0:00:05 Hi and welcome to the A16Z podcast. Today’s episode is a special conversation with Lorraine
0:00:10 Powell Jobs, founder and president of the Emerson Collective, a firm she founded in 2004 to drive
0:00:15 social impact through investments across a broad range of areas such as education, immigration,
0:00:21 and the environment. Lorraine Powell Jobs is interviewed by A16Z co-founder Ben Horowitz,
0:00:25 and their discussion covers everything from Lorraine’s childhood in mountainous rural New
0:00:31 Jersey and how it shaped her to what the Emerson Collective is driven by and does and why it’s a
0:00:38 collective for that matter. For more about Lorraine Powell Jobs’ work, see www.emersoncollective.com.
0:00:43 This conversation originally took place at our most recent summit event in November 2018.
0:00:48 Welcome, everybody. I’m Ben. This is Lorraine. Coming in, I was just talking to Lorraine.
0:00:54 I was saying it’s really hard to introduce her because she’s not like our other co-investors
0:01:01 like at all in a good way, but she’s got a much more complex thing that she does and background.
0:01:05 So I could read the read. I could say, well, she’s a media mogul. She’s a tech investor.
0:01:11 She’s an education reformer and so forth. But you won’t even know really who she is if I just did
0:01:16 it like that. And none of them would be really honest. I don’t think anybody would call me a
0:01:22 media mogul except you. Or what you are a media mogul, technically. I’m so excited to be here,
0:01:28 to be having this conversation because there is nobody else like this. And so you’re in for a treat.
0:01:32 Why don’t we start at the beginning back in West Milford, New Jersey, where you grew up.
0:01:37 You didn’t have the whole Silver Spoon. No, we were solidly middle-class family.
0:01:46 Yeah. And what was that town like? West Milford, New Jersey is about 20 miles west of the George
0:01:52 Washington Bridge and then another 10 miles north. If people don’t know New Jersey, there is a
0:01:59 mountainous part of New Jersey. And in fact, one can go skiing and one can ice skate. And so we
0:02:04 did all of those things. We were just in the beginning of the mountainous parts. And so now
0:02:12 as an adult looking back, it’s lovely. It’s wooded. It’s wild. I grew up with three brothers who were
0:02:19 very wild. So we had sort of this connection to nature in the natural world that we would all
0:02:25 hope for our children. However, growing up there was also gritty. And it had a lot of
0:02:32 Jersey in it. Yeah, Jersey. Like, what is Jersey? It really did. It was kind of hard to scrap all.
0:02:41 People had big hearts, but also big edges. And so you learn really quickly, as a child,
0:02:48 where the boundaries are and which boundaries one shouldn’t cross. We were all of us
0:02:56 put to work really early, which was great. So we developed an extraordinary work ethic.
0:03:02 As kids, you know, they were in the end, my mom remarried, and then we had a mix of blended
0:03:08 family. My dad died when I was three in a playing crash. And so we ended up with six kids,
0:03:13 like the Brady Bunch, three girls and three boys. But in order to have controlled chaos,
0:03:21 we all had chores. And we had very set times for eating and sleeping. And I shared a room my whole
0:03:27 life. And I shared a bathroom. There were six of us that shared one bathroom. And if you can imagine
0:03:34 what it was like getting to school on time, it was a mess. That was sort of my childhood. I was
0:03:40 always trying to eke out a little bit of privacy. And so now I can empathize with those in social
0:03:48 media who would like to regain their privacy. Get out of my bathroom, Facebook. It’s a joke.
0:03:55 It’s a joke, people. Anyway, I think a lot of what shaped me from that experience in West
0:03:59 Melbourne, New Jersey, and then, you know, our big trip each year was going down the shore. We’d
0:04:07 rent a little house and drive down there and get terribly sunburned. We were probably five blocks
0:04:12 back from the ocean, but it was our favorite time. And then we’d drive back up in our station wagon
0:04:19 back up to Northern New Jersey. That sort of circumscribed our life. Chores. And then one
0:04:28 vacation and get sunburned. But we were steeped in core values of real dedication and a sense that
0:04:35 there was always a way out. And that was through education. And that was communicated early on to
0:04:45 me. And luckily, I loved books and I love school. And I think I sought out teachers and tried to
0:04:51 ingratiate myself and just, you know, find a little place where I could excel and where I could feel
0:04:57 that there was a reward for the work that also gave me joy, which was, you know, doing school.
0:05:02 Right. It wasn’t just a chore. It was work with the benefit. That’s right. That’s a great inspiration.
0:05:06 And you went to University of Penn which is like a super prestigious school.
0:05:12 I did. I did. Yeah. I was the first person in my high school to go to an Ivy League school.
0:05:18 West Milford Township is massive and stretched all the way up to New York State. Probably 20%
0:05:24 of our graduating class went on to any further schooling. Certainly not all four years. A lot
0:05:28 of them went on to trade school. Yeah. I was reading something that you said that I thought was
0:05:34 very interesting. So when you were a kid, I guess you donated like $20 to the Southern Poverty
0:05:43 Leadership Law Center. Yeah. And they would send you letters. And the thing that you were very focused
0:05:49 on was who got the opportunity and who didn’t. Yes. Because I was focused on it because they
0:05:57 were focused on it. Yeah. SPLC had a huge impact in my young life because I read about them in,
0:06:02 I think, the reader’s digest. I think that’s where I read about them. There was a profile on
0:06:09 Morris D’s. So I saved up some newspaper money and I sent them for me, which was a lot of money
0:06:15 at the time, $20. I think I was either in late middle school or high school. Yeah. I don’t know
0:06:20 if you remember. I don’t know if you remember when you’re a kid getting mail with such an exciting
0:06:26 thing. That’s the only place that ever sent me any mail, that in one of my grandmas. So they would
0:06:33 send me mail reliably, probably every quarter. Of course, it was a beautiful form letter, but it
0:06:40 always told a story of justice meeting injustice and opened my eyes to things that were going on
0:06:48 in the world in the early 70s that I otherwise wasn’t privy to. So I really hung on there everywhere.
0:06:54 I remember saving all the letters from Morris D’s in actually one of my most wonderful moments,
0:06:59 and it only just happened a couple of years ago at Emerson Collective. We do all of our
0:07:08 philanthropic giving anonymously, but we had been funding SPLC and we decided that we wanted to do
0:07:13 some teaching tolerance curriculum in partnership with them. And so one of our team members was
0:07:19 actually talking to Morris D’s who still works there. And so I said to her, “Can I get on the phone
0:07:25 with Morris D’s?” I got to tell him that he was the one. He planted that seed in me that individual
0:07:34 people could pay attention and engage and maybe do something about injustices that seem intractable
0:07:41 or far away or impenetrable. Oh, that’s a great story. And coming from your Big Bruce Springsteen
0:07:46 fan, and it’s really interesting that in his work, even though he’s Bruce Springsteen,
0:07:51 it’s still all about New Jersey. And do you feel that way about your work, where that
0:07:58 a lot of the inspiration is still from that time? A lot of inspiration. Yes, although I don’t find
0:08:06 that the work is necessary all about New Jersey, but a lot of how I see the world and how I think
0:08:14 about basic fairness comes from New Jersey. I think people actually want to know what’s going on.
0:08:20 And they have clearly held opinions. This is what I recall and work hard, but also are open
0:08:28 to hearing from other people because New Jersey was certainly a melting pot in the first wave
0:08:33 of immigrants from Europe. And so they had to accommodate. It’s not a glamorous place to be
0:08:40 from. And so people were distracted by glamour or coolness in any way. Lyrics of Bruce Springsteen
0:08:47 still echo through my head. It’s one of the soundtracks of my life, I think. So he pops up
0:08:53 when I do not expect him to pop up when I’m observing a situation. But to your point,
0:09:01 a lot of the work that I do references something that I learned a little over 20 years ago from
0:09:07 College Track. And I think it’s true to say that all of the work that we do at Emerson Collective
0:09:14 now is informed and certainly influenced and shaped by what was learned at College Track.
0:09:19 And so maybe College Track is my New Jersey. Yeah, interesting. And so tell us about
0:09:24 College Track and how what you learned, what you tried to do, and then what you learned,
0:09:30 and then how you moved it to be the entire Emerson Collective. Sure. It’s sort of a beautifully
0:09:35 long and winding story because it all took place probably starting about 22 years ago.
0:09:42 After graduate school, I was running a natural foods company. And per chance, I met the California
0:09:48 Teacher of the Year. She was teaching at a local high school. And I had not ever visited a high
0:09:53 school in California because I had moved just for graduate school. She asked me if I could come and
0:09:59 talk to her students, that all of her students in this one class were from East Palo Alto. And this
0:10:03 was at Carlemont High School, which is where all of the East Palo Alto students stood out. And that’s
0:10:07 when East Palo Alto was super dangerous, right? That’s right around the time of the murder capital.
0:10:13 Yeah, right around that time. I jumped at the opportunity because when I was at Stanford,
0:10:20 I found it really odd to have the juxtaposition of Palo Alto and East Palo Alto because I had moved
0:10:26 to Palo Alto from New York City, where all the demographics are right on top of each other. And
0:10:31 so you can have one block of rich and one block of poor, and people really mix. And it felt really
0:10:37 awful and awkward to have one-on-one dividing this socioeconomic group from this socioeconomic
0:10:41 group. So I said to her, “Yes, I’d love to. I’d love to come and talk to them.” She told me they
0:10:46 were seniors. It was September of their senior year, and they were all going to college. So I
0:10:50 said, “Well, what do you want me to say?” And she said, “Just tell them about what college is like,
0:10:54 and what it’s like to go to graduate school, and what it’s like to start your company.” So I said,
0:11:01 “Easy, okay.” So I went and I started talking to them about college and just wondering if they were
0:11:07 excited and where they had visited and who they knew. And I could tell I was starting to get some
0:11:12 blank dates, and I thought, “I’m losing my audience.” So I said, “Okay, guys, help me out here. How many
0:11:17 of you have visited a college? Maybe a few. How many of you know somebody that’s in college? Maybe
0:11:21 one or two. There were 35 students in this class.” And I said, “Okay, how many of you have already
0:11:26 taken your SATs?” And it was no one. And I said, “Okay, how many of you are going to take your SATs?
0:11:32 It’s already September, so you must be studying.” No one. And then I said, “Do you guys know that you
0:11:36 have to take your SATs and you have to do these standardized tests in order to go to college?”
0:11:41 And they said, “Well, we heard about it.” And the teacher said, “You know, we were going to talk
0:11:48 about this.” I thought, “Well, this is a bizarre lack of information to give to college-bound
0:11:54 seniors.” So I said, “Guys, how many of you have visited with the college counselor to talk this
0:12:03 through?” No one. As a result of Prop 13, California started cutting all nonessential portions of their
0:12:10 education system, which included arts and drama and PE and college counselors in addition to science
0:12:16 labs and higher mathematics. And it is amazing on that Proposition 13 was like in the late 70s.
0:12:25 Yeah. Exactly. And we were living with that legacy today. So I told the students I would come back
0:12:32 every Friday afternoon, and I would be their college counselor. And so I did that for the next
0:12:39 eight weeks. And what I discovered was of all the students, the 35 students, only two students
0:12:45 had actually taken the courses that they needed to take in order to apply to a four-year college.
0:12:54 So 33 students had missed a year of English or math passed Algebra I, or no one had taken a
0:13:02 lab site. No one ever told them what classes they needed to take. They were all graduating,
0:13:07 so they all had sufficient credits, but they didn’t have the credits that lined up
0:13:12 to apply to a four-year college. So for them, we got them to apply to a two-year college,
0:13:17 but it was such colossal waste, and it was just such an awareness that I had immediately that
0:13:24 this is actually a solvable problem. This is lack of access to the kind of information and guidance
0:13:30 that can be provided for all of these students. So I met with subsequently juniors and sophomores
0:13:35 and freshmen, and then I talked to parents at back to school night, and I just did this
0:13:40 as a volunteer because I thought this is something I can do. I can address this problem. I know this
0:13:46 stuff. But then there were layers of issues that I started to become aware of with a friend of mine,
0:13:53 Carlos Watson. We started visiting in the community. Yeah, exactly. He now runs Aussie. Just in the
0:14:00 communities, the families and understanding what happens actually when you’re first in your family.
