of the day. It’s logical. I like the pep talk here. I’m feeling better about this approach.

Loren Padelford:

And most customers will just be like, “Yeah. Okay, I get it. Let’s move on to the thing I really want, which is your platform that helps me do what I want to do.”

Jason Lemkin:

I’m with you. Let’s break. I think we’ve all just been through the brutal security audits. Those 500 page documents that come through procurement-

Loren Padelford:

Oh, I never do them.

Jason Lemkin:

… that come through department, and that department is still here in July 19th. And we’ve all lost a deal, maybe it’s only five. But we all lost the deal for not responding to that questionnaire or not checking the boxes, when we’ve been in a multi vendor situation. So-

Loren Padelford:

Don’t do RFPs.

Jason Lemkin:

… it’s a good challenge. What’s that?

Loren Padelford:

Don’t do RFPs.

Jason Lemkin:

Yeah. We all want to not-

Loren Padelford:

Don’t do RFPs.

Jason Lemkin:

We all want to not do the RFPs too but… and I’m with you. I’m aligned with your values. But sometimes as a small startup when you’re building your brand, when you don’t do the RFP, you don’t get to go to the dance. And it can be-

Loren Padelford:

Okay.

Jason Lemkin:

If it’s a game changer deal, if it’s closing a Shopify or a Microsoft or Google, sometimes you got to do the RFP, I think. But I’m not saying you’re wrong.

Loren Padelford:

I would agree. What I’d say to all the founders is, do the math. 80% of RFPs are decided before they ever send them out to the public.

Jason Lemkin:

That is really [crosstalk 00:45:45].

Loren Padelford:

If you aren’t talking to the customer already, before you get an RFP, the odds that you win are less than 1%. And so, is it worth it? I’m sorry, it’s just math. It’s not an opinion. It’s just the math. This is why we don’t do them. It’s like you can’t win. I didn’t write it so I can’t win it. If I wrote it, I can win it.

Jason Lemkin:

That is the art of the RFP. All right, it’s good. I know we’re exactly at 1:50 where we’ve got to end. Loren, this was amazing. Anything you want to add at the end that we didn’t touch or anything you want to hit? Any book tours or any new YouTube channels or anything you want to hit? Anything about Shopify Plus you want to highlight before we break?

Loren Padelford:

Everyone in the enterprise space, stop acting like the enterprise, right? This was a world created by five software companies that worked perfectly for 50 years. It’s over. It’s over. Now they’re big, it’s going to take them a while to wind down some of this stuff. But that world is over. And it’s over the more we push on it. So don’t just comply to a world created by others. Let’s create a new space. There’s enough… you’re going to talk to Aaron shortly. It’s like, there’s a new version of enterprise in the world, led by everyone probably listening to this call and everything else. We all got to stop acting the way that the enterprise software space has acted for the last 50 years. Because-

Jason Lemkin:

I’m with you.

Loren Padelford:

… it’s not worth it.

Jason Lemkin:

I’m going to try to quickly ask him about SLAs and RFPs but I am with you. Loren, it’s always more than a delight and a learning experience being with you. So thank you again for joining us. And this was terrific and stay safe.

Loren Padelford:

Thanks, Jason. Appreciate it. You too.

Jason Lemkin:

All right.

 

The post SaaStr Podcasts for the Week with Bernadette Nixon, Jay Snyder, Nick Mehta, Loren Padelford, and Jason Lemkin appeared first on SaaStr.

SaaStr Podcast #361 with ServiceNow Chief Customer and Partner Officer Lara Caimi


This post is by Amelia Ibarra from SaaStr

Ep. 361: Lara Caimi is the Chief Customer and Partner Officer @ ServiceNow, the company that allows you the power to make work, work better. Prior to their IPO, ServiceNow raised funding from some of the best in the business, including Sequoia Capital and Greylock. As for Lara, she joined ServiceNow in 2017 and spent 3 years as Chief Strategy Officer before assuming her current role just this month. Before ServiceNow Lara spent an incredible 17 years at Bain & Co across a variety of different projects and roles.

In Today’s Episode We Discuss:

* How Lara made her way into the world of ServiceNow and SaaS having spent an incredible 17 years at Bain & Co.
* What does the role of Chief Strategy Officer really entail? How did the role change in Lara’s 3 years in the position? What is the optimal relationship between the Chief Strategy Officer and the CEO? How does Lara advise founders on when to hire their Chief Customer Officer?
* How does Lara see the 4 phases of startup growth? What are the most challenging elements within each? How does one instill process and discipline without losing agility and speed? How does one set targets that are a stretch but also not a stretch too far? What is the right balance?
* How does Lara think about what great change management looks like today? How does that change in a COVID world? How does Lara approach the right way to address enterprise customer communications? Why has that been made easier in COVID times?

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
ServiceNow

Below, we’ve shared the transcript of Harry’s interview with Lara.

Harry Stebbings:

We are back. You are listening to the official SaaStr podcast, and you’re listening to Harry Stebbings. Now, joining me in the hot seat today, I’m thrilled to welcome Lara Caimi. Lara is the chief customer and partner officer at ServiceNow, the company that allows you the power to make work work better. Prior to their IPO, ServiceNow raised funding from some of the best in the business, including Sequoia Capital and Greylock.

Harry Stebbings:

As for Lara, she joined ServiceNow in 2017 and spent three years as chief strategy officer before assuming her current role just this month. And prior to ServiceNow, Lara spent an incredible 17 years at Bain and Company across a variety of different projects and roles.

Harry Stebbings:

But that’s quite enough for me, so now I’m very excited to hand over to Lara Caimi, chief partner and customer officer at ServiceNow.

Harry Stebbings:

Lara, it is so great to have you on the show today. I’ve heard so many good things from many former guests on the show, so thank you so much for joining me today, Lara.

Lara Caimi:

Thank you. I’m so excited to be here.

Harry Stebbings:

Well, that is very kind. But I do want to start with a little bit of context. Tell me, how did you make your way into the wonderful world of SaaS, which we both know it is, but especially come to be chief strategy officer at ServiceNow today?

Lara Caimi:

Yes. Well, it was, like many good career stories, not one that I had ever planned, but one I’m super happy to have landed in. I started my career at Bain and Company in consulting and unexpectedly spent over the course of 17 years staying at Bain mainly because when I would get comfortable, I would always have the next opportunity for the next promotion or the next client, et cetera, so I felt like I was always learning and growing.

Lara Caimi:

And like many good opportunities, I wasn’t looking, but in fact was busy, had my head down, was happy in my job and had a headhunter call come across my desk. And a lot of those, as you do, you glance at them and move on with your day. But this one was like, “Oh.” It’s reporting to John Donahoe, who, as you know, is an amazing leader and started his career, like me, 20 years at Bain, so was renowned in the halls of my Alma mater and then ServiceNow, and of course, knew about ServiceNow.

Lara Caimi:

And then the more I dug in and studied, the more intrigued I was about how amazing the opportunity for the company was. And so really, that’s where I landed in this role of chief strategy officer, which I held for two and a half years and actually a week ago just got promoted to chief customer and partner officer. And so that’s a bit about my history there.

Harry Stebbings:

Congratulations on the promotion. I do have to ask, though, because, again, we mentioned [inaudible 00:04:29] getting on schedule. I do just have to ask, in terms of John, obviously, as you said, amazing leader. I’m really intrigued, from your perspective, though now having had the chance to work side by side with him, what makes him the amazing leader that he so clearly is, from your perspective, having had the chance to work with him?

Lara Caimi:

He’s an amazing strategist. I mean, he understands business. He’s a real student of leadership and understands how companies need to scale and evolve as they reach the next level of their growth. But also, he’s just a wonderful human and he’s a very down to earth, humble, thoughtful person who really cares about developing individuals. He’s the kind of person that when you read the review that he writes for you, you’re like, “Man, he nailed it.” He sees everything and the way he invests in helping you grow and develop and rise is really special. And so I learned so much from him. In the same way, I’m learning so much from Bill McDermott, who is a very different kind of leader in many dimensions, although shares a lot of the same core characteristics of John.

Harry Stebbings:

No, absolutely, and incredible to hear in terms of the commitment to people’s development. I do want to ask another one, which is 17 years at Bain enjoying that success, and I have a lot of university graduates coming into the workforce today and they always ask me, “Should I join a startup? Should I start a startup or should I join a large incumbent?” I’m always quite struck by the responsibility is suddenly placed on your advice, but then I’m mostly thinking especially for you with this incredible experience at Bain, and now in ServiceNow, how would you advise them and what would you say?

Lara Caimi:

Well, I think my career is unusual to spend as much time and then jump over to the senior role that I had. I’m not sure it’s the thing that everybody gets to do. As I think back of what would I do differently, I don’t think I would change much because I’m so happy with where I landed.

Lara Caimi:

But when I think about others starting their career, I do believe that the foundational training of strategy consulting or sometimes investment banking can provide is it gives you this baseline skillset around a general manager headset, foundational understanding of how to think about big problems and divide them up into meaningful chunks, focusing on the real pieces of value that’ll move the needle and then how to communicate very clearly to influence. And those are just, I think, core general business skillsets that get hammered into you formally through training, but then just through your experience with clients that at least a couple years getting that kind of skillset, if you haven’t already in your career, is a valuable thing to consider.

Lara Caimi:

And then in terms of where to go from there, to me, it so depends on the opportunity, the team, and the track record of growth that others have seen. I like places where you don’t get pigeonholed in a particular function or a particular silo, that people are looking for talent that can grow and expand perhaps in unconventional ways, but will give people a shot and then identify high potential people and put them in roles of responsibility. And I think those are real great opportunities when you see a management team or a leader or a company who tends to do that, that will be a place where you will learn and grow faster maybe than in a different environment.

Harry Stebbings:

Totally with you in searching for those opportunities for growth within roles. We mentioned your promotion and I’m really interested because we have seen the rise of chief strategy officers over the last decade or so and it means different things to different firms. Can I ask, what does it really entail and how did your role change over the time that you were chief strategy officer?

Lara Caimi:

Yeah, it’s interesting because when John brought me in, the company had never had strategy formally before or a chief strategy officer. And so in some ways I was defining it for the company and for my peers in the C suite. And it started by, of course, building a purpose-built function, often people that came from consulting or strategy backgrounds, but it was designed to be a feeder of talent into the organization, into other roles. It was never meant to be something that was permanent. It was always a source of talent.

Lara Caimi:

And the way I thought about it was when you think about some chief strategy roles, one spectrum could be like, “Hey, it’s a staff role that makes slides for the CEO for board meetings or something.” And at the other end, it’s a true partner in the C suite that’s partnering and guiding the strategic agenda for the company. And that’s the much more powerful and meaningful end, which is what I think we created at ServiceNow.

Lara Caimi:

And as I thought about that, it was definitely not to be John’s person or John’s team that would parachute into situations that the CEO wanted to fix, but rather it was to act as a true peer on the C suite with CJ Desai, who runs product, or Dave Schneider, who at the time was the president of customer operations, and really think about what we needed to do to make the company better.

Lara Caimi:

And in that way, that’s really how that role evolved. It started with just proving myself and building out a basic team and adding some value to really thinking about the longterm strategic agenda. And for us, it was painting our path to $10 billion in revenue, which is the aspiration that we laid out, which is super exciting. And that was done very much in collaboration with the business, with the management team, with the board.

