When Business is Battle: Inside the Boardrooms of the CEOs that Survived the Storm

25:47And now you're talking about, okay, we're going to change the way people travel. How many of them, what percentage of them in engineering are going to be relevant to the new architecture? And how do you think about that as a CEO and how you evolve? Because it's a very different skill set. So I'm old. Yeah, I was only 20, that I was around in 1999. And it happens all the time, right? It web happened and then cloud happened and SAS and then mobile happened and now this happens and probably this one is faster. And I think if you already develop or anybody, you can be a salesperson that knows to sell on -prem kind of and doesn't know what the fuck is SAS, right?

26:28So I think you always need to adjust, definitely if you are in tech. and you need to learn. And I really didn't know what generative I is like in November, last year, never held of this in my life. So my co -founder, Ken of New, but even he didn't really know it, but now I really know. So that's it. You have to learn, you have to adjust, and if you'll not, you'll have a problem to find a job. It's a reality. Yeah. And then how do you go about figuring out who's who and that equation, like who's come up to speed and who hasn't? I think you see it. I think it's exactly like we talked about these transitions in COVID.

27:05And you saw, you know, we are handling something right now and we had a board meeting yesterday and we talked about it in the board meeting in June. And that was kind of a low point of this thing. And you saw yesterday, the team completely adjusted to the problem to fixing it. And now you can actually see that. So I think if you have a team that can adjust, they can adjust. They can adjust a lot of different things. And one of them is we've talked about a day after Chechy Pity was released. We've done almost like an emergency meeting and I was saying it's the thing that can actually make us bigger or the thing that can kill us and really really fast because of everything that you've said earlier.

27:43And the team already adjusted and you can see how many things we're doing around it. So it means that we took a team that was doing one thing and we told them, pay, it's not relevant, let's do something else. And still they'll think, you know, the hardest thing is we've done with the agents. What do you tell them? Because if somebody in the company Yeah, not the AI agency, human agency The human agency to answer the phone If somebody is building a model to replace them, what does it mean? I think you know what that means So definitely you need to Almost finding them a certain mission Great, great.

28:15I'd like to thank REL And thank you for listening to us Thank you

28:24Next up is OxyCoFender and CEO Todd McKinnon. Like Ariel, Todd faced a whirlwind of challenges since he chose to bet on the cloud in 2009. And today he shares his war stories with A16C General Partner, David Yulovich. Todd does not hold back here as he discusses the difficulty of being measured as a public company including missing many quarters in row and the tension that can exist between keeping the board and employees happy. So I've known Todd McKinnon for a long time, co -founder and CEO of OCTA. I'm not going to read his whole bio. I will tell you two quick facts about Todd. One is when I was at Cisco, I tried to buy OCTA that turned out to be really stupid and I called up Todd and And I was like, hey, we want to do some things in identity.

29:14Can we buy your company? He's like, are you fucking smoking cracks? Like, do you not know how good we are? He made a smart decision to not take another phone call. And then the second thing about Todd is, I realize at some point, I think just before COVID or during COVID, you became a world champion, a CrossFit champion, like one of the top 15 in the world across the world. It was 14. 14. Your number 14. That was sure to, sure to me, Dave. Yeah. 14, which I am not. not a crossfit person which you may have already known by looking at me, but I think that's quite a hard feat. While being CEO of a publicly traded company, so those are my two intros for Todd.

29:50I'm proud of those things, but my father, all he ever cares about is my kids, that's all he calls me up because I go, don't talk about octa business, he goes, how are the kids taught? That's what a grandpa should do. Well, we're gonna talk about octa, because I'm not your father. Uh, and so you are the only founder and CEO of a publicly traded company that we have here So I'm going to start there. How have you managed the whip -lash effect of the last few years? You've had massive financial changes, cultural changes, way that you work changes, personality changes, talk about how you've managed that as a CEO.

30:24Well, I was thinking about this group in this room and it wasn't very long ago. I was much earlier stage in the journey as a CEO and a founder and a company life cycle. And I remember coming to meetings like this and watching CEOs of companies that were further ahead me in the journey and thinking to myself, man, that person, I'm never going to be like that person. That person's made it. They must be happy and calm and not have to deal with a lot of problems. So I got good news and I got bad news for you all. So the good news is that you all have a shot. To be successful, to grow, to exceed expectations, to create a world -beating company and totally kick us.