0:14:04 What happens when you’re first in your family to graduate high school? What does that mean for
0:14:08 the information that you get from your family? What happens when you’re first to want to go to
0:14:13 college to apply and to thrive and to complete college? What happens when you’re first in your
0:14:17 family if you’re a college grad? Sometimes they resent you when you’re first. Many things. But
0:14:23 also to have that aspiration. You’re a leader in your family and you’re a problem solver in your
0:14:28 family. That’s a wonderful thing, but it also means you get sucked back into all problems because
0:14:34 you’re a good problem solver. And sometimes if you’re a child of immigrants and you’re the translator
0:14:40 for the family, the family relies on you for that. So there are all sorts of really interesting
0:14:43 issues that were just in this one community. And that’s when I decided to start
0:14:51 College Track to do a more holistic support for students and families so that we could
0:14:58 seriously prepare students for college and make sure that they persisted and completed college
0:15:04 and work with their families to solve problems within the family so that the individual didn’t
0:15:09 have to be the problem solver. And so that’s how we started College Track and we started it with
0:15:18 25 high school freshmen at Kalman High School and I would go to the lunch times and I’d find the
0:15:22 ring leaders because I had a sense that everyone has to come with a friend because that would be
0:15:27 a reinforcing mechanism. And some people came with whole groups of friends and that was even better
0:15:33 because they would hold each other accountable. So we built out a cohort and so they were responsible
0:15:38 for and to each other as well as to the adult. So we started in East Palo Alto this year.
0:15:45 We have grown. We have 3,000 high school students. We have 1,000 college students and we have 550
0:15:52 college grads. Wow, that’s amazing. I’m listening to you and it’s so different than normally in
0:15:57 Silicon Valley. People go to a fancy dinner. Somebody gives a presentation. They put some
0:16:03 money on it. Here you are. You go and you go. I want to go teach this class and then from there
0:16:08 build it all the way out into College Track. It seems like your philosophy. I think that’s
0:16:14 probably how entrepreneurs work, right? You see a problem and you actually think this is something
0:16:19 that I can bring some energy and some problem solving and some smarts and maybe a little bit
0:16:26 of innovation to this problem, to this issue. Really, really amazing. So then take us from that to
0:16:33 Emerson Collective, which is like the world like now you’ve really expanded your horizons.
0:16:39 And we’ll maybe start with the name because the name is so unusual. Emerson, which I know from
0:16:43 reading about it is Ralph Waldo Emerson and then tell me about that and then also about
0:16:48 Collective because like there’s no other like VCs we work with called Collective.
0:17:02 In Brooklyn, there’s the cheese board collective. That’s funny. So I’ll tell you what we’re not.
0:17:06 We’re not the cheese board collective. We are not a group governance organization,
0:17:15 which actually makes it much better. We’re more of a collective of leaders and innovators
0:17:21 across different sectors. And we see the connectedness of every issue. So just in the simple
0:17:30 college track story, we talked about educational inequities and access and the need for enhanced
0:17:39 and robust curriculum, but also good immigration laws and fair immigration practices so that that
0:17:46 actually could be a foundation instead of because that’s essential to the education agenda.
0:17:52 Of course, of course. And so many of our first generation college bound students
0:17:58 are recent immigrants to America. And certainly in California, many of our recent immigrants
0:18:04 are undocumented. And so understanding what it means to be undocumented as a child growing
0:18:09 up in the United States, you cannot access any state or federal funding for your education.
0:18:14 And so you might be the valedictorian of your high school and you can’t get state or federal
0:18:19 funding. And in fact, there are only a handful of states that would allow you to pay in state
0:18:25 tuition. But for undocumented families, even in state tuition at $17,000 a year, when you can
0:18:31 get generally no scholarships, no loans to fund it, that’s out of reach too. So that’s another
0:18:37 issue that we learned about firsthand environmental toxicity in low income neighborhoods. So the
0:18:42 access to clean air, water and soil and access to food and access to financial services and
0:18:48 banking services, all of these things you learn about in one community. And they’re all connected
0:18:54 because these are all systems and experiences that touch the individual’s life. And so you pull one
0:18:59 thread, the whole fabric follows. We were pulling one thread and we made it a really tough thread
0:19:07 around this educational support in our own way. But we understood we can’t just solve
0:19:14 the education issue without looking at the holistic issues of what actually are the,
0:19:20 what are all the touch points to an individual’s life? And how do we make sure if we can help
0:19:27 remove obstacles in all of these different systems or even better redesign these systems
0:19:34 so that an individual can just have access to the opportunity that they’re qualified for,
0:19:40 that will be the whole work. So that’s why it’s a collective because we actually collectively wrap
0:19:47 around problems and understand that complex problems require complex problem solving and
0:19:52 complex solutions. Yeah, really complex. So it’s interesting, Arnie Duncan had a quote where he
0:19:58 said, “Well, you know, Lorraine said to me, you’re trying to solve these really intractable
0:20:03 problems, so why don’t you let me help?” And he said, “You know, I think she was attracted to the
0:20:07 degree of difficulty.” It was like the harder it was, like that’s what she wanted to do. Is that
0:20:18 true? Yeah, I mean, for me, it’s so exciting and invigorating to think about devoting my life
0:20:24 to solving the problems of our day. You know, these are intractable problems. They’re not
0:20:28 problems that no one has worked on before, quite the opposite. These are problems that people have
0:20:34 worked on. And now they pass the baton to us. We have the great privilege of trying to make a dent
0:20:39 in them and trying to maybe redesign the system a little more elegantly and make things a little
0:20:44 more fair and more just. And we’ll work on them for 20, 30 years. And then someone else is going
0:20:49 to come up and we get to pass the baton to them. So that’s how we think about it. And it’s joyful
0:20:58 work. If you can, at one point, be part of that inflection point in another person’s life. If
0:21:04 you can, for one person, know that for you, that person has opportunities they otherwise wouldn’t
0:21:10 have had, it’s the most intoxicating feeling. And you want to do it again and again and again.
0:21:14 So you do it, you try to change the world, but you do it for the individual.
0:21:19 So the intractable-ness of the world doesn’t bother you at all. Yes. That’s how I can think about
0:21:25 it. And that’s how I can actually, and I think for all of us, we understand where we’re trying to go
0:21:30 and then we backwards map it. So most everything we’re working on, we have a 10-year time horizon.
0:21:36 Some things we have a 10-year and then we’ll renew it for another 10 years. For Arnie, he’s hoping
0:21:43 to put a dent in gun violence and specifically in the number of homicides that are gun-related
0:21:49 deaths in Chicago in 14 specific neighborhoods. And he wants to see impact within the next few years.
0:21:58 Yeah. When you go after education, immigration, gun violence, environmental issues, you end up with a
0:22:05 pretty unusual kind of diverse team. So you’ve got Mark Echo, Arnie Duncan, Steve McDermott,
0:22:11 my old friend Steve McDermott. Did you put all those? I can’t even imagine all those three in a
0:22:18 meeting. That just seems so wild. How does that work? How do you? Every Monday, including today,
0:22:24 we have all staff meetings. And because we have five different offices around the country, so we
0:22:30 have on the screen, like Hollywood Squares, generally a three-by-three matrix with different
0:22:37 teams populating in the nine squares. And we have different teams report out. Sometimes we have
0:22:42 guests who come and speak who are either in the philanthropic portfolio or the for-profit portfolio
0:22:50 or who are policy advocates or policy writers or just brilliant people that happen to be passing
0:22:57 through one of our cities that we bring to the table to listen to and learn from. And then we have
0:23:03 follow-up. So it’s sort of like every single Monday, we set the stage and we know where we are,
0:23:07 we give a report back and look forward and then we keep going. And then you want everybody out
0:23:12 in the field? Then you want everybody out in the field. Yeah. If people sat in an office more than
0:23:17 five, six days in a row, that would be bad. And that’s because all the knowledge is out in the field?
0:23:24 Yeah, exactly. And so when we decided to bring a big idea forward in education, for example,
0:23:31 with the ExQ Institute, Ruslan Alley, who was running our education practice at the time,
0:23:36 came out of the Obama administration. She was the assistant secretary of education. She ran
0:23:42 the office of civil rights. I love that we have these extraordinary people who have a body of work
0:23:46 and a network and there’s something big that they want to accomplish that maybe they didn’t get to
0:23:53 do in government or in business or in the social sector. And so we say, okay, come, do you think
0:23:58 we can do this in 10 years? And what does it look like? What kind of team do you need? And so we
0:24:07 build out like that. So we’ve built our organization from these individuals who come in this extraordinary
0:24:13 way. And then the newer hires, the more junior people hear about the fact that they might get
0:24:17 to work with some of these amazing people. And so it’s become kind of this really nice
0:24:27 giant magnet for talent in that way. I was telling you about Ruslan and ExQ. So we both
0:24:32 had worked in the Ed sector for over a decade and we both had a sense of the brokenness of the
0:24:39 design of the system and the fact that students who come to school needing the most receive the least
0:24:47 in all educational resources. And you just have to wrap your head around that. Students who come in
0:24:55 who are already behind in hearing just the number of words, let alone the quality of words
0:25:03 at home actually are behind in kindergarten and they rarely catch up. And the students who are
0:25:08 slow to learn to read by the end of the third grade, every school in this country shifts from
0:25:13 learning to read to reading to learn. So then when you enter the fourth grade, if you’re not a really
0:25:19 good reader in the third grade, all of your learning comes from reading text. And so you’re
0:25:26 further and further behind. And whoever came up with the idea that humans learn best by sitting
0:25:31 still for six to eight hours. Especially little kids. Yeah, especially little kids. That’s not how
0:25:38 synapses are formed. We came with all of this frustration about how we’re just ruining the
0:25:44 humans and the massive potential that’s in every single person’s skull. You know, the brains that
0:25:53 we carry around can solve any problem, any person. The talent and the IQ that is randomly distributed
0:26:00 does not meet up with opportunity. Opportunity is siloed. So we decided, well, we want to flip the
0:26:07 system. We want to flip the system from measuring learning in the high school. So we’re both also
0:26:11 fixated on the high school as a fulcrum for what happens after high school and what happens before
0:26:19 high school. So K8 shifts when high school shifts and obviously access to higher ed and career
0:26:25 also is influenced by what happens in high school. So if you change high school, you can actually
0:26:33 change the whole system. But you get a high school degree by sitting through 120 hours of a list of
0:26:39 subjects, mathematics and English and some history and some science. And the reason for that is because
0:26:48 in 1906. 1906. I’m sorry. Right. Good thing there’s been no technological change since 1906.
0:26:56 1906. And if you walked into high school in 1906, you’d feel, if you time traveled to 2018, you’d
0:27:03 feel very much at home. It’s still the same. Still the same life. Awesome. In 1906, they decided that
0:27:09 what they wanted to do was systematize. Great for Rip Van Winkle. Yeah, that’s right. That would be a
0:27:16 good movie. What they wanted to do was bring the learnings of industrial revolution and productivity
0:27:23 into the school setting. It was actually a really good idea that we would standardize schools because
0:27:31 schools at that point had only been generally for young men and they wanted to have universal access
0:27:37 to high school. And they also wanted to standardize the lessons across the country. So this was smart
0:27:44 and this was innovative for its time in 1906. Unfortunately, that system that got set up
0:27:49 is still the system today. That’s still how you get your high school diploma. Not to mention
0:27:55 the fact that you actually don’t need a proxy for learning. You don’t need for time to be the
0:28:00 standard. You actually need content mastery to be the standard and time should be the variable.