Lara Caimi:

And so that for me is how it evolved as we built that, which it’s the most fun job I’ve ever had because I could think about the company, think about what we needed to do to get to the next level and improve and we would just go partner with the business and get that done. A lot of that has to do with the culture we had that we were true partners and we weren’t coming in to tell somebody what to do. But also I think the culture of the company, that one of our cultural values is hungry and humble and this notion that, “Hey, we all have a growth mindset and we can all get better and we all want to do a great job.” And that I think is conducive to partnering to solve problems and ultimately help individuals and the company be successful.

Harry Stebbings:

Can I ask, when I listen to this, it seems like such a foundational role that all companies should have really from day one in terms of the relationship with the CEO, the thought partner, how it expands throughout the different functions in the business. My question to you is I guess, how do you advise startups who are thinking about hiring a chief strategy officer? When’s the right time and how they should think about that from a strategic point-of-view?

Lara Caimi:

It’s interesting because I think about phases of a software company, and I think the first person to coin this was probably Frank Slootman, who was the CEO before John, and then we borrowed it and expanded upon it. But as I think about it, phase one for a software company is zero to 100 million dollars in revenue where you want to find that lightning in a bottle and you’re just looking for product market fit.

Lara Caimi:

And then phase two is when you go from 100 million to a billion and that’s when you found that product market fit and then you just have to scale the heck out of it while that window is open and scaling, building go to market, growing that revenue is the primary responsibility and thinking about growth and new customers is the main focus.

Lara Caimi:

And then phase three, which is where I came in, which is when we were transitioning into that phase with John was going from a billion to a multibillion dollar company. And to me, that’s an interesting inflection point where you might think about this because you think about the business I think even more holisticall.y expanding customers and renewing them becomes more important so you introduce customer success in a meaningful way.

Lara Caimi:

For us at ServiceNow, we were the best kept secret in Silicon Valley. And so we started to invest in brand that we’d never done before. And we had brand campaigns. That’s when we brought Pat Waters in as our CHRO, where we actually started to introduce a diversity and inclusion and belonging agenda and the company. It was really building the foundations for an enduring company.

Lara Caimi:

And oftentimes, as you think about those phases, you have founders or early stage CEOs who are doing a lot of that strategy work themselves in maybe phase one, phase two. And it’s really in phase three when the problem becomes multi-dimensional, but it’s often good to bring in additional thinking. That’s also sometimes when companies go from a single product to multiproduct, et cetera, when they start expanding geographically. And so I think it helps to bring in more structured thinking around that.

Lara Caimi:

And then of course, phase four is where we’re in now, which is where Bill’s really focused, which is where you go from four or five billion to a $10 billion company. And that’s where it’s even more complex because you start to think about the role of the ecosystem in a meaningful way, verticalization. You have to truly force multiply. That notion of customer success has to truly scale and deliver those customer value outcomes that you need. You have to expand not just to be known as your brand, but you actually have to be relevant to C suite buyers because you’ve started to have $10 million, $20 million, $30 million, $40 million customers. That is a C suite conversation at that point. There’s a lot of nuance, I think, as you think about those phases. And so I would say that phase three is when formal strategy might be important.

Harry Stebbings:

I think one thing that really strikes me in my thinking here listening to you is when you think about the scaling process that may be specifically in stage three and it’s like, how do you instill process and frameworks in this maturation stage without also creating barriers without creating a slowdown of process? How do you instill frameworks without slowing down activities so to speak?

Lara Caimi:

Yeah. I think that is such an important question. When I have studied companies that scale, a lot of what slows companies down is not having a good go to market engine or not having a good product. It is truly that they start to die under the weight of their own bureaucracy. And so that was something I was super cautious about.

Lara Caimi:

At the same time that we’re introducing a proper three year planning process and going through strategic product reviews once a year and actually having structure to how we think about our markets and our customers and our products and the product roadmap, all that stuff, we also started to think about talent and that was where we said, “Okay, of course diversity, inclusion, belonging is a super important conversation that we need to invest in and educate and build into the core culture of the company. But also, how do we really think about our cultural values and what are the things that we want to keep from the previous phase and what are the things frankly, that we want to evolve, which is a nice opportunity for a new CEO coming in to be able to do that?”

Lara Caimi:

And for us, it was about foundationally articulating the company’s purpose supported by those values, right, and creating a rallying cry around that, that inspired and motivated people. And then also we invested in a little bit of foundational operational excellence. And I would say that’s simple stuff sometimes, right? But it’s like, we needed a decision making framework. Who has the D? Who gets to make decisions? How do you ensure that you teach people really great meeting management skills in addition to educating people about program management or change management or getting work done cross-functionally? A lot of those were conversations that we had in more formal leadership development programs that I think were super important to ensure that that dying under the weight of your own bureaucracy thing didn’t happen.

Harry Stebbings:

I totally get you. And I love that also, because it goes back to what you said also about John in terms of the commitment to people development. Kind of tied to framework in a way is the element of planning just in terms of strategic thought-provoking activity. My question to you on planning today is given the transient state of the world and given the current flux that we live in, how do you think about appropriate planning and try and be as accurate as possible? What does that look like?

Lara Caimi:

Yeah. I mean, no one has a crystal ball and I think every quarter … We’ve now been through a couple in COVID, but it continues to be a question mark, how deep is it going to go? How long will it last? Et cetera. And so I find that there’s plan, plan and replan, and also build scenarios around that. So what is the worst case scenario that we could consider here?

Lara Caimi:

And a part of how we’ve thought about doing that is you start to get pretty granular in how you think about that, like segmenting your customer base, which industries and companies are most impacted, how exposed are we to those companies and how exposed is our revenue base to that? We’ve been very conscious about costs. I was just talking to a CFO of a pre-IPO company earlier this week. And he was saying how this has actually been a really good opportunity to reign in spending because there’s a huge opportunity with no T&E, no travel, not being an offices, et cetera, and really focus on that cash burn rate.

Lara Caimi:

For me, it’s about being super thoughtful about building multiple plans and the replanning as you learn more. And then I think inspecting is super important, so what pipeline do we need? For us with our go to market model, what kind of ramped reps will we need as we think about out quarters?

Lara Caimi:

And then I think when it gets really interesting is when you start to think about, okay, this is a new normal, and there are new problems now in the world that our customers are facing, so what problems can we solve that create opportunities for our business, right? And so the example that we went through is very quickly at the beginning of the pandemic, we mobilized to support our customers by delivering four emergency response apps that were totally free in March, right, that just helped them with crisis management, and then we pivoted in May to this thinking around safe workplace, returning to work.

Lara Caimi:

And so in the span of a quarter, we designed, developed, launched, took to market, and sold four different applications that were focused on employee readiness, employee health screening, workplace safety management, PPE and inventory management, contact tracing, which we had 500 customers that implemented. There were 2,500 app installations in that quarter alone. It was big names like Coca Cola, Uber, state of North Carolina, Sanford Health, Ascension Health, all of these different companies that we were really partnering with to help them think about the problem at hand, which was one that no one had ever imagined before, no one had ever planned for. And so I think that that’s a real opportunity too, in this pandemic, as you’re thinking about planning, also thinking about what are the new opportunities that we can help solve for customers that are new to the world that we may be well-suited to help with?

Harry Stebbings:

I totally agree with you there in terms of the product innovation and moving with the times, but I’m really interested. You mentioned some of the incredible customers that you have there with the product line that was created in the last couple of courses. My question to you is, customer communication is so key, especially in times like this. How do you think about the right customer communication process and how have you thought about that during the pandemic?

Lara Caimi:

Yeah. I actually think it’s easier to schedule meetings now with people because it’s so much less logistics and meetings are shorter, they’re more frequent. I actually think the meaningful customer communications, especially when I start to talk to more senior folks in the organization, it’s created an opportunity to, I think, connect more frequently.

Lara Caimi:

And in terms of how it’s changed, I think this should always be the case, but it’s even more acute during the pandemic, which is you have to lead with empathy and with understanding their business context. I’ll give an example. I had a conversation with Honor Health, and it was really important for me to dig into what was happening with COVID in Arizona, what was happening with the hospital system there, what was the context that they were dealing with? And it just creates opportunities to have curious conversations around their business problems and help them real time. And so it’s that frequency of conversation and the availability of senior people, as well as I think it’s raising the bar to help them in a time of need in a more thoughtful and nuanced and specific way to their specific needs.

Harry Stebbings:

A lot of customers in these challenging times are also adopting digital first tools, processes for the very first time, especially when you look at, as you said there, the life of COVID, thousands of employees around the world. And the big thing for me is change management and adoption. And it’s one that I think about far too much, I’m sure. But tell me, what does great change management mean to you from a starting point, I guess?

Lara Caimi:

Well, I mean, I think what’s so interesting about this time is the amount of change that this situation has forced us to go through is in such speed, it’s really mind-boggling, right? You would never in a million years plan to transition your workforce all remote overnight. That would be a change management nightmare, but yet the urgency of the situation has left the world with no other options. And so in that way, you’ve created one of the most foundational change management strategies, which is you need a burning platform, you need to be very clear about why you need to change and what you’re changing for. And I think obviously COVID created a huge burning platform that drove accelerated change.

Lara Caimi:

I think as we think about digital transformation, it’s a business imperative now. It’s not an optional thing to do. And frankly, the gap between those who are digitally transformed and those who aren’t will actually have meaningful business results and will accentuate the difference between winners and losers. I think the business imperative is incredibly clear, maybe more so than it’s ever been before. And so that creates an opportunity to have the burning platform, make a decisive decision about what you have to do, and then communicate that change over and over again until almost you feel like you’re babbling, you’ve said it so often, because I don’t think you can over-communicate enough about it.

Lara Caimi:

And then importantly, and this is what I think about, which is what can get screwed up as a result of this, right, which is I think too often when people are doing programs or change or whatever, they think about a project plan and a bunch of progress milestones. And it’s like, that’s the wrong thing to measure. You need to measure outcomes and outcomes have leading and lagging indicators that actually indicate whether you’re doing the right thing or not and whether you’re going to be successful at the speed you want to be. And those are the things you need to be measuring, not just the progress maps.

Harry Stebbings:

Can I ask, when you think about measurement of KPIs and when you think about targeting goal setting, one other thing that I’m always so stuck on is how do you think about setting super ambitious targets which inspire a team to achieve maybe more than they could [inaudible 00:22:38] but also not too ambitious where if they don’t hit them, they’re massively dejected and it creates negative morale within the workforce? How do you strike that balance?

Lara Caimi:

I mean, this is something that Bill McDermott is really amazing at. He’s a glass half full guy in a way that makes you realize that the glass was 10 times bigger than you ever imagined. He pushes you to think about not just what’s great, but what’s game changing. And he sets these big, audacious, big dream goals.

Lara Caimi:

That being said, I think it’s super important to not create something completely unrealistic, in which case you pretty quickly lose credibility and that whole big dream plan becomes just a pipe dream. And so that’s where I think timing plays a big role and making sure that goals are set in the context of reality that they’re actually achievable, but that they’re pushing people to go a little faster than maybe they would comfortably sign up for on their own. I think it is art as you think about it, marrying that, but that big dream narrative that might be a little bit off in the distance I think helps inspire and rally in a way that’s incredibly powerful.