31:03That's the good news. Bad news is I'm not sure it gets any easier. The problems are different. They have different flavors, but it's a challenge. It's kind of like what I love about it. Proving that we can build something and we can keep going forward and we can do something that we think a lot of people or we think is very unique to what we're trying to do and it's a challenge. So, yeah, there is adversity and we're dealing with all this stuff like you all are. But I think one thing about me is that, and I think I have this in common with a lot of people here, is that I'm very kind of challenged driven.

31:34So if there's a challenge and I have to fight for something and I have to go through some diversity I kind of seek that out. So when it gets stressful and hard and tired I just go back to that fact that everything in my life when I've had a lot of happiness or a lot of Satisfactions always been going through some hard times. Excellent. Type 2 fun as they call it. Exactly. Have you changed the way that you lead your own teams to the CEO from remote work to in person to all hands? those kinds of things, like how have you even just tactically sort of changed the way that you operate and lead? Yeah, like recently.

32:06Sure. Yeah. I think a big change I've noticed in myself and maybe some of you have noticed the same thing. Over the last two years or three years particularly, I think three years ago, I myself and Octa and I think a lot of the people were way too much trying to keep everyone happy. Employees and partners and customers, although I think it's always good to try to keep customers happy and be really oriented on that. Particularly on employees, there was this vibe and this mindset of, if we do anything wrong, if we do something that's going to make people upset, people will quit, we can't keep talent.

32:39Oh my God, their stock options might be underwater, we have to give them more stock. If we make some comment internally in the company that they don't like politically, they're not going to like work in here, we were very, very, in myself, I was very, very kind of like cautious and wanted to just keep everyone happy. And I think part of that was the war for talent and part of that was just the macro environment. and there was jobs everywhere, and companies were competing, and money was free. And I think that right now, I'm much more kind of in the middle of the spectrum. You don't want to be totally careless and cavalier about employee satisfaction and what employees are going to love and want.

33:12But I think we were too far on the spectrum. And so now I think we're more in the middle where it's having more confidence. If you have conviction as a leader and as leadership team, that it's the right thing for the business, and it's the right thing for the market, you got to do it. You got to be clear about it, because this can be clear for the employees, what you stand for, and what's important in the company, what your strategy and what your priorities are. It's going to be less confusing. It also has the effect. It sounds obvious when you say that a lot, but it has the effect of galvanizing people that are aligned with that and want to do that.

33:41It's a win -win. I think speaking at a very high level, that's one example I would give. You can give a concrete example. For you. I hate when CEOs talk about this stuff and they're like super high level and like all this word. This is what we're here for. Yeah. And so I'll give you a really concrete example. So we did this acquisition a couple of years ago, and we were 3 ,000 people in this company, Auth0, is 1 ,000 people. So we're integrating the company as we did the GNA, Functions First, and then the Go -To -Market Teams 18 months ago, and then we were really, really slow to integrate the security teams.

34:14Auth0 security, Auth0 security, there was some reasons, like the security team was kind of embedded in the development team. So there was all these excuses about why upset the Apple and why make a change? What are we really doing at Flora? People won't like it, people will leave. But then for stuff that was going on in the industry and stuff that happened to Octa about security issues, it was very clear to me, like getting our shit together for security internally was really, really critical. Being the most secure company in the world, locking everything down. And having two separate security organizations for these companies was not the way to do it.

34:46So just made the card call there being combined tomorrow. So the debate's over. I don't want to hear any excuses, figure out how to do it, they were being combined tomorrow. And it turns out some people did leave, and it was controversial, but I think it was just a very concrete example of this shift I've been on. Much clearer for the people that stay. Yeah, exactly. This is what we're about. We're going to make the hard call to do what's right for the company. Awesome. How is a public company you get measured every single quarter in a different way than a private company in sort of a board meeting gets measured?

35:17How do you think being measured on a quarterly basis by the public markets has changed your to CEO? And would you have taken anything you've learned there and applied it when you were a private company? Well, I think this is a big topic so recently. One of the more interesting things is that I have a challenge because when you're public, like you want to set really realistic external expectations. And then hopefully you execute and over achieve them and you know, beaten raise, you've all heard the term. So the last year or so, a lot of companies have really been conservative on their external expectations as we should be because what's going on in the macro economy.