0:28:07 And we can do that. We actually know how to measure what you know about anything at any time
0:28:14 in any classroom. We also know a lot more about neuroscience now and we know how the brain develops
0:28:22 when it’s actually engaged in a task and we also know that you don’t learn things in silos, isolated
0:28:27 silos. You don’t learn math and then leave math and then start to learning this and leave it. It’s
0:28:34 actually much more robust and sticky when things are integrated and connected. And so we decided
0:28:42 that we wanted to change high schools in America and we started it a few years ago and we started
0:28:47 it with a competition across America and we wanted to put students in the center. And so we
0:28:53 crisscross the United States. I think we’re on our fifth trip across the United States and we visit
0:29:02 communities and we hold student roundtables and we hold civic leader and business leader and parents
0:29:08 and teacher roundtables and we sit and we talk to people and we listen to them. So then by the time
0:29:13 we issued this challenge for communities across America to redesign high schools in their own
0:29:18 community that mapped on to the workforce demands in their communities, that repurposed assets in
0:29:23 their communities, we had already talked to thousands and thousands of people. And they were
0:29:28 able to pick this up and there were no who you always hear about all they do and there are so many
0:29:32 inhibitors in terms of changing how things are done and you know between the you know structure and
0:29:37 the unions and this and then that but people were able to pick it up and redesign these high schools.
0:29:44 We weren’t sure. We weren’t sure. We definitely were stepping into unknown territory. We weren’t
0:29:50 sure how many people would actually take this up. We had designed the we used a design thinking
0:29:58 set of modules. We had 13 modules that every team had to go through. We made these kits with posters
0:30:04 and workbooks and cards that you could use and you had to have on your team students, parents,
0:30:11 business leaders, designers of any sort and even in small communities. In the end,
0:30:18 it was a seven month process to go through this whole thing. So communities really had to dig in.
0:30:28 We had 700 full applications for brand new high schools in all 50 states over 10,000 people participated
0:30:34 for what we’re going to be 10 schools that we funded and built. Oh wow. Yeah. It was amazing.
0:30:43 And after the competition, so we awarded our 10 and then after our competition, we followed
0:30:49 about 140 that we’re continuing on and building their own even though they didn’t win. Oh wow.
0:30:57 And since then, we’ve awarded another nine the XQ Super School moniker because their models
0:31:03 are so inspiring and breakthrough. And so they’re part of this cohort of super schools and we bring
0:31:10 them together. And so now 17 of the 19 are open. The other two will open next August. And of course,
0:31:16 along the way, we’re learning all sorts of wonderful things and they’re teaching each other and they
0:31:20 have professional learning communities. And of course, they have to break from the Carnegie
0:31:26 unit, which is time as a proxy for learning. So they all have to have competency based learnings.
0:31:34 We have a standardized learner outcome. And so all of the students in all of the schools can tell
0:31:39 you the XQ learner outcomes are about being a synthesizer and a collaborator and a creative
0:31:46 problem solver. They happen to know that for them 65% of the jobs that they will hold haven’t been
0:31:52 created yet. And so they understand they have to be agile nimble thinkers. They have to be creative
0:31:57 problem solvers. They have to understand critical thinking skills. And these are schools that are
0:32:02 not skimming. These are schools that exist in communities and they’re open enrollment public
0:32:07 schools. Yeah, so with the kids who actually need to help. But they actually bring the answers.
0:32:12 They bring the answers and the teachers are heroically scrambling to catch up and design
0:32:18 new curriculum. And it’s really exciting journey to be on. Because you have Arne Duncan on the team.
0:32:25 How do you think about taking that those models and changing policy and, you know, kind of
0:32:33 We do think that. So in many of the sectors where we work, policy is the tip of the spear. So certainly
0:32:40 for immigration reform policies at the tip of the spear and there’s work that we can do, each of us
0:32:46 can do to be welcoming to immigrants. And there are individual policies that municipalities can
0:32:54 instill around drivers licenses and not using local law enforcement to enforce immigration laws.
0:33:00 On the other hand, with education, it’s very, very layered. And so we do have a policy team
0:33:08 that is mapping out specific state and federal policies that we advocate for. So part of the
0:33:16 beauty of being an LLC or a series of LLCs is that we can be policy writers, policy advocates,
0:33:22 right? We can do whatever you want. We can be investors and we do do all those things. We use
0:33:27 every possible tool that we missed out on some tax breaks. That’s right. That’s right. So if you
0:33:32 don’t care about tax preference, there’s a whole heck of a lot that you can do. A lot more flexibility.
0:33:38 You get ultimate flexibility. That’s really great. Yeah. When we were really digging in on the work
0:33:45 about six years ago, I was contemplating what structure we should have. And most people start a
0:33:52 foundation so that they migrate, pretext either any dollars or stock into that generally, whatever
0:34:00 asset they’re going to be using, and then use that foundation construct. They use kind of the
0:34:06 5% payout to do the work that they’re going to do. Well, first of all, I felt that if I really
0:34:12 care about impact, if I actually really care about solving problems and I don’t care about
0:34:20 increasing wealth, then I would be foolish to close off any avenues by which change happens.
0:34:25 And a lot of change happens in brilliant for-profit companies. So I wouldn’t want to close that off.
0:34:30 And a lot of change happens at the policy level. And so we wouldn’t want to close that off.
0:34:35 So then so I thought, well, why doesn’t everybody do this? I don’t understand money.
0:34:39 But if people have taken the giving pledge and they plan to give away all their money,
0:34:45 why does they even care about a tax break? I still actually don’t understand it because
0:34:51 I’m hoping we go through as much of the wealth as we possibly can. I mean, that’s the purpose of it.
0:34:59 And we’re living in times of urgency and extreme crisis. I don’t understand what the 95% of the
0:35:03 corpus is waiting around for because it’s not going to get worse than we’re in right now.
0:35:06 So I hope people put more work, more money to work.
0:35:10 Let’s talk a little bit about profit because you invest in tech companies.
0:35:15 And there are a lot of tech companies here who I’m sure, and a lot of them ask me,
0:35:20 how do I get money from Amherst and Collective? What are you looking for on the for-profit side?
0:35:24 Almost all of our investments are mission aligned. We have an environmental practice.
0:35:31 So within the environmental practice, there’s a robust portfolio. We have an ed tech portfolio
0:35:37 that’s obviously aligned with our education practice. We have cancer companies that we’ve
0:35:42 invested in because we invest in oncology research and some policy there as well.
0:35:48 We started in immigration incubator. There isn’t a lot of technology that’s migrated into the
0:35:54 immigration sector. So we’d love to encourage that, but we would love to invest in people who
0:36:00 are bringing differentiated thinking or new thinking to old problems in this way.
0:36:08 And so there’s a lot of wonderful opportunity for entrepreneurs to marry their passion and
0:36:13 their purpose with their company. Those are the entrepreneurs that we get super excited by.
0:36:20 So one last question, and you’ve kind of answered this, but there’s another answer that I’m looking
0:36:25 for. So how do you know when you’re succeeding? On the micro level, I definitely get it and you’re
0:36:31 changing lives. But on these big agendas that you have, how do you know when you’re kind of on the
0:36:37 track and getting there? Yeah, we collect data on everything that we do so we can understand
0:36:44 if we’re trending in the right direction. In education around XQ, I’ll just use that as an
0:36:51 example because I’ve been talking about that. In addition to the schools, we now have the
0:37:00 district of Tulsa and the state of Rhode Island, which want to have kind of a complete redesign
0:37:04 of all of their high schools. So in Rhode Island, they have 45 high schools. So you can do experiments
0:37:10 in Rhode Island or at least use it as a laboratory for other states. So all 45 of their high schools,
0:37:14 they want to become XQ super schools. So we’re working with them on a statewide competition
0:37:22 in that way. So that’s moving in the right direction. In Chicago, there’s very good data on
0:37:31 both fatal and non-fatal gun violence. And so we have really good metrics there. But we also see
0:37:37 success in smaller ways, in anecdotal ways, which I think are very powerful as well,
0:37:44 where people come back to us and they tell us no one has ever talked to us before. No one’s
0:37:49 ever taken a shot on me. No one’s actually ever listened to me and then given me the chance
0:37:56 to try a big hairy idea. And so that to me is also success. And that’s moving things forward.
0:38:02 I think there are also other more subtle ways. We didn’t even talk about, you know, how do you make
0:38:07 sure that you’re part of the cultural narrative and how do you make sure that some of our most
0:38:13 imperiled and important institutions, like the media, like high quality journalism, are supported
0:38:19 and sustained. But seeing how many people are going into those disciplines is actually another
0:38:25 measurement of success. Seeing where IQ is migrating is really important measure of success.
0:38:28 We see that in the ed sector. We’re seeing that in other sectors as well.
0:38:33 That’s great. Well, thank you so well. We all appreciate you being you and fixing the world.
0:38:40 So everybody, please join me in thanking Maureen. Thank you so much.

0:00:05 The content here is for informational purposes only, should not be taken as legal business
0:00:10 tax or investment advice or be used to evaluate any investment or security and is not directed
0:00:14 at any investors or potential investors in any A16Z fund.
0:00:19 For more details, please see a16z.com/disclosures.
0:00:22 Hi everyone, welcome to the A6NZ podcast.
0:00:26 I’m Sonal and I’m here today with David Yulovich, one of our new general partners who covers
0:00:30 all things enterprise, but honestly, that can mean so many different things to so many
0:00:31 different people.
0:00:36 So we briefly discussed what enterprise products really mean today for entrepreneurs, companies
0:00:42 and users, especially given the latest shifts driving SaaS beyond the cliche of consumerization
0:00:44 of the enterprise.
0:00:48 We also cover specific advice on the topics of pricing and packaging, how to balance being
0:00:53 a product visionary with being a product manager, when and how to scale out and hire
0:00:57 your leadership team, and how do you know that’s working or not, plus how to best manage
0:01:02 your own time and your own psychology as a leader while doing all this.
0:01:06 For context, David founded OpenDNS, where he actually went through a rough period in
0:01:12 going from CEO to CTO in 2009 and then back to CEO again, in a company that itself pivoted
0:01:14 from consumer to enterprise.
0:01:18 We discuss how did he make a comeback, I mean it’s not like he changed instantly overnight,
0:01:20 so what and how were the lessons learned?
0:01:25 In 2015, Cisco later acquired OpenDNS and David ran their security business where he
0:01:27 also led the acquisition of three companies before coming here.
0:01:31 So he’s seen startups from all sides, from being acquired to being the acquirer, from
0:01:36 small to big to small to big again, from on the inside and from on the outside.
0:01:40 But the real theme of this episode is the journey many founders make, from technical
0:01:42 to product to sales CEO.
0:01:47 And while we end with the story of OpenDNS and the most important lesson learned there,
0:01:51 we begin with what is the one piece of advice David has for founders?
0:01:55 So I think that there’s not usually like one, I’m not a big fan of the platitudes where
0:01:59 you just like say one thing that applies to everyone, because there’s never one thing
0:02:02 that makes the difference between success and failure.
0:02:05 As a founder, generally you’re at different stages in the company building journey.
0:02:08 Sometimes you’re a technical CEO trying to build a product to make sure it actually
0:02:09 is feasible.
0:02:13 Then you’re constantly in the market with customers doing customer discovery, making
0:02:17 sure that you are solving the problems you’re trying to solve, you end up becoming sort
0:02:19 of a product CEO, making sure that you have product market fit.
0:02:22 Then you end up becoming a sales CEO on the enterprise side, where you’re trying to generate
0:02:26 revenue and figure out how you can go acquire more customers.
0:02:29 And then if that works out, you become this really general sort of manager, go to market
0:02:32 CEO, and you’re thinking about how do you scale and accelerate a business.
0:02:37 And so I like to think about those different journeys as where there’s like the right decisions
0:02:41 for the right time, and really trying to help founders understand like what time is it and
0:02:43 where are they in that journey and where do they want to go.
0:02:47 Is it possible to be all four at once, or is it really tied to the stage of the company?
0:02:50 So generally you want to be more focused than less focused, and the reason I think you’re
0:02:55 probably also not all those things at the same time is like a company is a set to me
0:02:59 of like these like interconnected little knobs, and you can never just like optimize one and
0:03:01 then forget it and not come back to it.
0:03:04 You end up going to another knob, like if you fix pricing and packaging, then you’re
0:03:05 going to control panel.
0:03:06 Yeah, it’s like a control panel.
0:03:08 Then you’re going to move to demand gen to try to like increase the top of the funnel.