Harry Stebbings:

Yeah. I think you have to have that driving north star visionary so I totally agree with you there. I’m pleased to hear that. And I also love to hear art over science any day of the week, so that makes me very happy. I do want to move, though, into my favorite, which is a quick fire round. I say a short statement line then you give me your immediate thoughts, and it’s about 60 seconds per round. Does that sound okay?

Lara Caimi:

Okay. That sounds fun.

Harry Stebbings:

Okay, so your biggest challenge with your role with ServiceNow today?

Lara Caimi:

Yeah. My new role is chief customer and partner officer, which I’ve now been in for a week, so I’ll give you my top of mind thoughts here, which is we’ve launched customer success a year or two ago, found good results, but now we need to scale it and I think focus on how do we get it much more embedded to ensure our customers are seeing value, getting to outcomes, et cetera, in a meaningful way is a big challenge that I’m very excited to think about different models. And I think there’s business models that we can innovate around, et cetera, to think about how to do this differently. And so that’s exciting.

Lara Caimi:

The second big piece of my job that I think about is the partner ecosystem. The partner ecosystem in SaaS, sometimes it’s underplayed. And the reality is that these guys have very deep, important relationships with big customers, right? They are helping drive their digital transformation agenda and recommending software platforms that can enable that. And so it’s really important to get to know these guys, go to market with them, help them build practices around you for at least the kind of software that we sell to the largest enterprises in the world. And I think there’s ways that their models can innovate, frankly, to accommodate a SaaS model. And so I think that partnership and really growing together is another piece of what I’m looking forward to impacting in my new role.

Harry Stebbings:

Tell me, what would you most like to change in the world of SaaS today?

Lara Caimi:

I think it goes back to what I was saying about customer success. In a world where SaaS can proliferate in such an amazing way with anybody in the company that has a credit card can swipe and download something, I think it has a potential to take away the focus of what SaaS can really do for you and that ultimately it will have this negative consequence of almost giving SaaS a bad name.

Lara Caimi:

And I think we can change the narrative where we really start to think about, what is the value or the outcome delivered from this software? And so to me, customer success in the past has always talked a lot about NPS and customer advocacy and stuff like that, which is important. But I think we can almost innovate the narrative where we can think about customer success being defined as realized value. We’ve introduced this concept of now value at ServiceNow that we really think about embedding through the life cycle where we’re always focused on how the customer can get the most value and that narrative I think is really important for SaaS to broadly develop and adopt because that will avoid that nightmare scenario that I laid out in the beginning.

Harry Stebbings:

Tell me, what was the biggest surprise for you internally since COVID began?

Lara Caimi:

I just was really, I think, proud of our employees and how quickly we were able to pivot to remote work to stay productive and that people at the same time were dealing with unprecedented personal change and the amount of empathy and thoughtfulness that was applied and we ramped up our communications to employees. We treated them with care and respect. We cared about them and their families. That is a major pivot. And I think as a result, our employees are more loyal. And I think we’ve created a situation that obviously you have to keep evolving. This is a long trying time. People get Zoom fatigue, whatever, but I was surprised and I think proud of both our employees and just the way it was managed.

Harry Stebbings:

Yeah, absolutely. I think it’s been incredible to see. Tell me, what moment in your life has changed the way that you think? Very, very hard question to ask.

Lara Caimi:

I mean, I guess I have to go back and credit Bill McDermott. It was a big transition where I started working for one CEO and within a couple of years had a very different and wonderful CEO to work with and learn from. And the biggest thing that he has done for me and for this company is instilled the power of the big audacious goals. He wants us to not just be a good company or a great company or just hit the quarter or whatever. Of course, he wants all that. But his goal for us is we want to be the defining enterprise software company of the 21st century. And when you set goals like that, it’s such a powerful unlock that lets people think about, I don’t just need to do what for us, what Salesforce did … I don’t need to just follow that model or think about other big software companies. I can think about how do we reinvent this? What are the problems that no one has figured out yet?

Lara Caimi:

And that bandwidth for thought and that inspiration that he puts out, I see it trickle down in the organization in all sorts of ways that we’re doing things and thinking about things differently for the first time ever and moving faster and I think with more enthusiasm than I’ve seen, and that’s incredibly inspiring. That’s an incredible leadership lesson that I’ve taken from him that I’m really grateful for.

Harry Stebbings:

It’s amazing to hear that about Bill, but Lara, listen, I’ve so enjoyed today. I so appreciate you putting up with me getting off schedule quite so frequently, but thank you so much for joining me.

Lara Caimi:

Thank you. This has been so fun. I really, really appreciate this conversation. Thank you for your time.

Harry Stebbings:

So enjoyed having Lara on the show there and such exciting times ahead for ServiceNow as they scale through phase four. And if you’d like to see more from us behind the scenes, you can on Instagram. 

Harry Stebbings:

As always, I so appreciate all your support and I can’t wait to bring you a fantastic, fantastic episode next week with Kyle Parrish, head of sales at Figma.

 

The post SaaStr Podcast #361 with ServiceNow Chief Customer and Partner Officer Lara Caimi appeared first on SaaStr.

SaaStr Podcasts for the Week with Matt Garratt, Trisha Price, David Schmaier, Rob Bernshteyn, and Jason Lemkin


This post is by Amelia Ibarra from SaaStr

Ep. 359: The Secrets to Vertical Growth, What it Really Takes to Build a $1B SaaS Company with Matt Garratt, SVP, Managing Partner @ Salesforce Ventures, Trisha Price, Chief Product Officer @ nCino and David Schmaier, CEO & Founder @ Vlocity. From strategies in recruitment and team building to sales tactics, these leaders from Salesforce, nCino, and Vlocity, will discuss the top tips for moving beyond horizontal SaaS and building a billion-dollar SaaS company.

 

This episode is sponsored by Linode.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from a session at SaaStr Summit: Enterprise. You can see the full video here, and read the podcast transcript below.

 

Ep. 360: Digital transformation marks a radical rethinking of how companies use tech, people, and operations to fundamentally change their business performance. Coupa CEO, Rob Bernshteyn, and SaaStr CEO, Jason Lemkin, will discuss how the Cloud has changed in 2020.

This episode is sponsored by Guideline.

 

This episode is an excerpt from Jason and Rob’s session at SaaStr Summit: Enterprise. You can see the full video here, and read the podcast transcript below.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Matt Garratt
Trisha Price
David Schmaier
Rob Bernshteyn

We’ve shared the transcript of episode 359 below. You can also jump down to the transcript of episode 360.

Transcript of Episode 359:

Matt Garratt:

Thank you. I’m really excited to be here today. I am Matt Garratt, Managing Partner of Salesforce Ventures, and we will be talking about the secrets to building a $1 billion vertical SaaS company, and we’re very fortunate to have two executives from leading enterprise software companies who have done this.

So first, Trisha Price, who is the Chief Product Officer of nCino, who recently had an amazing IPO, and also David Schmaier, who’s the founding CEO of Vlocity, and CEO now of Salesforce Industries, as they were recently acquired by Salesforce for over a $1 billion, as well. So, very excited to have both of you with us today, and thank you so much for making the time.

Before we go into our stories [inaudible] a bit more, provide a bit of context. I’ve had the fortune of working with both of you over the last few years and seeing, really, the change in the vertical SaaS industry change over a number of years. We’ve invested in over 300 companies at Salesforce Ventures and have partnered with both of you closely and it’s been amazing to see this story up close and personal over the years.

Matt Garratt:

I remember a few years ago when companies were out fundraising, vertical SaaS was not as popular as it was today, and part of that is, the adage would go that, “Well, these are smaller TAMs and these are going to be lower gross margin businesses, and if you look at the chart we’re showing, the gross margin in the early days can be as low as 30% and maybe getting above 50%. There’s a lot of services. Are these really product companies? There’s heavy services, at least 30 to 45% versus best-in-class that want to be less than 10%.”

Matt Garratt:

But then when you start to grow and you start to get these customers, you see some really nice benefits. These companies can scale really efficiently. They need fewer sales as a percentage of overall employees. When you look at sales efficiency as measured by magic number, it’s quite good. Retention is much better than most businesses and then the upsell opportunities are quite good, so it’s not surprising that while maybe not so popular a few years ago, you’ve seen quite a few successful exits in this space. A few of the leading companies in the Cloud 100 list, as put together by Forbes, of leading enterprise software companies are in industry verticals and just on the Salesforce platform, the three most valuable companies built on the platform were industry-vertical companies, including nCino, Vlocity, and Veeva.

Matt Garratt:

If you just look at Vlocity and nCino, amazing businesses. Grew to over a hundred million dollars in revenue in five years. As I mentioned, acquired by Salesforce for over a billion dollars and nCino, amazing business. Had a fantastic IPO recently valued depending on stock price around $6 billion, so we wanted to hear firsthand: How did you do this? We have, again, David Schmaier of Salesforce Industries. David, maybe would you give us a quick background about you and what gave you the idea to start this company?

David Schmaier:

Yeah. Thank you, Matt, and it’s great to be here. Thanks for inviting me and welcome to all the folks from SaaStry. I’ve been working in the front office space for 34 years, so I’ve been doing this a long time and when I started, the worldwide market for what we now call CRM software was $50 million globally and so I worked back out of graduate school at a small company called Oracle in the ’80s and I met a guy named Tom Siebel there and I went off and founded a company called Siebel Systems with him and I met another guy named Marc Benioff who went off to found Salesforce, so I was either smart or lucky, and either answer’s okay by me, but maybe a little bit of both.

David Schmaier:

But I had built CRM and then I had built industry-specific verticals, actually over 20 in my prior life, and a few of my colleagues worked with Salesforce right when the app exchange started to found a company called Veeva Systems and Veeva became, I think, it’s still the biggest company ever built on the Salesforce platform and as the worldwide leader in life sciences CRM, and so I saw how successful Veeva was and I went to my first Dreamforce in 2013 to find the next Veeva and what I found was incredible. I was amazed by how big Salesforce was in the ecosystem. I was amazed by the app exchange. I think back then there was 2,800 companies. Now, there’s 5,000 and 2,799 of them were horizontal software companies and one was Veeva. Actually, two. I think nCino had been already started, but I didn’t see nCino there, I didn’t know of them then, so maybe there’s a couple of vertical SaaS companies, but Veeva was a big one and it became clear to me that this was a huge opportunity.

David Schmaier:

I’d built verticals before, so I called up my old friends from Oracle and Siebel who founded Veeva and I got together the next morning with the three Veeva founders, and of course it wouldn’t be a great software company without a cocktail napkin, so on a cocktail napkin, we drew out the strategy for what became Vlocity, so that’s how we got started.

Matt Garratt:

Fantastic. Trisha, I’d love to get a bit more of your background for everyone and then talk about the founding story of nCino, which is certainly a little bit different than Vlocity.

Trisha Price:

Sure, Matt, and David, the reason you didn’t know about the other industry vertical is because that stage, we probably had like two customers or something like that, so we were just too small to be on your radar back then, but I appreciate the chance to talk to everybody today, Matt.