36:02So internally you have your internal plan and you're maybe missing it or just meeting it and you think you can do more and you're trying to fire your team up to really get aggressive and don't take excuses about macro and we got to go faster and do more and fire people up. We miss this number, do this. And then externally you do these earnings reports and it's like, you blow out your numbers. And Wall Street loves you and this talk price goes up and everyone's celebrating high -fiving. And then you're walking around the office and you're going like, I know that you got to just suspend belief on that for a second because we got to go faster.

36:35We just ran down the runway and jumped over a one -foot bar. We got to jump over the five -foot bar. It's like, come on. So it's a little bit of a different twist on that. But in terms of the being measured quarterly, a couple of other things I'll add there, I think that there's a lot of things about being public that are great. Access to capital markets, you can raise money if you need money much, much faster than raising it privately and at much better terms, although with interest rates it's changing a little bit. That's good. The other thing is that I think we're paying all our people in stock.

37:07And it's just, it's a fair thing for the employees. People forget this. Like the most obvious reason to go public is that you've paid your people in stock and you've got to give them a fair deal. You've got to let them sell it. It's not fair to stay private for many, many years and then have these weird kind of secondary markets, which is not as liquid as a real stock market. So that's a good reason. And one more thing on this too is that it's like table stakes for going public is somewhat of a predictable business because the main point I wanted to make here is that the investor relations, it's very simple.

37:38You might think you got to communicate a vision and be compelling for the long -term lot of stuff, but they're going to look at the numbers and when they look at the numbers, it's like deviations from plan are speak loudly and get punished or rewarded more than anything else. So you got to make sure you have someone of a predictable business. I don't know how folks went public with the traditional revenue model in software or they didn't have recurring revenue. Having that recurring base of business and stable retention and stuff makes it much more manageable. Because once you get out there, your arcs goes.

38:07But I think if you have that solid business and that stable business, there are a lot of benefits that I think make it very worth it. Nice. I'm going to shift more to the founder journey and sort of building a company. He started the company in 2009. There was the height of the financial crisis. There were pros and cons, but people sort of perceived it to be a more difficult time to fundraise. Let's start with capital raising. You raise money from, and recent Horowitz, first check. But talk about the fundraising journey and the company formation of those early years. Well, I was running engineering at Salesforce, and so I say that just to make myself kind of sound cool.

38:41They're not sure it does. It does. It was true. In this room, that is very cool. Okay, yeah. That is very cool. This room, and maybe zero other rooms in the whole world. I say that because, being at that company for six years at the time, this is late 2008, it was pretty clear that Cloud, computing as a service, were going to be huge. And being that company, it was pretty obvious to see it because you had us at the app layer, we're doing well, they called it Google Apps for domains at the time, was going to be like the collaboration layer and email was going to go in the cloud and then AWS was out, simple storage was out and compute was out EC2 and you could tell the infrastructure was going to go together.

39:18So this Cloud thing was going to be big, it was pretty obvious. Not everyone saw it, but I did. And so I had a great job running engineering and kind of convinced my wife that it wasn't totally insane to quit because from the outside perspective it was like the financial world was going to the shit. I mean it was like Lehman Brothers was failing and banks were going away and if financial system was freezing up and the government had to bail everyone out and it was the shitcho. And you know the technology arc was very clear so for me it felt like a great time. Then I got out into the VC world and started to fundraise.

39:52And you could tell that when you talked to these venture funds that they were nodding and they were maybe listening to you, but you could tell they were scared. You could tell that, I don't know the details, I didn't ask for the details, but you could tell they were thinking, do my LPs have money at Lehman Brothers? And when I do that capital call to the LPs, is it going to come in? And they were really unsure about raising them. And my co -founder and I first got introduced to this really exciting new firm called Andrieson Horowitz, even before that at A16z and Andrieson Horowitz. Then we went into a conference room at the Rosewood offices and it had a laser printed sign that said, Andrieson Horowitz, laser printed and taped to the wall.

40:35He walked into the conference room and it was marked and it was bent and it was Scott Cooper. and we sat down at the folding table that was folded out and stood up in the conference room. And my co -f I was nervous. I was like, are these guys gonna give us money? Are they scared? They even have money? Yeah, as I go today. They even have money. And we're sitting there and I'm looking at Mark and Ben and Scott and my co -founder looks at him and he goes, did you get this table at Costco? Mark said, yeah, and Freddie goes, oh yeah, I have one too of my backyard. So the ice was broken, but Mark and Ben, And they wrote a check.