0:03:11 And if you fix that, then you want to make sure that your SDRs and salespeople are like
0:03:15 making sure they’re converting all the marketing leads into qualified leads, then you’re closing,
0:03:16 then you’re doing customer success.
0:03:20 And like once you tighten one of those knobs, it just creates slack in one of the other
0:03:21 knobs.
0:03:24 So you might switch those hats from time to time, but I think you’re rarely going to
0:03:26 be wearing more than one of those hats at the same time.
0:03:30 So I have to ask this then, since we’re going with this theme of let’s not do the platitudes.
0:03:33 A lot of people say it’s about the customer and the customer journey and understanding
0:03:34 the customer.
0:03:37 Honestly, when I hear that, I’m like, they can pull you in a million different directions.
0:03:39 You don’t even know what to do, especially if you’re a technical founder.
0:03:41 You don’t know to sell the Fortune 500.
0:03:43 Like there’s a bit of a chicken egg.
0:03:47 So how do you sort of figure out how to sell to the right customer?
0:03:50 It’s okay for a company in the early stages not to know exactly who they want to go after,
0:03:54 but they do have to understand the consequences of the customers that they’re targeting.
0:03:59 I think we’re living today in one of the best times to be an enterprise software startup.
0:04:04 And to me, one of the reasons is that because so many companies today are SaaS and subscription
0:04:08 software companies where there’s a recurring revenue component, it’s better for the customer
0:04:11 because they know that the customer experience is going to be good or they’ll stop paying
0:04:12 for the subscription.
0:04:13 It’s a repeat business.
0:04:14 It’s not a runtime sale.
0:04:15 That’s a repeat business.
0:04:16 Right.
0:04:17 I never think about the first sale when I look at a business.
0:04:19 I always think about like, what are you going to do in year two, year three to make sure
0:04:21 you renew the account, to grow the account?
0:04:25 It’s actually, it’s a way of peeling back the onion to figure out like how confident
0:04:27 are you and where your product is today?
0:04:30 Because if you say, oh, we’re only doing three-year contracts, well, is that because
0:04:34 it’s really hard to implement and tough to get customers onboarded until you need runway
0:04:35 to get them happy?
0:04:38 Or is it because you think you’re overselling your capability set and you just don’t want
0:04:41 the customer to figure it out within a year and not renew?
0:04:46 But if the startup I’m talking to says, oh, well, we did a couple three-year contracts,
0:04:49 but we realized that we were priced really low.
0:04:52 And so now if a customer wants a three-year contract, we’re actually going to charge them
0:04:53 more in the out years.
0:04:56 Well, that tells me your product is really good and getting better.
0:04:57 That’s fascinating.
0:05:00 Another way to think about that is that what used to just be like a product experience is
0:05:02 now much more of a customer lifecycle experience.
0:05:07 It starts before you sell, building a Vangelis, then there’s an onboarding part, then there’s
0:05:09 making sure the customer is really happy.
0:05:11 How do you market to your existing customers to make sure they’re getting full utilization
0:05:12 of your product?
0:05:17 And so that customer lifecycle makes it much easier as a startup is getting started to
0:05:21 start to really identify who is the target customer and then thinking about does that
0:05:23 actually map to the business I want to build?
0:05:26 Is it the big Fortune 500, the Global 5000?
0:05:27 Is it SMBs?
0:05:29 Because it has all these downstream effects.
0:05:32 So a lot of startups will come in here and in my first six months here, I’ve now met
0:05:37 with over 200 companies and a lot of them, they really have this ambition to go after
0:05:38 SMBs.
0:05:42 And one of the cool things about SaaS is that SaaS can take something that in the olden
0:05:46 days of enterprise computing, you’d have to buy the biggest server, the biggest box
0:05:47 to get the best solution.
0:05:51 But with cloud and with SaaS applications, you can now have the power to get this massively
0:05:54 great CRM system or this massively great HR system.
0:05:57 I actually like to think about it as SaaS is very democratizing.
0:05:58 SaaS is totally democratizing.
0:06:02 Because it enables smaller and medium-sized companies to have the accesses to big company
0:06:03 resources.
0:06:07 They don’t have the in-house engineers, but they can essentially as a service it into
0:06:08 their company.
0:06:09 Absolutely.
0:06:10 Small companies have unlimited compute.
0:06:11 They have unlimited storage.
0:06:13 They have unlimited bandwidth now.
0:06:17 And so when I meet with startups, they often want to like, ambitiously and altruistically
0:06:21 want to go satisfy this pain for SMBs, but it turns out that the reality is if you want
0:06:26 to charge a high price point, if you want to pay an expensive sales force, then you’re
0:06:28 going to realize that your average sales sizes have to be higher.
0:06:32 If I really want to go after a target market where the price point is going to be lower,
0:06:36 then I have to think about bottoms-up sales, about self-serve offerings, because I might
0:06:40 not be able to afford to have a sales force or a huge customer success engine.
0:06:43 And so I love when I see startups that think not just about who they want to go after,
0:06:46 but then they build that into their whole sort of customer experience model and like
0:06:50 marketing programs, pricing and packaging, renewals, sales, and the whole business model.
0:06:55 I mean, nowadays, think about how many emails you get where it reminds you of a new feature
0:06:57 that you may not have even known existed.
0:07:01 For instance, like I’m using an email product called Superhuman, and every week I basically
0:07:05 had an email from the team saying, “Did you know that you could use this functionality?
0:07:09 If you press Apple I, it’ll automatically route someone to BCC in their reply, or you
0:07:11 just press Apple C, it’ll copy the whole email.
0:07:12 You don’t have to select it first.”
0:07:16 Actually, I saw this awesome tweet from Patrick Cullis and the CEO of Stripe where he said,
0:07:20 “I feel like Rahul Vora, the CEO of Superhuman, is essentially inventing new user experience
0:07:23 interaction paradigms that will eventually cascade into other products, much like Steve
0:07:27 Jobs did with letting us learn new behaviors, like how to touch a phone.”
0:07:32 Patrick’s tweet was right on, and Rahul’s weekly marketing email to existing users,
0:07:34 it helps teach me these new things that they’ve unlocked.
0:07:35 They become very intuitive.
0:07:37 You still have to learn about them.
0:07:40 One of the best things about building a company today is it’s easier than ever to get close
0:07:45 to customers, to get constantly get iterative real-time feedback, both from an analytical
0:07:49 standpoint and just from customer surveys, MPS scores, all these kinds of things.
0:07:53 They have all this telemetry through SaaS products where you actually see how people
0:07:54 use the product.
0:07:58 But the second thing that’s happened is people talk about this bottoms-up SaaS motion, but
0:07:59 it’s not always just that.
0:08:02 It’s really about making sure they understand that there are evangelists in the company
0:08:06 that you have to win over before you’re going to get signed off from the CFO, the CIO, the
0:08:07 CISO.
0:08:10 Whoever he or she is that makes that decision, you’re going to have to get some champions
0:08:12 underneath that person to be your evangelist internally.
0:08:16 So this is a little counterintuitive too though, because the other piece of advice I’ve often
0:08:20 heard from folks is that the number one mistake a lot of consumerization of the enterprise
0:08:24 type of founders make is that they go too heavy on bottom-up to the point of ignoring
0:08:27 the importance of top-down sales.
0:08:28 What’s your view on that?
0:08:29 I like to frame it a little bit differently.
0:08:33 When people talk about the consumerization of enterprise, enterprise customers today
0:08:36 are being bombarded by so many different vendors.
0:08:39 Their attention span is so limited that the products today, like I think when people say
0:08:41 consumer, they mean easy.
0:08:43 They don’t really mean consumer.
0:08:48 The value proposition that I’m hearing when I talk to customers is that the time to value
0:08:49 needs to be short.
0:08:50 There’s actually two parts.
0:08:54 The first is I want value almost immediately, sometimes even before I pay for it.
0:08:57 I want a trial where I want to get up and running on my own, and then I’ll talk to a
0:08:58 salesperson.
0:09:03 So the time to value can either be like T minus zero days, like negative time, or it
0:09:04 has to be very short from hours to days.
0:09:09 And so I always encourage founders, think about the first hour, the first day experience,
0:09:11 the first week experience, the first month experience.
0:09:16 The second part is that enterprise software can get quite complex.
0:09:19 And so Zoom is in the news because they went public.
0:09:23 And Zoom’s a great example of something where they earn the right to be more complicated.
0:09:24 Wait, let’s pause on that for a minute.
0:09:27 Earn the right to be more complicated.
0:09:29 So this goes hand in hand with a short time to value.
0:09:33 So the short time to value gets you in the door, but we know that you and I could download
0:09:37 Zoom on our phones and be in a video conference call, and now we’re like, well, wait a minute.
0:09:39 Maybe all of our conference rooms should have Zoom.
0:09:42 Maybe we should integrate Zoom with our Google Calendar, G Suite.
0:09:45 You’ve earned the right to do that complexity because you’ve already proven so much value.
0:09:49 And not only that, the value you get by doing the integration with G Suite or by adding some
0:09:53 cameras to your conference room so that you can have room-based Zoom rooms, that complexity
0:09:56 is commensurate with the value you’re getting.
0:09:59 And so when people say, oh, consumerization of enterprise just means it has to be easy
0:10:02 or simple, that’s not quite what it is.
0:10:03 To me, it’s two things.
0:10:07 It’s a short time to value, and then the complexity curve is commensurate with the value proposition.
0:10:11 So then I want to ask you more about what needs to go into that time to value.
0:10:13 So let’s be a little bit more specific.
0:10:16 I mean, I get the point that you’re talking about, it’s incredibly competitive.
0:10:19 So you’ve got to differentiate fast and show the value.
0:10:20 But what are the things that drive that?
0:10:26 Is it a great, like a cute little Jiffy that jumps out at you and makes cute, like a clippy
0:10:27 type of thing?
0:10:28 I mean, what is it?
0:10:29 Wait, did you say a Jiffy?
0:10:30 Like a Giff?
0:10:31 Are we going to rumble?
0:10:32 Wait, I don’t know if we can do this.
0:10:33 Are we going to just stop?
0:10:35 I can’t tell if you’re trolling me or not.
0:10:36 We can’t be.
0:10:37 I am not trolling you.
0:10:38 I don’t believe.
0:10:40 I’m one of the people who calls Jiff’s not Giff’s.
0:10:41 I hate that.
0:10:43 You know there’s a world of people that think they should be J.
0:10:47 I don’t know if I would have ever agreed to this podcast if I knew you called him Jiff.
0:10:48 It’s like nail scratching on a chalkboard.
0:10:49 You’re literally right now in my ears.
0:10:51 It’s like someone’s poking pins in it right now.
0:10:54 How have you been so successful in your career this whole time calling him Jiff?
0:10:57 I actually feel like I kind of hate you right now, to be honest.
0:10:58 This is amazing.
0:10:59 Oh my goodness.
0:11:01 You don’t have any friends that pronounce Jiff Jiff.
0:11:02 I don’t think so.
0:11:03 You’re it.
0:11:04 Chris Dixon, is he a friend of yours?
0:11:05 He is.
0:11:07 I’m just shouting him on the podcast because I’m not going to go down on this thing.
0:11:08 I’m not going down on this ship alone.
0:11:11 We might have to edit that part out because I don’t know if that can be out there.
0:11:16 There’s like this dissonance in my brain because you and him are so smart but you also call
0:11:17 it a Jiff.
0:11:20 Like I don’t know what to do right now.
0:11:21 All right.
0:11:22 Okay.
0:11:24 So Slack for instance, they did a lot of really creative things.
0:11:28 I remember I was at Wired and the product that we use was Hip Chat.
0:11:31 And the thing that kind of eventually got me into Slack was the fact that you could do
0:11:34 all these like Jiffs, whatever.
0:11:38 You could do kind of more fun things and even I know that sounds really…
0:11:40 And they had integrations.
0:11:44 Other things could drive information into your Slack channel.
0:11:46 And that was not something that Hip Chat had for a long time.
0:11:47 That’s right.
0:11:48 Like Google documents and…
0:11:49 That’s right.
0:11:50 Dropbox files.
0:11:51 Exactly.