Trisha Price:

nCino is a little bit different in its background. We were actually built out of a bank called Live Oak Bank and Live Oak Bank was founded in 2009 and they had a need for a completely digital bank. Well, to most of you, that may not seem crazy today. You may even engage with a bank that is completely digital today, but at that time, it was pretty much unheard of to have branchless institutions, and so they started looking around for the right software to help digitize their processes and Cloud was important to them for scalability and they couldn’t find anything, so they started working on this concept of digital banking in the Cloud, and from there, very early on, we spun out and created nCino, which is Spanish for Live Oak, and we created nCino.

Trisha Price:

Our roots from the very beginning were built by bankers for bankers and from the very beginning, we made the choice to build the application on the Salesforce platform and since then, we’ve scaled quite a bit. We have over 1100 customers across the globe. We have offices in Tokyo, Sydney, Melbourne, Toronto, Salt Lake City, and then our headquarters here at the beach in Wilmington, North Carolina, and we have over 900 employees.

Matt Garratt:

Super. We went to the idea, so let’s talk about the different phases of building a $1 billion vertical SaaS company. David was kind enough to share this framework that he uses. David, you talked a bit about the team and the founders. Can you talk about maybe a little bit broader than the initial founding team and when you were first hiring people, how did you think about hiring people who had SaaS and software experience versus people that had industry-specific experience?

David Schmaier:

Sure. I think the team is probably the most fundamental step, maybe even more important than the idea, so I’m a big believer in Jim Collins’s book, Good to Great, where “You want to get the right people on the bus and then figure out where you want to drive the bus to,” and luckily from my prior experience, I was able to call a few of my old colleagues who were like-minded, and I think that’s the key is if you’re starting a company, it sounds glamorous, but it’s 24 by seven and it’s a lot of work, it’s exciting, it’s thrilling. There’s amazing highs, but there’s low lows, too, and you have to do everything. You have to plug in the computers, you have to set up the network, you have to figure out how to pay people, you have to find office space, all that stuff.

David Schmaier:

But we found a team of people who are really passionate about building software and building a company and so I went through my Rolodex of top people that I knew from my prior networks of companies and there was a founding six and ultimately 10 of us that banded together in a little low-cost office to figure out how to build a bunch of industry Cloud verticals, and then the key part, which I think we’ll get to later, is we figured out that we had to do it with a partner and so there was no other choice in our mind, we were all aligned at doing it with Salesforce. That was maybe the other most fundamental decision besides the team is the partnership with Salesforce.

Matt Garratt:

Thank you. Trisha, similar question: When you were starting to hire and scale out the team in Wilmington, were you focused on people who had experience in financial services or software experience or a little bit of both and how did you balance that?

Trisha Price:

Yeah, I mean, I couldn’t agree more with David. At nCino, it all comes down to the people and execution, right? Ideas are a dime a dozen, lots of people have lots of them, but to make a company successful, it takes grit, it takes determination, it takes a certain attitude, it takes relentless focus on customers, and that is just a level of execution that you need to get to the kind of success that David’s company and we at nCino have had, and so we’ve always been one to hire for attitude and aptitude more than a specific skill set.

Trisha Price:

Now, in an industry vertical like financial services, you absolutely have to have a deep banking experience and the built by bankers for bankers has been a part of our core DNA, so we absolutely have hired lots of folks with a banking background, but the problem you get if you only focus on folks with a banking background is the faster horse’s problem and what I mean by faster horses is they know how to automate the processes that already exist at a bank, but that’s not really going to disrupt an industry, that’s not really going to get people to get off of their current systems and processes, and so it’s not about faster horses, it was about inventing a car, right?

Trisha Price:

So, how do you get people who are innovative, who can think outside the box? It does require, certainly, people with technical background. For us that didn’t necessarily mean Salesforce. We’ve tended to hire just the best attitude and aptitude full-stack developers we can find and Salesforce has such a plethora of trailheads and training that that’s not really an issue, and so it has been a combo, I would say, of three types of people: the best technical talent we could find with the best attitude, certainly people with deep domain experience, which is needed in vertical SaaS, and then those out-of-the-box thinkers, those inventors, those creative folks who can really cause you to think about things in a different way.

Matt Garratt:

Well, I can attest to the commitment to hire for aptitude versus specific skills. I don’t know if you recall, but we were at dinner one time and there was a waiter that she just blew us away. We were really impressed with her and she ended up becoming one of your… I kept saying, “You need to hire her,” and she became one of your customer success managers, if I recall.

Trisha Price:

Yes.

Matt Garratt:

A full testament to you never know where great talent is going to come from.

Trisha Price:

That’s right.

Matt Garratt:

Let’s move on to the initial product. David, can you talk about the initial product that you took to market? Maybe to provide some framework, I generally think of industry-vertical solutions of having to be sort of full-stack and a bit broader than a horizontal app, and so there’s generally a higher build upfront. Can you talk about the first product and how did you know it was done or at least ready to take to market in the first place?

David Schmaier:

Sure. Yeah, I’m a product person by training and so we had had a lot of experience building SaaS and vertical products. The key for us was we were building not one industry Cloud, but four, and then at Vlocity, we later added two more and expanded to six, so the secret of building one vertical SaaS product is going deep. The secret to building more than one is reusing components so that you don’t have six engines that do the same thing, that you reuse that engine and you get to use what we call metadata to reimagine it for each one of these industries.

David Schmaier:

Luckily, we had had experience doing that, so I couldn’t agree more with what Trisha said: If you do industries, you got to have domain experts, so I had originally four domain experts, now six, leading each one of our industry teams. Then we also hired full-stack developers, so like you said, Trisha, not Salesforce experts, but just great developers and they all learned Salesforce. We immediately standardized on Salesforce and did the full training course, I think this was pre-trailhead, but did whatever the training was back then, can’t even remember what it’s called now.

David Schmaier:

We were amazed how fast we were able to build on top of the platform. So my prior life, I had built the platform and the core apps and the industry apps, but to build the platform can actually be several years of work and cost hundreds of millions of dollars depending on how you do it, and so we got incredible leverage, incredible. It’s hard to overstate this from the Salesforce platform and so we actually created our company in March of 2014 and at Dreamforce, we showed the four vertical apps, which is about six months later, and they were beta releases and then we shipped them soon after Dreamforce, so maybe in seven or eight months, we were able to ship for industry Clouds, and then we were off to the races. But the key again in industry-specific SaaS is understanding the business processes, understanding the critical problems and the issues, and really going deep in each one of these industries.

Matt Garratt:

Now, I want to pick up on that in a second with you, Trisha, but David, I guess when you were building this out and you had such a big vision, can you talk about the fundraising? Did you need to raise more money to build such a big product platform and were there specific VCs that you sought out or that were going to be more attracted to this solution? How did you manage that?

David Schmaier:

Sure. Yeah, I think on the fundraising, maybe our experience was a little unique, which was we knew a lot of people in the industry, so because we wanted to partner with Salesforce, our first call was with Salesforce and John Somorjai and Marc Benioff wanted to immediately invest in our company, which was great. If you’re going to build a company with Salesforce, who better to invest than Salesforce? I think if that’s the question, the answer to that should be yes.

David Schmaier:

Salesforce became our lead investor and then in our second round, there was room for a second investor, and so we went with Sutter Hill Ventures was a VC partner of ours and I had known a bunch of the partners there. It’s a great tier one firm on Sand Hill Road, but I think what they’re looking at when they’re trying to fund you is this wheel of: Is there a great idea? Is there a strong team that’s done it before? What is the product, or what will the product be, or where is the product? Do you have customers? And then, how repeatable is the model? And so, because we had done this before, we were able to very quickly do the fundraising, so we literally had like two meetings with each one of the investors and were able to close on the financing, so I don’t think that’s normal. I wouldn’t expect that to be the typical process, but it was pretty straightforward for us

Matt Garratt:

And Trisha, maybe back to the product and building the platform: How do you compare this building a more vertical industry solution versus a horizontal application and how challenging is that initial build?

Trisha Price:

Yeah, I mean, certainly when you’re in a vertical build, the depth you have to go to for customer success is deep, right? There has to be value that you’re delivering beyond a surface level set of features. It’s got to solve end-to-end problems at a financial institution or whatever your vertical may be. It may be that they’re on spreadsheets or word documents or things of that nature and so maybe your barrier to entry in those type of processes can be a little bit lighter, but if you’re doing a rip-and-replace of a legacy solution, that requires an end-to-end set of features that really solve that end-to-end business problem, and that typically means deep integrations, right?

Trisha Price:

Most of these vertical industries that we’re talking about, you’re not the only shop in town, right? It’s an ecosystem of applications and so having a very strong approach to integrations, whether it’s one like Salesforce took with having your own app exchange type concept and ecosystem or whether you’re building direct productized integrations or a combination of both, that takes quite a bit of time, not just to solve your end-to-end set of workflows and feature sets, but to get those integrations right for customer success.

Trisha Price:

I do think that takes time, but I completely agree with David: Building on top of Salesforce dramatically decreased our time to market. From my background, I’ve been building banking software for my entire 20-plus year career. It’s really the only thing I’ve ever done, pretty much, and so for me, this was the first time I’ve worked for a product company built on top of Salesforce. It was a tremendous difference for me to come in, certainly a learning curve of different ways of doing things that takes some getting used to, but the benefit that we received from it from a company perspective was tremendous.

Trisha Price:

It wasn’t just in the early days to get that product out quicker. Think about the scalability as you go global. I talked about our offices in all these different countries across the world, data centers. I mean, have you thought about data centers in Japan? Have you thought about data centers in Australia? These are not simple things to solve. And then you layer on top of that platform features like multicurrency, multi language, you layer on top of that things like entitlements in security and investment in security and so that certainly did impact our ability to get to market, even with the kind of complexity and depth that our product and our vertical requires.

Matt Garratt:

You hit on something pretty interesting there, Trisha. When you said you’re talking about ripping out incumbent players. Even if it’s a bad solution, as long as people aren’t miserable, they’re not going to rip those out if it’s part of your banking platform. What was the core value proposition or the thing that you focused on most that was the most convincing thing or that really was compelling for banks, particularly the larger banks, to move off of their incumbent solution to you?

Trisha Price:

Yeah, I mean, for us, it has changed over the years and it has changed as we’ve launched new solutions, right? When we first started, we primarily focused in the commercial lending space and since then, we’ve launched retail banking solutions as well, and retail banking solutions tend to be more fully banked than the commercial lending space was when we first started, which was a lot of spreadsheets and Word documents in the early days. Changed a little bit now, but primarily, that’s still true.

Trisha Price:

But from the beginning, we’ve had core value that we’ve been able to deliver to our customers, right, faster. As a customer, what do you care about when you’re applying for a loan? Am I approved? When do I get my money, right? Whether you’re a business or you’re a consumer. And so, how do you help banks do that quicker? How do you help them do that at scalability and how do you as a software company do that for the smallest community and regional institution in the US to the largest, most sophisticated global institutions in the world on one code base, right? Cloud, definite differentiator, right? Because if you look at these financial institutions, they have growth aspirations, right? They get acquired, they acquire other institutions, so having immediate scalability of the Cloud, definite differentiator, and then having a set of features and solutions that drive value of regulatory compliance, supporting their growth strategies, doing it in a cost-efficient way are really our core values in how we think about building software and why I think so many customers have jumped on the nCino product.