41:09I joke that we had kind of a little bit of an interesting idea. Some credibility, because besides this room, they're probably only two people that think the VP of engineering Salesforce is cool. Someone that might be able to do it. But I say that this is all seriousness. If we would have walked in there three years later, they would probably have been like, all right, go talk to someone else. So they were willing to take a shot and it worked out great. But it was a scary time. And yeah, those were some of the early memories there. So I actually forgot your question. Do you have a question? No, that's pretty good.

41:39Like the stories are the thing that we're all here for. Yeah, yeah. I sort of just like make up a prompt that will generate a story. That's me. So I GPT. Yeah. So continuing that thread, you've had tremendous success, but I have heard from Ben that there might have been a period of like one or two or like five, six, or like eight quarters where you missed your numbers in a row. That happened. Yeah. It was not all up into the right. Yeah. We've had the last couple of years for Octa. We've had some bumps. Well, I mean in the early days. Yeah. I'm getting there. Oh, I'm a, I'm a stateful chatbot.

42:10I can bring it back to the question you asked. It's been rough. And when we were going through these rough times, we had this issue with a, is like a security issue, where some hacker claimed that they had access to the system and wasn't true and we didn't handle it great. And it was a pretty stressful time for the company. We had an acquisition we were integrating that we could have done better. So it's some stressful times. And I used to tell people that the company has like, listen, this may not even be in the top five of how it's times in the company. And if I were to stack rank that for you, number one would be, we raised money in, beginning in 2009 and in 2011, some of you, I'm sure maybe remember this phase of your company or not yet or maybe in right now, but you've been doing it long enough where the early hype and excitement is kind of waned a little bit.

42:54You're able to raise money, it energized people, there was a story and people were excited that you might be, you're on a roll. The hype had waned and there were expectations. It's been a couple of years now. You should have revenue and customers, and you had a financial plan, and you got to hit it. But really, two years probably wasn't enough. Like cloud adoption, maybe wasn't where it needed to be. The product wasn't quite good enough. And so you're kind of in this valley of death or tough times. And so that was a tough period. And how did we get through that? Well, first thing is we had a board, and one thing I did differently, during that time period, I shifted from early in the company with the board, particularly my mindset and my mode of operating was kind of like collaborative in the sense of, there's a bunch of ideas we have, a bunch of ways this could go, a bunch of thought we had, what do you guys all think?

43:46And like kind of collaborate and try to get an opinion out of the board. That was huge mistake. Because when I did that, it's not a democracy. Well, when I did that, the perception, my perception was like, now I have a really strong instinct on what we should do. But I'm not totally sure it would be right. So if I come out and bang my fist on the table and say this is where we're going They may not agree with me and they may think I'm not a good leader But when you flip that around what really was happening is when I was saying this is different options What do you guys think we should do what they were hearing was he doesn't know what to do and why are his people I'm gonna follow him if he doesn't even know what to do here So I switched my approach and I still remember the board meeting where I said to myself All right, I'm gonna change my approach.

44:28I got vibes from your board members. You guys can get vibes from your board members. Vibes, like Todd, this is a mess. Like you gotta do better job. Todd, maybe some people in the board don't have confidence in you, those kind of vibes. Yes. Yeah. Well, I was getting those vibes. And so I changed my approach. I said, I'm just gonna be super strong about what I think we should do. This is what I think we should do. We gotta change this, go to market strategy. We gotta be clear about this. This is the direction we're going. And it just was a dramatic difference. It was like, yeah, they gave me input and it wasn't like all of a sudden they thought it was flawless analysis and perfect direction, but it totally changed.

45:05And it was like, this guy is going to be in charge, this guy is going to take us forward and they had more confidence in me. At the same time, one thing I did that was really a step forward I think was internally in the company. And this is just to give you an idea, we probably had 50 people. So it was 50 people in the company, maybe not that, maybe 40, so like 15, 20 engineering and like few people in sales, G &A. So that's good you a scale. And we probably, in revenue, was our new AR bookings target for the quarters were like 200 grand. So the whole year was going to be like a million in AR bookings.