0:11:52 Or even automated updates.
0:11:55 Like if you’re a developer, when somebody would do a push to production, it could notify
0:11:57 people inside the Slack channel.
0:11:58 Right.
0:12:00 But now that’s not a case where IT has to decide the integration.
0:12:01 That’s right.
0:12:02 And they made it easy for individual users.
0:12:06 As long as you could use like Google Auth to authenticate, anybody could basically set
0:12:08 up a Slack channel inside their organization.
0:12:10 After a while, IT says, “Hey, wait a minute.
0:12:13 We have all these teams that are chatting on this thing.
0:12:14 They’re doing integrations.
0:12:15 Files are being shared.
0:12:18 We need to have a little bit more visibility, a little bit more access control.
0:12:22 And even for like security and compliance reasons, it became an enterprise sale that
0:12:23 went wall to wall.
0:12:25 It’s now already entrenched in the organization.
0:12:28 There’s already integrations happening with some of the developer tools and workflows.
0:12:30 And at that point, they were in the right to be more complicated.
0:12:32 I’ve noticed this resurgence.
0:12:36 And I don’t know if it’s just like a zeitgeist thing or just anecdotal evidence of design
0:12:40 focused startups precisely because of the thing you’re saying, because that’s one of
0:12:41 the ways to instantly differentiate.
0:12:46 I think it’s also design thinking is sort of another way of saying, thinking about…
0:12:47 Oh, I hate that phrase.
0:12:48 I know.
0:12:49 Talk about the platitude of all platitudes.
0:12:51 That phrase drives me fucking up a wall.
0:12:54 So here’s a better way to frame it, because I also don’t like that phrase, is it’s really
0:12:58 about that extension of the product experience and really taking that more holistic approach.
0:13:00 It’s not just about the UI.
0:13:03 It’s not even just about the user experience of a particular workflow.
0:13:05 It’s about that whole customer experience.
0:13:07 We’re actually entering a period of time where more and more people in the workforce
0:13:11 are sort of digital natives, and they want to be power users.
0:13:14 Why isn’t there an equivalent to Microsoft Excel on the web?
0:13:15 Like Google Sheets is not Excel.
0:13:21 The current state of collaborative tools in SaaS apps is just so weak and they don’t
0:13:22 let you be a power user.
0:13:25 It’s also, I think, ignoring the realities of organizations today, which used to be so
0:13:29 siloed, and now you have people collaborating cross-functionally in different ways.
0:13:33 You could argue that Google Docs did create a multiplayer mode where you could have collaborative
0:13:37 editing, but it was just such a garbage experience from a functionality standpoint.
0:13:38 It was afterthought.
0:13:40 It wasn’t baked in from natively.
0:13:41 That’s basically my rule of thumb for all of this.
0:13:43 If it’s an add-on, it’s not important.
0:13:47 I think that’s what, well, I mean, all of, I would say, Google G Suite is an add-on.
0:13:50 Google should just shut down G Suite altogether, even though the whole Silicon Valley would
0:13:51 get crazy.
0:13:55 I mean, there are rounding error in their business, and it’s a rounding error to productivity
0:13:56 versus what Microsoft has.
0:14:01 I don’t think they’ll do that, but strategically, it’s just so unimportant for them.
0:14:06 What I would say, though, is that I like software that is easy to use, that has that
0:14:09 short time to value, but allows me to be a power user if I want to be.
0:14:14 In fact, as an investor, when I talk to companies, I always try to figure out what is their pricing
0:14:16 and packaging strategy.
0:14:17 What is packaging?
0:14:18 Actually?
0:14:23 Packaging is usually a convenient bunch of things, but to me, packaging is what set of
0:14:24 features.
0:14:27 Are you going to put into an offering to a customer?
0:14:30 I always try to think that you want to make it easy for your customer to give you money.
0:14:31 That doesn’t matter.
0:14:35 It’s like a foundational principle for me, and so packaging is our way to do that.
0:14:38 We’ve all been to the restaurant where the All Our Cart menu is all over the place, but
0:14:40 sometimes restaurants just say, “Well, here’s the three options.”
0:14:44 It comes with one of these appetizers, you get this main course, and you get this dessert.
0:14:47 If you want to make things easy for people to give you money, generally, people come
0:14:52 up with packages, and the friction is removed to becoming a buyer.
0:14:57 In the SaaS world, sometimes there might be a tier that says, “You’re going to get the
0:15:01 full functionality of the product, but you’re not going to get archiving and logging and
0:15:03 all this detailed reporting and analytics.”
0:15:07 It allows the company that maybe doesn’t want to spend as much or isn’t as big to get the
0:15:12 full functionality of your product, but then there’s a hurdle, and usually when I think
0:15:17 about packaging, usually there’s a key product milestone that happens that forces somebody
0:15:18 to jump to the next tier.
0:15:19 Interesting.
0:15:20 What do you mean?
0:15:21 Give me an example of that.
0:15:22 Sign on is a good one.
0:15:25 You have to generate accounts and use a product, but if you want to tie it to your octa directory
0:15:30 or some other directory service, you’re going to have to jump to a much more expensive tier,
0:15:33 but generally, the customers that have to jump that tier are more enterprise companies.
0:15:34 They have a directory service.
0:15:36 They have a single sign-on service.
0:15:39 They might want two-factor authentication with tokens.
0:15:41 The security person in me doesn’t love that one being a tier.
0:15:45 I always think you want all your customers to be secure, but there are other tiers, so
0:15:46 like compliance.
0:15:50 If you’re in a regulated industry, you might not just be satisfied with 30 days of logging.
0:15:52 You might need 365 days of logging.
0:15:55 You might need to be able to export your logs to another data store.
0:15:58 So far, if I heard that as an entrepreneur, though, I would assume that all packages are
0:15:59 tiered.
0:16:02 Are there untiered packages where it’s just like a different combo that’s all like kind
0:16:03 of horizontal?
0:16:05 I don’t think I’ve seen that.
0:16:09 Generally it’s much more of like a ladder where the next package includes everything
0:16:14 in the previous package, and I think that while there’s usually a number of features
0:16:17 that get unlocked when you go to the next package, to me, there’s always one that has
0:16:19 that forcing function.
0:16:23 In fact, when I think of packaging, it’s oftentimes a way to segment your customer base because
0:16:27 you’re going to say like, “We know SMB and mid-market under 1,000 employee companies,
0:16:28 they’re going to be in this package.”
0:16:32 Everything we do, the product manager in that package is thinking about those features,
0:16:35 thinking about that persona, and then the next package, the person saying, “Wait a minute,
0:16:39 I want to go after the 1,000 to 10,000 employee company,” and this is what they need.
0:16:41 This is how I communicate with them.
0:16:43 This might be how I do webinars to them.
0:16:46 This is how I’m going to do pricing that’s more fits their model.
0:16:48 Maybe you can’t do a three-year contract if you’re on the low-end product.
0:16:53 So all these things are puts and takes that reflect where’s the product, who is the customer
0:16:57 you’re targeting, and then how do you want to market and create demand with that audience.
0:16:59 Is there a balance or a rule of thumb?
0:17:03 I know I’m sure it must vary by business in what the ideal number of packages are or
0:17:07 how many customer segments you should be trying to reach as a startup.
0:17:09 I think generally fewer is better because focus is key.
0:17:10 Less is more.
0:17:11 Yeah, less is more.
0:17:15 Time is always the most valuable currency in an individual’s life and a company life.
0:17:19 And then aligning all that time behind the most important, like putting more wood behind
0:17:22 fewer arrows to me is always much more important.
0:17:26 I think generally like two packages, three packages, when you make it too complicated
0:17:30 for the customer to figure it out, that creates friction to the sales cycle.
0:17:34 Now with that said, one thing that startups often do is they share their pricing publicly
0:17:35 on the site.
0:17:38 And the engineer and all of us, like the pragmatic person and all of us, we’re like, “Well, of
0:17:43 course we want to share pricing because as customers we hate not knowing the price, but
0:17:47 as products get much more nuanced and organizations that are buyers and you actually don’t know
0:17:50 what your pricing discovery looks like, you’re better off not sharing your pricing.”
0:17:51 Okay.
0:17:55 And one way you know you have a great product is when your salespeople are the ones demanding
0:17:58 you remove the pricing because that means that they’re telling you…
0:17:59 You can get more money.
0:18:00 You can get more money.
0:18:05 Maybe you’re a technical CEO who’s becoming a product CEO, who’s becoming a sales CEO.
0:18:08 If you’re listening, you’re going to be like, “Wait a minute, they’re telling me we’re
0:18:09 leaving money on the table.”
0:18:11 It’s generally a very strong signal.
0:18:14 I have a stage question on this though because if you think about the definition of a startup,
0:18:19 a startup by definition is a business under a high condition of uncertainty compared to
0:18:20 more established business.
0:18:22 I wouldn’t even peg it to a particular size.
0:18:25 And given that, a startup is an experiment.
0:18:26 You’re running an experiment.
0:18:29 And the product, you can run multiple experiments at the same time.
0:18:32 We’ve heard of the famous pivot, the dreaded P word, there’s all these different flavors
0:18:33 of this.
0:18:37 How do you run multiple experiments and also strike a balance with focus and the pricing
0:18:38 and packaging strategy?
0:18:41 Well, that is the art of running a business.
0:18:42 Not a science.
0:18:43 Yeah.
0:18:46 And everything is multivariate, but you can generally, if you have smart people paying
0:18:50 attention to the numbers, paying attention to the data, collecting the analytics and giving
0:18:54 yourself enough time to collect that data, the worst thing for a company to do is make
0:18:58 a decision and then not allow there to be enough time to collect the outcome of that
0:19:02 decision and understand the consequences of that decision and then they make another decision.
0:19:06 So the question of how do you make decisions and run multiple experiments, I don’t think
0:19:07 it’s that complicated.
0:19:11 As long as you’re paying attention to what are the outputs from those decisions that
0:19:15 you should be looking for and you should be looking at what’s changing across the business.
0:19:20 We’re living in an era today of running companies where it’s much easier to collect and analyze
0:19:21 data than it ever has been.
0:19:25 You have data lakes where you can bring in product data, your CRM can tie into that product
0:19:26 data.
0:19:27 We’ve never had that.
0:19:28 We have BI tools now that we have open source.
0:19:29 Business intelligence tools, right?
0:19:30 Yeah.
0:19:31 That’s right.
0:19:32 We have open source business intelligence tools.
0:19:34 We actually run complex analytics and say, “Wait a minute.
0:19:38 My West Coast territory is just doing so much better than my East Coast territory.
0:19:39 What is the difference that’s pushing there?
0:19:43 Is it because we actually are running more demand-gen campaigns on the West Coast and
0:19:46 the marketing team on the West Coast is separated or is it just that the West Coast sales reps
0:19:47 are better?”
0:19:48 You need to be able to tease apart those.
0:19:51 You need to be able to tease those things apart, but it’s easier to get access to the
0:19:55 data and analyze it quickly and avoid that sort of analysis paralysis than I think it
0:19:57 ever has been in the past.
0:20:01 So a big part of this, so the big theme I’m hearing from you is a lot of these things
0:20:05 have intentionality, even if you don’t know the outcome, and that you can actually control
0:20:09 that intentionality by kind of being introspective, understanding your decision making, understanding
0:20:10 what works.
0:20:11 That sounds great.
0:20:17 Now, as a leader of the company, how do you, the CEO, figure out what to work on and depending
0:20:18 on what stage you’re at?
0:20:22 This whole journey from technical to product to sales to go to market, that’s not necessarily
0:20:23 perfectly linear.
0:20:24 So how do you figure this out?
0:20:25 It’s not linear at all.
0:20:28 I mean, sometimes in retrospect, we like to look and think that it was linear.
0:20:29 Of course, yeah.
0:20:32 But I think that there’s different ways to figure out sort of how do you prioritize
0:20:33 your time?
0:20:35 Where do you spend your mental calories?
0:20:36 Mental calories.
0:20:37 I love that phrase.
0:20:38 Yeah.
0:20:39 And that’s how I think about my days.
0:20:40 What do I want to, like you only have so many mental calories.