Matt Garratt:

Maybe a follow onto that: When you’re building an industry-vertical solution, how do you avoid a lot of the customization work? Is that a challenge from company to company? You have presumably a somewhat smaller TAM and if a large bank is coming knocking and they want something, how do you balance that in making something that’s reusable without too much customization and services?

Trisha Price:

Relentless focus, relentless focus. It is very easy in vertical and these kind of depth of applications, and I know David’s been faced with this, I’m sure, many times, to get off course from the industry product that you’re building and say yes to a customer. But if you have those creative people that I talked about earlier, you can figure out how to solve a customer problem, but do it in an industry way. I think, yes, that requires the customer to be able to apply configurations on top of your base product to meet their needs and it requires some ingenuity in how you code and create a product, but it certainly can be done, and I think coming back to the Salesforce platform, Salesforce has done this phenomenally as a platform, and so you can learn from what they’ve done and take advantage of a lot of their configurations to handle that in a similar way that they have.

Matt Garratt:

Well, we are at the bottom of the hour, so, David, Trisha, thank you so much for taking the time, walking us through your experiences at Vlocity and nCino. It’s been a pleasure working with you, and a pleasure talking here, so thank you both so much.

Trisha Price:

Thank you, Matt.

David Schmaier: 

Matt, thanks so much.

*****


Transcript of Episode 360:

Jason Lemkin:

Good morning everybody. I’m super excited for the next session at SaaStr Enterprise with one of my favorite CEOs in one of, I think, one of the most interesting cloud companies, Coupa, and I’m glad to have Rob back at SaaStr in general. He was kind enough to come a couple of years ago when Coupa was still on fire, maybe had recently IPOed, I don’t know the timing. But I’m super glad to have Rob back now because Coupa, to me, in the crazy world we’re in, is at a very interesting intersection. And there are what we’ve talked about as COVID beneficiaries. Folks that have benefited from these crazy times and Coupa is one of them. Coupa’s growing quickly and its stock price has done fine and it has benefited.

Jason Lemkin:

But at the same time Coupa is the market leader in spend management, and managing procurement, and managing supply chains and those are areas that are deeply impacted by the economy, deeply impacted. It’s hard not to walk downtown through [inaudible 00:01:05] it to see what’s happening in healthcare all over the place, in financial services. And so Coupa is super interesting because it’s benefiting as a software player but yet it has this insight into the economy of software and the economy of the real world that I can’t think of another vendor that has. I’m super excited to talk with Rob and down at the bottom on the Zoom, hit Q&A, we will save time for questions. We had a few already come in but click there and I’ll remind you at the end so we can chat and I can let Rob talk a little bit about Coupa and then we can chat about it but managing almost 2 trillion of spend across basically all segments of our economy. Which we’ll chat about.

Jason Lemkin:

Coming up on 500 million in revenue, whatever the exact number is, no forward looking statements in this presentation but what’s super interesting that I’ll make sure we talk about even here is that Coupa has redefined the category and now has more revenue in this category than ever existed. What does that mean for the cloud? How do you change a category? And again, we’ve been talking about digital transformation for 20 years, probably, Rob, since you and I started in software but so much has changed. I want to dig into a bunch of things on the slide but what are you seeing? What’s changed the most since March 15th? What’s unexpected? What’s expected? What are the number one things that have shocked you, or have been pulled forward years that you weren’t expecting?

Rob Bernshyten:

Well, I think as everyone is saying, Jason, and again thank you for having me on, there has been a greater energy and focus in what was already happening, which is the move to digital. I think in our case it’s even more interesting because when you’re in times of hyper growth folks tend to focus a little bit more on revenue than they do on profitability. And they do on operational efficiency frankly and our value proposition at Coupa has always been to help companies become more operationally efficient. To help them unlock all of their potential so they can pursue all of their missions and visions.

Rob Bernshyten:

Obviously we’re doing that now for hundreds and hundreds of companies around the world. It’s an opportunity to engage in the same dialogue we’ve been having now for well over a decade but the ears are perking up even more because they know that they need to move to a digital method of driving their operational efficiency, understanding how they’re managing their spending as it pertains to everything they need for their business, how they’re thinking about supplier risk, how they’re thinking about their inventory levels, their sourcing activities, and so much more. It’s really, really exciting for us to have a greater emphasis into an area that we know is so important anyhow.

Jason Lemkin:

It’s interesting because it’s different for different vendors. Since March 15th, was there a trigger point where maybe I had a project that I was talking to Coupa, it might be a 2021, 2022, 2023 long term deployment because you have many enterprise customers. Was there a particular drama issue, shelter issue, a wedge issue that got projects pulled forward years?

Rob Bernshyten:

Well, interestingly enough it was actually a bit of the opposite in the first month or so, and I mentioned that on the last earnings call. There was almost a deer in headlights moment amongst all the vast majority I would say of our prospects around the world whereas we don’t know what’s going to happen so we actually need your help. We need to get PPE equipment. We need to get things to sort it out so then I’m back in two, three weeks. You can do that. It was really rewarding for us here at Coupa. We have this robust community of existing customers and they came together on our platform to source personal protective equipment for their organization. We were less oriented to how do we close more business during that first month, to more oriented towards how do we help this community make sure that they are going concern which was very real in some industries for sure.

Jason Lemkin:

Yeah, we’ve all been through four phases since March. I hadn’t fully… I did hear that when you said it before but didn’t think through it. There were vendors where the end of March into April were crazy even Zoom the next day exploded. But even Slack it took a while for folks to figure out we needed to Slack more. Then Slack took off. You had the chief procurement officers, CIOs and others needed to survive for that first month. Then what was… Has there been four waves? What are the next couple of waves that you’ve seen across your partners and customers?

Rob Bernshyten:

Well, the most interesting thing for us is that we’ve taken dozens of customers live since this hit. Because it’s one thing to sell new prospects, and of course we’re focused on that, and we’re doing just fine there but when you think about the existing inflight projects when suddenly these people are operating from home and they’ve never operated in a virtual environment, and to take large global deployments live and have see them start running massive amounts of spend through our system.

Rob Bernshyten:

Ceding them control spend. We have a whole bunch of customers who didn’t have control over their spend. They couldn’t stop the company from spending money in certain places. We’re able to help them do that on their mobile phone through our integrated email capabilities offered via Coupa. That was very, very rewarding and powerful. And then of course we reemerged and we started looking at how we can drive our global reach and expansion, obviously we’re well into that now months after the crisis started.

Jason Lemkin:

For a big Coupa customer, pick one if you want or don’t or an example, but before March 15th what was a typical deployment to be fully into production? Not an agile kind but maybe an old school type. Would it be a year? Would it take a year from really signing and fully going live? If it was or whatever it was, how do you compress that into weeks? How do you manage the team? How do you do the internal change management and the external because we’re not necessarily wired that way until March, were we?

Rob Bernshyten:

That’s right. Well the average is roughly six to nine months for our enterprise customers. Our mid-market customers, four, maybe five, weeks, so it’s not bad. But you know what happened is that we gained a lot of efficiency ourselves in working while our customers remotely, you don’t have the time. “Well we’ll meet you on Thursday we’re going to fly in. Were all going to get into a room.” “Well, it’s Monday let’s just do it right now.”

Rob Bernshyten:

You’d get the systems integrator on the Zoom session, you have the existing customer on the Zoom session, you have my Coupa colleague on the Zoom session. We’re sharing as you’re sharing this slide the configuration set up and literally walking through it. In many ways we stand to gain an advantage in the efficiency with which we can work together as long as we can overcome the change management required for some folks, as you say, to be a little bit more tech savvy and be willing to work in this way. We’re seeing that happening without a doubt.

Jason Lemkin:

Where do you think… It’s hard… There’s so much change it’s hard to even predict but in some ways it’s great that you can now deploy customers over Zoom, right? It’s so much more efficient. You don’t have to get on an airplane. You don’t have to book the hotel and all this but some things are lost and some things are different. Has enterprise buying changed? Do you think it will swing back into the middle? Can we live this dream where we never have to get on jets again? Where do you think we’ll be on the other side of COVID?

Rob Bernshyten:

You know it’s hard to predict that, Jason, of course, and probably it’s somewhere in the middle. I don’t think it’d be an extreme one way, or the other if I had to predict. But what I will tell you that will be consistent is that enterprise software is really about driving change management. Driving the change. One of our core values at Coupa is focused on results. In other words, identify exactly what it is that you’re attempting to achieve after you’re live, a year after you’re live and then focus everything in and around that. Limitations like the inability to travel, or advantages like the ability to get on a virtual session like this are the methods of getting to have that result. As long as we keep people oriented toward that outcome I think we’re in fine shape, and that’s how we think about this approach.

Jason Lemkin:

That’s good. I want to talk about this because you have some great data in this. I worry about supply chains. I try not to worry in the world but there’s a lot going on. You want to remain positive, but I look back at some of the first SaaStr blog posts in 2012. I wrote one in 2012 as I was walking Downtown University in Palo Alto when the last retail store reopened, but it was four years. Downtown Palo Alto, it’s a fairly gentrified community.

Jason Lemkin:

There’s a lot of money in Palo Alto–tech money, but it took four years for the last retail, what’s now West Elm to reopen for four years. I’m worried about this. What are you seeing? And this one is interesting, 43% of companies were worried about the ability to fulfill orders. At the beginning of COVID you still can’t get a webcam. You couldn’t get a monitor. We were worried there were some groceries you couldn’t get at the beginning of this. Tell us what you’ve learned being at the center of this.

Rob Bernshyten:

Well, first of all brick and mortar retail absolutely is in trouble, and frankly brick and mortar retail to some extent has been in trouble well before this pandemic. We were looking at our business spend index, if your viewers go to spendindex.com they can see the data on that. We’ve been looking at retail for three, four quarters and it’s been trending down. When we’ve seen a lot of very interesting data I could share with you around the downward trend. But when you think about global supply chains and this massive globalization dynamic we’ve had in the world for the last six, seven, eight years. We’re getting into, let’s call it globalization 2.0, which begins to balance global with local. As this slide says is there some fragility in our supply chain? Yes. But I would argue that fragility is really in the area of information technology, information access rather than in physical access because the goods and services exist.

Rob Bernshyten:

And as soon as there’s demand, supply gets there. You look at PPE there was a massive demand and within three, four weeks, there was massive supply. The challenge wasn’t there. The challenge was having the information at your fingertips to hot swap suppliers, get access to things you needed at the right time, make commitments contractually to people to know that you will fulfill your obligations. That’s the world in which we play in at Coupa. That was what makes it so interesting. We’ve got customers literally hot swapping suppliers, moving them into certain areas where they never even thought they’d be buying from, creating contingency plans for categories of spend. You need information technology for that and that’s what’s exciting about many of the things we’re doing and seeing in our customer community.

Jason Lemkin:

Well, that’s interesting. I was following after right when we got into this wonderful pandemic, how Coupa was at the center of getting PPE and identifying this but I didn’t fully understand why. Other than it’s a great thing to do but I guess it took a while for me but the supply got there within a relatively short period of time relatively speaking but it needed help, it needed liquidity, it needed connection. And I guess Amazon works again, right? We can still get Amazon products to our home. I guess we don’t need to worry as much that–the market will solve this, no matter what global turmoil there is in the short term as long as technology can connect us, I guess is the learning.