45:39So it's pretty small, which ironically at the time felt like a huge number, but that's the stage we were. So internally in the company I kind of I've had this mindset of, it was almost opposite. It was like, my mindset in the company was, I got this, I can do it all. Yeah, I'm the CEO. I was the CEO two years before, but it was really a tiny company with only a few people. Now I'm a CEO, I got this, I can do everything, I know all the answers, I'm gonna be like, make no mistakes, and internally, that was having bad effects. And the effects were that people didn't feel bad in. They didn't feel like they could help.

46:11They didn't know how to help. I wasn't sharing enough information, I wasn't giving them the context they needed to help pull us out of this. So it's like I flipped my whole persona. But the board, I was like, this is what we're doing. Stop checking your blackberry during the board meeting. Pay attention to me. I'm the leader. There wasn't really someone of the blackberry. It was just us. No more blackberries. But internally, I was like totally opened up and I said, you guys, these are our problems. We have a lot of problems. I made some decisions. They weren't the greatest. But together, we can open up, recognize the problems, share the data, and we can get through this together and it really galvanized the team and it got them focused on the problems and really they were part of the solution.

46:49And I think even to the culture in OCTA today, I can see the reverberations of that switch. It's like pretty open, pretty transparent, pretty team oriented, bring people and solve the problem and collaborate. So those were some of the things I remember from the four minutes ago. So being a leader with a plan in the boardroom but having the right team around you and you've had a lot of people with a long tenure at OCTA, but you've also gone through executives and different phases of the company. I think that's something that founders in the room, either they have gone through that, and after a while they start to think they're the ones who are the problem, or they have not yet gone through it, and they probably should go through it.

47:22Talk a little bit about how your executive teams evolved over the course of Octas, and especially in the early days. So I remember, I was surprised by this, but when I became a founder and a CEO, my decision -making actually slowed down. It sounds weird, but as a leader in engineering in a Salesforce, I was pretty decisive. It was like, this person needs to go, this person's coming in and we're doing this, we're doing this. But I noticed myself being slower and more circumspect at Autta. And as I analyzed why, it was pretty obvious after thinking about it. It's like, at Salesforce, my boss could overrume me or tell me I was doing the wrong thing.

47:57And I had someone to help me, basically, above me. And being a CEO, as you all know, is different. It's like the buck stops at you and the mistakes seem like they're more consequential and difficult to unwind. So I had to really try to get back to faster decision making even though I didn't have that boss that was helping me guide me along the way. Particularly another thing that changed was related to this fast, particularly on people, this fast decision making is that when you go through a year like 2011 and you start to get some traction and you start to come out of that place where you really thought the company was going to die, you build this loyalty to people.

48:33and five years on from that, when the company started to outgrow a lot of those people and their capabilities and what they wanted to do, it was pretty hard for me. And I was pretty slow to make some tough decisions that would have basically, in my mind, I was perceiving them as breaking that loyalty. And I think for me, it was like, I basically had to outgrow it. I had to outgrow this feeling that this core group of people that got us through these tough days are going to get us forever. but it did take some time and it's something that if I had to do over again I'd probably make that shift faster.

49:03I've made the mistake in both ways like I've made the mistake We've had new leaders come in and I've counseled them to Go to slow in making changes in theirs team like right before the IPO We hired a new go -to -market leader. He was great He wanted to make a bunch of changes and I really said listen man slow down Just don't mess anything up before the IPO. Let us get through this and it ended up really hurting us like a couple years later We hadn't made changes fast enough. We weren't scaling fast enough. And now we're like three, four quarters as a public company and it really almost really hurt us.

49:33We had so much slack in our external guidance. We were okay, but it was really almost ended up hurting us. I've made the opposite mistake too. I've had leaders come in and I was like too permissive in what they could do and let them do everything. I think they basically screwed a lot of stuff up. So it's like finding that balance between loyalty and going slow and trusting what got you there, but not being too aggressive and not over -changing thing. It's kind of an art to find that balance. That is the name of the game, the CEO. And I think that's an excellent note for us to end on. And Todd, I really appreciate you making time out of your schedule.

50:08I know you're actually flying up, I think, for a board meeting with Ben tomorrow. Yeah, my whole perspective on all this stuff might change based on how tomorrow goes. Yeah, yeah. We don't want confident Todd. We want Todd to collaborate better. Thank you for taking the time here. You've looked an amazing company. even a great friend of the firm and so it's great to see you. Yeah, thanks David.

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