0:20:41 So I think about my day too.
0:20:45 I think of the nutrition density in terms of return on, so I have a phrase that I use
0:20:48 for all my editing, which is ROE, which is return on energy.
0:20:49 Oh, that’s good.
0:20:55 So I refuse to spend time on something that the output is going to be vastly low proportion
0:20:59 outsize win to what the amount of work I put in in terms of energy, creative.
0:21:01 So I have a whole framework for thinking about this.
0:21:02 I love that.
0:21:03 I’m ridiculously productive on this.
0:21:06 Well, hopefully this podcast gets published because I don’t know that it had a high ROE.
0:21:09 So I think figuring out how you spend your mental calories is a really important question
0:21:10 to ask.
0:21:14 And sometimes the act of asking that question itself is just like part of the process of
0:21:18 figuring out how to spend your time and spend it wisely.
0:21:20 And there’s different things that happen along different stages.
0:21:23 If you’re like, I always just look at like, what is the problem in the company?
0:21:26 Is it that we can’t get customers and then figuring out who that right customer is.
0:21:30 But as a company starts to mature, a lot of these companies get to this like $2 million,
0:21:32 $3 million in annual recurring revenue.
0:21:33 That’s a huge milestone.
0:21:35 Very few companies ever get there.
0:21:39 But yet it’s tiny when you should be doing $20 million, $30 million if you aspire to
0:21:40 be there.
0:21:43 Like you can celebrate the milestone, but it’s clearly you have a long way to go to build
0:21:46 an enduring iconic company.
0:21:48 And so at that point though, you start to have a leadership team.
0:21:51 One of the biggest things that we see when we give technical founders advice is they need
0:21:53 to bring on like a VP of engineering.
0:21:55 They need to bring on like a head of sales.
0:22:00 And they keep resisting this thing because they’re kind of attached to their early startup
0:22:01 team.
0:22:05 So how do they figure out when to really, there’s a lot of religious advice and debates
0:22:06 around this actually.
0:22:07 Yeah.
0:22:10 So I think that there’s a bunch of, you know, I always look at questions like, what time
0:22:11 is it?
0:22:12 Like, what is the priority?
0:22:15 Like, are you trying to figure out product market fit or are you focusing on go to market?
0:22:16 Like what time is it?
0:22:18 Are you hiring sales people and ramping up?
0:22:21 Are you like figuring out the customers are churning and you better go fix your product?
0:22:26 This is so important that if you were to ask all your leaders and all the people in your
0:22:29 organization, like what is the most important thing for our company right now, they should
0:22:30 have an answer.
0:22:34 But one of the, just one of the more tactical conversations that I have with leaders, when
0:22:37 they’re, especially when they’re a startup and they have this core founding team.
0:22:38 And then they’re thinking about scaling.
0:22:42 And they say, well, you know, I have this engineering manager, he or she was with me
0:22:43 from the beginning.
0:22:44 And I think, I think they’re doing a great job managing.
0:22:48 One of the things I highlight is like bringing in a world-class VP of engineering, like that
0:22:52 could rock the boat, it could cause issues, but it’s not an indictment of your current
0:22:53 engineering manager.
0:22:54 Like that’s not what’s happening.
0:22:58 Part of bringing on these high performing leaders and these really well respected leaders
0:23:03 that have a cult-like following with the people that have worked with them and for them before
0:23:06 is that they are going to help you accelerate your ability to recruit world-class talent.
0:23:09 And when you deliver that message to that person on your team who’s been there from
0:23:12 the beginning and is doing a great job, like that should resonate.
0:23:13 It’s like, oh, wait a minute.
0:23:14 Yeah.
0:23:15 We can get way better people way faster.
0:23:16 Like, yeah, let’s bring that person on.
0:23:19 Again, you have to be very careful about knowing, like, what are the problems you’re
0:23:21 trying to solve in the organization.
0:23:26 But oftentimes, you know, and I think VCs have a bad rep for this, is it like they shove
0:23:30 in somebody who’s way too senior and comes from way too big of a company.
0:23:33 And so you have to think about, like, what is the right team I need for the right time?
0:23:37 I think Ben wrote this in his book, actually, which is the mistake that people hire for
0:23:39 the future instead of the hire for the thing they need now.
0:23:43 This often comes up with like VP’s of sales hires where somebody maybe has run, you know,
0:23:46 a 10 or 20 person team, but you’re like, well, can they run a 500 person sales team?
0:23:48 Well, you don’t have a 500 person sales team problem.
0:23:51 People often think about the executives that are hiring like, well, is this person going
0:23:54 to be with me for four years or five years, for six years?
0:23:56 I think that’s not always the right question to ask.
0:24:00 In fact, I had a board member once, Dave Strom, who’s a mentor to me.
0:24:02 I think of him as like the Yoda in my life.
0:24:06 And he once said an expression that I’d never heard before, horses for courses.
0:24:07 So have you ever heard of horses for courses?
0:24:08 No, I don’t even know what that is.
0:24:09 Yeah.
0:24:10 So I think it’s like it’s sort of an archaic expression.
0:24:11 Yeah.
0:24:14 And in race, and in horse track racing, you know, there’s like dirt courses, there’s
0:24:15 grass courses.
0:24:16 Oh, I get it.
0:24:17 You know, you run the right horse for the right course.
0:24:18 Oh my God.
0:24:19 That’s a great phrase.
0:24:21 There’s a bad part of this phrase too, though.
0:24:25 There’s a bad connotation, which is that sometimes when horses, they run their few races and
0:24:26 then they’re finished.
0:24:28 They run their course.
0:24:29 That’s where it comes from, that expression.
0:24:30 They’ve run their course.
0:24:32 And do you know what happens to horses that run their course?
0:24:33 No, I don’t want to know.
0:24:34 Are they turned into gelatin?
0:24:35 Something like that.
0:24:36 I always used to joke.
0:24:39 It wasn’t very nice probably, but I would joke with the VP of sales I had to open yesterday.
0:24:43 Like, you know, maybe every quarter was his last quarter because he just constantly out
0:24:44 performed.
0:24:47 And we always wondered when we hired him, like, is this guy going to scale?
0:24:48 Now, he scaled wonderfully.
0:24:49 He’s an incredible sales leader.
0:24:54 He went from, you know, a 20-person sales team to ultimately a 200 or 400-person sales
0:24:55 team.
0:24:57 Then once we got to Cisco, he did wonderfully, but we didn’t know when we hired him and how
0:24:59 far he’d get past 20 people.
0:25:01 You got to hire horses for courses.
0:25:02 The right team for the right play.
0:25:07 This is a good way of really figuring out, like, is my leadership team adding capacity
0:25:08 for me?
0:25:10 Are they helping me understand what’s happening in the business?
0:25:15 Because as a certain point as a CEO, you’re going to start to spend less time on engineering,
0:25:16 less time on product.
0:25:20 Ideally, you’re going to spend more time in the field with customers, with partners,
0:25:21 with customer success.
0:25:25 And as you start to spend less time with any individual function, you’re going to need
0:25:29 to have leaders in place that really are spending all their time really understanding
0:25:31 closer to the medal what is happening.
0:25:35 I love that you said close to the medal because that’s the exact phrase I use when I think
0:25:36 of this.
0:25:37 It’s like bare-metal leadership.
0:25:38 Totally.
0:25:41 And that’s actually the biggest challenge as a product-oriented person or a visionary
0:25:45 for whatever the product is in any field is how do you kind of keep that close to the
0:25:49 medal insight yet you can’t actually be close to the medal if you’re scaling.
0:25:52 So this actually comes up a lot in startups.
0:25:56 This idea that if you are the product visionary, you’re the founder of the company, that means
0:25:59 you are the product manager for the company, but at the same time, you need to scale an
0:26:00 organization.
0:26:05 And I think it’s important to differentiate the product manager from the product visionary.
0:26:06 Oh, great.
0:26:10 As the founder and CEO, you can always be the product visionary, but there is going
0:26:14 to be a time where you’re not going to be able to spend hours of time with the engineers
0:26:18 hearing how they’re working on our product or how it’s technically going to work.
0:26:21 You’re not going to spend hours and hours of time looking at all the NPS survey data
0:26:24 or the customer support tickets that are coming in.
0:26:27 And so like oftentimes I’ll meet these startups are like, oh, I can’t hire a product manager.
0:26:28 I am the product manager.
0:26:29 That’s a common thing for technical.
0:26:30 Totally common.
0:26:32 And it feels like it’s your baby.
0:26:33 You don’t want to let it go.
0:26:36 You’re only going to have five seconds a day to think about different decisions you make.
0:26:40 And so if your engineering team and the rest of the organizations constantly come into you,
0:26:41 you’re going to end up getting paralyzed.
0:26:42 Yeah.
0:26:45 The worst thing for a product visionary is to make some decisions, and then they know
0:26:48 where the wrong decisions because they lack data or they lack the time to be thoughtful
0:26:49 about it.
0:26:52 And then they start to undermine their own thinking about whether or not they even are
0:26:56 a product visionary when the reality is just hire a product manager.
0:26:59 You’re not offloading the product vision to that person.
0:27:05 What you’re offloading is the day-to-day ground war of figuring out what is customer support
0:27:08 telling me, what is sales telling me, what is engineering telling me, what are customers
0:27:14 telling me, synthesizing, analyzing, prioritizing, sorting that data.
0:27:18 And obviously as a founder and visionary you have ultimate say, but you’re going to be
0:27:22 armed with so much more insight information that your intuition, which plays a big role
0:27:24 too, is just going to be that further enhanced.
0:27:29 As a visionary you’re going to have some special secret, some earned power that you have over
0:27:32 the lifetime of your experience, where you’re the domain expert in a problem set, you’re
0:27:33 going to know more about it.
0:27:35 Because you’ve gone through the idea maze, you’ve literally lived and breathed this thing,
0:27:39 you built the company, you started it because you literally have it seeping out of your
0:27:40 pores.
0:27:41 That’s right.
0:27:43 We had a recent podcast at Safi Bakal and he described how Steve Job had both the artists
0:27:44 and the soldiers.
0:27:47 And so not only did he have himself, but he had like Tim Cook and Johnny Ive.
0:27:51 But also when you think about the story of the iPhone, the app store was actually a result
0:27:56 of his team coming up with the point that, hey, you can’t just have Apple apps on this
0:27:58 if you want people to use this.
0:28:01 And so people and your product managers will come to you and they’ll, when they have conviction
0:28:04 on something and they have the data and they have the view, you’ll then be able to make
0:28:05 those bets.
0:28:06 Yeah.
0:28:08 And nobody would say that he wasn’t a product visionary just because he didn’t come up with
0:28:09 the app store.
0:28:12 On that note, just a probe on one bit, because I’ve always wondered about this.
0:28:17 There is a tension between this idea, like I hate this idea of the head and the hand.
0:28:20 You can’t have one person be the head and the other person be the hand.
0:28:21 How do you reconcile that bit?
0:28:25 Like how do you, I guess what I’m asking is how do you calibrate along this line of visionary
0:28:26 to manager?
0:28:30 So I think you want to know what you’re hiring for because there are product managers that
0:28:33 are much more analytical and there are product managers much more visionary and you might
0:28:35 need different kinds of people at different kinds of times.
0:28:39 So I think you have to be sort of self-aware and be really intellectually honest because
0:28:42 if you actually need someone who is more visionary, then you’re going to have to deal with the
0:28:46 fact that you’re going to be going to battle and sitting in a room and duking it out over
0:28:47 ideas.
0:28:51 It leads to a secondary insight, which is that if you’re a CEO of a company and you
0:28:55 do not trust that the information you’re getting from one of your leaders is what’s actually
0:28:57 happening on the ground, that’s a tremendous problem.
0:28:58 That’s a huge red flag.
0:28:59 Massive problem.
0:29:00 Fire and move on.
0:29:01 Fire.
0:29:02 Or it could be you if you’re just not a trusting person.
0:29:03 I think you have to work to resolve these things.
0:29:04 Yeah.
0:29:07 Like you don’t just cut and move on immediately, but you either have to work to understand what’s
0:29:10 actually, like do they understand what’s happening and are they able to communicate it to you
0:29:11 and the rest of your leadership team?