Rob Bernshyten:

Yeah. Absolutely information technology. Access to the right data at the right time to make the right decisions and collaborate amongst the supply chain. It’s very exciting to see some of the largest companies in the world really reorienting themselves to fully modernizing their supply chain, their business spend management approach. It couldn’t be more exciting for us obviously.

Jason Lemkin:

I want to get some of the data next but on this last point in the slide. This is something I think about a lot. Did we know that the cloud would be this strong after March, that there would be this boost? It’s crazy, right? Coupa is on fire but you talk about retail, look at Shopify. Shopify is a $120 billion company today. It’s crazy and the growth factor is insane. It’s the maximum output of this trend that we’ve seen but can’t… If we’re in shelter, if we’re in this world through the end of next year, can we have this divergence? Can we have a cloud on… Can cloud remain on fire when one out of three people are essentially unemployed in the country? How long can we remain divergent? Do you have any insights here?

Rob Bernshyten:

Well, it’s a tough question. It’s interestingly Shopify and Amazon, and these are our customers. Amazon runs in tens of billions they manage through Coupa so we’re close to these customers but the same value proposition that existed before this crisis exists now, it’s just seen as a higher priority. The ability to get greater speed, the ability to have information at your fingertips, the ability to embed, Jason, best practices into your deployments. Just about every CIO I talk to tells me, “Hey we’re going to go with Coupa, but hey promise me you’re going to deploy this in a way that’s going to be quote unquote, vanilla or best practice so that my team doesn’t start doing a whole bunch of end rounds that are going to make us on upgradable and slow us down.”

Rob Bernshyten:

They want agility. They want access to community information, hopefully we’ll talk about. I think there are a lot of dynamics that are really tailwinds for us in pushing cloud faster into the world at large and obviously these are big, big markets we’re all playing in and I’m sure many of your viewers are playing in. The opportunity is now, really, to accelerate our efforts, no doubt.

Jason Lemkin:

It’s usually the CIOs wanting these best practices, right? They don’t want custom made. They have this sort of on-prem scars of some hack. Some bit of corner code written that–or weird workflow. I should have known Amazon was a customer. I didn’t know it, but my mistake. But boy you must learn a lot from Amazon. Amazon must be the like the Walmart of today, where they’re an amazing customer, but they school you a bit. What is like for an Amazon? What do all your other customers benefit from? What are some… That vanillaism? What are some things you’ve learned from really those mega customers like Amazon that–and how does that benefit the others? How have they leveled you up?

Rob Bernshyten:

The beauty of enterprise software, as I think every one of you viewers knows is, is can you have minimal code that supports the massive amount of use cases, as many use cases as possible?

Jason Lemkin:

That’s the dream.

Rob Bernshyten:

That’s the dream. What we learn from our largest customers, Amazon being one and others, is how to support massive complexity in the simplest way possible. And what we learned from some of our smaller customers is how to keep things very intuitive and user centric but at the same time abstract them from some of the complexity that they may never need to use and make everything configurable. We’re constantly learning about scale and stretching our platform from the larger enterprise and we’re consistently staying very, very true to usability and user centricity that we’re picking up from the smaller growing companies. And that’s a beautiful marriage to have on one platform.

Jason Lemkin:

Yeah. Relate to this. This is something I wanted to learn from you in the enterprise is brands. You and I chatted right before we went live, I asked you about competition. I had some fun talking about Ariba which we’re in 2020, Coupa isn’t really an Ariba 2.0 but maybe in the early days there was some truth to that. I had a lot of experience there and you said I don’t spend some… Now that we’re big enough, now that we’re actually larger than this category used to be, I don’t spend as much time thinking about competition. I think one reason is you have this trusted brand. You’ve become… Every deal is hard. You have to prove yourself to Amazon and Shopify but you are this brand. There’s suites and there’s best-of-breed which we thought about. But do folks want even more from trusted brands now in 2020, and even more after March 15th? And what does that mean, versus going more horizontal? And where do we want to invest more in trusted brands?

Rob Bernshyten:

Well, it’s interesting. I’m looking at this slide and saying do enterprises want more from vendors? In some sense I would push back on the term vendors because I don’t consider our company, any one of my colleagues working here, anything that we offer, we’re not a vendor. When I think of vendors I think of a hotdogs at a baseball park-

Jason Lemkin:

I would have hated it myself as the CEO. You’re right. But-

Rob Bernshyten:

Well so, but-

Jason Lemkin:

But CIOs might still use the term.

Rob Bernshyten:

It plays into your question. It’s a term that’s grounded in business they used to be a products business, it smells of commoditization. The reality is what customers really want is they want trusted advisors, they want partners, they want people to bring best in class technology, embedded best practices, and they want folks that are focused on value creation with them and measurable success. That’s what they want more than ever and that’s what they deserve. They’ve always deserved. They just didn’t have the chance to get that on the first run of this thing, and enterprise software in the 90s and maybe a well into the new millennium.

Rob Bernshyten:

When you develop trust, and I believe trust is built on transparency. You have to actually see measurably that we’re delivering value for you. If a third party came in and said, “Okay, there’s a relationship between Coupa and one of their customers and here’s what’s happening.” They will be able to point to measurable value X amount saved, or X user adoption, or X spend categories and a management, or X improvement in operational efficiency, whatever that may be.

Rob Bernshyten:

Once that’s established, of course those customers are inclined to want to tap into subscribing to more what we call value as a service from those partners of theirs, and we consider ourselves to be that type of partner for them. We’ve benefited from that and I hope we’ll continue to benefit from that because we take every one of our customers very seriously. We want to keep them forever. We want to continue to drive more and more value for them.

Jason Lemkin:

Yeah, it’s interesting. I think at Salesforce, depending on how you look at it, CRM is either their fourth or third largest category now. It’s pretty crazy, isn’t it?

Rob Bernshyten:

Sure is, sure is. Well look, understanding every component of your customer, how you market to them, how you sell to them, how you service them, how you interact along on the web it’s super important. But I argue it’s just as important to understand your entire supply base and how you buy from them, how much you spend with them, how you can collaborate with them, whether or not you can mitigate risk when they have risks. We’re really operating on the exact opposite side of the equation. We’re helping people, companies who spend money do it in the most operationally efficient and thoughtful way.

Jason Lemkin:

And related to this and at the bottom point, when I listened to the last earnings call, you said inbound demand is up from your base. Your customers want more and more from you, from a trusted vendor. A related question because it seems like–so you’re coming up on 500 million in revenue, whenever it exactly, I don’t know exactly what ARR, it doesn’t really matter for this, but how far can you see? Can you see… You obviously can see to a billion. You can see it right behind you going across the bridge but can you see 10 X? Can you see to 5 billion now as crazy as that might have sounded a couple of years ago? How far can you see in… What do you see? What do customers want? How should the product and things like… What do you see? What’s the furthest you can see, and what do you see?

Rob Bernshyten:

Well, I appreciate that question, Jason. What I see is a $50 billion plus total adjustable market, and what I typically ask are two very, very simple questions of any prospect I interact with, frankly anyone I interact with whether it’s over Zoom, or before in the physical world. Do you think, number one, your company is doing a great job in managing the spending that it’s involved in for all the things and services that you need, or you think it’s done really, really well? I’ve rarely, rarely gotten an answer that says, “Oh yeah we’re great. We know everything about how we spend money. We have control over it. It’s complex.” Okay.

Rob Bernshyten:

Then I ask the second question, “Do you think you’re employing information technology in a way that’s comprehensive, and fully integrated, and user centric, and deployed quickly that addresses some of the challenges described?” And the answer is always no. Just about every company in the world can really stand to improve the way that they do their business spending and the way they manage their business spending. I see a huge, huge opportunity and I think this is in many ways early innings for this category. We’re proud to do our part in trying to lead a focus into this area and then fulfill that leadership with a real brand promise and real measurable outcomes for every one of our customers. I think that is why we’ve seen more inbound interest and more capabilities, and additional features and functions of modules that we can deliver for our customer base of course.

Jason Lemkin:

A couple things, this is more a tactical point and I want to make sure we get a couple of things on the data you have but this is a bit of a mystery to me. I should know the answer to this, but I don’t. Why are payments so hot now? I understand the innovation of Stripe of two lines of code back in the day, but why–you’re seeing this? Why is this all coming together now, and why couldn’t payments be as hot five years ago? I put hot in quotes. What’s so much more valuable today than it was, or what’s changed in technology because I’m missing a bit of, why now.

Rob Bernshyten:

Well first of all, it’s saying that the value proposition has been there for a long time. It’s been there for a long time. The question is, has the value proposition been fulfilled? I’m not sure [crosstalk 00:22:45]-

Jason Lemkin:

Why now?

Rob Bernshyten:

Well look at what’s happening in the consumer world. The value proposition has been there a long time too, but it’s only now starting to be fulfilled with Square, and Apple Pay, and Google Pay. Now if you look at B2B payments, my gosh. First of all it’s much bigger. There’s a lot more money flowing there but secondarily the technology, the capabilities there are really archaic. Old school technology, a lot of manual–a lot of paper. In the United States, nearly half is paper-based checks. What are we kidding ourselves? These systems are rigid, you have monthly batch jobs running out of incumbent solutions. There’s no ability to collaborate with your supply base around payment rails, around dynamic discounting, around virtual credit card payments and transfers, yet cross border is still super old school and complex.

Jason Lemkin:

Super old school.

Rob Bernshyten:

There’s is so much we can do here. You got third parties enter to do supply chain finance. We’re in the very early innings of a huge market and it requires leadership, and it requires incredible tech. Some of the approaches that been taken in the past year have largely been driven by banks. The approach we’re taking is partnering with banks where we’re bringing what we’re really good at to the equation. A highly scalable, robust, transactional platform. What we know about usability and how important user centricity is to that problem, and we’re starting to really get somewhere. We have, as I mentioned in the last earnings call, nearly 100 customers leveraging components of Coupa Pay and that’s growing. It’s really exciting for us.

Jason Lemkin:

If you look at what’s happened with Shopify, how big payments have gone there. If you look the very low end adjacent to like bill.com that used to have any payments revenue and then it became one of their key drivers of growth. What do you see a few years out here in the enterprise? How core is this? It’s obviously core to Coupa but how big… Is this flip around and become one of the most essential parts of what we’re doing in terms of managing this business commerce? Or are we… In five years will this be massive?

Rob Bernshyten:

It’s hard to make a detailed prediction. The way we like to do our business is do it very organically. Our customers are asking for these capabilities of us. We didn’t wake up and say we’re going to do payments. Our customers said we’re doing procure to okay to pay through your platform. How about we do procure to pay? [crosstalk 00:25:03]

Jason Lemkin:

Got to do the last mile, right?

Rob Bernshyten:

Yeah, let’s do the last mile and pick off a bunch of use cases that we’re struggling with. We see a big opportunity here. We’re going to co-develop with our customer community. We want to take the same approach we’ve taken with every other set of modules we’ve deployed and we’ll see where it goes. But the likelihood of us being able to capture a real meaningful portion of this market, based on what everyone is saying, I think, that’s objectively looking at this appears to be quite high.