0:29:13 I always like to think of leadership teams.
0:29:17 It’s not just this like, oh, the head of sales reports to the CEO, the head of marketing reports
0:29:18 to the CEO.
0:29:22 And you have these like siloed, you know, sort of pairwise conversations.
0:29:25 So leadership team needs to be working together as a team and communicating with each other
0:29:30 because as a CEO, you don’t want to be, you know, interjecting and intervening in every
0:29:32 conversation, every decision.
0:29:35 And so you want to start to figure out like, are they collaborating?
0:29:37 Are they sharing each other’s experiences?
0:29:39 Do they understand what’s happening in each other’s businesses?
0:29:40 Are they meeting on their own?
0:29:44 I think as a CEO, you actually want your leadership team to meet independent of the CEO.
0:29:45 That’s actually really interesting and counterintuitive.
0:29:46 Yeah.
0:29:47 I think it’s really important.
0:29:51 And I think it does happen in a lot of high-performing teams very commonly, maybe not explicitly,
0:29:52 but it happens.
0:29:56 And then obviously, I think in some places you can do it explicitly and when it’s done
0:30:00 a productive and positive way, not because the CEO is a distraction, but ideally the
0:30:04 CEO is out doing something that’s of high value to the company.
0:30:07 But if you get to this place where you do not have confidence that you are getting the
0:30:12 best information from your leaders, if you don’t resolve that, then you have to find
0:30:13 someone who’s a better fit.
0:30:17 Whenever I hear when I talk to a CEO who’s having a tough time in the company and they’re
0:30:21 telling me about like what’s happening, I’m like, well, like, just tell me, like, do you
0:30:23 really believe that that is what’s happening?
0:30:26 And you either have to go deep and as a CEO, you do get these occasional bullets where
0:30:30 you can cause a little bit of like organizational stress to like go at three levels deep and
0:30:31 really figure it out.
0:30:34 And if you find out what’s happening, it’s not what you are being told, you gotta make
0:30:35 a change in leadership.
0:30:39 By the way, I should just say that all my lessons about leadership and management, I pretty
0:30:40 much learned the hard way.
0:30:43 So I’m just trying to help save other people from making the same mistakes I made.
0:30:44 Yeah.
0:30:46 Well, speaking of that, let’s talk about your stories.
0:30:49 So you’re the founder of a company called OpenDNS.
0:30:51 First of all, what is OpenDNS?
0:30:56 So OpenDNS is a cybersecurity service that delivers a faster and safer internet.
0:31:00 And we really innovated on a 25-year-old technology that used to be a cost center that nobody
0:31:01 wanted to innovate on.
0:31:04 We actually proved that you can actually build a business on top of this like thing that
0:31:05 used to be free if you make it better.
0:31:09 So speed was one part, but then the other part was security.
0:31:13 Let’s say you type in zamazon.com, your meaning to go to amazon.com, that could be a phishing
0:31:15 site trying to steal your credentials.
0:31:19 So we would say, hey, wait a minute, we know that from our, you know, tens of millions of
0:31:23 users, what you really meant to type in was amazon.com, so we’re going to show you a page
0:31:27 that says, hey, you typed in zamazon.com, we think it’s a fraudulent site.
0:31:29 Did you really mean to go to amazon.com?
0:31:30 That may help protect you from getting phished.
0:31:32 It was the first third-party dance provider.
0:31:35 In fact, when we started the company, some of the, like, the gray beards of the internet
0:31:40 who I respected tremendously, they told me, A, what I wanted to do wasn’t possible, and
0:31:43 B, even if it was possible, nobody would want it because they just would get it from their
0:31:44 ISP.
0:31:45 Oh my God, this reminds me of Mark with Netscape.
0:31:49 One of my favorite stories is I saw these old forums that he was on when he was proposing
0:31:50 like a more of a graphical user interface.
0:31:51 Oh, like the image tag.
0:31:52 Exactly.
0:31:55 And the thing that I thought was so funny is the people who are the established kind
0:31:58 of old fogies for lack of a better phrase, they don’t like the change ironically, even
0:32:00 though they were very revolutionary at the time.
0:32:03 So you mentioned a 25-year-old technology.
0:32:06 Why was that almost impossible to them?
0:32:10 So think of the DNS as like a phone book, except that what we wanted to do was not just give
0:32:13 the same phone book to everyone, but we wanted to give a custom phone book to every person
0:32:17 which meant, let’s say you typed in playboy.com, well, for some user over here, they may not
0:32:20 want content filtering, so they want the answer for playboy.com.
0:32:23 But maybe for someone who has small kids at home, they want a different answer.
0:32:27 And doing this at very high speed was thought to be impossible.
0:32:28 That’s fantastic.
0:32:31 But it turned out that it was possible, and we could do it faster than even if you had
0:32:32 no preferences in settings.
0:32:34 I have to ask you, how old were you when you had the insight that you wanted to build
0:32:35 open DNS?
0:32:40 So I had started a DNS company in college that did a different kind of DNS.
0:32:43 And through that, I had gotten super interested in cybersecurity.
0:32:48 And so I met an investor when I moved out to California, who had asked me basically why
0:32:50 I wasn’t doing more with my original company.
0:32:53 Then he and I ultimately came up with the idea for open DNS.
0:32:56 That original business model that I worked on with him was an advertising supported business
0:32:57 model.
0:33:01 We pivoted the business, and then in 2009, having the people that use our service be
0:33:04 the people that pay us for our service, was such a much better alignment of interest.
0:33:06 And so that journey took a long time.
0:33:10 And by the time we pivoted the business, it really was a different business than when
0:33:11 we started in.
0:33:15 Then when we sold it in 2015, the Cisco was really a full blown cybersecurity company.
0:33:16 Why did Cisco want it?
0:33:21 So I think if you looked at what happened between, let’s say 2007 and 2015, the iPhone
0:33:22 came out.
0:33:25 You had more and more people working from coffee shops that all had Wi-Fi.
0:33:29 You had workers working from the road, people using mobile devices.
0:33:34 So installing like Norton Antivirus or McAfee Antivirus on your desktop was no longer sufficient
0:33:35 security.
0:33:39 And so our service, Open DNS, was cybersecurity delivered as a service.
0:33:42 And it happened just intrinsically as a part of your internet connection.
0:33:44 So you didn’t have to have special software.
0:33:47 You didn’t have to install an appliance or a piece of hardware.
0:33:50 And so as people were working differently and the networks were becoming more ephemeral,
0:33:54 Cisco, which is a major cybersecurity company, such as the largest cybersecurity company,
0:33:57 wants to evolve to match that shifting IT landscape.
0:33:59 You mentioned the pivot a few times.
0:34:02 Tell me about that, because that’s such an overuse, one of those platitude words like
0:34:04 big P, little P, whatever.
0:34:07 And I know you mean it and actually what happened, but give me a little bit more texture around
0:34:08 the pivot.
0:34:09 What was that like?
0:34:10 The best time I never want to have again.
0:34:15 I mean, look, this might be its podcast onto its own, because there was an 11 month period
0:34:17 where I wasn’t even CEO of the company.
0:34:19 My original investor had fired me.
0:34:20 Oh my God.
0:34:21 I was CTO.
0:34:22 I didn’t know that.
0:34:23 I’ve been demoted.
0:34:24 CTO is awesome though.
0:34:25 I think CTO is the most powerful person in the company.
0:34:26 Not when you want to be CEO.
0:34:27 I guess that’s true.
0:34:30 We pivoted the business 2009.
0:34:33 What we thought was a consumer business actually turned out to just be a free business.
0:34:37 One day we actually got a call from a major oil and gas company that had been using us.
0:34:41 And we knew they were using us globally, like on oil rigs or their headquarters or other
0:34:42 distributed offices.
0:34:46 And so then they finally we got an email like, look, we need to have a support contract
0:34:49 like as a matter of our, just like corporate hygiene.
0:34:51 So like figure it out and like give us a quote.
0:34:54 We need to like have a way to call you if there’s a problem.
0:34:58 And so we went and got one of these like virtual phone numbers on the internet that would like
0:34:59 route to like an engineer’s phone number.
0:35:02 And if that person didn’t pick up about route to like the next engineer’s phone number,
0:35:04 if that person didn’t pick up about route to my phone.
0:35:05 Oh my God.
0:35:06 You were like the support desk.
0:35:07 Yeah.
0:35:11 It was like a tiered call system and went to like three people and we sent them a quote
0:35:13 for a hundred grand and they signed it immediately and returned it.
0:35:17 And they now went from like us making $2 a year and advertising, which we hated to paying
0:35:20 us a hundred grand for something we’re already doing and we get to turn off the ads.
0:35:23 You don’t need to be a rocket science to figure out like, wait a minute, maybe there’s something
0:35:24 here.
0:35:26 And we had two or three other companies that had asked previously for something like that.
0:35:29 So we went and sent them quotes and they all signed them and returned them.
0:35:32 Why do you think you didn’t know that this would be the business model up front?
0:35:33 Like why did you have to pivot?
0:35:35 Honestly, not to sound judgmental at all.
0:35:38 It seems obvious to me when you say it in hindsight.
0:35:39 Totally.
0:35:40 So I’m confused at why you didn’t see that coming up.
0:35:44 I think we were sort of enamored with this idea of keeping the whole internet safer.
0:35:46 And that meant going after individuals.
0:35:47 Idealistic.
0:35:51 We had partnerships with Nectar and D-Link and these people that sold consumer routers.
0:35:55 And so we sort of ignored the opportunity that’s right in front of our face.
0:35:58 But as soon as you realize like you’re not going to be able to raise money and like you
0:36:01 actually have to build a business, you start to like open your eyes a little bit.
0:36:02 And so we did that.
0:36:07 And then I hired Michelle Law, who actually spent seven years at Greylock to run BD for
0:36:08 us.
0:36:13 And ultimately she became my COO, a wonderful person and good friend.
0:36:18 And she basically had seen enterprise companies many times and so she realized as we wanted
0:36:20 to go enterprise that a bunch of the team had to change.
0:36:23 First of all, half the team just like didn’t care about building an enterprise software
0:36:24 company so they just quit.
0:36:28 Then like the other half of the team just like could not internalize that we can’t just
0:36:32 like change the UI overnight because it turns out some of our big customers had their own
0:36:34 manuals that they had built with screenshots of our product.
0:36:38 If we got a nasty email once from this major oil and gas company, they said like we have
0:36:42 all this training material and screenshots and videos we made and you just totally changed
0:36:43 your whole dashboard.
0:36:44 Yeah.
0:36:45 Like you can’t do that.
0:36:47 And you just have to learn how to manage those things.
0:36:49 And like then you do feature flags, which are things that are like common today.
0:36:54 But in 2009, like feature flagging things and feature flagging means that like some subset
0:36:58 of cohort of customers gets the access to a new feature or a new look and feel.
0:37:01 A lot of people use it for A/B testing to see if something works, but you can also use
0:37:05 it just to like keep certain customers on certain packages or on older features or older
0:37:06 looks and feel.
0:37:11 So it’s not like you still have one code base, but people have slightly different experiences.
0:37:13 And so we were starting to do those things.
0:37:16 Like we started implementing feature flags and things of that nature, but it meant that
0:37:21 over the course of about 12 to 18 months of the 30 people before the pivot, I think only
0:37:22 three were left at the end.
0:37:25 When did you go from CEO to CTO?
0:37:28 So right before all that happened, from most to 2008.
0:37:32 And then the only good thing that ever came out of the total global recession and economic
0:37:35 collapse was that my early investor needed cash.
0:37:39 And so we found two investors, and that’s actually when I first met Mark and Ben.
0:37:42 We found two investors to come in and buy out my early investor.
0:37:44 Those investors came in, started to rebuild the company.
0:37:49 But the biggest thing that’s fascinating to me is you came back as a CEO.
0:37:53 So what changed that you didn’t make this, I mean, cause you’re the same person, you
0:37:54 didn’t change overnight.
0:37:55 Right.
0:37:57 Like how did you pull that off?
0:37:58 Yeah.
0:38:02 Coming back as CEO the second time, after spending almost a year as CTO, one of the things I
0:38:06 saw when I wasn’t CEO was all these things that weren’t happening in the company.
0:38:07 Yeah.
0:38:08 That sort of been happening.
0:38:12 And of course I blamed the current CEO, but the reality was I actually was not doing them
0:38:13 either when I was CEO.
0:38:16 Sometimes you just have to have this like outside the glass box kind of view.
0:38:17 Yeah.
0:38:18 Wait a minute.
0:38:19 People don’t know what’s important.
0:38:20 Wait a minute.
0:38:22 We’re not making it clear what the priorities are.
0:38:23 Wait a minute.
0:38:26 We’re not firing these low performing people, but I wasn’t doing any of those things either.
0:38:28 And so that to me was very eye opening.
0:38:32 So when I came back as CEO, I think I was a much better listener.
0:38:35 I think I had this like belief maybe the first time I was CEO that I’m expected to have all
0:38:36 the answers.
0:38:37 Uh huh.
0:38:38 And it’s just not possible.
0:38:41 What is important as CEOs have to make decisions, and I think they have to be able to articulate
0:38:44 their decisions, but they don’t have to have all the answers.
0:38:46 That’s a really important point.
0:38:49 There’s actually a big difference between an answer and a decision.
0:38:50 Totally.
0:38:52 That’s actually something really to reflect on because I think most people conflate those
0:38:53 two things.
0:38:54 Totally.
0:38:56 And in fact, it turns out actually the opposite is true about having the answers.
0:39:00 In fact, I often tell CEOs because I like even before I joined Andrews Norwood’s people
0:39:01 call me for advice.
0:39:02 And that’s one of the things I really enjoy.
0:39:03 That’s why you’re VC now.
0:39:04 Yeah.
0:39:05 That’s why I’m a VC.
0:39:07 That’s one of the best parts about the job is like, I like being the first phone call
0:39:10 for a CEO when they’ve had a tough moment or they need help.
0:39:14 One of the things I often tell CEOs is like, you know, actually, like when you think about
0:39:17 the table of leaders around you, like there’s actually room around the table for one person
0:39:20 who has no idea what they’re doing, and that’s you, a CEO.
0:39:24 If you have the right leadership team, they’re adding intelligence for you.
0:39:28 You know, I had sort of gone from technical CEO to product CEO to sales CEO.
0:39:31 But my fault as a sales CEO is that I loved the dog and pony show.
0:39:32 I loved the pitch.
0:39:33 I hated the clothes.
0:39:34 Why is that?
0:39:35 That’s fascinating.
0:39:39 You know, I thought, you know, you could say that it was ego or ignorance or naivete.
0:39:42 Like, I didn’t like asking for the purchase order because first of all, I always thought
0:39:43 our pricing was low.
0:39:46 So if the customer and customers often like to negotiate.
0:39:49 Oh, you’re like ready to fight, like, fuck you, I want you to pay more.
0:39:50 Yeah.
0:39:51 So the customer goes, oh, $100,000.
0:39:52 I think it’s to be 70.
0:39:53 I’m like, fuck you.
0:39:54 It should be $140,000.
0:39:55 Like, I’m raising the price.
0:39:57 You’re the wrong guy to bring it the clothes.
0:39:58 Yeah.
0:40:00 My sales would be like, yeah, so you can’t negotiate with this customer because like,
0:40:02 you’re going to blow up this deal.
0:40:06 But also I didn’t like the uncomfortable, and I’m in a much different place now, obviously.
0:40:10 But like at that time and where I was as a CEO, I hated the negotiation.
0:40:11 I got uncomfortable.
0:40:16 Everyone, they taught me so much because there was only room around the table for me to not
0:40:17 really know all the answers.
0:40:23 I will often say that my CMO at OpenDNS, Jeff Samuels, I think of him not just as my CMO,
0:40:24 but as a mentor to me.
0:40:27 I mean, he taught me so much and actually I would say that about my VP of engineering,
0:40:29 my head of sales, my VP of sales.
0:40:32 I could take the inputs and use all that to make a decision.
0:40:35 And I felt very good about those decisions I made.
0:40:38 I think CEOs find it a huge relief when you tell them, you’re allowed to not know.
0:40:42 In fact, you kind of, if you have the best people, you’re going to know the least.
0:40:47 It is not uncommon for a CEO or a leader, a manager, this is just a good general life
0:40:48 advice.
0:40:51 It’s like, you know, you don’t want to be like the whiny person constantly like harping
0:40:52 on something.
0:40:56 But what I would say is like, you do sometimes need to present an idea more than once.
0:41:01 My old head of finance who ultimately became my best friend, used to always joke with me
0:41:04 that like he would just tell me everything he said twice because he knew the first time
0:41:05 I’d ignore him.
0:41:07 I think I have the same problem.
0:41:08 Yeah.
0:41:11 He would tell me some statistic about what’s happening with marketing spend or with hiring
0:41:12 or sales plans.
0:41:14 And I’d be like, oh, that’s not really a problem.
0:41:15 Like whatever.
0:41:16 Like, I don’t care.
0:41:17 You’re just like a crazy finance, like bean counter.
0:41:18 I don’t care.
0:41:22 But then like you’d come back like a week later and be like, hey, I have more data.
0:41:24 Like I did further analysis.
0:41:25 Like you ignored me.
0:41:26 But like, I know I’m right here.
0:41:27 And then I’d be like, oh, you’re right.
0:41:29 Why didn’t you tell me this last week?
0:41:30 Yeah.
0:41:34 So in that case, the CEO can get answers from all their management team and then make a
0:41:36 decision based on all the answers you’re hearing.
0:41:37 That’s right.
0:41:40 And I do think sometimes you do have to tell people more than once and that’s just a function
0:41:42 of how human beings operate.
0:41:45 So speaking of this telling people more than once and learning to listen, that was your
0:41:49 big shift between when you came back to be CEO and you kind of learned your lesson, so
0:41:50 to speak.
0:41:54 I honestly feel like that’s kind of a trite thing people say all the time, listen better.
0:42:01 I hate the design thinking mindset around empathy for the, and this scenario and this persona
0:42:03 and it’s just so, I can’t diagnose what’s off.
0:42:07 I think when you’re building a company, being empathetic, really it means understanding.
0:42:09 It doesn’t mean accommodating.
0:42:12 There were situations all the time, this happens all the time as a leader, like you may not
0:42:14 resolve that thing.
0:42:15 You can still understand it and be empathetic.
0:42:17 Like I can be like, yeah, that is terrible.
0:42:18 Like I understand what you’re saying.
0:42:19 I’m hearing you.
0:42:21 Honestly, that’s half the battle in relationships.
0:42:22 That’s right.
0:42:23 You don’t need an answer, 99% of it.
0:42:24 You just need to understand.
0:42:25 You should have someone to say, fuck, I feel for you.
0:42:26 That sucks.
0:42:27 And you’re already feeling like 80% better.
0:42:28 That’s right.
0:42:29 That’s right.
0:42:32 When I think about empathy, you really want to be a great listener.
0:42:36 And so actually a friend of mine, Wendy McNaughton, she does this all like New York Times thing
0:42:39 every other week where she really goes deep onto a topic.
0:42:40 She’s written these books.
0:42:41 I think she thinks of herself as an artist.
0:42:43 I think of her as an artist and entrepreneur.
0:42:47 One of the things that she taught me about a year or a year or two ago was like when
0:42:52 she’s trying to teach people like how to sort of be a really, really solid listener, is
0:42:56 that when someone’s talking to you, you’re like, tell me more about that.
0:42:57 That’s just a phrase.
0:42:58 Tell me more about that.
0:42:59 Five words.
0:43:00 So just make that your first question.
0:43:02 When you talk to a customer, oh, what’s going on?
0:43:05 Oh, we’re doing like annual planning, budget planning, tell me more about that.
0:43:07 How are you thinking about that?
0:43:08 What is happening?
0:43:10 What’s the frustrating part about annual planning?
0:43:11 Tell me more about that.
0:43:15 So what’s interesting to me about that is, to me, this is the difference between a focus
0:43:18 group and an ethnographer.
0:43:21 Focus groups and surveys are asking questions for things you already know to ask.
0:43:22 That’s right.
0:43:26 And an ethnographer is embedded in an organization or is sitting and is essentially just listening
0:43:29 to learn and observe and letting those patterns reveal things.
0:43:33 So deeper insights come out when you go down there, like tell me more about that path.
0:43:34 Exactly.
0:43:37 That’s when you get these flashes in your brain of like, wait, now I really understand
0:43:38 what’s happening.
0:43:40 It’s not that annual planning sucks.
0:43:43 It’s that you’re having budget issues that aren’t being resolved in a way that you need
0:43:46 or that maybe your tools you’re using to do annual planning or your way you communicate
0:43:50 and collaborate with your team or the way you work cross-functionally is not working.
0:43:51 Totally.
0:43:52 Totally.
0:43:55 I consider myself an ethnographer-esque editor because I want the context to know what I’m
0:43:57 not hearing, to really understand.
0:44:01 So it’s interesting because on the ethnographer side, I don’t think people know this about
0:44:05 you, but you started off your career or academic career because you actually started working
0:44:06 when you were like what?
0:44:07 Eighth grade?
0:44:08 What is that?
0:44:09 Like 14 or 15?
0:44:10 And that’s when you got your first W too, right?
0:44:11 Yeah.
0:44:13 I’ve had a 1099 or a W2 every year since eighth grade.
0:44:17 I worked at a mom and pop ISP in San Diego and I learned all about routing and networking.
0:44:20 I went to Washington University in St. Louis.
0:44:22 I applied to the School of Arts and Sciences.
0:44:26 When I went there to interview, they actually then had me interview with somebody in the
0:44:28 School of Engineering in the computer science department.
0:44:31 By the end of first semester of freshman year, I switched back to the School of Arts and
0:44:32 Sciences.
0:44:35 And the reason I switched is I took a class of Introduction to Human Evolution and I
0:44:36 just found it so fascinating.
0:44:39 Like I’ve always learned in my life, I do best of the things I really enjoyed working
0:44:40 on.
0:44:42 Like I have trouble doing things I don’t want to do.
0:44:43 Me too.
0:44:44 I’m the exact same way.
0:44:46 Yeah, sounds obvious, but like some people can actually just like will their way through
0:44:47 the hard stuff.
0:44:48 No, I can’t.
0:44:49 I have no energy.
0:44:50 I have zero.
0:44:51 Talk about returning energy.
0:44:52 I have like no energy to do the things.
0:44:53 Yeah.
0:44:54 I’m just like also like I’ll be okay if I just don’t do this.
0:44:55 Yeah.
0:44:56 But I really didn’t enjoy it.
0:44:58 So I learned how to optimize for the things that I like doing.
0:45:02 Anthropology, every book I read I thought was so interesting.
0:45:06 I learned about like how women enforce power hierarchy in South America in a way that we
0:45:07 don’t have elsewhere in the world.
0:45:10 I learned about like what happens in Southeast Asia around farming.
0:45:12 I learned about the Green Revolution in Africa.
0:45:16 But then I find that like in my life, I actually think about these things all the time.
0:45:19 That was back to me in my next question is, do you think it actually is useful in your
0:45:21 career as a technologist?
0:45:22 Absolutely.
0:45:24 I think about demographic transitions.
0:45:26 I think about when I read about like what’s happening in Japan.
0:45:29 It makes me think about how is that going to change my investing thesis?
0:45:31 And I think it comes up constantly.
0:45:34 It comes up both both tactically as you think about yourself in like leadership and organizational
0:45:35 dynamics.
0:45:37 It gives you an appreciation that there’s many perspectives in the world.
0:45:40 In fact, it gives you an appreciation that more perspectives are more better and you
0:45:42 want more.
0:45:46 So that is then a perfect way to close this episode.
0:45:52 So David Yulovic, he’s made a journey from anthropologist to technical CEO to product
0:45:55 CEO to sales CEO to go-to-market CEO.
0:45:56 And now investor.
0:45:58 Welcome to the A6NC podcast.
0:45:59 Thanks.