Jason Lemkin:

Yep. Now this next slide is something I picked out of your investor report because it’s interesting to me as a founder, how do you… Fiscal discipline is super interesting. You turn around you probably can’t believe all the unicorns you read about on tech crunch each day that are raising 400 million and you don’t even want to know what the bottom line looks like because it doesn’t matter. Coupa is a generation… We’re generations ago in terms of thinking about this, and then you look at weird things like Zoom. You know what Zoom’s burn rate was the year before it’s IPO? You know what it was?

Rob Bernshyten:

I don’t, I don’t remember.

Jason Lemkin:

Zero. It wasn’t minus $1 or like Eric literally said to the marketing team, “You can spend every dollar we have, but it’s the funniest thing, it’s like 414 million in revenue and like 414 million of losses.” And it’s literally a zero. It’s the fun you can get it. You can imagine that conversation. Here’s your allowance. But what is this? What’s 50 is the new 40 and when should software be profitable? It’s supposed to… Shouldn’t it be really profitable? You need X number of engineers and everyone can buy it but what does this all mean? What are you saying about this 50 is the new 40?

Rob Bernshyten:

Well, first off let me say I love how Eric thinks and I think similarly in the sense that there need to be guardrails on your business. The idea of spending at all costs, and by the way we’ve had some pressure as a public company certain quarters where people say, “Well why don’t you just press further in sales and marketing and grow-“

Jason Lemkin:

Press on the gas.

Rob Bernshyten:

And then you’d have the other side as soon as there’s a little bit of backwards says “Hey, why don’t you accelerate the pace to profitability?” Look, we all know in software as a service what really matters is cash flow. Cash flow is what matters. That’s what fuels the business. We have put guardrails on the business now for 45 quarters. We’ve had guardrails on the business. Very, very careful and thoughtful growth not overextending ourselves, but at the same time, careful management of sales and marketing efficiency, and then getting scale into a model on the bottom line.

Rob Bernshyten:

Those are the guardrails we’ve had every quarter for 45 quarters, and just as Eric does it, here’s what it’s going to be for the next quarter. We’ve got 12 weeks, go, and we see what exactly what happens. We distill that, we look at all the metrics by business unit, by geography, by product line, and then we unlock the investment we’re going to have for the next quarter, go and do it over and over again. When you do that for as many quarters that we’ve done you get into this situation where you can have this rule 50 dynamic that my colleague and CFO came up with, I think when he became 50 years old. But we are operating at this level now and it’s exciting.

Jason Lemkin:

There’s a benefit at 50? Is 50 too much? Obviously you’re a proponent of it because you put it out, but where we’re at… How do you set that guardrail? What is too efficient versus too inefficient when you’re able to be efficient? I can think about it [crosstalk 00:28:26].

Rob Bernshyten:

I think you have to combine backwards looking metrics. When you complete a quarter, you look at all your backwards looking metrics and then you combine them with all your leading indicators as an executive which is what does the pipeline look like? What does our talent look like? Where are we in terms of stage of pipeline? Where would we want to make investments geographically? When are we launching the next product release, and then use your gut to fine tune exactly how you’re going to run out at the following quarter. You have the guardrails but you also don’t hamstrung yourself as an executive. Otherwise you could automate the job of the CEO in that area and that’s probably not the best way to do it.

Jason Lemkin:

Good. Let me skip… Oh, oops we had this slide. Maybe we lost one on the different segments. I want to talk about some of these points, but we might’ve taken some of this out, but tell me what you’re seeing across different industries because you do have some data on this. One of the most interesting things from some Coupa data I’ve seen is I read The Wall Street Journal, I read the New York Times. It seems like many banks are doing very well in this crazy environment. But like Coupa shows financial services under a lot of pressure, healthcare. It’s hard to get a handle on what’s happening in healthcare. Some hospitals are all at the edge of bankruptcy. On the other hand, other segments of healthcare are on fire. They’re literally on fire. Walk me through some of the data you see of different segments and maybe some things that are counterintuitive that you’re seeing in different parts of the economy.

Rob Bernshyten:

Well, I think one of the biggest things that I think most people now understand is that given the amount of liquidity in the market it’s very hard to gauge the extent to which financial services firms are doing well and healthcare et cetera. You have to have that context in mind. It’s very difficult to answer that question in two sound bites, I really do urge your audience to go to spendindex.com. Here’s what we’ve done there Jason-

Jason Lemkin:

We have a slide on it here. I think I just lost it but yes it was a great one.

Rob Bernshyten:

Let me tell you what we’ve done there because we have created an index that is a real leading indicator. Let me tell you why. We’re looking at things like what are the approval cycle times in the current quarter. In other words it didn’t take longer for people to prove something before they even bought it, before they even ordered it, before anything happened. We have a leading indicator in terms of how long, by industry, folks are thinking through purchases. That’s never been seen before, in an aggregate level with nearly $2 trillion worth of data. We’re looking at rejection levels. What percent of things are getting rejected? You never see that in the GDP. Now if there’s an increase in rejection levels, of course there’s a likelihood that that industry has concerns.

Rob Bernshyten:

We’re looking at average spend per employee and companies and we’ve put that into an index to give leading indicators that we launched this every quarter and when we backwards tested this to 2016 against the GDP, we saw a very real and meaningful correlation. We think this could be a real enabler for people to get a sense for things. But if you look at the last one, what we shared at the last earnings call of course significant retail slow down, slow down across the board frankly but what’s more so on pronouncing retail. When you look at a financial services slow down there as well whether that’s seen or not in stock prices. I’d urge people to go to spendindex.com. We’re sharing this openly. We want to be a good corporate citizen. We’re not gaining anything from sharing this other than maybe a little bit more awareness about Coupa. I’d urge your folks to check it out.

Jason Lemkin:

Yeah. Everyone go to that because it’s pretty awesome, spendindex.com and I’m on it on my iPad. I had a screenshot in here but I think maybe we took it out because it was backwards looking but let me ask you one or two questions because it is great. Everyone should check this out. It is great to see this data and granted there’s a little bit of a lot. It’s not up to the minute, right? It takes you… You’ve got to get that data so it’s through Q1. But one that that surprise to me is high tech was down. How you define high tech, right? That was down in Q1. When the cloud’s on fire but in spend index high tech’s down, what are we seeing there? What should I see something? Is there a story behind the story there?

Rob Bernshyten:

Well, you see what you see which is [crosstalk 00:32:27] Q1 when you look at the index purchases for hardware and software in the first quarter of the year, when you look at time to approve, when you look at number of rejections, we look at average spend per employee was down and that’s a reality of what happened there. Now whether or not that’s measured it in the stock prices of many of these companies, probably not. But again you could argue that the current liquidity environment and the longer term opportunity in the digitization area is very, very real. Look investors are looking for places where they going to get yield. They’re not going to get it U.S treasuries. They’ll look at placing a yield. They’re looking for longer term bets and there’s no question. Many things… My colleagues and I like Eric and others are doing have the opportunity to really stand the test of time and develop into very, very meaningful longterm businesses. That’s what we’re doing here.

Jason Lemkin:

I want to chat about your book next but on the spend index, the Q1 just remind me. Q1 is calendar Q1, right?

Rob Bernshyten:

That’s right.

Jason Lemkin:

So Q1 is through March. This retail one plummets dramatic even through Q1. That trend you can see it in Q4. Retail was already off deeply in Q4 then Q1 is down. Boy it’s just epic. It’s almost a step function. It’s almost a step function here, right?

Rob Bernshyten:

Absolutely step function. And look, if we have to make predictions I think they’re pretty obvious We’re going to see real backward seasoned retail, we’re going to see a lot of consolidation, we’re going to see brands get rolled up. It’s going to happen. It’s already beginning to happen because look, folks aren’t going to the mall and not buying in those stores. The retailers that are quick enough and nimble enough to get to consumers directly to figure out different innovative ways to manage their supply chain will stand the test of time but it’s a real struggle in retail. No question about it.

Jason Lemkin:

Yeah. I would literally encourage everyone listening now, or the thousands that will watch this later go to spendindex.com. It’s fascinating. Coupa has a massive… It has almost 2 trillion of spend thrown through the platform. If nothing else, this is a fascinating data point that you can segment across financial services, healthcare, high tech, manufacturing, retail, and it’s a slice but you may see right now a story that is worrisome of our economy. There is some optimism in this.

Jason Lemkin:

Actually health and life sciences out-performs more than I would expect from the press because our hospital’s not taking ordinary patients and our dentists at a lay level. I felt like that’s under more pressure than the spend index suggests. But outside of that, it’s a worrisome. It’s a bunch of more worrisome trends and maybe we’re all ballooned by the massive liquidity injections, the trillions of dollars in the economy, the planes fly nowhere and the extra unemployment checks but the real signals underneath our economy are very worrisome on these charts.

Rob Bernshyten:

Yes perhaps. I’m looking forward to the next quarters release. We’re actually going to start slicing by category of spend. What are the categories folks are spending on? Were they increasing, decreasing as part of the blocking enterprises? We’ll have more robust data. Greater fidelity of data as we go, and hopefully it’ll help folks understand what’s going on in the world frankly.

Jason Lemkin:

Yeah. All right. I’m going to post this on SaaStr after the next one’s out because it’s super fascinating. Okay so book. You got a book. Is it out? I should know I’m going to buy 100 copies, 50 copies are… Tell us about the book.

Rob Bernshyten:

Well, this is really a book that is the next step from values of service. A book that I did about three years ago. And this is really about breaking the silos of traditional enterprise software which was always deployed one customer time with one set of data and never being able to see anything across. Never able to take anonymized, sanitized, aggregated data. We’re beginning to take that data, distill insights from it, and push that back into individual customer environments so that we could be smarter together as a customer community.

Rob Bernshyten:

I look at this book as really… I don’t have a PhD, Jason, I ended at my MBA. This is kind of my hypothesis, or thesis, or dissertation if you’d like, and it’s really a position paper on where we see enterprise software going, which is the breakdown of those silos so that we could be smarter together as enterprises and customers for the use of information technology. We’re on the very bleeding edge of that with what we’re doing here at Coupa and every day we discover more and more interesting use cases that we can employ for our customers to take advantage of, and I’m happy to share anything you’d like about that.

Jason Lemkin:

It’s interesting in these communities. SaaStr is a community. I never knew much about community before this. I’m still learning. There’s a lot of talk about communities and how that customer, vendors, technology solution. People will be communities, communities are out there. What do you mean by communities? What are you seeing? What have you learned at Coupa in general? What does this mean?

Rob Bernshyten:

There’s so much but I would give you the metaphor that I love which is waves. I was very proud that Noma endorsed this book after having thought through our concept committee intelligence here-

Jason Lemkin:

Yeah, that’s a space you didn’t imagine community would exist on maps but it sure does.

Rob Bernshyten:

Exactly. And with waves we’re truly smarter together as we traveled from destination, from A to B because we’re leveraging immediate access to data and that data requires almost no friction, in some cases zero friction to collect, aggregate and distill insights that could be pushed back to the individual driver they could find their way through. The exact same concept applies to everything happening in business processes. Best practices for how many people you should have in your workflow Jason. There’s companies out there 60 people in their workflow to approve something that’s $200. If they knew how far outlier they are in real time they could fine tune that.

Rob Bernshyten:

They’re overpaying for categories of spend all over the place. They’re exposing themselves to risky suppliers and not leveraging community insights to figure out which suppliers they should be considering working with. The list goes on and on of all of these use cases where we can truly be smarter together, and proudly as a platform we’re enabling that for our customers. With every release of our product we’re turning on more and more of these community intelligence capabilities that allow them to be smarter together.

Jason Lemkin:

The book in large part, is it share a lot of learnings about how to build this community among your customer and partner base?

Rob Bernshyten:

Well, first of all it frames what it actually means to have a community intelligence environment. What are the components of that? It explains why the time is now to strike. Particularly if you have early stage companies that are watching us, right now is the time to really build up a platform that can have the stand the test of time in leveraging cross company committee insights, and then it shows a whole host of use cases and case studies of what we’ve experienced so far, and asks the reader as I did with values of service to comment on what they’re seeing, pushback on some of the hypotheses in the book so that we can learn together as a community of readers, frankly, of the book as well.

Jason Lemkin:

Okay. That’s great. Well let’s… Everyone let’s… I’m going to do a deep dive. I think community for business software is super powerful. It’s so important and it’s something we’re learning today. Just like payments, maybe. Everything in enterprise sometimes it’s four to five years later than consumer. Maybe payments is there, and maybe community is there too. Waze to hit this five years ago but we need to learn this as leaders. Let’s all read this and, Rob, if you want, maybe whenever you want we could do a deep dive on community on the podcast to 130,000 people because I think this is a great topic on its own.

Jason Lemkin:

How to building this community thing because… Otherwise this is a great book. Let’s all read it and I will share some learnings on it on SaaStr in a bit. There’s more I want to talk about, let’s make sure we have a few minutes of questions before we end. Actually hold on. How are we doing that? Let me make sure I grab… Apologies for one second. There was one very specific I wanted to hit and then we’ll go into the Zoom. These are specific to procurement but I think these are good ones to hit for Rob. What are the three pain points for chief procurement officers, excluding generating savings and reducing supply chain. What are the top pain points in 2020 for CPOs?

Rob Bernshyten:

One of the biggest pain points is ensuring that the CFO, the CEO, and the CIO become their truly connected colleagues in solving many of the challenges that they’ve been thinking about for a number of decades. If you go to a CPO conference of any kind, the conversation is typically, how do we get a seat at the table? How is it that the whole organization doesn’t understand all the value that we can offer? Now is the time to strike to showcase that value, and that value is in every possible way of course from savings, which is very obvious, but it extends to supplier risk mitigation, which is obvious, and all the way through managing the entire integrated way with which a business manages its spend through information technology. Now’s the time to strike.

Rob Bernshyten:

Look if we have a phenomenal CPO and we use our own platform but if my CPO ping me on Zoom, email or walked into my office and said, “Look, hey I need a budget of X because I’m going to make sure that we’re going to mitigate our supplier risk. I’m going to save us this much money. I’m going to give us a platform that’s going to help us be modern and scale into the future.” Why in the world would I not support them if they were a trusted advisor? That’s the opportunity.

Jason Lemkin:

Yup. The next one it’s a bit of a lay up, or even a commercial but I always love to hear what a CEO has to say which is, which new Coupa product or feature are you most excited about?

Rob Bernshyten:

Well, the most exciting one for me is community intelligence, which is a set of capabilities that we discuss in the book, but in the entire fabric of the product set. They appear for example in expense management, which we don’t talk about as often but we have hundreds of customers using Coupa’s expense management. We are mitigating fraud in spend management. We’re using the data set of our aggregated customer base and serving up individuals that are highest likely to be doing fraudulent activities so you can investigate rather than rigid policies, or a free for all. We found a way to use technology to be prescriptive, which is the P in Coupa. Prescriptive to individual controllers and people responsible for spending in a company leveraging community intelligence. And that’s just one example of many capabilities leveraging community intelligence within Coupa.

Jason Lemkin:

This one from Nikko. You probably don’t know the answer although it’d be wonderful if you did. I know Coupa works with many hospitality companies and how many quarters do you think bars and restaurants, hotels, airports will rebound? If you knew that you could probably be on CNBC any night, everywhere any night anyway but do you have any insights, or do you have a model? Do have an operating model, when will these hyper impacted hospitality businesses recover?

Rob Bernshyten:

Well, I love the second part of the question because of course I’m not a fortune teller. In fact, the big unknown is when some of these things will happen but we have a very clear scenario based model for V, U, and L, and then we execute accordingly based on where things work out.

Jason Lemkin:

So V, E. V I get. Are we past V, or is there still a chance for V?

Rob Bernshyten:

Well, it depends on how far you step back and looking at your V-

Jason Lemkin:

How wide it is.

Rob Bernshyten:

But I think in many ways you’re right. We are pretty much past it. I think that’s a fair assessment of the market.

Jason Lemkin:

This one will take you back but let’s at least do one and have some fun because we did chat about this before we started. What were the biggest challenges early on when Coupa was a startup procurement folks hadn’t quite heard of. You didn’t have the brand and were replacing their competing with solutions like Ariba.

Rob Bernshyten:

Well I can give you a very long list of challenges but I think the biggest is to get folks to give us a chance. If you look at some articles that came out in 2009 when I was raising money, and our first raise that I was involved in it was 15 million and a half post. There was I think $7 million raise, 15 and a half post. It was getting folks to try. We did things like we said, “Look, give us a year annual subscription. If we don’t deliver this quantifiable value to you within 12 months, you could cancel and we’ll give you your money back.”

Rob Bernshyten:

That was a big, big risk to take in 2009 and 2010. But we delivered for these customers and they became fans, and they became highly referenceable and they gave us a chance to go to the next customer, next customer and grow our ACV, and grow our renewal rate. It was very, very hard to really early days of course but that built a foundation and the right culture I think in this company because we don’t take anything for granted.

Jason Lemkin:

Did any material number of customers really ask for their money back?

Rob Bernshyten:

No, not even inmaterial. None asked for their money back.

Jason Lemkin:

I personally love the money back guarantee hack. It’s always one that asks for their money back, and it doesn’t matter because if you don’t keep the customer for life, it doesn’t matter if you give one year of revenue back, even though it’s stressful, it doesn’t matter.

Rob Bernshyten:

Well, you know, Jason, the beauty of it is, even if let’s say they were to ask at the end of the year if you’re objectively looking at data that said on a mid-market customer you paid a $100,000 a year. Well we’ve saved you $700,000 this year. Isn’t a little egregious for you to ask for your money back and isn’t it obvious we delivered value for you? Are we not a valued service partner for you? So frankly, we didn’t have that but that doesn’t mean it wasn’t easy to get those deployments, to configure the product, to build new features, to do what it took to get it done, no question. It’s very hard.

Jason Lemkin:

Let me ask you one related early question, and then we can wrap up with a few more current questions. But one of the reasons in the early days that I got very… From afar, I was interested in Coupa as back at Adobe Sign, EchoSign I would meet with a lot of folks and mostly on the contract side we would deal with sales side of course in the early days, but there’d be a lot of buy-side conversations, a lot of them. And we would go in and we built an Ariba connector early. It was very hard to do because it wasn’t an open platform but, and I mean this is no disrespect to anyone at SVB, but I never heard so many complaints.

Jason Lemkin:

People would complain about Ariba and people complain, obviously you’re biased, but it lit up the hair on the back of my neck because I hadn’t heard this. When you’re selling those early days and you don’t have the brand, can you… Looking back on it without bias, how do you leverage those complaints? How do you turn those into an asset? Do you bash the competitor? Do you not? Does that create a bigger wedge then if they’re happy, and maybe you didn’t see it but I heard this again and again at so many global 2000 companies Ariba would be their least favorite vendor.

Rob Bernshyten:

Well, to be frank, we did some bashing early on. We didn’t know whether it was right or wrong but that bashing wasn’t grounded in logic. It was grounded in facts. When you’re talking to a customer that’s getting 4% of their spend running through an incumbent system, the bar is not that high to get them to eight, nine, 10, 50.

Jason Lemkin:

It’s not that high.

Rob Bernshyten:

It’s not that high but it’s a matter of bringing that to the forefront. Bringing facts to the forefront that everybody could look at so they can make the right choices. Those were early day things you have to do but obviously now thankfully we’re well beyond that.

Jason Lemkin:

All right. Maybe the last one, or the penultimate one. Maybe this will be the last one. In this… But this is probably more from a founder perspective if you thinking about. In these uncertain times some deals go more quickly but some go most slowly. Any tips you’ve learned to accelerate closing of deals in these shelter area?

Rob Bernshyten:

Yeah I think it’s in the shelter area but I think it’s more broadly. What I notice now we work with so many different… I’ve had the chance to work with so many hundreds of sales professionals in my career, certainly hundreds of Coupa as well over this time. What you find is folks tend to pivot a little bit more towards being a bit aggressive. In other words, look where great, where the best, nine out of 10 people use us. I don’t love that. Then you have the other extreme which is they’re a little bit overly passive. In other words they chase balls. Yeah, let me give you 50 references. 50 references. Let me show you a customer exactly like you. What else can I do for you? Our mindset at Coupa is we don’t want to be too aggressive, and you don’t want to be too passive. You want to be assertive.

Rob Bernshyten:

Focus on the facts, become a trusted advisor, get vision lock on what is you’re attempting to achieve in working with us, and if we agree to that vision lock, perhaps I’m the right player to help you achieve it. If I’m not, you can go find the other player to help you achieve it. We try to be very, very assertive in our dealings and always, Jason, always grounded in integrity. That’s very, very important to me. I never wanted an environment where the sales person would sell something and then they’d be afraid to interact with that prospect. That’s horrible. We want a lifetime relationship with this customer. They should be proud of what they’ve done and they should know they have now thousands of people behind them, they’re going to deliver for that customer. This is value of service. It’s a different way of thinking about the traditional product space business into the business that is today. I mean, SaaStr right? This is what it’s about.

Jason Lemkin:

Yeah. No turn and burn deals.

Rob Bernshyten:

No.

Jason Lemkin:

They’re the worst. Rob this was incredible, thanks for giving us the full 50 minutes. I love spendindex.com go to it. We’ll talk about more about it on SaaStr spending next [inaudible 00:50:01] you will. There’ll be another quarter of data coming out shortly I assume.

Rob Bernshyten:

That true, it will.

Jason Lemkin:

But you will see things that are fascinating that are data-driven, which I love. Check that out and also Smarter Together. This community in B2B, I think, is super powerful for the next five years. So hopefully we can continue the conversation there but grab your copy. Rob again, this was wonderful. Thanks for taking the time out.

Rob Bernshyten:

Don’t mention it, cheers.

 

The post SaaStr Podcasts for the Week with Matt Garratt, Trisha Price, David Schmaier, Rob Bernshteyn, and Jason Lemkin appeared first on SaaStr.

The rules of VC are being broken


This post is curated by Keith Teare. It was written by Alex Wilhelm. The original is [linked here]

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

As ever, I was joined by TechCrunch managing editor Danny Crichton and our early-stage venture capital reporter Natasha Mascarenhas. We had Chris on the dials and a pile of news to get through, so we were pretty hyped heading into the show.

But before we could truly get started we had to discuss Cincinnati, and TikTok. Pleasantries and extortion out of the way, we got busy:

It was another fun week! As always we appreciate you sticking with and supporting the show!

Equity drops every Monday at 7:00 a.m. PT and Friday at 6:00 a.m. PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.